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Can capital grants help microenterprises reach the productivity level of SMEs? Evidence from an experiment in Sri Lanka

  • Laurin Janes
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    Using data from a randomized control trial in Sri Lanka, this paper explores whether cash and in-kind grants helped microenterprises approach the productivity level of SMEs. The paper first estimates production functions and subsequently treatment effects on TFP levels. Most significantly, more able and more risk-averse owners benefit from the larger in-kind grant. Also, the larger in-kind grants allowed for increases in productivity to the least productive firms. The paper then uses data from a representative sample of formal firms to put the TFP levels and treatment effects in the microenterprises into perspective. The results suggest that the least productive firms where able to catch up with the average microenterprise and formal SMEs, while a gap remains with large firms. This finding encourages a positive view of the potential for productivity growth in microenterprises.

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    File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/csae-wps-2013-18.pdf
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    Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2013-18.

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    Date of creation: 2013
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    Handle: RePEc:csa:wpaper:2013-18
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    1. Fafchamps, Marcel; McKenzie; Quinn, Simon; Woodruff, Christopher, 2011. "When is capital enough to get female microenterprises growing? Evidence from a randomized experiment in Ghana," CAGE Online Working Paper Series 50, Competitive Advantage in the Global Economy (CAGE).
    2. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, MIT Press, vol. 124(4), pages 1403-1448, November.
    3. Claudia Martínez A. & Esteban Puentes & Jaime Ruiz-Tagle, 2013. "Micro-Entrepreneurship Training and Asset Transfers: Short Term Impacts on the Poor," Working Papers wp380, University of Chile, Department of Economics.
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    6. Nicholas Bloom & Benn Eifert & Aprajit Mahajan & David McKenzie & John Roberts, 2011. "Does Management Matter? Evidence from India," CEP Discussion Papers dp1042, Centre for Economic Performance, LSE.
    7. Dean Karlan & Martin Valdivia, 2006. "Teaching entrepreneurship: Impact of business training on microfinance clients and institutions," Natural Field Experiments 00282, The Field Experiments Website.
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    9. Andrew B. Bernard & J. Bradford Jensen, 1999. "Exporting and Productivity," NBER Working Papers 7135, National Bureau of Economic Research, Inc.
    10. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
    11. Fernandes, Ana M. & Isgut, Alberto E., 2005. "Learning-by-doing, learning-by-exporting, and productivity : evidence from Colombia," Policy Research Working Paper Series 3544, The World Bank.
    12. Ilke Van Beveren, 2012. "Total Factor Productivity Estimation: A Practical Review," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 98-128, 02.
    13. Markus Eberhardt & Christian Helmers, 2010. "Untested Assumptions and Data Slicing: A Critical Review of Firm-Level Production Function Estimators," Economics Series Working Papers 513, University of Oxford, Department of Economics.
    14. Alice Amsden, 2010. "Say's Law, Poverty Persistence, and Employment Neglect," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 11(1), pages 57-66.
    15. Khundker N, 1989. "Technology adaptation and innovations in the informal sector of dhaka (Bangladesh)," ILO Working Papers 267516, International Labour Organization.
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