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Human and financial capital for microenterprise development: Evidence from a field and lab experiment

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  • Lars Ivar Oppedal Berge
  • Kjetil Bjorvatn
  • Bertil Tungodden

Abstract

Which is the most binding constraint to microenterprise development, human capital or financial capital? To answer this question, we present the first field experiment that jointly investigates these two constraints for poor microentrepreneurs, by introducing separate treatments of business training and a business grant. We combine survey data and data from a lab experiment to investigate treatment effects on business results, business practices, business skills and mind-set. Our study demonstrates a strong effect of business training on male entrepreneurs, while the effect on female entrepreneurs is much more muted. There is no effect of the business grant for either males or females. The results suggest that human capital may be the more important constraint for poor microentrepreneurs, but also point to the need for more comprehensive measures to promote development among female entrepreneurs.

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Bibliographic Info

Paper provided by CMI (Chr. Michelsen Institute), Bergen, Norway in its series CMI Working Papers with number 1.

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Length: 51 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:chm:wpaper:wp2011-1

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  1. 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.
  2. Suresh de Mel & David McKenzie & Christopher Woodruff, 2008. "Returns to Capital in Microenterprises: Evidence from a Field Experiment," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1329-1372, November.
  3. Pamela Jakiela & Edward Miguel & Vera L. te Velde, 2010. "You've Earned It: Combining Field and Lab Experiments to Estimate the Impact of Human Capital on Social Preferences," NBER Working Papers 16449, National Bureau of Economic Research, Inc.
  4. Dean Karlan & Martin Valdivia, 2011. "Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 510-527, May.
  5. Miriam Bruhn & Dean Karlan & Antoinette Schoar, 2010. "What Capital Is Missing in Developing Countries?," American Economic Review, American Economic Association, vol. 100(2), pages 629-33, May.
  6. Emran, M. Shahe & Morshed, A.K.M Mahbub & Stiglitz, Joseph E., 2011. "Microfinance and Missing Markets," MPRA Paper 41451, University Library of Munich, Germany.
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Cited by:
  1. Marcel Fafchamps & David McKenzie & Simon R. Quinn & Christopher Woodruff, 2011. "When is capital enough to get female microenterprises growing? Evidence from a randomized experiment in Ghana," NBER Working Papers 17207, National Bureau of Economic Research, Inc.
  2. Mano, Yukichi & Iddrisu, Alhassan & Yoshino, Yutaka & Sonobe, Tetsushi, 2012. "How Can Micro and Small Enterprises in Sub-Saharan Africa Become More Productive? The Impacts of Experimental Basic Managerial Training," World Development, Elsevier, vol. 40(3), pages 458-468.
  3. Fafchamps, Marcel & McKenzie, David & McKenzie, David & Quinn, Simon & Woodruff, Christopher, 2011. "When is capital enough to get female enterprises growing ? evidence from a randomized experiment in Ghana," Policy Research Working Paper Series 5706, The World Bank.
  4. Fairlie, Robert W & Karlan, Dean S. & Zinman, Jonathan, 2012. "Behind the GATE Experiment: Evidence on Effects of and Rationales for Subsidized Entrepreneurship Training," CEPR Discussion Papers 8823, C.E.P.R. Discussion Papers.
  5. McKenzie, David, 2011. "How can we learn whether firm policies are working in africa ? challenges (and solutions?) for experiments and structural models," Policy Research Working Paper Series 5632, The World Bank.

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