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Prof. Marcel Fafchamps

University of Oxford, United Kingdom

Authors: Marcel Fafchamps and Simon Quinn

Abstract: We run a controlled experiment to link managers of African manufacturing firms. The experiment has exogenous link formation, exogenous seeding of information and exogenous assignment to treatment and placebo. We study the impact of the experiment on real firm behaviour outside of the lab. We find that the experiment successfully created substantial new variation in peer networks. As part of the experimental design, we proposed two primary regression specifications to measure peer diffusion. We test both specifications on a range of outcomes and we find only limited evidence of diffusion. We find suggestive evidence of positive diffusion in several activities that may be characterised as relatively low risk and low cost (such as having a bank account or having an overdraft facility). We also find suggestive evidence of negative diffusion in activities that may present relatively higher risks and higher costs (such as exporting and introducing new products).

Full Text:  “Networks and Manufacturing Firms in Africa: Initial Results from a Randomised Experiment”