Entrepreneurship
Research insight
INVITED EDITOR
Editorial from
Cynthia Kinnan
James L. Paddock Junior Professor in International Economics, Department of Economics, Tufts Univesity
November 16, 2022
8. Decent work and economic growth

8. Decent work and economic growth

Promote inclusive and sustainable economic growth, full and productive employment and decent work for all
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1. No poverty

Eradicate poverty in all its forms everywhere
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9. Industry, innovation and infrastructure

Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
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Can Microfinance Unlock a Poverty Trap for Some Entrepreneurs?

RESEARCH SEMINAR | Under the the theme Economic Development in Africa, the NOVAFRICA Knowledge Center welcomes Cynthia Kinnan, from Tufts University to present her work on microfinance and entrepreneurship to unlock poverty.

Abstract

Can microcredit help unlock a poverty trap for some people by putting their businesses on a different trajectory? Could the small microcredit treatment effects often found for the average household mask important heterogeneity? In Hyderabad, India, we find that “gung ho entrepreneurs’’ (GEs), households who were already running a business before microfinance entered, show persistent benefits that increase over time. Six years later, the treated GEs own businesses that have 35% more assets and generate double the revenues as those in control neighborhoods. We find almost no effects on non-GE households. A model of technology choice in which talented entrepreneurs can access either a diminishing-returns technology, or a more productive technology with a fixed cost, generates dynamics matching the data. These results show that heterogeneity in entrepreneurial ability is important and persistent. For talented but low-wealth entrepreneurs, short-term access to credit can indeed facilitate escape from a poverty trap.

Read the research paper here

This content was originally published in Novafrica's website.

Cynthia Kinnan
James L. Paddock Junior Professor in International Economics, Department of Economics, Tufts Univesity
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