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Can you help some firms without hurting others? Yes, in a new Kenyan business training evaluation

David McKenzie's picture

There are a multitude of government programs that directly try to help particular firms to grow. Business training is one of the most common forms of such support. A key concern when thinking about the impacts of such programs is whether any gains to participating firms come at the expense of their market competitors. E.g. perhaps you train some businesses to market their products slightly better, causing customers to abandon their competitors and simply reallocate which businesses sell the product. This reallocation can still be economically beneficial if it improves allocative efficiency, but failure to account for the losses to untrained firms would cause you to overestimate the overall program impact. This is a problem for most impact evaluations, which randomize at the individual level which firms get to participate in a program.

In a new working paper, I report on a business training experiment I ran with the ILO in Kenya, which was designed to measure these spillovers. We find over a three-year period that trained firms are able to sell more, without their competitors selling less – by diversifying the set of products they produce and building underdeveloped markets.

Randomizing Competition: allowing CCT recipients to get more goods for their money

David McKenzie's picture
The Dominican Republic’s Solidaridad conditional cash transfer program provides its monetary transfers to poor families in the form of a debit card that can only be used at a network of grocery stores affiliated with the program (it does this in part to ensure they spend the money on food). The typical monthly transfer is about $36, which is 17% of median monthly food expenditure.