The productive role of social policy

This paper assesses the productive role of social policy. It analyses the effect that participating in social policy programmes has on business performance of enterprises in Cartagena, Colombia. To investigate these effects, we employ an instrumental variable analysis to account for the potential endogeneity of participation. Exploiting the existence of a partially complied eligibility rule for Participation in the poverty reduction programme we are able to identify the effect on several enterprise indicators. The paper contributes to the literature on entrepreneurship policies in developing countries from the social policy perspective. It sheds light on the effects and potential mechanisms that the participation on social policy schemes has on the entrepreneurial activity of household enterprises. The results show that complier participating entrepreneurs are more credit-oriented and work more hours per day. No statistically significant effect is found on profit measures.