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Monitoring in Small Firms: Experimental Evidence from Kenyan Public Transit

Author

Listed:
  • Erin M. Kelley
  • Gregory Lane
  • David Schönholzer

Abstract

Small firms struggle to grow beyond a few employees. We introduce monitoring devices into commuter minibuses in Kenya and randomize which minibus owners have access to the data using a novel mobile app. We find that treated vehicle owners modify the terms of the contract to induce higher effort and lower risk taking from their drivers. This reduces firm costs and increases firm profitability. There is suggestive evidence that some firms expand. These results suggest that small firms may be able to utilize monitoring technologies to overcome problems of moral hazard and enhance their profitability.

Suggested Citation

  • Erin M. Kelley & Gregory Lane & David Schönholzer, 2024. "Monitoring in Small Firms: Experimental Evidence from Kenyan Public Transit," American Economic Review, American Economic Association, vol. 114(10), pages 3119-3160, October.
    • Handle: RePEc:aea:aecrev:v:114:y:2024:i:10:p:3119-60
    DOI: 10.1257/aer.20210987
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    References listed on IDEAS

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    1. Isaiah Andrews & Matthew Gentzkow & Jesse M. Shapiro, 2017. "Measuring the Sensitivity of Parameter Estimates to Estimation Moments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1553-1592.
    2. Greer K. Gosnell & John A. List & Robert D. Metcalfe, 2020. "The Impact of Management Practices on Employee Productivity: A Field Experiment with Airline Captains," Journal of Political Economy, University of Chicago Press, vol. 128(4), pages 1195-1233.
    3. David Atkin & Amit K. Khandelwal & Adam Osman, 2017. "Exporting and Firm Performance: Evidence from a Randomized Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(2), pages 551-615.
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    Cited by:

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    2. Kerzhner, Tamara & Chilumpha, Zayeenab & Jana, Wilfred & Tukula, Sekani & Arroyo, Fatima, 2025. "“I have no choice”: Agency, poverty and embodied experience in urban transport," Journal of Transport Geography, Elsevier, vol. 124(C).
    3. Reca Sarfati & Vod Vilfort, 2025. ""Post" Pre-Analysis Plans: Valid Inference for Non-Preregistered Specifications," Papers 2510.02507, arXiv.org.

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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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