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How Can We Learn Whether Firm Policies Are Working in Africa? Challenges (and Solutions?) For Experiments and Structural Models -super-†

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  • David McKenzie

Abstract

Firm productivity is low in African countries, prompting governments to try a number of active policies to improve it. Yet despite the millions of dollars spent on these policies, we are far from a situation where we know whether many of them are yielding the desired payoffs. This article establishes some basic facts about the number and heterogeneity of firms in different Sub-Saharan African countries and discusses their implications for experimental and structural approaches towards trying to estimate firm policy impacts. It shows that the typical firm programme such as a matching grant scheme or business training programme involves only 100 to 300 firms, which are often very heterogeneous in terms of employment and sales levels. As a result, standard experimental designs will lack any power to detect reasonably sized treatment impacts, while structural models which assume common production technologies and few missing markets will be ill-suited to capture the key constraints firms face. Nevertheless, I suggest a way forward which involves focusing on a more homogeneous sub-sample of firms and collecting a lot more data on them than is typically collected. Copyright 2011 , Oxford University Press.

Suggested Citation

  • David McKenzie, 2011. "How Can We Learn Whether Firm Policies Are Working in Africa? Challenges (and Solutions?) For Experiments and Structural Models -super-†," Journal of African Economies, Centre for the Study of African Economies, vol. 20(4), pages 600-625, August.
  • Handle: RePEc:oup:jafrec:v:20:y:2011:i:4:p:600-625
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    File URL: http://hdl.handle.net/10.1093/jae/ejr024
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    Cited by:

    1. Miriam Bruhn & David McKenzie, 2014. "Entry Regulation and the Formalization of Microenterprises in Developing Countries," The World Bank Research Observer, World Bank Group, vol. 29(2), pages 186-201.
    2. Mattoo, Aaditya & Cadot, Olivier & Gourdon, Julien & Fernandes, Ana Margarida, 2011. "Impact Evaluation of Trade Interventions: Paving the Way," CEPR Discussion Papers 8638, C.E.P.R. Discussion Papers.
    3. 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 Group, vol. 29(1), pages 48-82.
    4. Ondřej Dvouletý & Stjepan Srhoj & Smaranda Pantea, 2021. "Public SME grants and firm performance in European Union: A systematic review of empirical evidence," Small Business Economics, Springer, vol. 57(1), pages 243-263, June.
    5. McKenzie, David, 2016. "Can Business Owners Form Accurate Counterfactuals? Eliciting Treatment and Control Beliefs about Their Outcomes in the Alternat," CEPR Discussion Papers 11280, C.E.P.R. Discussion Papers.
    6. Lauro Gonzalez & Caio Piza & Tulio Cravo & Samer Abdelnour & Linnet Taylor, 2014. "Protocol for a Systematic Review: The Impacts of Business Support Services for Small and Medium Enterprises on Firm Performance in Low‐and Middle‐Income Countries: A Systematic Review," Campbell Systematic Reviews, John Wiley & Sons, vol. 10(1), pages 1-46.
    7. Axel Demenet, 2016. "Does Managerial Capital also Matter Among Micro and Small Firms in Developing Countries?," Working Papers DT/2016/12, DIAL (Développement, Institutions et Mondialisation).
    8. Túlio A. Cravo & Caio Piza, 2019. "The impact of business-support services on firm performance: a meta-analysis," Small Business Economics, Springer, vol. 53(3), pages 753-770, October.
    9. Campos, Francisco & Coville, Aidan & Fernandes, Ana M. & Goldstein, Markus & McKenzie, David, 2014. "Learning from the experiments that never happened: Lessons from trying to conduct randomized evaluations of matching grant programs in Africa," Journal of the Japanese and International Economies, Elsevier, vol. 33(C), pages 4-24.
    10. Evans Mwasiaji, 2020. "Quality Imperative Value Addition and the Performance of Medium Scale Manufacturing Enterprises in Kenya," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 8(1), pages 39-46.
    11. Long Thanh Giang & Cuong Viet Nguyen & Tuyen Quang Tran, 2016. "Firm agglomeration and local poverty reduction: evidence from an economy in transition," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 30(1), pages 80-98, May.
    12. Long Thanh Giang & Cuong Viet Nguyen & Tuyen Quang Tran, 2015. "A Linkage between Firm Agglomeration and Poverty Reduction First evidence in Vietnam," Working Papers 2015-617, Department of Research, Ipag Business School.
    13. Szirmai A. & Gebreeyesus M. & Guadagno F. & Verspagen B., 2013. "Promoting productive employment in Sub‐Saharan Africa : a review of the literature," MERIT Working Papers 2013-062, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    14. Kersten, Renate & Harms, Job & Liket, Kellie & Maas, Karen, 2017. "Small Firms, large Impact? A systematic review of the SME Finance Literature," World Development, Elsevier, vol. 97(C), pages 330-348.

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