One Size Does Not Fit All: Evaluating the Relationship Between Microenterprise Measurement and Policy Evaluation

Abstract

Researchers and economic development practitioners regard microenterprises (MEs) as pivotal actors for economic development, poverty alleviation, and job creation. Notwithstanding the importance of MEs in the economy, and even though the discussion of these terms can be traced back as early as the 1920s, there is no consistent definition of Mes; thus, there is no consensus on the appropriate measurement and criteria that should be used to evaluate microenterprise performance. Two of the most commonly accepted standards to determine firm size are the number of employees and total annual revenues. Although there is a growing body of research conducted on microenterprise performance using the employment criteria to determine the firm size, fewer studies have used the revenue criteria. These criteria will be compared using a regional activity model at different units of geographic scale (state, county, and census tract level) using US data. Initial results suggest that there are no statistically significant changes in the estimated model when the criteria are changed for the same geographic unit of scale. However, for the same criteria (employment-based or revenue-based), a change in the unit of geographic aggregation produces different and sometimes contradictory results. These results imply that evaluations of MEs and their factors are more sensitive to scale than to criteria, raising awareness that for proper program evaluation, the unit of data aggregation matters.