IDEAS home Printed from https://ideas.repec.org/a/eee/deveco/v167y2024ics0304387823001888.html
   My bibliography  Save this article

Cash transfers and micro-enterprise performance: Theory and quasi-experimental evidence from Kenya

Author

Listed:
  • Delius, Antonia
  • Sterck, Olivier

Abstract

Theoretically, the welfare effects of cash-based assistance depend on how businesses respond to the demand shock and on resulting effects on prices. Such market effects have been largely overlooked in the literature. In this study, we examine the business and price effects of cash-based assistance to refugees in Kenya. Monthly restricted cash transfers worth 3 to 13 dollars were provided to 400,000 refugees in the form of digital money exclusively usable for food purchases at licensed shops. We show that licensed businesses have much higher revenues (+175%) and profits (+154%) and charge higher prices than unlicensed businesses. In line with theory, the restricted cash transfer program created a parallel retail market in which a limited number of businesses enjoy high market power. The theoretical and empirical results provide a cautionary tale highlighting the drawbacks of setting up a less competitive, parallel market to distribute cash-based assistance.

Suggested Citation

  • Delius, Antonia & Sterck, Olivier, 2024. "Cash transfers and micro-enterprise performance: Theory and quasi-experimental evidence from Kenya," Journal of Development Economics, Elsevier, vol. 167(C).
    • Handle: RePEc:eee:deveco:v:167:y:2024:i:c:s0304387823001888
    DOI: 10.1016/j.jdeveco.2023.103232
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304387823001888
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jdeveco.2023.103232?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. de Mel, Suresh & McKenzie, David J. & Woodruff, Christopher, 2009. "Measuring microenterprise profits: Must we ask how the sausage is made?," Journal of Development Economics, Elsevier, vol. 88(1), pages 19-31, January.
    2. Isabel Ruiz & Carlos Vargas-Silva, 2015. "The Labor Market Impacts of Forced Migration," American Economic Review, American Economic Association, vol. 105(5), pages 581-586, May.
    3. Ghislain B D Aihounton & Arne Henningsen, 2021. "Units of measurement and the inverse hyperbolic sine transformation," The Econometrics Journal, Royal Economic Society, vol. 24(2), pages 334-351.
    4. David McKenzie, 2017. "Identifying and Spurring High-Growth Entrepreneurship: Experimental Evidence from a Business Plan Competition," American Economic Review, American Economic Association, vol. 107(8), pages 2278-2307, August.
    5. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(4), pages 605-654.
    6. Hidrobo, Melissa & Hoddinott, John & Peterman, Amber & Margolies, Amy & Moreira, Vanessa, 2014. "Cash, food, or vouchers? Evidence from a randomized experiment in northern Ecuador," Journal of Development Economics, Elsevier, vol. 107(C), pages 144-156.
    7. Michael Lechner & Ruth Miquel & Conny Wunsch, 2011. "Long‐Run Effects Of Public Sector Sponsored Training In West Germany," Journal of the European Economic Association, European Economic Association, vol. 9(4), pages 742-784, August.
    8. Depetris-Chauvin, Emilio & Santos, Rafael J., 2018. "Unexpected guests: The impact of internal displacement inflows on rental prices in Colombian host cities," Journal of Development Economics, Elsevier, vol. 134(C), pages 289-309.
    9. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2014. "Business training and female enterprise start-up, growth, and dynamics: Experimental evidence from Sri Lanka," Journal of Development Economics, Elsevier, vol. 106(C), pages 199-210.
    10. Olivia D’Aoust & Olivier Sterck & Philip Verwimp, 2018. "Who Benefited from Burundi’s Demobilization Program?," The World Bank Economic Review, World Bank, vol. 32(2), pages 357-382.
    11. Miriam Bruhn & Dean Karlan & Antoinette Schoar, 2018. "The Impact of Consulting Services on Small and Medium Enterprises: Evidence from a Randomized Trial in Mexico," Journal of Political Economy, University of Chicago Press, vol. 126(2), pages 635-687.
    12. Marcel Fafchamps & Simon Quinn, 2018. "Networks and Manufacturing Firms in Africa: Results from a Randomized Field Experiment," The World Bank Economic Review, World Bank, vol. 32(3), pages 656-675.
    13. Ravallion, Martin, 2017. "A concave log-like transformation allowing non-positive values," Economics Letters, Elsevier, vol. 161(C), pages 130-132.
    14. Guido W. Imbens & Charles F. Manski, 2004. "Confidence Intervals for Partially Identified Parameters," Econometrica, Econometric Society, vol. 72(6), pages 1845-1857, November.
    15. Jing Cai & Adam Szeidl, 2018. "Interfirm Relationships and Business Performance," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(3), pages 1229-1282.
    16. Dennis Egger & Johannes Haushofer & Edward Miguel & Paul Niehaus & Michael Walker, 2022. "General Equilibrium Effects of Cash Transfers: Experimental Evidence From Kenya," Econometrica, Econometric Society, vol. 90(6), pages 2603-2643, November.
    17. Baez, Javier E., 2011. "Civil wars beyond their borders: The human capital and health consequences of hosting refugees," Journal of Development Economics, Elsevier, vol. 96(2), pages 391-408, November.
    18. Alberto Abadie & Guido W. Imbens, 2016. "Matching on the Estimated Propensity Score," Econometrica, Econometric Society, vol. 84, pages 781-807, March.
    19. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
    20. repec:oup:qjecon:v:129:y:2014:i:2:p:697-752. is not listed on IDEAS
    21. David McKenzie & Christopher Woodruff, 2017. "Business Practices in Small Firms in Developing Countries," Management Science, INFORMS, vol. 63(9), pages 2967-2981, September.
    22. Marc F. Bellemare & Casey J. Wichman, 2020. "Elasticities and the Inverse Hyperbolic Sine Transformation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(1), pages 50-61, February.
    23. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    24. Manuela Angelucci & Giacomo De Giorgi, 2009. "Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?," American Economic Review, American Economic Association, vol. 99(1), pages 486-508, March.
    25. Barbara Sianesi, 2004. "An Evaluation of the Swedish System of Active Labor Market Programs in the 1990s," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 133-155, February.
    26. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
    27. Alberto Abadie & Matthew M. Chingos & Martin R. West, 2018. "Endogenous Stratification in Randomized Experiments," The Review of Economics and Statistics, MIT Press, vol. 100(4), pages 567-580, October.
    28. David McKenzie & Christopher Woodruff, 2014. "What Are We Learning from Business Training and Entrepreneurship Evaluations around the Developing World?," The World Bank Research Observer, World Bank, vol. 29(1), pages 48-82.
    29. Marcel Fafchamps & Christopher Woodruff, 2017. "Identifying Gazelles: Expert Panels vs. Surveys as a Means to Identify Firms with Rapid Growth Potential," The World Bank Economic Review, World Bank, vol. 31(3), pages 670-686.
    30. Guido W. Imbens, 2015. "Matching Methods in Practice: Three Examples," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 373-419.
    31. Jean-François Maystadt & Philip Verwimp, 2014. "Winners and Losers among a Refugee-Hosting Population," Economic Development and Cultural Change, University of Chicago Press, vol. 62(4), pages 769-809.
    32. David S. Lee, 2009. "Training, Wages, and Sample Selection: Estimating Sharp Bounds on Treatment Effects," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(3), pages 1071-1102.
    33. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    34. Semih Tumen, 2016. "The Economic Impact of Syrian Refugees on Host Countries: Quasi-experimental Evidence from Turkey," American Economic Review, American Economic Association, vol. 106(5), pages 456-460, May.
    35. Suresh de Mel & David McKenzie & Christopher Woodruff, 2009. "Returns to Capital in Microenterprises: Evidence from a Field Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 423-423.
    36. Claire MacPherson & Olivier Sterck, 2019. "Humanitarian vs. Development Aid for Refugees: Evidence from a Regression Discontinuity Design," CSAE Working Paper Series 2019-15, Centre for the Study of African Economies, University of Oxford.
    37. Lars Ivar Oppedal Berge & Kjetil Bjorvatn & Bertil Tungodden, 2015. "Human and Financial Capital for Microenterprise Development: Evidence from a Field and Lab Experiment," Management Science, INFORMS, vol. 61(4), pages 707-722, April.
    38. Fafchamps, Marcel & McKenzie, David & Quinn, Simon & Woodruff, Christopher, 2014. "Microenterprise growth and the flypaper effect: Evidence from a randomized experiment in Ghana," Journal of Development Economics, Elsevier, vol. 106(C), pages 211-226.
    39. Arielle Bernhardt & Erica Field & Rohini Pande & Natalia Rigol, 2019. "Household Matters: Revisiting the Returns to Capital among Female Microentrepreneurs," American Economic Review: Insights, American Economic Association, vol. 1(2), pages 141-160, September.
    40. Christopher Blattman & Nathan Fiala & Sebastian Martinez, 2014. "Generating Skilled Self-Employment in Developing Countries: Experimental Evidence from Uganda," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 697-752.
    41. Jennifer Alix-Garcia & David Saah, 2009. "The Effect of Refugee Inflows on Host Communities: Evidence from Tanzania," The World Bank Economic Review, World Bank, vol. 24(1), pages 148-170, November.
    42. Jose G. Montalvo & Marta Reynal-Querol, 2007. "Fighting against Malaria: Prevent Wars while Waiting for the "Miraculous" Vaccine," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 165-177, February.
    43. Martin Huber & Michael Lechner & Andreas Steinmayr, 2015. "Radius matching on the propensity score with bias adjustment: tuning parameters and finite sample behaviour," Empirical Economics, Springer, vol. 49(1), pages 1-31, August.
    44. Fallah, Belal & Krafft, Caroline & Wahba, Jackline, 2019. "The impact of refugees on employment and wages in Jordan," Journal of Development Economics, Elsevier, vol. 139(C), pages 203-216.
    45. David Lagakos, 2016. "Explaining Cross-Country Productivity Differences in Retail Trade," Journal of Political Economy, University of Chicago Press, vol. 124(2), pages 579-620.
    46. Alloush, Mohamad & Taylor, J. Edward & Gupta, Anubhab & Rojas Valdes, Ruben Irvin & Gonzalez-Estrada, Ernesto, 2017. "Economic Life in Refugee Camps," World Development, Elsevier, vol. 95(C), pages 334-347.
    47. Huber, Martin & Lechner, Michael & Wunsch, Conny, 2013. "The performance of estimators based on the propensity score," Journal of Econometrics, Elsevier, vol. 175(1), pages 1-21.
    48. Johannes Haushofer & Jeremy Shapiro, 2016. "The Short-term Impact of Unconditional Cash Transfers to the Poor: ExperimentalEvidence from Kenya," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1973-2042.
    49. Imbens,Guido W. & Rubin,Donald B., 2015. "Causal Inference for Statistics, Social, and Biomedical Sciences," Cambridge Books, Cambridge University Press, number 9780521885881.
    50. Alix-Garcia, Jennifer & Walker, Sarah & Bartlett, Anne & Onder, Harun & Sanghi, Apurva, 2018. "Do refugee camps help or hurt hosts? The case of Kakuma, Kenya," Journal of Development Economics, Elsevier, vol. 130(C), pages 66-83.
    51. Alberto Abadie & Guido W. Imbens, 2006. "Large Sample Properties of Matching Estimators for Average Treatment Effects," Econometrica, Econometric Society, vol. 74(1), pages 235-267, January.
    52. Juan Jose Diaz & Sudhanshu Handa, 2006. "An Assessment of Propensity Score Matching as a Nonexperimental Impact Estimator: Evidence from Mexico’s PROGRESA Program," Journal of Human Resources, University of Wisconsin Press, vol. 41(2).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. MacPherson, Claire & Sterck, Olivier, 2021. "Empowering refugees through cash and agriculture: A regression discontinuity design," Journal of Development Economics, Elsevier, vol. 149(C).
    2. Jules Gazeaud & Eric Mvukiyehe & Olivier Sterck, 2023. "Cash Transfers and Migration: Theory and Evidence from a Randomized Controlled Trial," The Review of Economics and Statistics, MIT Press, vol. 105(1), pages 143-157, January.
    3. Sibhatu, Kibrom T. & Arslan, Aslihan & Zucchini, Emanuele, 2022. "The effect of agricultural programs on dietary diversity and food security: Insights from the smallholder productivity promotion program in Zambia," Food Policy, Elsevier, vol. 113(C).
    4. Altındağ, Onur & O’Connell, Stephen D., 2023. "The short-lived effects of unconditional cash transfers to refugees," Journal of Development Economics, Elsevier, vol. 160(C).
    5. Vintar,Mirko & Beltramo,Theresa Parrish & Delius,Antonia Johanna Sophie & Egger,Dennis Timo & Pape,Utz Johann, 2022. "Impact of COVID-19 on Labor Market Outcomes of Refugees and Nationals in Kenya," Policy Research Working Paper Series 9960, The World Bank.
    6. Betts, Alexander & Flinder Stierna, Maria & Omata, Naohiko & Sterck, Olivier, 2023. "Refugees welcome? Inter-group interaction and host community attitude formation," World Development, Elsevier, vol. 161(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. MacPherson, Claire & Sterck, Olivier, 2021. "Empowering refugees through cash and agriculture: A regression discontinuity design," Journal of Development Economics, Elsevier, vol. 149(C).
    2. David McKenzie, 2017. "Identifying and Spurring High-Growth Entrepreneurship: Experimental Evidence from a Business Plan Competition," American Economic Review, American Economic Association, vol. 107(8), pages 2278-2307, August.
    3. Betts, Alexander & Flinder Stierna, Maria & Omata, Naohiko & Sterck, Olivier, 2023. "Refugees welcome? Inter-group interaction and host community attitude formation," World Development, Elsevier, vol. 161(C).
    4. Claire MacPherson & Olivier Sterck, 2019. "Humanitarian vs. Development Aid for Refugees: Evidence from a Regression Discontinuity Design," CSAE Working Paper Series 2019-15, Centre for the Study of African Economies, University of Oxford.
    5. Betts,Alexander Milton Stedman & Stierna,Maria Flinder & Omata,Naohiko & Sterck,Olivier Christian Brigitte, 2022. "Social Cohesion and Refugee-Host Interactions : Evidence from East Africa," Policy Research Working Paper Series 9917, The World Bank.
    6. Grover,Arti Goswami & Imbruno,Michele, 2020. "Using Experimental Evidence to Inform Firm Support Programs in Developing Countries," Policy Research Working Paper Series 9461, The World Bank.
    7. González-Uribe, Juanita & Reyes, Santiago, 2021. "Identifying and boosting “Gazelles”: Evidence from business accelerators," Journal of Financial Economics, Elsevier, vol. 139(1), pages 260-287.
    8. Antonia Grohmann & Lukas Menkhoff & Helke Seitz, 2022. "The Effect of Personalized Feedback on Small Enterprises’ Finances in Uganda," Economic Development and Cultural Change, University of Chicago Press, vol. 70(3), pages 1197-1227.
    9. Marco Caliendo & Stefan Tübbicke, 2020. "New evidence on long-term effects of start-up subsidies: matching estimates and their robustness," Empirical Economics, Springer, vol. 59(4), pages 1605-1631, October.
    10. Mano, Yukichi & Akoten, John & Yoshino, Yutaka & Sonobe, Tetsushi, 2014. "Teaching KAIZEN to small business owners: An experiment in a metalworking cluster in Nairobi," Journal of the Japanese and International Economies, Elsevier, vol. 33(C), pages 25-42.
    11. Verme, Paolo & Schuettler, Kirsten, 2021. "The impact of forced displacement on host communities: A review of the empirical literature in economics," Journal of Development Economics, Elsevier, vol. 150(C).
    12. Giambra, Samuele & McKenzie, David, 2021. "Self-employment and migration," World Development, Elsevier, vol. 141(C).
    13. Gabriela Calderon & Jesse M. Cunha & Giacomo De Giorgi, 2020. "Business Literacy and Development: Evidence from a Randomized Controlled Trial in Rural Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 68(2), pages 507-540.
    14. Jeffrey Smith & Arthur Sweetman, 2016. "Viewpoint: Estimating the causal effects of policies and programs," Canadian Journal of Economics, Canadian Economics Association, vol. 49(3), pages 871-905, August.
    15. Gazeaud, Jules & Khan, Nausheen & Mvukiyehe, Eric & Sterck, Olivier, 2023. "With or without him? Experimental evidence on cash grants and gender-sensitive trainings in Tunisia," Journal of Development Economics, Elsevier, vol. 165(C).
    16. Goller, Daniel & Lechner, Michael & Moczall, Andreas & Wolff, Joachim, 2020. "Does the estimation of the propensity score by machine learning improve matching estimation? The case of Germany's programmes for long term unemployed," Labour Economics, Elsevier, vol. 65(C).
    17. Oriana Bandiera & Robin Burgess & Erika Deserranno & Ricardo Morel & Imran Rasul & Munshi Sulaiman & Jack Thiemel, 2022. "Microfinance and Diversification," Economica, London School of Economics and Political Science, vol. 89(S1), pages 239-275, June.
    18. Lars Ivar Oppedal Berge & Kjetil Bjorvatn & Bertil Tungodden, 2015. "Human and Financial Capital for Microenterprise Development: Evidence from a Field and Lab Experiment," Management Science, INFORMS, vol. 61(4), pages 707-722, April.
    19. Ferman, Bruno, 2021. "Matching estimators with few treated and many control observations," Journal of Econometrics, Elsevier, vol. 225(2), pages 295-307.
    20. Siu, Jade & Sterck, Olivier & Rodgers, Cory, 2023. "The freedom to choose: Theory and quasi-experimental evidence on cash transfer restrictions," Journal of Development Economics, Elsevier, vol. 161(C).

    More about this item

    Keywords

    Cash transfers; Micro-enterprises; Market imperfections; Salop circle;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:167:y:2024:i:c:s0304387823001888. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/devec .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.