Raising Achievement Among Microentrepreneurs: An Experimental Test of Goals, Incentives, and Support Groups in Medellin, Colombia

• Development Workshop

Date and Location

Thursday, February 2, 2017, 1:10 PM - 2:00 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

Inspired by the success of the California-based Family Independence Initiative (FII), we designed a field experiment to estimate the impact of a program structured around individual goal-setting, monetary incentives, and support groups on the achievement of business-related objectives. In collaboration with Medellin-based Bancos de la Opportunidades, we randomly assigned small business owners to one of four experimental groups that met regularly for six months and to two control groups. Our results show that the mere act of establishing a goal plays a large and significant role in individual outcomes, with subjects in any of the treatments where a goal is established achieved 35%-38% of the possible goals compared to rates of 15%-25% in control groups. The combination of setting a goal, the monetary incentive, and group support resulted in the highest outcome for both achieving individual outcomes and increasing total business sales. Our study contributes to the emerging literature demonstrating that low-cost interventions focused on the internal constraints of the poor can help facilitate pathways out of poverty.