Business Literacy and Development: Evidence from a Randomized Trial in Rural Mexico

A persistent puzzle in developing countries is the observation that some female micro-entrepreneurs are not efficiently running their businesses; for example, through the misallocation of capital and labor in the firm (de Mel, McKenzie, and Woodruff 2008). Given the importance of entrepreneurship in the development process, especially amongst women, it is of utmost importance to understand how crucial business decisions are made and if poor decisions are caused by a lack of financial literacy and managerial knowledge. Specifically, our research will answer the following questions: 1) Why are micro-entrepreneurs not running their businesses efficiently? 2) Is the policy intervention of classroom training an effective and efficient remedy?