Working Paper: CEPR ID: DP15219
Authors: Jonas Hjort; Vinayak Iyer; Golvine De Rochambeau
Abstract: Evidence suggests that many firms in lower-income countries stagnate because they cannot access growth-conducive markets. We hypothesize that overlooked informational barriers distort market access, excluding productive but ``information-poor'' suppliers. To investigate, we gave a random subset of medium-sized Liberian firms vouchers for a week-long program targeting equal-opportunity access to the input purchases of government, companies, and other organizations---a market that makes up upwards of 80 percent of global GDP. The program exclusively teaches ``sellership'': how to navigate large buyers' complex, formal sourcing procedures. Firms that participate win three times as many formal contracts a year later. The impact is heterogeneous: informational sales barriers bind for about a quarter of Liberian firms. Three years post-training, these firms continue to win desirable contracts, are more likely to operate, and employ more workers. We use a simple model of managers' time-constraints to illustrate a possible explanation for why informational market access barriers can persist and generate poverty-trap-like dynamics among firms, even absent credit constraints. Our results help rationalize common demand-side policies in public procurement that nonetheless appear to scratch at the surface of a bigger distortion.
Keywords: Informational Barriers; Market Access; Experimental Evidence; Liberian Firms
JEL Codes: D2; O1; O25; D83
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Winning contracts training (M53) | Number of contracts won (L14) |
| Winning contracts training (M53) | Firm performance (L25) |
| Winning contracts training (M53) | Tenders bid on by firms (D44) |
| Winning contracts training (M53) | Informational sales barriers (binding) (L14) |
| Winning contracts training (M53) | Employment of more workers (J23) |
| Firm performance (L25) | Winning contracts training (sustained improvements) (M53) |