July 16, 2007. David McKenzie1 of the World Bank Group presented: "Returns to Capital in Microenterprises: Evidence from A Field Experiment”. The seminar is the 15th installment of the USAID Microenterprise Development office After Hours Seminar Series.
Dr. McKenzie discussed the returns to capital in microenterprises. He aimed to answer three questions: What is the potential for growth of these enterprises? Even absent sustained growth, what is the potential for increasing incomes among these individuals? And what is the relevance for microlenders? Dr. McKenzie’s presented his findings and concluded that shocks to capital were large and random, and hence uncorrelated with ability. Suggested returns were about 5.7% per month. Furthermore, he found no evidence of non-linearities in returns, returns were higher where capital constraints bind tighter, and that there was no evidence that returns were affected by risk and uncertainty. Finally, McKenzie reported that ongoing work points to evidence that returns were much higher for males than females.
1David McKenzie is a Senior Economist in the World Bank’s Development Research Group. Prior to joining the World Bank in 2005, he was assistant professor of Economics at Stanford University (2001-05). He received his undergraduate degrees from the University of Auckland, New Zealand and his Ph.D. in Economics from Yale University. He has published over 30 articles in journals such as the Journal of Econometrics, Journal of Development Economics and Economic Development and Cultural Change. He was one of the authors of the 2007 World Development Report, and is a co-principal investigator for the Pacific-Island New Zealand Migration Survey, and the Sri Lanka Microenterprise Survey.
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Returns to Capital in Microenterprises
World Bank Working Paper.pdf Publication Date 05/2007
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