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Testing alternative measures of microenterprise profits and net worth

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  • Lisa Daniels

    (Department of Economics, Washington College, Chestertown MD, U. S. A.)

Abstract

Using data from 448 microenterprises in Zimbabwe, this paper examines five alternative measures of profits and five alternative measures of net worth. The results show that the single-question proxies are too difficult for proprietors to answer, whereas the most complex profit measures generate many negative estimates. The best measure of profits, based on three questions, could be answered by all proprietors and it avoids recall problems associated with sales and expenses. Among the net worth proxies, all of the measures are positively correlated. Nonetheless, the proxy based on fixed assets, accounts receivable, debt, and inventory, showed the highest correlation with the full measure of net worth. Copyright © 2001 John Wiley & Sons, Ltd.

Suggested Citation

  • Lisa Daniels, 2001. "Testing alternative measures of microenterprise profits and net worth," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(5), pages 599-614.
  • Handle: RePEc:wly:jintdv:v:13:y:2001:i:5:p:599-614
    DOI: 10.1002/jid.781
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    References listed on IDEAS

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    1. Daniels, Lisa & Mead, Donald C, 1998. "The Contribution of Small Enterprises to Household and National Income in Kenya," Economic Development and Cultural Change, University of Chicago Press, vol. 47(1), pages 45-71, October.
    2. Vijverberg, W., 1988. "Profits From Self-Employment - A Case Study Of Cote D'Ivoire," Papers 43, World Bank - Living Standards Measurement.
    3. Vijverberg, Wim P. M., 1991. "Profits from self-employment: The case of Cote d'Ivoire," World Development, Elsevier, vol. 19(6), pages 683-696, June.
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    Cited by:

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    3. Masakure, Oliver & Cranfield, John & Henson, Spencer, 2008. "The Financial Performance of Non-farm Microenterprises in Ghana," World Development, Elsevier, vol. 36(12), pages 2733-2762, December.
    4. de Mel, Suresh & Herath, Dammika & McKenzie, David & Pathak, Yuvraj, 2016. "Radio frequency (un)identification: Results from a proof-of-concept trial of the use of RFID technology to measure microenterprise turnover in Sri Lanka," Development Engineering, Elsevier, vol. 1(C), pages 4-11.
    5. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2007. "Measuring microenterprise profits : don't ask how the sausage is made," Policy Research Working Paper Series 4229, The World Bank.
    6. Pascaline Dupas & Jonathan Robinson, 2013. "Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 163-192, January.
    7. Anderson, Stephen J. & Lazicky, Christy & Zia, Bilal, 2021. "Measuring the unmeasured: Aggregating, anchoring, and adjusting to estimate small business performance," Journal of Development Economics, Elsevier, vol. 151(C).
    8. Rodriguez Torres, Omar, 2021. "How different are necessity and opportunity firms? Evidence from a quantile analysis of the Colombian microenterprise sector," MERIT Working Papers 2021-019, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
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    10. McKenzie, David & De Mel, Suresh, 2014. "Radio Frequency (Un)Identification: Results from a Proof-of-Concept Trial of the use of RFID Technology to Measure Microenterpr," CEPR Discussion Papers 10225, C.E.P.R. Discussion Papers.
    11. Rodríguez Torres, Omar, 2022. "The productive role of social policy," MERIT Working Papers 2022-010, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    12. Willebrands, Daan & Lammers, Judith & Hartog, Joop, 2012. "A successful businessman is not a gambler. Risk attitude and business performance among small enterprises in Nigeria," Journal of Economic Psychology, Elsevier, vol. 33(2), pages 342-354.
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