Monitoring in small firms: experimental evidence from Kenyan public transit

Abstract

Small firms struggle to grow beyond a few employees. The authors introduced monitoring devices into commuter minibuses in Kenya and randomized which minibus owners had access to the data using a novel mobile app. They found that treated vehicle owners modify the terms of the contract to induce higher effort and lower risk taking from their drivers. This reduced costs and increased firm profitability. The results suggest that small firms may be able to utilize monitoring technologies to overcome problems of moral hazard and enhance their profitability.

This article is part of the Private Enterprise Development in Low-Income Countries (PEDL) programme.

Citation

Kelley EM, Lane G and Schönholzer D. 'Monitoring in small firms: experimental evidence from Kenyan public transit' American Economic Review 2024: volume 114, issue 10, pages 3119-60

Links

Monitoring in small firms: experimental evidence from Kenyan public transit