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firm experiments

Setting up your own firm for a firm experiment

David McKenzie's picture

The typical approach to examining how workers, consumers, or governments interact with a firm has been for researchers to find a willing firm owner and convince them to run experiments. Examples include Bandiera et al. working with a UK fruit-farmer to test different payment incentives for immigrant workers; Bloom et al. working with a Chinese travel agency to test the effect of letting workers work from home; and Adhvaryu et al. working with an Indian garment firm to measure impacts of soft-skills training for workers and of introducing LED-lighting. However, finding/persuading a firm to do the experiment that a researcher would like to do can be hard, with many of these existing samples coming about through a researcher having a former student or relative who runs one of these firms.

So what should you do if you lack a connection, or you want to do something that you cannot persuade a firm to do?

Recently, a number of researchers have taken a different approach, which is to set up and run for themselves a firm in order to answer research questions. I thought I would give some examples of this work, and then discuss some of the issues that arise or things to think about when deciding about pursuing this research strategy.

Exporting on eBay: The Impact of Lowering the Hassle Costs of Exporting

David McKenzie's picture
Getting more firms to export is a policy goal in many countries around the world. However, the trade literature has not had very many well-identified evaluations of policy interventions that facilitate exports (a notable exception being work by Atkin et al in Egypt). So I thought it would be useful to share the results of a recent experiment by Xiang Hui making it easier for sellers to export on eBay.

Yikes, not only is it hard for us to do experiments with firms, it can be really hard for firms to experiment on themselves

David McKenzie's picture
I came across a new working paper written by researchers at Google and Microsoft with the title “on the near impossibility of measuring the returns to advertising”. They begin by noting the astounding statistic that annual US advertising revenue is $173 billion, or about $500 per American per year. That’s right, more than the GDP per capita of countries like Burundi, Madagascar and Eritrea is spent just on advertising!