Minding Small Change among Small Firms in Kenya

Many micro-enterprises in Kenya have low productivity. This paper, published in the Journal of Development Economics (May 2014) focuses on one particular business decision which may indicate low productivity: keeping enough change on hand to break larger bills. This is a surprisingly large problem. The researchers' estimates suggest that the average firm loses approximately 5–8% of total profits because they do not have enough change. The team conducted two experiments to shed light on why this happens: surveying firms weekly about lost sales, thereby increasing the salience of change, and explicitly informing firms about lost sales. They find that both interventions significantly altered change management and reduced lost sales. This largely rules out many potential explanations such as the risk of theft or the costs of holding change being too high. One explanation consistent with firms' response to the survey and information on their lost sales is that firms were not perfectly attentive to change management prior to the interventions.


Lori Beaman

Northwestern University

Jonathan Robinson

University of California - Santa Cruz

Jeremy Magruder

University of California, Berkeley