The Additionality Impact of a Matching Grant Program for Small Firms: Experimental Evidence from Yemen

23 Pages Posted: 20 Apr 2016

See all articles by David J. McKenzie

David J. McKenzie

World Bank - Development Research Group (DECRG); IZA Institute of Labor Economics

Nabila Assaf

World Bank

Ana P. Cusolito

World Bank

Date Written: October 29, 2015

Abstract

Matching grants are one of the most common types of private sector development programs used in developing countries. But government subsidies to private firms can be controversial. A key question is that of additionality: do these programs get firms to undertake innovative activities that they would not otherwise do, or merely subsidize activities that would take place anyway? Randomized controlled trials can provide the counterfactual needed to answer this question, but efforts to experiment with matching grant programs have often failed. This paper uses a randomized controlled trial of a matching grant program for firms in the Republic of Yemen to demonstrate the feasibility of conducting experiments with well-designed programs, and to measure the additionality impact. In the first year, the matching grant is found to have led to more product innovation, firms upgrading their accounting systems, marketing more, making more capital investments, and being more likely to report their sales grew.

Keywords: E-Business, Small Scale Enterprises, Microfinance, Business in Development, ICT Policy and Strategies

Suggested Citation

McKenzie, David John and Assaf, Nabila and Cusolito, Ana P., The Additionality Impact of a Matching Grant Program for Small Firms: Experimental Evidence from Yemen (October 29, 2015). World Bank Policy Research Working Paper No. 7462. Available at SSRN: https://ssrn.com/abstract=2683687

David John McKenzie (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Nabila Assaf

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Ana P. Cusolito

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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