PEDL Policy Insights Series

PEDL Policy Insights No. 1 | Management and Productivity in the Private Sector

What explains differences in productivity across firms and countries? For the past decade, a project called the World Management Survey has been collecting management data to understand the role of management practices as an important factor in explaining variation in firm productivity. Bloom et al. (2016) find three key results, which are briefly summarized and discussed in this article.

First, there are large and persistent variations in management practices across firms and countries. Second, these variations in management practices account for much of the variation in productivity, growth, innovation and exporting we see across firms and countries. Finally, the authors find five key factors that are associated with better management practices. Hence, policies to open markets, relax ownership controls, increase trade and FDI, deregulate markets and raise workforce skills will help to improve management practices, and thus productivity and growth.

PEDL Policy Insights No.2 | Entry Regulation and the Formalization of Microenterprises in Developing Countries

Is there a policy rationale for actively trying to encourage small firms to formalise? In the last two decades, hundreds of regulatory reforms have been implemented in countries across the world with the primary objective of making it easier to formally register a business. Bruhn and McKenzie (2016) summarise the evidence on the effect of these policy reforms and find three key results.

Firstly, they find that most reforms have not been very successful at increasing the number of formal firms. Secondly, they notice that an increased enforcement of existing rules is more effective at boosting formalisation rates, as is any demand of formality by consumers and suppliers. Thirdly, from the firms’ perspective, it appears that the decision to remain informal is rational and privately optimal. Thus, policy makers should think carefully about whether to request formality from small-scale, subsistence enterprises, and should focus their efforts on bringing larger and more profitable informal firms into the formal system.

PEDL Policy Insights No.3 | Chinese Investment in Africa: How Much Do We Know?

Many reports have described Chinese engagement in Africa as “neo-imperialism” and “authoritarian capitalism”, exploiting resources and local labour while undermining democracy. On the other hand, Chinese demand for natural resources has sometimes been credited with boosting growth and resource prices across the African continent. Using the best available data, we put these claims to the test and find three key results, which are briefly summarised in this article.

First, Chinese investment is smaller, more diverse and more growth-oriented than is often believed. Second, investment is not the most important form of economic engagement between China and African countries. Trade is much more important for many African countries in monetary terms, whereas Chinese construction companies are highly involved in building Africa’s infrastructure. Third, Chinese investment on the continent has the potential to support growth and productivity if it creates jobs, supplies local markets and transfers knowledge to local firms.

PEDL Policy Insights No.4 | Getting capital to Microenterprises: What do we know about why and how?

Recent research illuminates the opportunity to increase incomes of microenterprise owners through the provision of capital. Experiments providing capital grants to randomly selected subsets of enterprises show that the average increase in earnings following receipt of a grant is much higher than the interest rates charged by micro lenders. But there is important heterogeneity in the returns.

Moreover, results from experiments on loans made through traditional microcredit contracts are disappointing. Research implementing tweaks to microcredit contracts and eliciting information from entrepreneurial communities on potential returns from investments shows some promise in overcoming these issues. Ongoing work on microequity contracts also offers hope for contracts that provide some risk-sharing, allowing entrepreneurs to make riskier investments.

PEDL Policy Insights No.5 | The Importance of Protecting Export-Oriented Firms

The COVID-19 crisis has hit everywhere at once. Lower-income countries should not expect large inflows of  aid; they will be left largely to their own resources. Those resources are limited, so lower-income countries need to find leverage wherever they can. Export-oriented firms are one important source of leverage. The large, formal firms typically have relationships with banks and a solvency buffer. They also provide a conduit for reaching a part of  the labour force.

Using an example from the garment sector in Bangladesh, this Policy Insight shows how concessionary loans have been used to leverage limited government resources. The export sector also provides foreign currency earnings particularly important for countries that import a significant part of their basic food budget. The viability of  exports will depend on international demand, but also on keeping the domestic part of  the supply chain open.