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

Work & Education Uganda

Firms in developing countries are both less productive and smaller than in developed economies. In industries with economies of scale, small firm size may itself be a driver of low productivity, for example, by hindering technology adoption and mechanization. This intervention will help overcome the small scale of operations in developing countries by fostering cooperation among entrepreneurs in clusters of firms. The intervention is informed by a novel large-scale survey of manufacturing firms in Uganda implemented in partnership with BRAC, which reveals the presence of significant economies of scale and so the potential to achieve productivity growth by helping firms integrate and increase the effective scale of their operations. The research team will conduct a pilot of the proposed interventions in selected firm clusters across urban Uganda. The pilot will generate critical information to finalize the design of a large-scale intervention aimed at stimulating productivity by leveraging firm clusters to effectively increase the boundary of each individual firm.

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