Quality upgrading is a key pathway to growth for small businesses in low-income countries (World Bank, 2020; Verhoogen, 2023). Yet, the manufacturing sector is plagued with small, unprofitable firms producing low quality products. Policy interventions and academic research have targeted the likely culprits of this low performance: the lack of training (Bloom et al., 2013; Hanna et al., 2014), technology barriers (Duflo et al., 2011; Bernard et al., 2017), credit constraints (De Mel et al. 2008; Banerjee 2013), labor shortages or inadequacy (Cai and Wang, 2022), among others. A smaller literature has devoted attention to demand-side incentives for quality production (Atkin et al., 2017; Andrabi et al., 2017; Jensen and Miller, 2018; Bai, 2023; Bold et al., 2022). This project unpacks demand- and supply-side constraints for quality upgrading in Ugandan carpentry, and studies the interaction between these two sources of constraints.
The researchers work with a sample of 750 Ugandan wood furniture workshops across five of the country’s districts, carefully measuring both workmanship quality and customer relationships. The wood furniture sector in Uganda is typical of light manufacturing sectors in low- and middle-income countries: there is a large number of micro- and small-scale firms with low profitability and most sales are made directly by manufacturers to final consumers, with this direct channel accounting for 86% of output among our sample firms.
