Reproducibility package for Do Informal Businesses With More Educated Owners Adopt Better Business Practices? Evidence From Central African Republic

The business practices of unregistered or informal enterprises can significantly affect their performance and the overall productivity of the sector. However, very little is known about the prevalence of business practices and the sorts of factors that influence their adoption among informal enterprises. This is especially the case in the context of fragile economies. The present paper attempts to fill this gap in the literature by analyzing the adoption of business practices among informal enterprises in Central African Republic, which serves as a unique context – high informality, low education attainment, and recurrent shocks including conflict and the AIDS epidemic. While several factors correlated with the decision to adopt business practices are uncovered, the focus is on the education level of the business owner or manager. A conservative estimate suggests that relative to no education or up to primary education, secondary or higher education increases the likelihood of adopting one or more of the nine business practices considered by about 10 percentage points. The number of business practices adopted increases by 0.66 (against a mean value of 1.7). We show that the positive impact of education is most likely causal using entropy balancing, inverse probability weighting, the Oster test for selection on observables, and the impact of the AIDS epidemic in the latter half of the 1990s on school enrollment as an instrument for the education level of current business owners. We also find significant heterogeneities in the relationship between education and business practices. Belonging to a business association and a business owner’s past experience in the industry may compensate for a lack of formal education, while the use of electricity, manufacturing vs. services activity, and location in Bangui city vs. Berberati complement and magnify the positive effect of education. Several avenues for future research emerge from our analysis which are discussed.