Matching grants are one of the mostcommon types of private sector development programs used indeveloping countries. But government subsidies to privatefirms can be controversial. A key question is that ofadditionality: do these programs get firms to undertakeinnovative activities that they would not otherwise do, ormerely subsidize activities that will take place anyway?Randomized controlled trials can provide the counterfactualneeded to answer this question, but efforts to experimentwith matching grant programs have often failed. This paperuses a randomized controlled trial of a matching grantprogram for firms in the Republic of Yemen to demonstratethe feasibility of conducting experiments with well-designedprograms, and to measure the additionality impact. In thefirst year, the matching grant is found to have led to moreproduct innovation, firms upgrading their accountingsystems, marketing more, making more capital investments,and being more likely to report their sales grew.
PDF
download
878987797
028-85220240
