Heterogeneous Impact Dynamics of a Rural Business Development Program in Nicaragua

Michael R. Carter, Emilia Tjernström, Patricia Toledo

NBER Working Paper No. 22628
Issued in September 2016
NBER Program(s):Development Economics

We study the impacts of a rural development program designed to boost the income of the small-farm sector in Nicaragua. Exploiting the random assignment of treatment, we find statistically and economically significant impacts on farm incomes and investment in farm capital. Using continuous treatment estimation techniques, we examine the evolution of program impacts over time and find that incomes in the activities targeted by the program as well as farm capital rise significantly over time, even after the expiration of the program. Because of the temporal pattern of impacts, shorter-term binary treatment estimators do not fully capture the impacts of the program. Additionally, panel quantile methods reveal striking heterogeneity of program impacts on both income and investment. We show that this heterogeneity is not random, and that there are some low-performing households that simply do not benefit from this program that tried to engage them as agricultural entrepreneurs. While the benefit-cost ratio of the program is on average highly positive, these findings on impact heterogeneity signal limitations of business development programs as a way to eliminate rural poverty.

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Document Object Identifier (DOI): 10.3386/w22628

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