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Cash Transfers and Micro-Enterprise Performance: Theory and Quasi-Experimental Evidence from Kenya

Olivier Sterck () and Antonia Delius

No 2020-09, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

Abstract: Theoretically, the effect of household cash transfers depends on how businesses respond to the demand shock and on the resulting effect on prices. Such market effects have been largely overlooked in the literature, which mostly focuses on direct impacts on households. We study the impact of a household cash transfer program on retail businesses operating in two refugee sites in Kenya. Refugees receive a monthly mobile money transfer that can only be spent at licensed businesses. We compare licensed and unlicensed businesses, using matching methods to control for all variables considered in the licensing process. We show that licensed businesses- have much higher revenues and profits and charge higher prices than unlicensed businesses. The cash transfer program created a parallel retail market in which a limited number of businesses enjoy high market power. We identify a series of market imperfections explaining the results.

Keywords: Cash Transfers; Micro-Enterprises; Market imperfections; Salop circle (search for similar items in EconPapers)
JEL-codes: L2 O2 O12 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ent, nep-mfd and nep-sbm
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