The vast majority of firms in developing economies are micro and small enterprises owned by families whose members also provide the labour to the units. Often, they fail to grow in size even with the relaxation of credit constraints. In this paper, we show that frictions in the labour market...

This paper develops a theoretical model to study features of the spontaneous growth of private enterprises in China's Zhejiang province. The model predicts that in a developing economy where the market environment is immature or unstable, the ownership structure of a typical private enterprise...