Post on 21-Nov-2014
description
Is it both what you know and who you know?Human capital, social capital and entrepreneurial
success
Ivar Kolstadand
Arne Wiig,Chr. Michelsen Institute
Development Workshop, Luanda, 16 September 2011
Background
Survey conducted in Luanda by DW and CMI:– February to March 2010– 539 clients of Kixicredito– …from 51 randomly selected credit grops in two branches (São Paulo
and Hoje Ya Henda)
Purpose: To find out what makes a microcredit client successful in business:– More education?– Better health?– Access to networks?– Trust?
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Context: Urban areas and petty trade.
6 January 2010 Sosialøkonomenes fagkonferanse 2011, NHH 3
Problem in finding effect of education
• We have addressed this problem• We therefore have a reliable estimate of effect of
education 4
Education Profit
Ability
Problem in finding effect of health
• The next round of the survey (2013) will solve this problem
• Current data only give us an indication of effect of health
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Health Profit
Risk preference
Main results
i) An added year of schooling significantly increases entrepreneurial profits.
ii) Profits are substantially lower for entrepreneurs suffering from chronic illness.
iii) Entrepreneurs who know a local police officer have higher profits, suggesting that specific forms of networks are related to entrepreneurial success.
iv) Different family background variables are associated with the educational attainment of men and women, indicating that educational attainment is gendered.
Main variables
Descriptives
Main results
Implications so far
The importance of schooling:• Helping keep people in school longer will make it
easier for them to escape poverty through entrepreneurship
• Alternative: Business training:– Results from other studies show effect only on men
• Effect on repayment rates?
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Implications continued
The importance of health:• Chronic illness may cut profits substantially
– Malaria may cut profits in half– Stomach disorders by a third
• But these estimates need to be checked in the next round of the survey
The importance of social capital:• People who know a police office have higher profits• Why?
– Connection increases profits?– Or are people with higher profits a target for police corruption?
• No effect of other kinds of networks• No effect of trust 11
Gender differences?
Education and credit group dynamics
Are educated people more likely to give priority to their fellow solidarity group members, over outside demands?
To address this question, we performed an economic experiment as part of the survey.
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The experiment
Dictator game in two versions
Version 1: • ”At the end of this survey, we will give you a sum of 500 kwanza. You may
choose to keep this money, or give some or all of it to another member of your solidarity group. The person the money is given to will be randomly picked by us. You will not know who this other member is, and he/she will not know who you are. How much of the 500 kwanza do you want to give to the other member of your group?” (bold font added)
Version 2: • ”We will also give you an additional 500 kwanza. You may choose to keep
this money, or give some or all of it to a person outside your solidarity group. The person the money is given to will be randomly picked by us. You will not know who this person is, and he/she will not know who you are. How much of the 500 kwanza do you want to give to the person outside your group?” (bold font added) 14
Results from the experiment
Figure 1: Amounts given in dictator game
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0 100 200 300 400 500Amount given to credit group member
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0 100 200 300 400 500Amount given to outsider
Descriptive statistics
Main result
Some possible implications
More educated individuals more likely to give priority to fellow credit group members over outside demands:– Schooling may help both individual and group performance– Give educated group members a prominent position in group?
Women more likely to prioritise solidarity group over outside interests
Clients with a more cosmopolitan background are less likely to prioritize solidarity group
Do choices in dictator game predict repayment?– Results from other regions suggest a link– If so: Can use game as screening device– Requires follow up study
Concluding remarks
• Our results document importance of education:– For individual business performance– For solidarity group dynamics
• The survey presents an important baseline:– To assess the situation of clients over time– To assess the importance of health and social capital– To study other forms of interventions
• Data from the current round can provide vital new information:– On link between experimental behaviour and repayment behaviour
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Thank you!
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