32. Trading, the most popular sector, is still a good choice for HE operators. Only two sectors -- mining and construction -- appear to generate more earnings for male-run HEs, and one sector – hotels and restaurants -- for female-run HEs. Note that with training, however, hotels and restaurants generate positive returns for men.

33. Other authors have found that access to infrastructure matters a lot for HE profitability (e.g., Jin and Deininger, 2008). However, these correlations are difficult to interpret since clearly infrastructure comes first to richer areas (e.g., Dar es Salaam). In our regression analysis, local conditions are very important in determining earnings. The coefficients on Dar es Salaam and on Other Urban areas are positive. in addition, the fixed effects variables account for the majority of the variance explained by the regression. This may be why we did not find access to electricity, to be significant, but we did find that being near a market matters to female HE operators. As noted above, De Weerdt (2008) found that rural households living near towns were much more likely to be successful in using an HE as a route out of poverty.

34. Surprisingly, apprenticeship training does not help earnings, and more formal types of training tend to help only male HE operators. The effect of training on earnings is also difficult to isolate as it involves a certain element of omitted variable – what is it that causes people to go get training in the first place? Some authors have found that training comes up negative in these types of regression because only poorly educated people go for training (Kahyarara and Teal, 2008). Testing this with the ILFS 2006 data, training is found to be a fairly rare event in Tanzania – only about 10 percent of female HE operators and 18 percent of male HE operators had any training at all. Those who received training tended to be concentrated in a few sectors. To clarify the effect of training on earnings, interaction terms between training and the sector of activity were included in the regression. The results show that indeed in some sectors training can increase earnings, but not for women HE operators. This is most likely because in Tanzania, the training sector is still quite underdeveloped. In Ghana, where the apprenticeship sector is more developed, similar analysis showed strong positive results for informal training for both male- and female HE operators.

35. What do these findings mean for policy efforts to increase the productivity and earnings of HE operators? The picture is less clear since the information available from the ILFS can only explain about 30 percent of the variation in HE earnings (compared with over 60 percent for wage-earners in Fox and Novella, 2011). Obviously, other variables not measured in the data set matter a lot for HEs‟ success. What is clear is that for now, wage and salary employment in Tanzania is mostly not available for those without at least secondary school qualifications. Those with these qualifications tend to find a wage and salary job, and thus for them staying in the HE sector does not pay off relative to the costs of school. For primary school leavers, however, operating an HE is likely to be the only alternative to agriculture. Since they make up the majority of new entrants to the labor force, and given the shortage of placements in secondary schools, the crucial question is how to make this economic activity pay off. The next sections will examine this issue using information mainly from other data sets, such as those collected from the qualitative FGD study.

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