Periodic Reporting for period 1 - ACCESS (Market Access and Economic Development)
Reporting period: 2022-10-01 to 2025-03-31
A huge challenge for research and policy efforts to accelerate economic development is that firms in poor countries grow surprisingly slowly, making job creation in the “Global South” difficult to achieve. We know little about why this is: the existing literature has focused on internal (or “supply-side”) determinants of productivity that firms in poor countries are hypothesized to lack, but these overall appear to have modest explanatory power.
A notable alternative explanation is that many latently productive firms are constrained by forces external to the firm. Recent studies indeed establish that access to input and output markets appear to be important for growth. However, the existing evidence focuses on access constraints arising from poor infrastructure and countries’ trade barriers: firms’ and individuals’ de facto ability to acquire production inputs and sell output is likely influenced by a much broader set of economic, political, and social factors. Similarly, the consequences of market access may extend to “subsequent” economic development outcomes like job creation and changes in inequality.
ACCESS puts the causes and consequences of market access in poor countries at the center of inquiry. The research program is organized around the various stages of the production process: firms’ access to labor markets; firms’ access to suppliers and buyers in intermediate markets; and firms’ access to final product demand. In its last part, ACCESS returns to the origin of the production process to investigate how barriers to the most fundamental form of market access—individuals’ ability to own and operate firms—affects local economies.
A notable alternative explanation is that many latently productive firms are constrained by forces external to the firm. Recent studies indeed establish that access to input and output markets appear to be important for growth. However, the existing evidence focuses on access constraints arising from poor infrastructure and countries’ trade barriers: firms’ and individuals’ de facto ability to acquire production inputs and sell output is likely influenced by a much broader set of economic, political, and social factors. Similarly, the consequences of market access may extend to “subsequent” economic development outcomes like job creation and changes in inequality.
ACCESS puts the causes and consequences of market access in poor countries at the center of inquiry. The research program is organized around the various stages of the production process: firms’ access to labor markets; firms’ access to suppliers and buyers in intermediate markets; and firms’ access to final product demand. In its last part, ACCESS returns to the origin of the production process to investigate how barriers to the most fundamental form of market access—individuals’ ability to own and operate firms—affects local economies.
ACCESS has completed working papers for two of its five sub-projects, on “Informational Barriers to Market Access: Experimental Evidence from Liberian Firms” and on “The Missing Middle Managers: Labor Costs, Firm Structure, and Development”. They are now posted on the PI’s website. A working paper for a third sub-project, titled “Input Sourcing in Lopsided Low-income Economies” is also close to completion. With this ACCESS has achieved much of its original aspiration in generating new evidence on firms’ access to suppliers in domestic markets (in Uganda); on barriers to firms’ access to large, domestic buyers (in Liberia); and on their cost of accessing to middle managers and its impact on firm structure (across much of the world).
The research team has meanwhile put in an enormous amount of work digitizing and organizing many decades of hitherto largely unexplored census data for a fourth sub-project, and is now beginning analysis of these data. This sub-project is very labor-intensive.
Finally, in the fifth and last sub-project, ACCESS has in early analysis uncovered evidence of a specific policy tool that substantially increases rural firms’ access to buyers in international markets.
The research team has meanwhile put in an enormous amount of work digitizing and organizing many decades of hitherto largely unexplored census data for a fourth sub-project, and is now beginning analysis of these data. This sub-project is very labor-intensive.
Finally, in the fifth and last sub-project, ACCESS has in early analysis uncovered evidence of a specific policy tool that substantially increases rural firms’ access to buyers in international markets.
The first of ACCESS’ completed working papers, “Informational Barriers to Market Access: Experimental Evidence from Liberian Firms”, shows that the complex sourcing procedures used by large buyers which procure inputs through formal contracts (such as for example long and complex bidding forms for tenders) can and do in and of themselves deter many capable firms from bidding on and winning such contracts. The paper shows, through a randomized-controlled trial in Liberia, that a simple week-long training substantially increased initially-disadvantaged firms’ bidding on and winning of tenders and other formal contracts. The impact is due to about a quarter of firms for which informational market access barriers were initially binding. These firms win much bigger and new types of formal contracts after learning how to sell to large buyers. They are more likely to remain in operation and employ more worker also in the longer run. The paper’s results have important implications for the design of public procurement procedures and many related issues.
The second of ACCESS completed working papers, titled “The Missing Middle Managers: Labor Costs, Firm Structure, and Development”, shows that the middle managers firms with modern, hierarchical structures employ are almost as expensive in the world’s poorest countries as in rich ones, and that this appears to be a quantitatively important part of the reason why such structures and the job creation they enable are rare in poor countries. This has important implications for strategies to spur job creation there.
The second of ACCESS completed working papers, titled “The Missing Middle Managers: Labor Costs, Firm Structure, and Development”, shows that the middle managers firms with modern, hierarchical structures employ are almost as expensive in the world’s poorest countries as in rich ones, and that this appears to be a quantitatively important part of the reason why such structures and the job creation they enable are rare in poor countries. This has important implications for strategies to spur job creation there.