VoxDev Development Economics

If you walk down a street in a low-income country, count the businesses you can see, you will miss many entirely. Someone who cooks at home and sells at the roadside never appears in a registry. What we know about businesses in developing countries has always been incomplete. 
In this week's VoxDev Talk, Marcela Eslava (Universidad de los Andes Bogota) talks to Tim Phillips about two decades of research into why firms in developing economies stay small, grow slowly, and rarely break through. A worker in a developing economy is about three times more likely to be running, or working in, one of these very small businesses than a worker in a high income economy, and far more likely to be self-employed, a one-person firm. 
Weaker human capital and less access to technology make it harder to start a business. Costlier credit, labour regulation that makes it difficult and expensive to employ staff, and taxes on formal firms make it harder to grow. Some of these distortions are even introduced by well-meaning policymakers, such as low taxes for small firms - which then effectively tax growth.
The research behind this episode:
Eslava, Marcela. 2026. "Firm Size and Dynamics in Less-Developed Economies." Annual Review of Economics, volume 18. Review in advance; changes may still occur before final publication.
To cite this episode:
Phillips, Tim, and Marcela Eslava. 2026. "Why businesses stay small in emerging markets." VoxDev Talks (podcast).

About the guest

Marcela Eslava is Professor of Economics and Dean of the Faculty of Economics at Universidad de los Andes in Bogota¡, and President of the Latin American and the Caribbean Economic Association. Her research spans firm dynamics, productivity and demand at the firm level, labour informality, credit constraints, and the regulations that shape how businesses grow in developing economies.
Research cited in this episode

The Lucas-Hopenhayn framework. The workhorse model of firm dynamics, built on Robert Lucas's 1978 account of occupational choice and Hugo Hopenhayn's 1992 model of entry and exit; it links the size of the average firm to the productivity of potential entrepreneurs and to distortions that stop the most efficient firms from scaling. Eslava's review extends it to explain why firms are smaller in poorer economies.
Nonemployers and micro employers. Own-account and self-employed workers plus the smallest employers; in Eslava and co-authors' sample of 51 economies they account for over 90% of employment in lower-middle-income economies and around 20% in the United States. Their dominance is the main reason average firm size is so low in poorer countries.
Correlated distortions. Taxes, regulations and credit frictions that fall more heavily on high-productivity firms; because they hold back the firms that should be growing, they push labour towards less productive businesses and drag down aggregate output. They show up in the models as residuals, the part of the size gap that productivity and quality cannot explain.
Size-dependent policies. Rules that switch on above an employment threshold, such as the extra workplace obligations that apply to firms above 50 employees in France, or above 20 in Peru; Eslava describes comparing firms just above and just below a threshold as one way to prise open the black box of distortions and measure what a specific rule does.
Demand versus cost efficiency. Work on Colombian manufacturing decomposing a firm's success into technical efficiency and the appeal of its products; the demand side contributes many times more to differences in revenue than cost efficiency does. Eslava's point is that trimming costs buys survival, while product quality and market access drive real growth.
The data-coverage puzzle. Early firm-level studies found average firm size falling as countries got richer, the reverse of what later work established; the anomaly came from datasets that captured only the large, registered firms in poor economies and missed the vast base of tiny ones. Better censuses, and household and employment surveys that count people rather than firms, corrected the picture.
More VoxDev Talks episodes

What have we learned about the informal sector? Gabriel Ulyssea and Mariaflavia Harari on the causes and consequences of informality, the close cousin of micro-enterprise that runs through this conversation.
Related reading on VoxDev

Can variation in firm growth explain the development gap? Colombia vs the US, by Marcela Eslava, John Haltiwanger and Alvaro Pinzón, on how a deficit of superstar plants and an excess of surviving underperformers shape Colombia's development problem.
The links between capabilities and export dynamics in developing countries, on how firm capabilities, product quality and market knowledge shape which firms manage to export.

A river dries up. The soil turns salty. A harvest fails. Farmers across the developing world feel climate change constantly and personally, they rarely blame their government, or demand action.
Guy Grossman (University of Pennsylvania) is one of three authors of a new review of the politics of climate change in the developing world. He tells Tim Phillips that almost all of the existing research on this topic is focused on rich countries, even though the developing world faces the worst of the damage,  and has the least capacity to absorb it, because in those countries the link between climate change and political action is more explicit.
Political solutions are needed: developing country income losses could run 60% higher than losses in wealthy countries, and climate change could push between 32 and 132 million people into extreme poverty within a decade. Grossman's review turns up a paradox in the public opinion data. Concern runs high even where formal climate literacy is low, because people experience the crisis through a failed harvest or a dried up well, not a scientific chart. This disconnect isn't neutral, because vulnerability isn't simply inherited. It is produced, by decisions about who owns land, whose villages get seawalls, and whose voice counts when climate money is handed out.
The research behind this episode:
Grossman, Guy, Audrey Sacks, and Alice Xu. 2026. "The Politics of Climate Change in the Developing World." Annual Review of Political Science 29: 101-126.
To cite this episode:
Phillips, Tim, and Guy Grossman. 2026. "Climate Change Politics in Developing Countries." VoxDev Talks (podcast).

About the guest

Guy Grossman is the David M. Knott Professor of Global Politics and International Relations in the Department of Political Science at the University of Pennsylvania. He founded and co-directs Penn's Development Research Initiative (PDRI-DevLab), and his research spans governance, forced displacement, political accountability, and conflict processes across the developing world, with a particular regional focus on Sub-Saharan Africa.
Research cited in this episode

Extreme poverty projections. World Bank economists Bramka Arga Jafino, Stephane Hallegatte, Julie Rozenberg, and Brian Walsh estimate that climate change could push between 32 and 132 million people into extreme poverty by 2030; the wide range reflects uncertainty over which emissions and development pathway the world follows. Read the working paper.

Afrobarometer. A long running, pan African survey network covering more than 30 countries. Grossman's review draws on it to show that only around four in ten respondents identify human activity as the main cause of climate change, even as concern about its effects runs far higher.
The attitudinal and accountability channels. Two frameworks political scientists use to trace how climate exposure might change political behaviour. The attitudinal channel asks whether living through a flood or a drought changes what someone believes about climate change; the accountability channel asks whether it changes their vote. Grossman finds evidence for both, but little that explains when concern turns into political pressure.
Maladaptation. The academic term for private adaptation that shifts harm onto someone else, such as a village embankment that protects one community by pushing floodwater into the next. Grossman uses it to illustrate why adaptation without government coordination can widen inequality rather than close it.
Ecuador land titling. Mark Buntaine, Stuart Hamilton, and Marco Millones's 2015 study of a titling programme in Morona Santiago found it did almost nothing to slow deforestation, because the state never backed the new titles with enforcement. Grossman cites it as evidence that representation without power tends to fail.
Indigenous managed land. Research led by Stephen Garnett finds that Indigenous peoples, roughly 6.2% of the world's population, manage more than a quarter of the planet's land surface, often protecting carbon sinks more effectively than formally designated protected areas.
More VoxDev Talks episodes

Financing climate adaptation: what works, what doesn't, and can carbon credits help to bridge the gap? Namrata Kala, Rohini Pande, and Catherine Wolfram pick up where Grossman leaves off, on who pays for adaptation when governments won't.
How the urban environment can adapt to climate change. Matthew Kahn and Siqi Zheng discuss how cities in the developing world can adapt their buildings and infrastructure as climate driven migration accelerates.
Related reading on VoxDev.org

Climate politics: understanding political inaction on climate change. Allan Hsiao and Nicholas Kuipers show that Indonesian politicians underestimate voter concern about climate and pollution, and that correcting their misperceptions does not, on its own, produce policy action; a real world case of the accountability channel breaking down.
Political representation and forest conservation? This finds that transferring formal political power, not just consultation, to India's historically marginalised Scheduled Tribes led to a measurable fall in deforestation.

This is an episode from VoxDev's new podcast series, Ideas in Development. This series has a separate podcast feed, where you can find every episode of Oliver Hanney’s conversations on evidence.
YouTube: https://www.youtube.com/watch?v=EacHFVRt9p4 
Apple Podcasts: https://podcasts.apple.com/us/podcast/has-development-economics-lost-its-way/id1866874059?i=1000775748550 
Spotify: https://open.spotify.com/episode/2Lcy3FrbBuoE2nj3cnhOAm?si=76aedb574426479e 
Audioboom: https://audioboom.com/posts/8924691-has-development-economics-lost-its-way 
Substack: https://ideasindevelopment.substack.com/p/has-development-economics-lost-its 
What should development economists be working on – and how does their work actually reach the people making decisions?
Rachel Glennerster, President of the Center for Global Development, whose career spans the research and policy sides of development, joins Oliver Hanney to discuss her proposal for a radical simplification of aid, why she feels the micro-macro debate is largely a false one, the messy but vital process of building consensus, and what impactful careers look like in economics.
In this wide-ranging conversation, we cover the Smart Buys evidence panels in education and how cross-disciplinary consensus gets built, her three-box framework for evidence-based policymaking, why AI tools move too fast for RCT-based procurement, and what it would take to fix development economics' concentration problem.

How many maize seeds should farmers plant in each hole? Ask the farmers and they say two or three. Agronomists can show them more reliable seeds, where they only need one. 
But change the seed and everything else changes too; the fertiliser, the spacing, the whole system. This is why getting better technology into the hands of African farmers, and helping them to find ways to improve their profits, is so much harder than it looks.
Rachid Laajaj (Universidad de los Andes) and Karen Macours (Paris School of Economics) tell Tim Phillips about an experiment in Kenya in which farmers ran trial plots on their own land for three seasons, comparing input combinations side by side, and were followed for five seasons more.
Farmers adopted the new inputs and their profits fell. But they kept experimenting anyway, season after season, until the losses became gains. The most skilled farmers went first, made the most mistakes, and paid the highest price; their neighbours watched, copied, and adopted at a fraction of the cost.
Each failed attempt costs a farmer a season. Lower that cost, Laajaj and Macours argue, and you change what is possible for millions of farming households.
The research behind this episode:
Laajaj, Rachid, and Karen Macours. 2026. "The Complexity of Multidimensional Learning in Agriculture." Econometrica 94 (2): 465-503. 
To cite this episode:
Phillips, Tim, Rachid Laajaj, and Karen Macours. 2026. "Why farmers struggle to adopt new agricultural technology" VoxDev Talks (podcast). 

About the guests

Rachid Laajaj is Associate Professor of Economics at Universidad de los Andes in Bogota, with research spanning technology adoption in agriculture, corruption, and human capital, studied from a micro-development perspective with particular attention to the role of information. He received his PhD in Agricultural and Applied Economics from the University of Wisconsin-Madison.
Karen Macours is a professor at the Paris School of Economics, a senior researcher at INRAE, and a Research Fellow of the Centre for Economic Policy Research in the Development Economics programme. Her research spans agricultural productivity, rural poverty, social programmes, and early childhood development. She chairs the Standing Panel on Impact Assessment of the CGIAR and is co-editor of the Journal of Development Economics.
Research and concepts cited in this episode

The trials. In 48 randomly selected villages in Kenya, ten farmers per village were invited to run a three-season agronomic trial on a small parcel of their own land, guided by an agronomist. Each trial plot was divided into six subplots; five tested different combinations of modern inputs and one served as a control. The trials occupied a tiny share of each farm, so the direct economic effect was negligible; the point was the opportunity to learn. A further 48 villages served as controls, giving a sample of 960 farmers followed across six seasons of data collection.
Integrated Soil Fertility Management (ISFM). The input combinations tested in the trials followed ISFM principles; a sustainable intensification approach that combines improved seed with mineral fertiliser and organic inputs, adapted to local conditions. Its logic is precisely the multidimensionality the paper studies; the components work through their combination, not in isolation.
The International Institute of Tropical Agriculture (IITA) provided the agronomists who guided farmers through the trials. The paper builds on joint work with IITA.
The target-input model. The workhorse theory of learning in agriculture, in which farmers learn the optimal quantity of a single input through experience; it dates to work by Foster and Rosenzweig in 1995 and underlies much of the literature on social learning, including Conley and Udry's study of pineapple farmers in Ghana. Laajaj and Macours extend it to many interdependent inputs, where adopting one requires re-optimising the others; what Laajaj calls the curse of multidimensionality.
Measuring farmer skills. The origin of this project; Laajaj and Macours spent years developing measures of farmers' cognitive, non-cognitive, and technical skills, work that circulated as CEPR Discussion Paper 13271, "Measuring Skills in Developing Countries" (gated). Asking farmers agronomic questions revealed that many had no single right answer; the answer depended on everything else the farmer was doing.
Employment in agriculture. Macours notes in the episode that agriculture accounts for half of employment in sub-Saharan Africa, rising to as much as two-thirds when the wider agro-food sector is included.
Conservation agriculture. A prominent example of a knowledge-intensive sustainable practice; it combines minimal tillage, crop rotation, and the retention of crop residues, so a farmer must learn several new practices at once and find a combination that works.
More VoxDev Talks episodes

African agriculture's underappreciated supply side. Hope Michelson on the other half of the adoption puzzle; the markets and firms that supply seeds, fertilisers, and pesticides to smallholders.
Strengthening climate resilience in agriculture. Tavneet Suri on how small-scale farmers respond to extreme weather, and the seed varieties that protect crops against floods and droughts.
Combining improved seed varieties and index insurance to address drought losses. Paswel Marenya on a trial in Mozambique and Tanzania that paired drought-resistant seeds with insurance.
Related reading on VoxDev

Agricultural Technology in Africa, the VoxDevLit surveying the evidence on what drives, and blocks, technology adoption by African farmers.
Improving agricultural extension and information services in the developing world, drawing lessons from nearly fifty randomised evaluations of constraints on smallholder productivity.
Encouraging agricultural technology adoption through autonomy: evidence from Mexico, on how giving farmers ownership of the adoption process makes new practices stick.
Harnessing the benefits of digital agriculture for smallholder farmers in East Africa, on text-message-based extension programmes evaluated in Kenya and Rwanda.

Wars get the headlines. A civil war can wreck a country's economy and dominate its news for a decade. But if you assume war is the most costly form of violence a society faces, you would be wrong.
In this week's VoxDev Talk, James Fearon (Stanford) joins Tim Phillips to argue that the violence happening quietly inside homes and on ordinary streets does far more damage than war and terrorism combined.
Drawing on his new book Worse Than War (PUP), written with Anke Hoeffler, Fearon estimates that interpersonal violence, meaning homicide, intimate partner violence and severe physical abuse of children, kills and injures more people than war, and costs society more too. Large-scale collective violence hits very few countries in any year. Almost every country carries rates of homicide and assault that exceed the global average for war.
Fearon's argument is not that war does not matter. It is that the interpersonal violence is less dramatic and often hidden from view. There is evidence on what works to reduce it, but we aren't giving the problem the attention it needs.
The book behind this episode:
Hoeffler, Anke, and James D. Fearon. 2026. Worse than War: The Global Costs of Violence. Princeton: Princeton University Press.
To cite this episode:
Phillips, Tim, and James Fearon. 2026. "Interpersonal violence costs the world more than" VoxDev Talk (podcast). 

About James Fearon

James Fearon is the Theodore and Frances Geballe Professor in the School of Humanities and Sciences and professor of political science at Stanford University, and a senior fellow at the Freeman Spogli Institute for International Studies. His research spans civil and interstate war, ethnic conflict, the international spread of democracy, the evaluation of foreign aid and institution building, and the costs of collective and interpersonal violence. He was elected to the National Academy of Sciences in 2012 and the American Academy of Arts and Sciences in 2002.
The book is co-authored with Anke Hoeffler, professor of development research at the University of Konstanz and co-author of Breaking the Conflict Trap, whose work on the economics of civil war includes the influential conflict-trap research with Paul Collier.
Research and concepts discussed in this episode

Interpersonal versus collective violence. The book distinguishes collective violence, perpetrated by organised groups such as states, rebel organisations, terrorists, or criminal gangs, from interpersonal violence, committed by individuals. Interpersonal violence is broken down into homicide, intimate partner violence, and severe physical abuse of children. The central finding is that the average annual cost of interpersonal violence is far larger than that of interstate and civil war, somewhere between five and 20 times larger, with a best estimate of about eight times.
Prevalence, not intensity. The reason interpersonal violence costs more in aggregate is that it is far more widespread. Very few countries experience large-scale collective violence in any given year, but almost all countries carry annual death and injury rates from homicide, intimate partner violence, and child abuse that exceed global average war death and injury rates. For 2000 to 2019, the authors estimate a global annual average of not quite 1.5 deaths per 100,000 people from war and terrorism, against about 7 per 100,000 for homicide.
Intimate partner violence. The authors estimate global annual averages of about 3,300 and 1,600 per 100,000 people for intimate partner physical and sexual assault respectively, which is roughly twice those rates for women specifically.
Severe physical abuse of children. Measured conservatively, capturing beatings far more serious than a mild spanking, the estimates imply that 15% of children aged 14 or younger are subjected to monthly beatings that would be classed as assaults if the victims were adults.
Economic costs versus well-being costs. Civil war can cause severe economic devastation in the worst-affected countries, mainly through reduced growth, and at the global level the strictly economic costs of collective violence may exceed those of interpersonal violence. But economic loss is only one cost. Drawing on methods that use what people pay to avoid risks of death or injury, the authors estimate well-being losses that are far greater for interpersonal violence, because it kills and injures so many more people each year. The authors note that the difficulty of estimating the economic cost of interpersonal violence means their figures probably understate it relative to collective violence.
Why interpersonal violence stays invisible. National media and political debate focus far more on collective violence, partly because it is dramatic and episodic while interpersonal violence is persistent and, happening inside households, often practically invisible. Sustained public and policy attention on the scale of interpersonal violence is itself a step towards reducing its costs.
It is not just "culture". Against the view that little can be done because interpersonal violence is cultural, the authors point to a broad range of programmes and policies with evidence behind them. For homicide and intimate partner violence, measures that reduce alcohol access and consumption. For intimate partner violence and child abuse, adolescent dating programmes and parenting programmes. Across all forms, police reform to improve accountability and training, and more police in countries with low ratios of police to homicides.
Reducing collective violence. There is reasonable evidence that UN peacekeeping operations are a relatively inexpensive way to lower violence in civil war countries and to reduce the chance of war resuming after a peace agreement. The authors note that rising conflict among the permanent five members of the UN Security Council, and sharpening regional rivalries among larger states in conflict-affected areas, have sharply reduced the prospects for new peacekeeping operations for now.