A critical development goal involves reducing subsistence farming and
encouraging entrepreneurship and formal sector employment. A growing number of
studies examine cross-national variation in the rates of subsistence farming,
marginal self-employment, formal employment, and prosperous entrepreneurship by
level of development. However, despite significant regional disparities in
development within most low-to-middle-income countries, little is known about
how development at the local level is associated with labor market patterns.
Using a pooled cross-section containing four waves of data from the Mexican
Census (1990-2015), this study investigates the relationship between social
development and municipal workforce composition. In the 1980s, Mexico initiated
an ambitious and multipronged development agenda intended to reduce extreme
regional disparities in educational attainment, housing quality, access to
utilities, and poverty. This study measures social development using a
multi-dimensional measure that captures educational attainment, housing quality,
access to utilities, and poverty. Laborers are separated into employed,
own-account workers, and employers, with each category divided into agricultural
and non-agricultural. In a second set of analyses, non-agricultural own-account
workers are categorized as high and low growth potential and non-agricultural
wage workers are separated into informal and formal sector. Results from fixed
effects regression models indicate that local development significantly reduces
the rate of own-account agricultural work and increases non-agricultural wage
labor and employer self-employment. As less developed areas advance, the largest
initial increase in non-agricultural work is in the informal sector. But, in
more developed communities, social development increasingly predicts growth in
formal sector employment and more selective entry into non-agricultural
own-account work. The findings suggest that investment in community-level social
development has the potential to reduce subsistence self-employment, encourage
formal sector work, and promote entrepreneurship. Yet, the greatest gains occur
in communities that already have mid to high levels of social development.