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Can capital grants help microenterprises reach the productivity level of SMEs? Evidence from an experiment in Sri Lanka

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  • Laurin Janes
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    Abstract

    Using data from a randomized control trial in Sri Lanka, this paper explores whether cash and in-kind grants helped microenterprises approach the productivity level of SMEs. The paper first estimates production functions and subsequently treatment effects on TFP levels. Most significantly, more able and more risk-averse owners benefit from the larger in-kind grant. Also, the larger in-kind grants allowed for increases in productivity to the least productive firms. The paper then uses data from a representative sample of formal firms to put the TFP levels and treatment effects in the microenterprises into perspective. The results suggest that the least productive firms where able to catch up with the average microenterprise and formal SMEs, while a gap remains with large firms. This finding encourages a positive view of the potential for productivity growth in microenterprises.

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    File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/csae-wps-2013-18.pdf
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    Bibliographic Info

    Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2013-18.

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    Date of creation: 2013
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    Handle: RePEc:csa:wpaper:2013-18

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    Keywords: Economic development; microenterprises; formal informal; total factor productivity; embodied technology;

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    1. Claudia Martínez A. & Esteban Puentes & Jaime Ruiz-Tagle, 2013. "Micro-Entrepreneurship Training and Asset Transfers: Short Term Impacts on the Poor," Working Papers, University of Chile, Department of Economics wp380, University of Chile, Department of Economics.
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    11. Fafchamps, Marcel & McKenzie, David J. & Quinn, Simon & Woodruff, Christopher, 2011. "When is capital enough to get female microenterprises growing? Evidence from a randomized experiment in Ghana," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8466, C.E.P.R. Discussion Papers.
    12. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, Elsevier, vol. 87(1), pages 115-143, August.
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    14. Khundker N, 1989. "Technology adaptation and innovations in the informal sector of dhaka (Bangladesh)," ILO Working Papers, International Labour Organization 267516, International Labour Organization.
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