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Minding small change among small firms in Kenya

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  • Beaman, Lori
  • Magruder, Jeremy
  • Robinson, Jonathan

Abstract

Many micro-enterprises in Kenya have low productivity. We focus on one particular business decision which may indicate low productivity: keeping enough change on hand to break larger bills. This is a surprisingly large problem. Our estimates suggest that the average firm loses approximately 5–8% of total profits because they do not have enough change. We conducted two experiments to shed light on why this happens: surveying firms weekly about lost sales, thereby increasing the salience of change, and explicitly informing firms about lost sales. We find that both interventions significantly altered change management and reduced lost sales. This largely rules out many potential explanations such as the risk of theft or the costs of holding change being too high. One explanation consistent with firms' response to the survey and information on their lost sales is that firms were not perfectly attentive to change management prior to the interventions.

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  • Beaman, Lori & Magruder, Jeremy & Robinson, Jonathan, 2014. "Minding small change among small firms in Kenya," Journal of Development Economics, Elsevier, vol. 108(C), pages 69-86.
  • Handle: RePEc:eee:deveco:v:108:y:2014:i:c:p:69-86
    DOI: 10.1016/j.jdeveco.2013.12.010
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    3. Emily A. Beam & David McKenzie & Dean Yang, 2016. "Unilateral Facilitation Does Not Raise International Labor Migration from the Philippines," Economic Development and Cultural Change, University of Chicago Press, vol. 64(2), pages 323-368.
    4. Mayneris, Florian & Poncet, Sandra & Zhang, Tao, 2018. "Improving or disappearing: Firm-level adjustments to minimum wages in China," Journal of Development Economics, Elsevier, vol. 135(C), pages 20-42.
    5. Singh, Nirvikar, 2018. "Financial Inclusion: Concepts, Issues and Policies for India," Santa Cruz Department of Economics, Working Paper Series qt98p5m37s, Department of Economics, UC Santa Cruz.
    6. David Atkin & Azam Chaudhry & Shamyla Chaudry & Amit K. Khandelwal & Eric Verhoogen, 2017. "Organizational Barriers to Technology Adoption: Evidence from Soccer-Ball Producers in Pakistan," The Quarterly Journal of Economics, Oxford University Press, vol. 132(3), pages 1101-1164.
    7. Emily C. Keats & Jai Das & Ayesha Siddiqua & Daina Als & Zulfiqar A. Bhutta, 2018. "PROTOCOL: Large‐scale food fortification (LSFF) efforts for improving health outcomes in low‐ and middle‐income countries: a systematic review," Campbell Systematic Reviews, John Wiley & Sons, vol. 14(1), pages 1-30.
    8. Julia Seither, 2021. "Keeping up with the Joneses: economic impacts of overconfidence in micro-entrepreneurs," NOVAFRICA Working Paper Series wp2108, Universidade Nova de Lisboa, Faculdade de Economia, NOVAFRICA.
    9. Massimo Filippini & Suchita Srinivasan, 2020. "Voluntary adoption of environmental standards and limited attention: Evidence from the food and beverage industry in Vietnam," CER-ETH Economics working paper series 20/338, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    10. Mckenzie,David J., 2020. "Small Business Training to Improve Management Practices in Developing Countries: Reassessing the Evidence for 'Training Doesn’t Work'," Policy Research Working Paper Series 9408, The World Bank.
    11. Réka Juhász & Mara P. Squicciarini & Nico Voigtländer, 2020. "Technology Adoption and Productivity Growth: Evidence from Industrialization in France," NBER Working Papers 27503, National Bureau of Economic Research, Inc.
    12. Kondor, Péter & Koren, Miklós & Pál, Jenő & Szeidl, Ádám, 2014. "Cégek kapcsolati hálózatainak gazdasági szerepe [The economic role of the networks of connections possessed by firms]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 1341-1360.
    13. Benjamin Handel & Joshua Schwartzstein, 2018. "Frictions or Mental Gaps: What's Behind the Information We (Don't) Use and When Do We Care?," Journal of Economic Perspectives, American Economic Association, vol. 32(1), pages 155-178, Winter.
    14. Mendi, Pedro & Mudida, Robert, 2018. "The effect on innovation of beginning informal: Empirical evidence from Kenya," Technological Forecasting and Social Change, Elsevier, vol. 131(C), pages 326-335.

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