Private Enterprise Development in Low Income Countries (PEDL) is a joint research initiative of the Centre for Economic Policy Research (CEPR) and the Department for International Development (DFID). Over the period 2011-6 it will pursue a research agenda focusing on private-sector development in low-income countries (LICs). The Initiative is motivated by the need to better understand what determines the strength of market forces driving efficiency in these countries. Existing research suggests that the private sector in these countries faces a multitude of constraints that act upon each other. For example, the strategic interaction of firms with market power will be affected by the regulatory regime governing both new entrants and incumbent firms. What is needed is research that allows us to understand how these constraints interact.
The Initiative will pursue a range of approaches that promise to produce credible research results that will be useful for policy-making, supporting research related to private enterprises of all sizes. PEDL will initially focus on four research themes
- Modelling market frictions in LICs using newly available data - We aim to achieve a better understanding of the impact of constraints to enterprise development in LICs. PEDL will encourage researchers to extend a “structural” approach to markets in LICs in order to measure the effect of frictions in these markets.
- Understanding how constraints interact using micro-founded macro models - Constraints on enterprise growth are most often analysed one at a time, but firms often face constraints which come in bundles. We need an approach that allows us to understand how constraints interact, and how constraints on one industry have knock-on effects on other industries.
- The dynamics of SMEs: Informality and entrepreneurship - Research on firms in LICs is challenging because firm-level data sets undercount the informal firms, microenterprises that operate outside the regulatory structure of the state and account for a third to a half of all economic activity. We will particularly encourage projects which identify innovative and cost-effective ways to gather new data to fill in gaps in the existing data sets.
- The role of export-oriented industries in driving growth - In many LICs the dynamic, growing sectors are export-oriented and the evidence suggests that exporters and MNCs (multinational corporations) play a role which is disproportionate to their share in output. We will encourage research in this area, since it has great potential.
PEDL will give particular encouragement to proposals which address cross-cutting issues such as:
In 2013 PEDL will undertake a range of other activities aimed at building a research community in private enterprise development in low-income countries, such as research workshops, training workshops, open events, a working paper series and a dedicated policy website.
To read more about PEDL, please read the Project Overview.