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  • March 2022
  • Article
  • American Economic Review

Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field

By: Reshmaan Hussam, Natalia Rigol and Benjamin N. Roth
  • Format:Print
  • | Pages:38
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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 9.5% per month, microentrepreneurs reported in the top third of the community are estimated to have marginal return to capital between 24% and 30% 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.

Keywords

Microentrepreneurs; Community Information; Field Experiment; Loans; Entrepreneurship; Developing Countries and Economies; Financing and Loans; Information; Mathematical Methods; India

Citation

Hussam, Reshmaan, Natalia Rigol, and Benjamin N. Roth. "Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field." American Economic Review 112, no. 3 (March 2022): 861–898.
(Online Appendix with Corrigendum—Thanks to Isabella Masetto, Diego Ubfal, and The Institute for Replication for identifying a minor coding error in the production of Table 4.)

Supplemental Information

Online Appendix
Online Appendix with Corrigendum -- Thanks to Isabella Masetto, Diego Ubfal, and The Institute for Replication for identifying a minor coding error in the production of Table 4.
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About The Authors

Reshmaan N. Hussam

Business, Government and the International Economy
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Natalia Rigol

Entrepreneurial Management
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Benjamin N. Roth

Entrepreneurial Management
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More from the Authors
  • GiveDirectly: Can Direct Cash Transfers End Extreme Poverty? By: Natalia Rigol, Benjamin N. Roth, Sarah Mehta and John Schultz
  • Core Innovation Capital: Investing in Fintech for Good (B) By: Ray Kluender, Natalia Rigol, Benjamin Roth and Nicole Tempest Keller
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