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The Returns to Scale: Stimulating Productivity in Firm Clusters in Uganda

Work & Education Uganda

Firms in low and middle-income countries are both less productive and smaller than in high-income countries. In industries with economies of scale, small firm size may itself be a driver of low productivity by hindering technology adoption and mechanization. In Uganda, furniture making is one such industry that has a high potential to benefit from increased scale. This pilot intervention randomly allocates furniture making firms to be part of (i) business clubs, (ii) business clubs with the opportunity to rent machines, and, (iii) a control group. This intervention aims to overcome the small scale of operations by fostering cooperation among entrepreneurs in clusters of firms. Results from this pilot will inform decisions being made by the Ministry of Trade in Uganda, which has already provided machines to clusters of businesses.

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