Baseline Investment Intention Realization in Microenterprises
Evaluating whether cash transfers to liquidity-constrained firms translate into intended asset purchases requires distinguishing between targeted baseline goals and aggregate capital expenditure noise.
Picture this
Imagine telling a friend that if you get $100, you will buy a specific power drill for your workshop. When given the $100, you immediately go out and buy that exact drill. However, over the next year, you do not buy any additional tools, and the drill eventually sits unused because your overall customer orders haven't grown. Unconditional grants successfully fund targeted baseline purchase intentions in the short run, but fail to trigger sustained long-term capital accumulation.
What the evidence says
Capital grant recipients invested 179.3 cedis more than control firms in their baseline-specified category at Round 3 (p < 0.10), but by Round 8, total investment flows turned negative (-378.3 cedis, p < 0.10), showing no persistent asset accumulation.
- Who
- 160 urban microenterprise tailors in Accra, Ghana.
- How
- Longitudinal tracking comparing self-reported baseline investment intentions against actual category investment flows (machines, property, inputs) at Round 3 (2 months post-grant) and Round 8 (14 months post-grant).
What to do
Measure baseline specific investment intentions separately from aggregate asset flows to capture short-run liquidity relaxation without assuming long-term capital growth.
From the source
"In column 1, we see that the capital grant group invested an average of 179 cedis more than the control group in Round 3 (about two months after the grants)... However, a year later (Round 8, Column 2) the effect disappears."
Consulting and Capital Experiments with Microenterprise Tailors in Ghana