Thread by @Noahpinion

Getting knowledge of rich-world business practices to developing-country businesses could help boost development. We should give free management consulting as a form of foreign aid.

bloomberg.com/opinion/articl…

A decade ago, a team of economists offered free management consulting to textile plants in India. The result was a big increase in productivity as a result of improved business practices.

nber.org/papers/w16658

But did those improvements last?

YES!

Almost a decade later, productivity was still higher at the plants where the consultants had given advice (though some good business practices had spread to other plants).

nber.org/papers/w24249

Meanwhile, another team of economists gave free management consulting to a bunch of small and medium sized companies in Mexico, in a variety of industries, and also found significant positive effects!

dspace.mit.edu/bitstream/hand…

These experiments suggest that business advice can be used as an effective form of foreign aid - which is more than we can say for many of the forms of aid we've tried in the past.

amazon.com/Dead-Aid-Worki…

It also suggests two things developing countries can do to encourage the adoption of better business practices:

1. encourage/allow workers to move around between companies more, and

2. encourage foreign investors to set up joint ventures with local companies!

Business managers are not the idealized profit-maximizing machines you see in economic models.

They need help. So let's give them help!

(end)

bloomberg.com/opinion/articl…