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Testing alternative measures of microenterprise profits and net worth

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Author Info

  • Lisa Daniels

    (Department of Economics, Washington College, Chestertown MD, U. S. A.)

Abstract

Using data from 448 microenterprises in Zimbabwe, this paper examines five alternative measures of profits and five alternative measures of net worth. The results show that the single-question proxies are too difficult for proprietors to answer, whereas the most complex profit measures generate many negative estimates. The best measure of profits, based on three questions, could be answered by all proprietors and it avoids recall problems associated with sales and expenses. Among the net worth proxies, all of the measures are positively correlated. Nonetheless, the proxy based on fixed assets, accounts receivable, debt, and inventory, showed the highest correlation with the full measure of net worth. Copyright © 2001 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jid.781
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 13 (2001)
Issue (Month): 5 ()
Pages: 599-614

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Handle: RePEc:wly:jintdv:v:13:y:2001:i:5:p:599-614

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Web page: http://www3.interscience.wiley.com/journal/5102/home

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  1. Daniels, Lisa & Mead, Donald C, 1998. "The Contribution of Small Enterprises to Household and National Income in Kenya," Economic Development and Cultural Change, University of Chicago Press, vol. 47(1), pages 45-71, October.
  2. Vijverberg, W., 1988. "Profits From Self-Employment - A Case Study Of Cote D'Ivoire," Papers 43, World Bank - Living Standards Measurement.
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Cited by:
  1. Ali, Merima & Peerlings, Jack, 2011. "Value Added of Cluster Membership for Micro Enterprises of the Handloom Sector in Ethiopia," World Development, Elsevier, vol. 39(3), pages 363-374, March.
  2. Robinson, Jonathan & Dupas, Pascaline, 2009. "Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya," Santa Cruz Department of Economics, Working Paper Series qt34w0w53t, Department of Economics, UC Santa Cruz.
  3. 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.
  4. Martijn Boermans & Daan Willebrands, 2012. "Financial constraints, risk taking and firm performance: Recent evidence from microfinance clients in Tanzania," DNB Working Papers 358, Netherlands Central Bank, Research Department.
  5. Masakure, Oliver & Cranfield, John & Henson, Spencer, 2008. "The Financial Performance of Non-farm Microenterprises in Ghana," World Development, Elsevier, vol. 36(12), pages 2733-2762, December.
  6. Willebrands, Daan & Lammers, Judith & Hartog, Joop, 2012. "A successful businessman is not a gambler. Risk attitude and business performance among small enterprises in Nigeria," Journal of Economic Psychology, Elsevier, vol. 33(2), pages 342-354.
  7. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2007. "Measuring microenterprise profits : don't ask how the sausage is made," Policy Research Working Paper Series 4229, The World Bank.

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