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Do interventions targeted at micro-entrepreneurs and small and medium-sized firms create jobs? A systematic review of the evidence for low and middle income countries

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  • Grimm, Michael
  • Paffhausen, Anna Luisa

Abstract

Worldwide, 600 million jobs are needed over the next 15years to keep employment rates at their current level. Because most employment in low and middle income countries is in micro-, small and medium-sized enterprises, governments, non-governmental organizations and donors spend on targeted programs and broader policies to enhance employment creation in these firms. But despite these efforts, not much is known about which of these interventions are really effective. This systematic review synthesizes the existing evidence on the employment impact of these programs. The results show that the effects have so far been very modest. Even if many interventions were relatively successful in boosting self-employment, expanding employment in already existing firms is generally more difficult but eventually easier in somewhat larger firms compared to very small firms. This finding is also true in relative terms, but it is probably not fully independent from the contexts in which firms of different sizes have been observed. The effects of finance interventions have on average been weaker than the effects of entrepreneurship training or business development services. Our study also reveals that about a third of the interventions covered by this review are not primarily designed to create employment but rather strive for income stabilization and poverty reduction. A further striking finding is that the study design matters for the impacts found; randomized controlled trials find systematically smaller effects than quasi-experimental studies. A significant shortcoming of the literature is that almost nothing is known about long term effects and cost-effectiveness and many studies fail to provide a detailed analysis of why certain effects occurred or did not occur — making it hard to extrapolate lessons.

Suggested Citation

  • Grimm, Michael & Paffhausen, Anna Luisa, 2015. "Do interventions targeted at micro-entrepreneurs and small and medium-sized firms create jobs? A systematic review of the evidence for low and middle income countries," Labour Economics, Elsevier, vol. 32(C), pages 67-85.
  • Handle: RePEc:eee:labeco:v:32:y:2015:i:c:p:67-85
    DOI: 10.1016/j.labeco.2015.01.003
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    Cited by:

    1. Björn Nilsson, 2019. "The School-to-Work Transition in Developing Countries," Journal of Development Studies, Taylor & Francis Journals, vol. 55(5), pages 745-764, May.
    2. Yoonyoung Cho & David Robalino & Samantha Watson, 2016. "Supporting self-employment and small-scale entrepreneurship: potential programs to improve livelihoods for vulnerable workers," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-26, December.
    3. David McKenzie, 2017. "Identifying and Spurring High-Growth Entrepreneurship: Experimental Evidence from a Business Plan Competition," American Economic Review, American Economic Association, vol. 107(8), pages 2278-2307, August.
    4. repec:ate:journl:ajbev4i4-4 is not listed on IDEAS
    5. Axel Demenet, 2016. "Does Managerial Capital also Matter Among Micro and Small Firms in Developing Countries?," Working Papers DT/2016/12, DIAL (Développement, Institutions et Mondialisation).
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    7. Grabrucker, Katharina & Grimm, Michael, 2018. "Does crime deter South Africans from self-employment?," Journal of Comparative Economics, Elsevier, vol. 46(2), pages 413-435.
    8. Blattman, Christopher & Dercon, Stefan, 2016. "Occupational choice in early industrializing societies: Experimental evidence on the income and health effects of industrial and entrepreneurial work," CEPR Discussion Papers 11556, C.E.P.R. Discussion Papers.
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    11. Kluve, Jochen & Puerto, Susanna & Robalino, David & Romero, José Manuel & Rother, Friederike & Stöterau, Jonathan & Weidenkaff, Felix & Witte, Marc, 2016. "Do Youth Employment Programs Improve Labor Market Outcomes? A Systematic Review," Ruhr Economic Papers 648, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    12. Fox,Louise & Kaul,Upaasna, 2018. "The evidence is in : how should youth employment programs in low-income countries be designed ?," Policy Research Working Paper Series 8500, The World Bank.
    13. David Card & Jochen Kluve & Andrea Weber, 2018. "What Works? A Meta Analysis of Recent Active Labor Market Program Evaluations," Journal of the European Economic Association, European Economic Association, vol. 16(3), pages 894-931.
    14. Burchell, Brendan. & Coutts, Adam. & Hall, Edward. & Pye, Nick., 2015. "Self-employment programmes for young people : a review of the context, policies and evidence," ILO Working Papers 994898993402676, International Labour Organization.
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    17. repec:eee:labeco:v:47:y:2017:i:c:p:75-95 is not listed on IDEAS
    18. Erhardt, Eva, 2017. "Microfinance beyond self-employment: Evidence for firms in Bulgaria," MPRA Paper 79294, University Library of Munich, Germany.
    19. repec:eee:wdevel:v:114:y:2019:i:c:p:237-253 is not listed on IDEAS
    20. repec:eee:jbrese:v:98:y:2019:i:c:p:191-203 is not listed on IDEAS
    21. Floridi, A. & Demena, B.A. & Wagner, N., 2019. "Shedding light on the shadows of informality : A meta-analysis of formalization interventions targeted at informal firms," ISS Working Papers - General Series 642, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    22. repec:taf:apeclt:v:24:y:2017:i:18:p:1320-1326 is not listed on IDEAS

    More about this item

    Keywords

    Employment; Active labor market policy; Firm creation; Micro-; small- and medium-sized firms; Impact evaluations; Systematic review;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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