With tomorrow being Halloween, I thought it perfect timing to discuss a paper about death and zombies. Small firms are an important source of income for the poor in developing countries, and the target of many policy interventions designed to help them grow. But we don’t actually know much about their death, with no systematic evidence available as to the rate of small firm death, which firms are more likely to die, and why they die. Indeed firm death often ends up being hidden in the attrition numbers of much of our data, and out of 35 published RCTs on interventions for small firms in developing countries, only 13 either report a firm death rate or look at death as an outcome.
My new working paper (ungated version) (with Anna Luisa Paffhausen) aims to provide systematic evidence on small firm death in developing countries. We spent several years cleaning and putting together data on more than 14,000 small firms from 16 firm panel surveys in 12 countries, enabling estimation of the rate of firm death over horizons as short as 3 months and as long as 17 years. Detailed questions added to nine of these panel surveys also enable us to dig deeper into cause of death.