American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field
American Economic Review
vol. 112,
no. 3, March 2022
(pp. 861–98)
Abstract
Identifying high-growth microentrepreneurs in low-income countries remains a challenge due to a scarcity of verifiable information. With a cash grant experiment in India we demonstrate that community knowledge can help target high-growth microentrepreneurs; while the average marginal return to capital in our sample is 9.4 percent per month, microentrepreneurs reported in the top third of the community are estimated to have marginal returns to capital between 24 percent and 30 percent per month. Further we find evidence that community members distort their predictions when they can influence the distribution of resources. Finally, we demonstrate that simple mechanisms can realign incentives for truthful reporting.Citation
Hussam, Reshmaan, Natalia Rigol, and Benjamin N. Roth. 2022. "Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field." American Economic Review, 112 (3): 861–98. DOI: 10.1257/aer.20200751Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
- L25 Firm Performance: Size, Diversification, and Scope
- L26 Entrepreneurship
- O12 Microeconomic Analyses of Economic Development
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance