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  • March 2022
  • Article
  • American Economic Review

Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field

By: Reshmaan Hussam, Natalia Rigol and Benjamin N. Roth
  • Format:Print
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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 we 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 we find evidence that community members distort their predictions when they can influence the distribution of resources. Finally, we demonstrate that simple mechanisms can realign incentives for truthful reporting.

Keywords

Microentrepreneurs; Community Information; Field Experiment; Loans; Entrepreneurship; Developing Countries and Economies; Financing and Loans; Information; Mathematical Methods; India

Citation

Hussam, Reshmaan, Natalia Rigol, and Benjamin N. Roth. "Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field." American Economic Review 112, no. 3 (March 2022): 861–898.
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About The Authors

Reshmaan N. Hussam

Business, Government and the International Economy
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Natalia Rigol

Entrepreneurial Management
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Benjamin N. Roth

Entrepreneurial Management
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More from the Authors
  • Indigenous Wisdom and the Climate Crisis By: Reshmaan Hussam
  • Investing in the Next Generation: The Long-Run Impacts of a Liquidity Shock By: Patrick Agte, Arielle Bernhardt, Erica M. Field, Rohini Pande and Natalia Rigol
  • Contractual Restrictions and Debt Traps By: Ernest Liu and Benjamin N. Roth
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