How can we learn whether firm policies are working in africa ? challenges (and solutions?) for experiments and structural models, Vol. 1 of 1

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How can we learn whether firm policies are working in africa ? challenges (and solutions?) for experiments and structural models

Author:	McKenzie, David;	Collection Title:	Policy Research working paper ; no. WPS 5632
Country:	Africa;	Date Stored:	2011/04/12
Document Date:	2011/04/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	Africa
Report Number:	WPS5632	SubTopics:	Small Scale Enterprise; Banks & Banking Reform; Microfinance; E-Business; ICT Policy and Strategies
Volume No:	1 of 1

Summary: 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 paper 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 program such as a matching grant scheme or business training program 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 reasonable 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, the author suggests 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.


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