| 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 outcomes disappear
over time. |