Working Paper: NBER ID: w19740
Authors: Gabriela Calderon; Jesse M. Cunha; Giacomo De Giorgi
Abstract: A large share of the poor in developing countries run small enterprises, often earning low incomes. This paper explores whether the poor performance of businesses can be explained by a lack of basic business skills. We randomized the offer of a free, 48-hour business skills course to female entrepreneurs in rural Mexico. We find that those assigned to treatment earn higher profits, have larger revenues, serve a greater number of clients, are more likely to use formal accounting techniques, and more likely to be registered with the government. Indirect treatment effects on those entrepreneurs randomized out of the program, yet living in treatment villages, are economically meaningful, yet imprecisely measured. We present a simple model of experience and learning that helps interpret our results, and consistent with the theoretical predictions, we find that "low-quality" entrepreneurs are the most likely to quit their business post-treatment, and that the positive impacts of the treatment are increasing in entrepreneurial quality.
Keywords: business literacy; microentrepreneurs; randomized controlled trial; rural Mexico
JEL Codes: C93; I25; O12; O14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| low-quality entrepreneurs quitting (L26) | business literacy training (M53) |
| business literacy training (M53) | increase in revenues (H27) |
| business literacy training (M53) | increase in number of clients served (L84) |
| business literacy training (M53) | decrease in profits for untreated entrepreneurs (L26) |
| business literacy training (M53) | increase in profits (D33) |
| business literacy training (M53) | more likely to use formal accounting techniques (M41) |