Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design In The Field

Working Paper
Published on 23 November 2020

Abstract

Identifying high-growth microentrepreneurs in low-income countries remains a challenge due to a scarcity of verifiable information. With a cash grant experiment in India Hussam, Rigol and Roth (2020) demonstrate that community knowledge can help target high-growth microentrepreneurs; while the average marginal return to capital in our sample is 9.5% per month, microentrepreneurs reported in the top third of the community are estimated to have marginal return to capital between 24% and 30% per month. Further the authors find evidence that community members distort their predictions when they can influence the distribution of resources. Finally, they demonstrate that simple mechanisms can realign incentives for truthful reporting.

Authors

Reshmaan Hussam

Harvard University

Natalia Rigol

Harvard University

Benjamin Roth

Harvard University