Carolyn Pelnik

Observationally similar business owners earn vastly different profits across city locations within Kampala, Uganda. This variation may reflect spatial misallocation, aspects of entrepreneurs’ objective function other than profits (e.g., amenities or risk), or sorting on unobservables. I first quantify the extent of profit variation using primary surveys of microentrepreneurs. I then quantify the extent of spatial misallocation using a field experiment with nearly three thousand microentrepreneurs and a structural model. I experimentally allocate a moving subsidy, cross-randomized with an information intervention, and estimate the effect of moving business location on profits. Entrepreneurs realize 45% higher profits—net of the value of the subsidy—as the result of moving, but only when they receive both the subsidy and information. The subsidy serves as insurance for profitable but risky moves, and information induces high-return entrepreneurs to select into moving. Impacts fade throughout the month after the intervention ends, consistent with risk-averse entrepreneurs gradually losing the ability to self-insure. I rationalize these results in a structural model where entrepreneurs choose locations and realize profit in equilibrium. Using data from the experiment to estimate the model, I show that aggregate income increases by 37% when financial and information constraints are relieved at scale. The results demonstrate spatial misallocation of entrepreneurs within the city, as well as complementarities between liquidity and information in overcoming frictions that otherwise inhibit the mobility of entrepreneurs.

Education in developing countries is often plagued by the twin challenges of low school quality and tight educational budgets. Teachers and principals are constrained in how they spend their time, and staffing may not be optimal. To explore cost-effective personnel changes, we conduct a field experiment in 112 rural Ugandan schools where we shock the labor structure of the schools by exogenously adding staff of different types. We assess students on numeracy and literacy and measure impacts on the time allocation across tasks completed by different types of workers (teachers and administrators) within schools. We find that adding a new layer of management together with new workers significantly improves student numeracy by one-third of a standard deviation and results in the reallocation of time between tasks by existing workers. Using the experimental data, we estimate a task-based production function for schools in which workers of various types differ in their comparative advantage across tasks and optimally allocate their time between tasks in order to maximize student learning. Using the model, we can predict how student outcomes change with counterfactual worker composition. We find a free lunch: counterfactual cost-neutral personnel changes can lead to large improvements in student outcomes, roughly one-quarter of a standard deviation in test scores for the median school.