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How can we learn whether firm policies are working in africa ? challenges (and solutions?) for experiments and structural models

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  • McKenzie, David

Abstract

Firm productivity is low in African countries, prompting governments to try a number of active policies to improve it. Yet despite the millions of dollars spent on these policies, we are far from a situation where we know whether many of them are yielding the desired payoffs. This paper establishes some basic facts about the number and heterogeneity of firms in different sub-Saharan African countries and discusses their implications for experimental and structural approaches towards trying to estimate firm policy impacts. It shows that the typical firm program such as a matching grant scheme or business training program involves only 100 to 300 firms, which are often very heterogeneous in terms of employment and sales levels. As a result, standard experimental designs will lack any power to detect reasonable sized treatment impacts, while structural models which assume common production technologies and few missing markets will be ill-suited to capture the key constraints firms face. Nevertheless, the author suggests a way forward which involves focusing on a more homogeneous sub-sample of firms and collecting a lot more data on them than is typically collected.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5632.

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Date of creation: 01 Apr 2011
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Handle: RePEc:wbk:wbrwps:5632

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Keywords: Microfinance; Small Scale Enterprise; E-Business; ICT Policy and Strategies; Banks&Banking Reform;

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References

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  1. Nick Bloom, 2011. "Does management matter?: evidence from India," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 36391, London School of Economics and Political Science, LSE Library.
  2. Fafchamps, Marcel; McKenzie; Quinn, Simon; Woodruff, Christopher, 2011. "When is capital enough to get female microenterprises growing? Evidence from a randomized experiment in Ghana," CAGE Online Working Paper Series, Competitive Advantage in the Global Economy (CAGE) 50, Competitive Advantage in the Global Economy (CAGE).
  3. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2007. "Returns to Capital in Microenterprises: Evidence from a Field Experiment," IZA Discussion Papers 2934, Institute for the Study of Labor (IZA).
  4. McKenzie, David, 2011. "Beyond baseline and follow-up : the case for more t in experiments," Policy Research Working Paper Series, The World Bank 5639, The World Bank.
  5. Harrison, Ann E. & Lin, Justin Yifu & Xu, Lixin Colin, 2014. "Explaining Africa’s (Dis)advantage," World Development, Elsevier, Elsevier, vol. 63(C), pages 59-77.
  6. Dijk, Michiel van, 2002. "South African manufacturing performance in international perspective, 1970-1999," GGDC Research Memorandum, Groningen Growth and Development Centre, University of Groningen 200258, Groningen Growth and Development Centre, University of Groningen.
  7. Karlan, Dean S. & Zinman, Jonathan, 2009. "Expanding Microenterprise Credit Access: Using Randomized Supply Decisions to Estimate the Impacts in Manila," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7396, C.E.P.R. Discussion Papers.
  8. Lars Ivar Oppedal Berge & Kjetil Bjorvatn & Bertil Tungodden, 2011. "Human and financial capital for microenterprise development: Evidence from a field and lab experiment," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway 1, CMI (Chr. Michelsen Institute), Bergen, Norway.
  9. Bruhn, Miriam & McKenzie, David, 2008. "In pursuit of balance : randomization in practice in development field experiments," Policy Research Working Paper Series, The World Bank 4752, The World Bank.
  10. Marcel Fafchamps & Simon Quinn & David McKenzie and Christopher Woodruff, 2010. "Using PDA consistency checks to increase the precision of profits and sales measurement in panels," Economics Series Working Papers, University of Oxford, Department of Economics CSAE WPS/2010-19, University of Oxford, Department of Economics.
  11. David McKenzie, 2010. "Impact Assessments in Finance and Private Sector Development: What Have We Learned and What Should We Learn?," World Bank Research Observer, World Bank Group, World Bank Group, vol. 25(2), pages 209-233, August.
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Cited by:
  1. McKenzie, David J. & Woodruff, Christopher, 2013. "What are we learning from business training and entrepreneurship evaluations around the developing world?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9564, C.E.P.R. Discussion Papers.

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