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How Can We Learn Whether Firm Policies Are Working in Africa? Challenges (and Solutions?) For Experiments and Structural Models -super-†

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  • David McKenzie

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 article 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 programme such as a matching grant scheme or business training programme 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 reasonably 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, I suggest 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. Copyright 2011 , Oxford University Press.

Suggested Citation

  • David McKenzie, 2011. "How Can We Learn Whether Firm Policies Are Working in Africa? Challenges (and Solutions?) For Experiments and Structural Models -super-†," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 20(4), pages 600-625, August.
  • Handle: RePEc:oup:jafrec:v:20:y:2011:i:4:p:600-625
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    File URL: http://hdl.handle.net/10.1093/jae/ejr024
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    Citations

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    Cited by:

    1. Long Thanh Giang & Cuong Viet Nguyen & Tuyen Quang Tran, 2016. "Firm agglomeration and local poverty reduction: evidence from an economy in transition," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 30(1), pages 80-98, May.
    2. Cadot, Olivier & Fernandes, Ana M. & Gourdon, Julien & Mattoo, Aaditya, 2011. "Impact evaluation of trade interventions : paving the way," Policy Research Working Paper Series 5877, The World Bank.
    3. Mckenzie,David J., 2016. "Can business owners form accurate counterfactuals ? eliciting treatment and control beliefs about their outcomes in the alternative treatment status," Policy Research Working Paper Series 7668, The World Bank.
    4. repec:eee:wdevel:v:97:y:2017:i:c:p:330-348 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).
    6. repec:eee:jjieco:v:33:y:2014:i:c:p:4-24 is not listed on IDEAS
    7. Campos, Francisco & Coville, Aidan & Fernandes, Ana M. & Goldstein, Markus & McKenzie, David, 2014. "Learning from the experiments that never happened: Lessons from trying to conduct randomized evaluations of matching grant programs in Africa," Journal of the Japanese and International Economies, Elsevier, vol. 33(C), pages 4-24.

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