81454 enGender Impact: The World Bank’s Gender Impact Evaluation Database Returns to Capital in Microenterprises: Evidence from a Field Experiment Author(s) de Mel, Suresh, David McKenzie and Christopher Woodruff Contact dmckenzie@worldbank.org Country Sri Lanka Organizing Economic Opportunities and Access to Assets Theme Status Completed Intervention Cash Transfer Category Sector Finance and Private Sector Development We use randomized grants to generate shocks to capital stock for a set of Sri Lankan microenterprises. We find the average real return to capital in these enterprises is 4.6%–5.3% per year), substantially higher than market interest rates. Abstract We then examine the heterogeneity of treatment effects. Returns are found to vary with entrepreneurial ability and with household wealth, but not to vary with measures of risk aversion or uncertainty. Treatment impacts are also significantly larger for enterprises owned by males; indeed, we find no positive return in enterprises owned by females. Gender Gender Informed Analysis Connection Gender Gender disaggregated productivity Outcomes IE Design Randomized Control Trial Firms from the survey were randomly selected to receive an influx of capital. There were four possible grants, one of approximately $100 equipment, $200 equipment, $100 cash or $200 in cash. The $100 treatment is equivalent to Intervention approximately 3 months profit or 55% of the median invested capital. Cash treatments were given without restriction. For the in-kind treatments, research assistants accompanied the owner to the market to purchase business items. Enterprises could supplement the in-kind funds with their own money. Intervention 2007 Period To identify microenterprises, a door-to-door screening survey was conducted in 3 districts in South and Southwest Sri Lanka. The survey went door-to-door and collected information on 3361 households. Through the survey, 408 individuals Sample were identified that were self-employed workers outside of agriculture, transportation, fishing and professional services, population between the age of 20-65, and had no paid employees. 203 firms were in retail sector while 205 firms were in manufacturing and services. Comparison The comparison group also participated in the survey, but did not receive the cash transfer conditions Unit of Firm level analysis Evaluation Surveys were conducted quarterly from April 2005- April 2007 Period The average real return to capital was 4.6 to 5.3 percent per month, substantially higher than the market interest rate. Returns are found to vary with entrepreneurial ability and with household wealth, but not to vary with measures of risk Results aversion or uncertainty. Treatment impacts are also significantly larger for enterprises owned by males, and the authors find no positive return in enterprises owned by females. Last updated: 14 August 2013 1 enGender Impact: The World Bank’s Gender Impact Evaluation Database Since all firms determined their hours worked after they received the intervention, it is difficult to isolate the changes in Primary profits due to capital and due to increased labor. However, this concern is mitigated by the fact that increases in labor study were minimal. Also, this sample does not allow for the analysis of capital constraints prohibiting entry into the limitations marketplace. Funding NSF Grant SES-0523167; The World Bank Source De Mel, S., McKenzie, D., & Woodruff, C. (2008). Returns to capital in microenterprises: evidence from a field Reference(s) experiment. The Quarterly Journal of Economics, 123(4), 1329-1372. Link to Studies http://qje.oxfordjournals.org/content/123/4/1329.short Microdata http://microdata.worldbank.org/index.php/catalog/1243http://microdata.worldbank.org/index.php/catalog/1243 Last updated: 14 August 2013 2