Interventions for employment creation in micro, small and medium-sized enterprises in low-and middle-income countries. A systematic review

Employment creation has become a top priority for governments around the world. Especially in low and middle income countries (LMICs) the question of how best to create jobs for the large number of people expected to enter the labor force over the next years is a major concern. Against this background, the question of how and where to create these jobs has received increasing attention. It has been shown that in LMICs, micro, small and medium (MSMEs) enterprises account for most employment.

Governments, international organizations and other donors have designated substantial resources to the support for the development of MSMEs in developing countries. Notwithstanding these efforts, research on the effectiveness of these interventions in LMICs, and especially as regards employment creation is still limited. Only recently, a number of rigorous impact evaluations have been conducted to assess the impact of various MSME promotion programs. The findings gained by these rigorous and mostly experimental studies provide important insights into the effectiveness of such interventions in promoting the development of MSMEs. However, a common criticism of these impact evaluations - often conducted as randomized control trials (RCTs) - is their limited external validity, i.e. the fact that their findings are not necessarily generalizable. By reviewing the results of a sufficiently large number of impact evaluations from many different sources and contexts, systematic literature reviews provide a tool to test the generalizability of the individual findings.[1] We hence set out to answer the question which interventions create employment in MSMEs in LMICs through a systematic review of the existing literature on the effectiveness of interventions aimed at creating jobs in MSMEs in LMICs.

The review follows international standards of systematic reviews in international development, employing a transparent decision making process for literature searching, data collection, quality appraisal and synthesis, drawing on published and unpublished literature to answer the research question and using appropriate methods to critically appraise the literature. Considered studies must in a credible way be able to establish a causal relationship between a policy intervention or a certain set of conditions and job creation. The review is theory based, i.e. it aims at teasing out from the reviewed studies how outcomes may vary by context and the underlying causal mechanisms at work.

The systematic review is funded by the German Development Bank, Kreditanstalt für Wiederaufbau (KfW) Entwicklungsbank and registered with the Campbell Collaboration.

The purpose and main findings of the systematic review are also summarized in the following OECD publication: Creating jobs in small businesses - Evidence from a systematic review. OECD Evaluation insights, Number 9, May 2014, OECD, Paris.

M. Grimm and A.L. Paffhausen (2015), Do Interventions Targeted at Micro-Entrepreneurs and Small and Medium-Sized Firms Create Jobs? A Systematic Review of the Evidence for Low and Middle Income Countries. Labour Economics, 32, 67 - 85. (Previous version published as IZA Discussion Paper No. 8193).

The final report can be found here:

M. Grimm and A.L. Paffhausen (2014), Interventions for employment creation in micro, small and medium sized enterprises in low and middle income countries - A systematic review. KfW-Research "Studies and Proceedings", KfW Development Bank.

See further: 

Grimm, M., E. Lutz, M. Mayer and A.L. Paffhausen (2014), Employment effects of road construction and access-to-energy interventions - Evidence from a review of the literature. KfW "Studies and Proceedings", KfW-Research, KfW Frankfurt/M.

M. Grimm (2014), Unleashing those constrained gazelles, The Broker (The leading Dutch Economics Magazine).

M. Grimm (2016), What interventions create jobs? A review of the evidence. Policy Brief prepared for the 2016 Brookings Blum Roundtable. Also published in L. Chandy (ed.), The future of work in the developing world. Brookings Institution.

[1] See Petticrew, M. and H. Roberts (2008): ‘Systematic Reviews in the Social Sciences, A Practical Guide’, Oxford: Blackwell Publishing.