Savings Constraints and Microenterprise development

Savings Constraints and Microenterprise development - 1...

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Unformatted text preview: 1 Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya Pascaline Dupas Jonathan Robinson University of California, Los Angeles University of California, Santa Cruz** and NBER* March 23, 2009 Abstract We conducted a field experiment to test whether savings constraints prevent the self-employed from increasing the size of their businesses. We opened interest-free savings accounts in a village bank in rural Kenya for a randomly selected sample of poor daily income earners. Despite the fact that the bank charged substantial withdrawal fees, take-up and usage was high among women and the savings accounts had substantial, positive impacts on their productive investment levels and expenditures. These results imply that a substantial fraction of daily income earners face important savings constraints and have a demand for formal saving devices (even for those that offer negative de facto interest rates). JEL Codes: O12, G21, L26 * Department of Economics, University of California, Los Angeles, e-mail: [email protected] ** Department of Economics, University of California, Santa Cruz, e-mail: [email protected] We are grateful to Leo Feler, Fred Finan, Seema Jayachandran, Craig McIntosh, John Strauss, Chris Woodruff, and seminar participants at Bristol, Cornell, LSE, Santa Clara, UCLA, UCSD, USC, Innovations for Poverty Action, the 11 th Santa Cruz Center for International Economics Annual Conference, and the 2008 NEUDC at BU for helpful discussions and suggestions. We thank Jack Adika and Anthony Oure for their dedication and care in supervising the data collection, and Nathaniel Wamkoya for outstanding data entry. We thank Eva Kaplan, Katharine Conn, and Willa Friedman for excellent field research assistance, and thank Innovations for Poverty Action for administrative support. We are grateful to Aleke Dondo of the K-Rep Development Agency for hosting this project in Kenya, and to Gerald Abele for his help in the early stages of the project. Pascaline Dupas gratefully acknowledges the support of a Rockefeller Center faculty research grant from Dartmouth College and Jonathan Robinson gratefully acknowledges the support of an NSF dissertation improvement grant (SES-551273), a dissertation grant from the Federal Reserve Bank of Boston, and support from the Princeton University Industrial Relations Section. All errors are our own. 2 1 Introduction Hundreds of millions of people in developing countries earn their living through small-scale businesses (World Bank, 2004; Hernando de Soto, 1989). For instance, recent evidence that combine 13 World Bank Living Standards Measurement Surveys finds that, on average (across countries), 21.9% of households living on less than US $1 per person per day and 24.1% of households living on less than US $2 per day have at least one self-employed household member (Abhijit Banerjee and Esther Duflo, 2007). In Kenya, employment in small and medium enterprises has been estimated to account for more than 20% of adult employment and...
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This note was uploaded on 01/13/2010 for the course ECON 120 taught by Professor Robinson during the Fall '08 term at UCSC.

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Savings Constraints and Microenterprise development - 1...

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