DP15219 Informational Barriers to Market Access: Experimental Evidence from Liberian Firms
Evidence suggests that many firms in lower-income countries stagnate because they cannot access growth-conducive markets. We hypothesize that overlooked informational barriers distort market access, excluding productive but ``information-poor'' suppliers. To investigate, we gave a random subset of medium-sized Liberian firms vouchers for a week-long program targeting equal-opportunity access to the input purchases of government, companies, and other organizations---a market that makes up upwards of 80 percent of global GDP. The program exclusively teaches ``sellership'': how to navigate large buyers' complex, formal sourcing procedures. Firms that participate win three times as many formal contracts a year later. The impact is heterogeneous: informational sales barriers bind for about a quarter of Liberian firms. Three years post-training, these firms continue to win desirable contracts, are more likely to operate, and employ more workers. We use a simple model of managers' time-constraints to illustrate a possible explanation for why informational market access barriers can persist and generate poverty-trap-like dynamics among firms, even absent credit constraints. Our results help rationalize common demand-side policies in public procurement that nonetheless appear to scratch at the surface of a bigger distortion.
