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Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field

Author

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  • Reshmaan Hussam
  • Natalia Rigol
  • Benjamin N. Roth

Abstract

Identifying high-growth microentrepreneurs in low-income countries remains a challenge due to a scarcity of verifiable information. With a cash grant experiment in India we demonstrate that community knowledge can help target high-growth microentrepreneurs; while the average marginal return to capital in our sample is 9.4 percent per month, microentrepreneurs reported in the top third of the community are estimated to have marginal returns to capital between 24 percent and 30 percent per month. Further we find evidence that community members distort their predictions when they can influence the distribution of resources. Finally, we demonstrate that simple mechanisms can realign incentives for truthful reporting.

Suggested Citation

  • Reshmaan Hussam & Natalia Rigol & Benjamin N. Roth, 2022. "Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field," American Economic Review, American Economic Association, vol. 112(3), pages 861-898, March.
    • Handle: RePEc:aea:aecrev:v:112:y:2022:i:3:p:861-98
    DOI: 10.1257/aer.20200751
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    Cited by:

    1. Lucia Del Carpio & Samuel Kapon & Sylvain Chassang, 2022. "Using Divide-and-Conquer to Improve Tax Collection: Evidence from the Field," Working Papers 301, Princeton University, Department of Economics, Center for Economic Policy Studies..
    2. Tanner Regan & Martina Manara, 2022. "Ask a local: Improving the public pricing of land titles in urban Tanzania," Working Papers 2022-07, The George Washington University, Institute for International Economic Policy.
    3. Alhorr,Layane, 2024. "Virtual Windows Through Glass Walls? Digitalization for Low-Mobility Female Entrepreneurs," Policy Research Working Paper Series 10803, The World Bank.
    4. Lori Beaman & Dean Karlan & Bram Thuysbaert & Christopher Udry, 2023. "Selection Into Credit Markets: Evidence From Agriculture in Mali," Econometrica, Econometric Society, vol. 91(5), pages 1595-1627, September.
    5. Fiala, Nathan & Rose, Julian & Aryemo, Filder & Peters, Jörg, 2022. "The (very) long-run impacts of cash grants during a crisis," Ruhr Economic Papers 961, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. Federico Crippa, 2024. "Regret Analysis in Threshold Policy Design," Papers 2404.11767, arXiv.org, revised Apr 2025.
    7. Diego Javier Ubfal, 2023. "What Works in Supporting Women-led Businesses?," World Bank Publications - Reports 38564, The World Bank Group.
    8. Olga Takács & János Vincze, 2023. "Heterogeneous wage structure effects: a partial European East-West comparison," CERS-IE WORKING PAPERS 2305, Institute of Economics, Centre for Economic and Regional Studies.
    9. Gharad Bryan & Dean Karlan & Adam Osman, 2024. "Big Loans to Small Businesses: Predicting Winners and Losers in an Entrepreneurial Lending Experiment," American Economic Review, American Economic Association, vol. 114(9), pages 2825-2860, September.
    10. Christoph Carnehl & Marco Ottaviani & Justus Preusser, 2024. "Designing Scientific Grants," Papers 2410.12356, arXiv.org.
    11. Pablo Balán & Augustin Bergeron & Gabriel Tourek & Jonathan L. Weigel, 2022. "Local Elites as State Capacity: How City Chiefs Use Local Information to Increase Tax Compliance in the Democratic Republic of the Congo," American Economic Review, American Economic Association, vol. 112(3), pages 762-797, March.
    12. Christoph Carnehl & Marco Ottaviani & Justus Preusser, 2024. "Designing Scientific Grants," NBER Chapters, in: Entrepreneurship and Innovation Policy and the Economy, volume 4, pages 139-178, National Bureau of Economic Research, Inc.
    13. Martina Manara & Tanner Regan, 2025. "Ask a Local: Improving the Public Pricing of Land Titles in Urban Tanzania," The Review of Economics and Statistics, MIT Press, vol. 107(1), pages 188-203, January.
    14. Fiala, Nathan & Rose, Julian & Ankel-Peters, Jörg & Aryemo, Filder, 2023. "The (very) long-run impacts of cash grants during a crisis," OSF Preprints rdjn9_v1, Center for Open Science.
    15. Lunzheng Li & Philippos Louis & Zacharias Maniadis & Dimitrios Xefteris, 2024. "Reciprocity in Peer Assessments," University of Cyprus Working Papers in Economics 06-2024, University of Cyprus Department of Economics.
    16. Olga Takács & János Vincze, 2023. "Where is the pain the most acute? The market segments particularly affected by gender wage discrimination in Hungary," CERS-IE WORKING PAPERS 2304, Institute of Economics, Centre for Economic and Regional Studies.
    17. Iacovone,Leonardo & Mckenzie,David J. & Meager,Rachael, 2023. "Bayesian Impact Evaluation with Informative Priors : An Application to a ColombianManagement and Export Improvement Program," Policy Research Working Paper Series 10274, The World Bank.
    18. Haushofer, Johannes & Niehaus, Paul & Paramo, Carlos & Miguel, Edward & Walker, Michael W, 2022. "Targeting Impact Versus Deprivation," Department of Economics, Working Paper Series qt07j8n9vz, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    19. Jason Milionis & Jens Ernstberger & Joseph Bonneau & Scott Duke Kominers & Tim Roughgarden, 2025. "Incentive-Compatible Recovery from Manipulated Signals, with Applications to Decentralized Physical Infrastructure," Papers 2503.07558, arXiv.org.
    20. Bernardus F Nazar Van Doornik & Armando Gomes & David Schoenherr & Janis Skrastins, 2023. "Financial access and labor market outcomes: evidence from credit lotteries," BIS Working Papers 1071, Bank for International Settlements.
    21. Matthew Olckers & Toby Walsh, 2022. "Manipulation and Peer Mechanisms: A Survey," Papers 2210.01984, arXiv.org, revised May 2024.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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