Working Paper: NBER ID: w27662
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; Liberian firms; randomized controlled trial
JEL Codes: D2; D83; O1; O25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Informational Sales Barriers (L15) | Ability to Operate and Employ Workers (J54) |
| Training Program (M53) | Contract-Winning Capabilities (L14) |
| Training Program (M53) | Revenue Increase (H29) |
| Training Program (M53) | Firm Performance (L25) |