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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.

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Bibliographic Info

Article provided by Centre for the Study of African Economies (CSAE) in its journal Journal of African Economies.

Volume (Year): 20 (2011)
Issue (Month): 4 (August)
Pages: 600-625

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Handle: RePEc:oup:jafrec:v:20:y:2011:i:4:p:600-625

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Cited by:
  1. Cadot, Olivier & Fernandes, Ana M. & Gourdon, Julien & Mattoo, Aaditya, 2011. "Impact evaluation of trade interventions : paving the way," Policy Research Working Paper Series 5877, The World Bank.

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