Researcher: Eric Verhoogen with Giacomo de Giorgi and Aminur Rahman

Sustained economic growth in developing countries typically requires raising productivity and moving into higher value-added, more knowledge-intensive activities. If there are positive spillovers among firms in this process, as a variety of evidence suggests, then there is a rationale for industrial policy to promote upgrading. But it is difficult for governments to know ahead of time which specific activities are likely to lead to sustained improvements in productivity and promote broad-based growth. An alternative approach is to commit ahead of time to reward firms for export success – to offer “pay for performance.” This approach does not require governments to choose ahead of time which particular activities to promote, as in more traditional programs. This project aims to evaluate the effectiveness of a pay-for-performance approach and a traditional approach using a randomized control trial of a $22 million export-promotion program in Tunisia, named TASDIR+. For agricultural and agri-business firms, there are three arms: one arm offers matching grants and technical assistance using the existing model; a second arm offers the matching grants and technical assistance plus an export rebate – a payment equivalent to 10-20% of exports to a new destination; a third arm is a control group. Under this scheme, the researchers expect to treat 225 firms. While the TASDIR+ program will fund the intervention itself, the seed grant will help support the evaluation of the intervention, which needs to be funded independently.