Can entrepreneurship transform the lives of the poor (and how)? New research you should read

My post last week on giving cash to the poor got far more traction and publicity than I imagined. For those interested in some of the best new and unpublished research in this area, some of my recent favorites:

  • Oriana Bandiera and several co-authors evaluate asset transfers in Bangladesh–especially cattle–to poor women, and find that it shifts them out of agriculture wage work into self-employment (cattle raising and farming). My take: like my study, providing capital is sufficient to create a boost in growth in development.
  • My friend Mushfiq Mobarak and co-authors study a vocational training program in Malawi (skills only, no capital) and find a gain in skills but not in incomes or employability. My take: Skills are not the binding constraint on the poor.
  • Bianchi and Bobba have an outstanding paper that compares one-time conditional cash transfers to smaller, continuous transfers. They argue the regular transfers promote more entrepreneurship because it mitigates risk. The takeaway: Risk, in addition to credit, constrains the poor.
  • McKenzie and Woodruff step back and look at what we’ve learned from innumerable business training programs around the world. The answer: not much. There’s certainly little evidence of any positive impact. more evidence of skills not being the binding constraint?
  • It remains to be seen whether business and finance training combines well with grants. The same authors have one new study on this in Sri Lanka. Unlike the above, I haven’t read it closely. My quick look tells me that cash plus training helps the poor start new businesses (much like we see with the other papers) but that it’s no panacea.
  • My friends Karen Macours and Patrick Premand look at a combination of cash and vocational training in Nicaragua. They see high returns to the package, with extra added punch from more capital alone. Clearly skills and capital are complements, though I still see capital as the scarcer, more valuable input.
  • Also, see my recent policy report (paper forthcoming) where we look at the effects of cash+training on female entrepreneurship in Uganda. We also evaluate whether a hands-on NGO presence (giving advice and holding them accountable to invest the cash) helps. The answer: women’s incomes double, and the hands-on aspect helps. But the NGO advising is so costly it doesn’t pass a cost-benefit test.

If this stuff interests you, I cannot recommend enough the SSRN Randomized Social Experiments e-Journal (fixed). Sign-up is free and you will get the latest and greatest papers in your inbox weekly.