Fiala (2014) shows that the profits of firms owned by women in the treatment group who lived near their family were even lower than the profits of firms owned by similar women in the control group (i.e. those who did not even receive any grants or other support). Nordman and Vaillant (2014) discuss the role of involuntary inefficiency effects, which occur when members of the entrepreneur’s network consume part of the goods or services produced by the business, which reduces the value added for a given level of inputs.

Currently, we do not know enough about how African households allocate resources, especially when several members of the household run businesses. The limited evidence comes from studies such as an experiment conducted by Schaner in Kenya (2013), where married couples were randomly assigned different levels of subsidies on individual and joint savings accounts. The experiment shows that when the higher subsidy was assigned to a joint account, the couples were more likely to invest in livestock and household assets, while individuals were more likely to invest in their income generating activities when the higher subsidies was assigned to their individual accounts. This suggests that control over resources matters for their allocation, and therefore that households’ behavior tends to follow a noncooperative model.

Additionally, Fafchamps et al. (2014) provided grants to both male and female entrepreneurs in Ghana. Half of the beneficiaries were randomly selected to receive an in-kind grant and the other half were selected to receive a grant in cash. In-kind grants had positive impacts on profits for both male and female entrepreneurs. For women-owned firms, cash grants were not effective and there was a significant difference in the effectiveness of the in-kind and cash grants, while no such difference was observed for male-owned enterprises. If we assume that it is easier for women to shield in-kind grants than cash grants from the demands of other household members, this result is also in line with a noncooperative model of resource allocation.

On the other hand, Nordman and Vaillant’s analysis (2014) of the allocation of resources among households operating informal businesses in urban Madagascar potentially challenges the notion that households operate as non-unitary entities. They observe low within-household differences in returns to capital. This suggests an unbiased allocation of capital among household members – if returns to capital were not equal among the ventures of different household members, this would suggest that the household would gain from re-allocating capital to ventures with the highest returns to capital.

Bernhart et al. (2017) explore the impact of microfinance loans and cash grants on enterprising households. Their findings suggest that in households in which there is both a male and female enterprise, the loan tends to be invested in the male enterprise, even when the woman is the loan recipient and would likely have control over its use. If returns to capital tend to be higher in the maleowned enterprise, such choices are consistent with profit maximization at the household level. But this difference in returns to capital between female and male-owned businesses may be driven by earlier biases in the allocation of resources rather than by innate differences in managerial ability.

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