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The additionality impact of a matching grant program for small firms : experimental evidence from Yemen

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  • Mckenzie,David J.
  • Assaf,Nabila
  • Cusolito,Ana Paula

Abstract

Matching grants are one of the most common types of private sector development programs used in developing countries. But government subsidies to private firms can be controversial. A key question is that of additionality: do these programs get firms to undertake innovative activities that they would not otherwise do, or merely subsidize activities that would take place anyway? Randomized controlled trials can provide the counterfactual needed to answer this question, but efforts to experiment with matching grant programs have often failed. This paper uses a randomized controlled trial of a matching grant program for firms in the Republic of Yemen to demonstrate the feasibility of conducting experiments with well-designed programs, and to measure the additionality impact. In the first year, the matching grant is found to have led to more product innovation, firms upgrading their accounting systems, marketing more, making more capital investments, and being more likely to report their sales grew.

Suggested Citation

  • Mckenzie,David J. & Assaf,Nabila & Cusolito,Ana Paula, 2015. "The additionality impact of a matching grant program for small firms : experimental evidence from Yemen," Policy Research Working Paper Series 7462, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7462
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    References listed on IDEAS

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    1. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2014. "Business training and female enterprise start-up, growth, and dynamics: Experimental evidence from Sri Lanka," Journal of Development Economics, Elsevier, vol. 106(C), pages 199-210.
    2. Miriam Bruhn & Dean Karlan & Antoinette Schoar, 2018. "The Impact of Consulting Services on Small and Medium Enterprises: Evidence from a Randomized Trial in Mexico," Journal of Political Economy, University of Chicago Press, vol. 126(2), pages 635-687.
    3. David McKenzie & Christopher Woodruff, 2014. "What Are We Learning from Business Training and Entrepreneurship Evaluations around the Developing World?," The World Bank Research Observer, World Bank, vol. 29(1), pages 48-82.
    4. Ben S. Bernanke, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(1), pages 85-106.
    5. David McKenzie & Nabila Assaf & Ana Paula Cusolito, 2016. "The demand for, and impact of, youth internships: evidence from a randomized experiment in Yemen," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-15, December.
    6. Campos, Francisco & Coville, Aidan & Fernandes, Ana M. & Goldstein, Markus & McKenzie, David, 2014. "Learning from the experiments that never happened: Lessons from trying to conduct randomized evaluations of matching grant programs in Africa," Journal of the Japanese and International Economies, Elsevier, vol. 33(C), pages 4-24.
    7. Olivier Cadot & Ana M. Fernandes & Julien Gourdon & Aaditya Mattoo, 2011. "Where to Spend the Next Million? Applying Impact Evaluation to Trade Assistance," World Bank Publications - Books, The World Bank Group, number 16358.
    8. David McKenzie & Nabila Assaf & Ana Paula Cusolito, 2016. "The Demand for, and Impact of, Youth Internships," World Bank Publications - Reports 23756, The World Bank Group.
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    Citations

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    Cited by:

    1. David McKenzie & Anna Luisa Paffhausen, 2019. "Small Firm Death in Developing Countries," The Review of Economics and Statistics, MIT Press, vol. 101(4), pages 645-657, October.
    2. Ondřej Dvouletý & Stjepan Srhoj & Smaranda Pantea, 2021. "Public SME grants and firm performance in European Union: A systematic review of empirical evidence," Small Business Economics, Springer, vol. 57(1), pages 243-263, June.
    3. Paloma Bernal-Turnes & Ricardo Ernst, 2024. "More Bang for Your Buck: Best-Practice Recommendations for Designing, Implementing, and Evaluating Job Creation Studies," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 1889-1912, March.
    4. Mohamed Ali Marouani & Michelle Marshalian, 2020. "Winners and losers in industrial policy 2.0," Working Papers hal-04001036, HAL.
    5. Stjepan Srhoj & Bruno Škrinjarić & Sonja Radas, 2021. "Bidding against the odds? The impact evaluation of grants for young micro and small firms during the recession," Small Business Economics, Springer, vol. 56(1), pages 83-103, January.
    6. Hossain, Marup & Mabiso, Athur & Garbero, Alessandra, 2022. "Matching grants and economic activities among horticultural entrepreneurs: Long-term evidence from Rwanda," World Development, Elsevier, vol. 150(C).
    7. Srhoj, Stjepan & Walde, Janette, 2020. "Getting ready for EU Single Market: The effect of export-oriented grant schemes on firm performance," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 279-293.
    8. Marup Hossain & Tisorn Songsermsawas & Robinson H. Toguem, 2024. "The role of access to finance in disaster recovery: Evidence from coastal communities in India," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(1), pages 218-234, February.

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