IDEAS home Printed from https://ideas.repec.org/p/csa/wpaper/2020-09.html
   My bibliography  Save this paper

Cash Transfers and Micro-Enterprise Performance: Theory and Quasi-Experimental Evidence from Kenya

Author

Listed:
  • Olivier Sterck
  • Antonia Delius

Abstract

Theoretically, the effect of household cash transfers depends on how businesses respond to the demand shock and on the resulting effect on prices. Such market effects have been largely overlooked in the literature, which mostly focuses on direct impacts on households. We study the impact of a household cash transfer program on retail businesses operating in two refugee sites in Kenya. Refugees receive a monthly mobile money transfer that can only be spent at licensed businesses. We compare licensed and unlicensed businesses, using matching methods to control for all variables considered in the licensing process. We show that licensed businesses- have much higher revenues and profits and charge higher prices than unlicensed businesses. The cash transfer program created a parallel retail market in which a limited number of businesses enjoy high market power. We identify a series of market imperfections explaining the results.

Suggested Citation

  • Olivier Sterck & Antonia Delius, 2020. "Cash Transfers and Micro-Enterprise Performance: Theory and Quasi-Experimental Evidence from Kenya," CSAE Working Paper Series 2020-09, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:2020-09
    as

    Download full text from publisher

    File URL: https://www.csae.ox.ac.uk/materials/papers/csae-wps-2020-09.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Marcel Fafchamps & Christopher Woodruff, 2017. "Identifying Gazelles: Expert Panels vs. Surveys as a Means to Identify Firms with Rapid Growth Potential," World Bank Economic Review, World Bank Group, vol. 31(3), pages 670-686.
    2. Dennis Egger & Johannes Haushofer & Edward Miguel & Paul Niehaus & Michael W. Walker, 2019. "General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya," NBER Working Papers 26600, National Bureau of Economic Research, Inc.
    3. Lars Ivar Oppedal Berge & Kjetil Bjorvatn & Bertil Tungodden, 2015. "Human and Financial Capital for Microenterprise Development: Evidence from a Field and Lab Experiment," Management Science, INFORMS, vol. 61(4), pages 707-722, April.
    4. Fafchamps, Marcel & McKenzie, David & Quinn, Simon & Woodruff, Christopher, 2014. "Microenterprise growth and the flypaper effect: Evidence from a randomized experiment in Ghana," Journal of Development Economics, Elsevier, vol. 106(C), pages 211-226.
    5. de Mel, Suresh & McKenzie, David J. & Woodruff, Christopher, 2009. "Measuring microenterprise profits: Must we ask how the sausage is made?," Journal of Development Economics, Elsevier, vol. 88(1), pages 19-31, January.
    6. Baez, Javier E., 2011. "Civil wars beyond their borders: The human capital and health consequences of hosting refugees," Journal of Development Economics, Elsevier, vol. 96(2), pages 391-408, November.
    7. Isabel Ruiz & Carlos Vargas-Silva, 2015. "The Labor Market Impacts of Forced Migration," American Economic Review, American Economic Association, vol. 105(5), pages 581-586, May.
    8. Ghislain B. D. Aïhounton & Arne Henningsen, 2019. "Units of Measurement and the Inverse Hyperbolic Sine Transformation," IFRO Working Paper 2019/10, University of Copenhagen, Department of Food and Resource Economics.
    9. 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.
    10. Jing Cai & Adam Szeidl, 2018. "Interfirm Relationships and Business Performance," The Quarterly Journal of Economics, Oxford University Press, vol. 133(3), pages 1229-1282.
    11. Arielle Bernhardt & Erica Field & Rohini Pande & Natalia Rigol, 2019. "Household Matters: Revisiting the Returns to Capital among Female Microentrepreneurs," American Economic Review: Insights, American Economic Association, vol. 1(2), pages 141-160, September.
    12. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 605-654.
    13. Christopher Blattman & Nathan Fiala & Sebastian Martinez, 2014. "Generating Skilled Self-Employment in Developing Countries: Experimental Evidence from Uganda," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 697-752.
    14. Guido W. Imbens, 2015. "Matching Methods in Practice: Three Examples," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 373-419.
    15. Hidrobo, Melissa & Hoddinott, John & Peterman, Amber & Margolies, Amy & Moreira, Vanessa, 2014. "Cash, food, or vouchers? Evidence from a randomized experiment in northern Ecuador," Journal of Development Economics, Elsevier, vol. 107(C), pages 144-156.
    16. Michael Lechner & Ruth Miquel & Conny Wunsch, 2011. "Long‐Run Effects Of Public Sector Sponsored Training In West Germany," Journal of the European Economic Association, European Economic Association, vol. 9(4), pages 742-784, August.
    17. Depetris-Chauvin, Emilio & Santos, Rafael J., 2018. "Unexpected guests: The impact of internal displacement inflows on rental prices in Colombian host cities," Journal of Development Economics, Elsevier, vol. 134(C), pages 289-309.
    18. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2014. "Business training and female enterprise start-up, growth, and dynamics: Experimental evidence from Sri Lanka," Journal of Development Economics, Elsevier, vol. 106(C), pages 199-210.
    19. Olivia D’Aoust & Olivier Sterck & Philip Verwimp, 2018. "Who Benefited from Burundi’s Demobilization Program?," World Bank Economic Review, World Bank Group, vol. 32(2), pages 357-382.
    20. Miriam Bruhn & Dean Karlan & Antoinette Schoar, 2018. "The Impact of Consulting Services on Small and Medium Enterprises: Evidence from a Randomized Trial in Mexico," Journal of Political Economy, University of Chicago Press, vol. 126(2), pages 635-687.
    21. Alberto Abadie & Matthew M. Chingos & Martin R. West, 2018. "Endogenous Stratification in Randomized Experiments," The Review of Economics and Statistics, MIT Press, vol. 100(4), pages 567-580, October.
    22. Ravallion, Martin, 2017. "A concave log-like transformation allowing non-positive values," Economics Letters, Elsevier, vol. 161(C), pages 130-132.
    23. Jennifer Alix-Garcia & David Saah, 2009. "The Effect of Refugee Inflows on Host Communities: Evidence from Tanzania," World Bank Economic Review, World Bank Group, vol. 24(1), pages 148-170, November.
    24. David McKenzie & Christopher Woodruff, 2017. "Business Practices in Small Firms in Developing Countries," Management Science, INFORMS, vol. 63(9), pages 2967-2981, September.
    25. Suresh de Mel & David McKenzie & Christopher Woodruff, 2009. "Returns to Capital in Microenterprises: Evidence from a Field Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 124(1), pages 423-423.
    26. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    27. Jose G. Montalvo & Marta Reynal-Querol, 2007. "Fighting against Malaria: Prevent Wars while Waiting for the "Miraculous" Vaccine," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 165-177, February.
    28. David McKenzie & Christopher Woodruff, 2014. "What Are We Learning from Business Training and Entrepreneurship Evaluations around the Developing World?," World Bank Research Observer, World Bank Group, vol. 29(1), pages 48-82.
    29. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
    30. repec:oup:qjecon:v:129:y:2014:i:2:p:697-752. is not listed on IDEAS
    31. Guido W. Imbens & Charles F. Manski, 2004. "Confidence Intervals for Partially Identified Parameters," Econometrica, Econometric Society, vol. 72(6), pages 1845-1857, November.
    32. Marc F. Bellemare & Casey J. Wichman, 2020. "Elasticities and the Inverse Hyperbolic Sine Transformation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(1), pages 50-61, February.
    33. Martin Huber & Michael Lechner & Andreas Steinmayr, 2015. "Radius matching on the propensity score with bias adjustment: tuning parameters and finite sample behaviour," Empirical Economics, Springer, vol. 49(1), pages 1-31, August.
    34. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    35. Fallah, Belal & Krafft, Caroline & Wahba, Jackline, 2019. "The impact of refugees on employment and wages in Jordan," Journal of Development Economics, Elsevier, vol. 139(C), pages 203-216.
    36. David Lagakos, 2016. "Explaining Cross-Country Productivity Differences in Retail Trade," Journal of Political Economy, University of Chicago Press, vol. 124(2), pages 579-620.
    37. Alloush, Mohamad & Taylor, J. Edward & Gupta, Anubhab & Rojas Valdes, Ruben Irvin & Gonzalez-Estrada, Ernesto, 2017. "Economic Life in Refugee Camps," World Development, Elsevier, vol. 95(C), pages 334-347.
    38. Manuela Angelucci & Giacomo De Giorgi, 2009. "Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?," American Economic Review, American Economic Association, vol. 99(1), pages 486-508, March.
    39. Barbara Sianesi, 2004. "An Evaluation of the Swedish System of Active Labor Market Programs in the 1990s," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 133-155, February.
    40. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
    41. Huber, Martin & Lechner, Michael & Wunsch, Conny, 2013. "The performance of estimators based on the propensity score," Journal of Econometrics, Elsevier, vol. 175(1), pages 1-21.
    42. Johannes Haushofer & Jeremy Shapiro, 2016. "The Short-term Impact of Unconditional Cash Transfers to the Poor: ExperimentalEvidence from Kenya," The Quarterly Journal of Economics, Oxford University Press, vol. 131(4), pages 1973-2042.
    43. David S. Lee, 2009. "Training, Wages, and Sample Selection: Estimating Sharp Bounds on Treatment Effects," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 1071-1102.
    44. Imbens,Guido W. & Rubin,Donald B., 2015. "Causal Inference for Statistics, Social, and Biomedical Sciences," Cambridge Books, Cambridge University Press, number 9780521885881, February.
    45. Semih Tumen, 2016. "The Economic Impact of Syrian Refugees on Host Countries: Quasi-experimental Evidence from Turkey," American Economic Review, American Economic Association, vol. 106(5), pages 456-460, May.
    46. Alix-Garcia, Jennifer & Walker, Sarah & Bartlett, Anne & Onder, Harun & Sanghi, Apurva, 2018. "Do refugee camps help or hurt hosts? The case of Kakuma, Kenya," Journal of Development Economics, Elsevier, vol. 130(C), pages 66-83.
    47. Claire MacPherson & Olivier Sterck, 2019. "Humanitarian vs. Development Aid for Refugees: Evidence from a Regression Discontinuity Design," CSAE Working Paper Series 2019-15, Centre for the Study of African Economies, University of Oxford.
    48. Juan Jose Diaz & Sudhanshu Handa, 2006. "An Assessment of Propensity Score Matching as a Nonexperimental Impact Estimator: Evidence from Mexico’s PROGRESA Program," Journal of Human Resources, University of Wisconsin Press, vol. 41(2).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jules Gazeaud & Eric Mvukiyehe & Olivier Sterck, 2019. "Cash Transfers and Migration: Theory and Evidence from a Randomized Controlled Trial," CSAE Working Paper Series 2019-16, Centre for the Study of African Economies, University of Oxford.
    2. MacPherson, Claire & Sterck, Olivier, 2021. "Empowering refugees through cash and agriculture: A regression discontinuity design," Journal of Development Economics, Elsevier, vol. 149(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. MacPherson, Claire & Sterck, Olivier, 2021. "Empowering refugees through cash and agriculture: A regression discontinuity design," Journal of Development Economics, Elsevier, vol. 149(C).
    2. 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.
    3. Claire MacPherson & Olivier Sterck, 2019. "Humanitarian vs. Development Aid for Refugees: Evidence from a Regression Discontinuity Design," CSAE Working Paper Series 2019-15, Centre for the Study of African Economies, University of Oxford.
    4. González-Uribe, Juanita & Reyes, Santiago, 2021. "Identifying and boosting “Gazelles”: Evidence from business accelerators," Journal of Financial Economics, Elsevier, vol. 139(1), pages 260-287.
    5. Giambra, Samuele & McKenzie, David, 2021. "Self-employment and migration," World Development, Elsevier, vol. 141(C).
    6. Marco Caliendo & Stefan Tübbicke, 2020. "New evidence on long-term effects of start-up subsidies: matching estimates and their robustness," Empirical Economics, Springer, vol. 59(4), pages 1605-1631, October.
    7. Gabriela Calderon & Jesse M. Cunha & Giacomo De Giorgi, 2020. "Business Literacy and Development: Evidence from a Randomized Controlled Trial in Rural Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 68(2), pages 507-540.
    8. Jeffrey Smith & Arthur Sweetman, 2016. "Viewpoint: Estimating the causal effects of policies and programs," Canadian Journal of Economics, Canadian Economics Association, vol. 49(3), pages 871-905, August.
    9. Verme, Paolo & Schuettler, Kirsten, 2021. "The impact of forced displacement on host communities: A review of the empirical literature in economics," Journal of Development Economics, Elsevier, vol. 150(C).
    10. Goller, Daniel & Lechner, Michael & Moczall, Andreas & Wolff, Joachim, 2020. "Does the estimation of the propensity score by machine learning improve matching estimation? The case of Germany's programmes for long term unemployed," Labour Economics, Elsevier, vol. 65(C).
    11. Stephen J. Anderson & Rajesh Chandy & Bilal Zia, 2018. "Pathways to Profits: The Impact of Marketing vs. Finance Skills on Business Performance," Management Science, INFORMS, vol. 64(12), pages 5559-5583, December.
    12. Lars Ivar Oppedal Berge & Kjetil Bjorvatn & Bertil Tungodden, 2015. "Human and Financial Capital for Microenterprise Development: Evidence from a Field and Lab Experiment," Management Science, INFORMS, vol. 61(4), pages 707-722, April.
    13. Marco Caliendo & Stefan Tübbicke, 0. "New evidence on long-term effects of start-up subsidies: matching estimates and their robustness," Empirical Economics, Springer, vol. 0, pages 1-27.
    14. Elsayed, Ahmed & Roushdy, Rania, 2017. "Empowering Women under Social Constraints: Evidence from a Field Intervention in Rural Egypt," IZA Discussion Papers 11240, Institute of Labor Economics (IZA).
    15. Arielle Bernhardt & Erica Field & Rohini Pande & Natalia Rigol, 2019. "Household Matters: Revisiting the Returns to Capital among Female Microentrepreneurs," American Economic Review: Insights, American Economic Association, vol. 1(2), pages 141-160, September.
    16. Dettmann, E. & Becker, C. & Schmeißer, C., 2011. "Distance functions for matching in small samples," Computational Statistics & Data Analysis, Elsevier, vol. 55(5), pages 1942-1960, May.
    17. Aysun Aygun & Murat Guray Kirdar & Berna Tuncay, 2020. "The Effect of Hosting 3.4 Million Refugees on the Health System in Turkey and Infant, Child, and Elderly Mortality among Natives," Koç University-TUSIAD Economic Research Forum Working Papers 2014, Koc University-TUSIAD Economic Research Forum.
    18. Mano, Yukichi & Akoten, John & Yoshino, Yutaka & Sonobe, Tetsushi, 2014. "Teaching KAIZEN to small business owners: An experiment in a metalworking cluster in Nairobi," Journal of the Japanese and International Economies, Elsevier, vol. 33(C), pages 25-42.
    19. 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.
    20. Dalton,Patricio S. & Ruschenpohler,Julius & Zia,Bilal Husnain, 2018. "Determinants and dynamics of business aspirations : evidence from small-scale entrepreneurs in an emerging market," Policy Research Working Paper Series 8400, The World Bank.

    More about this item

    Keywords

    Cash Transfers; Micro-Enterprises; Market imperfections; Salop circle;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:csa:wpaper:2020-09. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/csaoxuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Julia Coffey (email available below). General contact details of provider: https://edirc.repec.org/data/csaoxuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.