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Do Capital Grants Improve Microenterprise Productivity?

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  • Laurin James
  • Michael Koelle
  • Simon Quinn

Abstract

Can large capital injections increase the productivity of microenterprises? We use the lens of a production function to re-examine two previous randomised controlled trials that allocated capital grants to microenterprises. We find that productivity is higher for treated firms, and accounts for 16–34 percent of the revenue effects of capital grants. We find that treatment tilts the asset composition towards durables with a technology component: a result consistent with an important role for capital- embodied technology. These productivity effects are still present six years after the grants, suggesting that the intervention has put microenterprises on a different tra- jectory.

Suggested Citation

  • Laurin James & Michael Koelle & Simon Quinn, 2019. "Do Capital Grants Improve Microenterprise Productivity?," CSAE Working Paper Series 2019-13, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2019-13
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    References listed on IDEAS

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    1. Frank Windmeijer, 2018. "Testing Over- and Underidentification in Linear Models, with Applications to Dynamic Panel Data and Asset-Pricing Models," Bristol Economics Discussion Papers 18/696, School of Economics, University of Bristol, UK.
    2. Soderbom, Mans & Teal, Francis, 2004. "Size and efficiency in African manufacturing firms: evidence from firm-level panel data," Journal of Development Economics, Elsevier, vol. 73(1), pages 369-394, February.
    3. Wooldridge, Jeffrey M., 2009. "On estimating firm-level production functions using proxy variables to control for unobservables," Economics Letters, Elsevier, vol. 104(3), pages 112-114, September.
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    1. Vittorio Bassi & Raffaela Muoio & Tommaso Porzio & Ritwika Sen & Esau Tugume, 2022. "Achieving Scale Collectively," Econometrica, Econometric Society, vol. 90(6), pages 2937-2978, November.

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    More about this item

    Keywords

    Economic development Microenterprises Formality and informality embodied technology Total factor productivity;

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