Working Paper: NBER ID: w21084
Authors: Marcel Fafchamps; Simon Quinn
Abstract: We gave US$1,000 cash prizes to winners of a business plan competition in Africa. The competition, entitled ‘Aspire’, was intended to attract young individuals aspiring to become entrepreneurs. Participants were ranked by committees of judges composed of established entrepreneurs. Each committee selected one winner among twelve candidates; that winner was awarded a prize of US$1,000 to spend at his or her discretion. Six months after the competition, we compare winners with the two runners-up in each committee: winners are about 33 percentage points more likely to be self-employed. We estimate an average effect on monthly profits of about US$150: an annual profit of 80% on initial investment. Our findings imply that access to start-up capital constitutes a sizable barrier to entry into entrepreneurship for the kind of young motivated individual most likely to succeed in business.
Keywords: entrepreneurship; cash prizes; business plan competition
JEL Codes: L26; O12; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Winning the business plan competition (M13) | Self-employment (L26) |
| Winning the business plan competition (M13) | Monthly profits (D33) |
| Winning the business plan competition (M13) | Annual profit (D33) |
| Winning the business plan competition (M13) | Hours worked in self-employment (J22) |