Aspirations, expectations, identities: Behavioral constraints of micro-entrepreneurs

Research output: Working paper

Abstract

This paper presents empirical evidence on the relationship between behavioral constraints and entrepreneurial success of micro-firms. Approximately 600 micro-entrepreneurs were randomized into treatments providing information about a role model, additionally the importance of establishing realistic
goals, and how to maintain funds within their enterprises. Six months after implementation we find significant positive effects of shifts in aspirations on effort levels and savings. These effects can be precisely
estimated even one year after implementation. On average, changes in investment behavior translate to
increases in sales of 99% and 89% in profits compared to a control group. In contrast, human capital
improvements have no effect on investment behavior. Furthermore, setting business goals mitigates the
positive effects of role models on economic growth. Despite similar effects on effort levels, participants
that condition their aspirations increase on a one-year goal save less and the positive effects on firm
outcomesdisappear over time.
Original languageEnglish
Pages1-28
Number of pages28
Publication statusPublished - Aug 2019

Publication series

NameNovaAfrica working paper series
No.1906
ISSN (Print)2183-0843

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