Delay of gratification and business performance in least developed countries : evidence from LAO PDR

Abstract

Does delay of gratification affect the probability of engaging in self-employment and does it contribute to their business performance? This article aims to quantify impacts of delay of gratification on engaging in self-employment and business performance. Using Lao PDR as representative of least-developed countries, We analyze nationally representative survey data from the Lao-STEP Skills Measurement Household Survey, we estimate binary Probit and Logit model to quantify impacts of delay of gratification on probability of self-employment. And, we estimate impacts of delayed gratification on business performance of those self-employed individual. Those with a lower degree of delayed gratification tend to elect to be self-employed instead of being full-time employees. However, a higher delay of gratification score is found to positively correlate with higher business performance among those who are self-employed. Other control variables, such as business characteristics, education level and skills of the self-employed also play an important role in higher business performance. Analysis from this article still shows some weak points and limitations. First, the dataset on self-employment has little representation from industry and the service sector, and lacks of many important variables such as parents’ characteristics and working hours. Secondly, there is no clear measurement of delay of gratification as our measurements use only hypothesis money. Lastly, there is a lack of studies to back up the result of delay of gratification on business performance, especially in a least-developed country like Lao PDR. The authors suggest that future research be conducted with richer data regarding the self-employed in industries and services. It would be quite interesting to study further the delay of gratification along with the grit, another behavioral variable, on the business performance. Based on this finding, it is therefore crucial that the Lao government support a policy that helps strengthen both cognitive and non-cognitive skills and the delay of gratification along with education to make Lao self-employment more productive. Even though there is extensive of research indicating that delayed gratification exists in many contexts, there are very few studies investigating the impact delayed gratification on the business, especially on the decision to be self-employed and the resulting business performance. The delay of gratification could be one factor that influences decisions on job selection or employment status and that influences business performance as well. This article is also the first one conducted in a least-developed country like Lao PDR.