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Measuring the return on household enterprise: What matters most for whom?

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  • Samphantharak, Krislert
  • Townsend, Robert M.

Abstract

Return on assets (ROA) of household enterprise is crucial for understanding the productivity of households in developing economies. Yet the definition and measurement of household enterprise ROA remain inconsistent or unclear. We illustrate potential measurement problems with examples from various surveys. We take advantage of a detailed household survey and analyze what matters and for whom. The three issues that matter most for measurement of household enterprise ROA are the choice of accrual versus cash income, the treatment of household labor in enterprise income, and the treatment of non-factor income. This sensitivity matters most for a poorer region dominated by cultivation relative to a richer region with non-farm enterprises. Though the choice between accrued and cash income matters less when the frequency of the data declines, there remains high sensitivity in annualized data. We provide recommendations on how to improve the survey questionnaires for more accurate measurement in field research.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 98 (2012)
Issue (Month): 1 ()
Pages: 58-70

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Handle: RePEc:eee:deveco:v:98:y:2012:i:1:p:58-70

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Web page: http://www.elsevier.com/locate/devec

Related research

Keywords: Return on assets; Household enterprise; Measurement; Income; Assets; Survey; Questionnaire design;

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  1. Dillon, Andrew & Bardasi, Elena & Beegle, Kathleen & Serneels, Pieter, 2010. "Explaining Variation in Child Labor Statistics," IZA Discussion Papers 5156, Institute for the Study of Labor (IZA).
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  3. Christopher Udry & Santosh Anagol, 2006. "The Return to Capital in Ghana," American Economic Review, American Economic Association, vol. 96(2), pages 388-393, May.
  4. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, October.
  5. 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.
  6. Esther Duflo & Michael Kremer & Jonathan Robinson, 2008. "How High Are Rates of Return to Fertilizer? Evidence from Field Experiments in Kenya," American Economic Review, American Economic Association, vol. 98(2), pages 482-88, May.
  7. Banerjee, Abhijit V. & Duflo, Esther, 2005. "Growth Theory through the Lens of Development Economics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 7, pages 473-552 Elsevier.
  8. David McKenzie & Christopher Woodruff, 2008. "Experimental Evidence on Returns to Capital and Access to Finance in Mexico," World Bank Economic Review, World Bank Group, vol. 22(3), pages 457-482, November.
  9. anonymous, 2000. "The brave new world of agriculture," EconSouth, Federal Reserve Bank of Atlanta, issue Q3, pages 8-13.
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