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Returns to Capital in Microenterprises: Evidence from a Field Experiment

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  • Suresh de Mel

    (University of Peradeniya)

  • David McKenzie

    (World Bank)

  • Christopher Woodruff

    (University of California, San Diego)

Abstract

We use randomized grants to generate shocks to capital stock for a set of Sri Lankan microenterprises. We find the average real return to capital in these enterprises is 4.6%-5.3% per year), substantially higher than market interest rates. We then examine the heterogeneity of treatment effects. Returns are found to vary with entrepreneurial ability and with household wealth, but not to vary with measures of risk aversion or uncertainty. Treatment impacts are also significantly larger for enterprises owned by males; indeed, we find no positive return in enterprises owned by females. (c) 2008 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 123 (2008)
Issue (Month): 4 (November)
Pages: 1329-1372

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Handle: RePEc:tpr:qjecon:v:123:y:2008:i:4:p:1329-1372

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  1. Simeon Djankov & Edward Miguel & Yingyi Qian & Gerard Roland & Ekaterina Zhuravskaya, 2005. "Who are Russia’s entrepreneurs?," Working Papers w0048, Center for Economic and Financial Research (CEFIR).
  2. 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.
  3. David S. Lee, 2005. "Training, Wages, and Sample Selection: Estimating Sharp Bounds on Treatment Effects," NBER Working Papers 11721, National Bureau of Economic Research, Inc.
  4. Banerjee, Abhijit & Duflo, Esther, 2004. "Do Firms Want to Borrow More? Testing Credit Constraints Using a Directed Lending Program," CEPR Discussion Papers 4681, C.E.P.R. Discussion Papers.
  5. Edward Miguel & Michael Kremer, 2004. "Worms: Identifying Impacts on Education and Health in the Presence of Treatment Externalities," Econometrica, Econometric Society, vol. 72(1), pages 159-217, 01.
  6. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
  7. Filmer, Deon & Pritchett, Lant, 1998. "Estimating wealth effects without expenditure data - or tears : with an application to educational enrollments in states of India," Policy Research Working Paper Series 1994, The World Bank.
  8. Aghion, Philippe & Bolton, Patrick, 1997. "A Theory of Trickle-Down Growth and Development," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 151-72, April.
  9. John Gibson & David McKenzie, 2007. "Using the Global Positioning System (GPS) in Household Surveys For Better Economics and Better Policy," Working Papers in Economics 07/04, University of Waikato, Department of Economics.
  10. Lybbert, Travis J. & Barrett, Christopher B. & McPeak, John G. & Luseno, Winnie K., 2007. "Bayesian Herders: Updating of Rainfall Beliefs in Response to External Forecasts," World Development, Elsevier, vol. 35(3), pages 480-497, March.
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  1. The new must-read paper for field experimenters
    by Chris Blattman in Chris Blattman on 2010-12-21 02:07:32
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