Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/147941
Authors: 
Blattman, Christopher J.
Dercon, Stefan
Year of Publication: 
2016
Series/Report no.: 
IZA Discussion Papers 10255
Abstract: 
As low-income countries industrialize, workers choose between informal self-employment and low-skill manufacturing. What do workers trade off, and what are the long run impacts of this occupational choice? Self-employment is thought to be volatile and risky, but to provide autonomy and flexibility. Industrial firms are criticized for poor wages and working conditions, but they could offer steady hours among other advantages. We worked with five Ethiopian industrial firms to randomize entry-level applicants to one of three treatment arms: an industrial job offer; a control group; or an "entrepreneurship" program of $300 plus business training. We followed the sample over a year. Industrial jobs offered more hours than the control group's informal opportunities, but had little impact on incomes due to lower wages. Most applicants quit the sector quickly, finding industrial jobs unpleasant and risky. Indeed, serious health problems rose one percentage point for every month of industrial work. Applicants seem to understand the risks, but took the industrial work temporarily while searching for better work. Meanwhile, the entrepreneurship program stimulated self-employment, raised earnings by 33%, provided steady work hours, and halved the likelihood of taking an industrial job in future. Overall, when the barriers to self-employment were relieved, applicants appear to have preferred entrepreneurial to industrial labor.
Subjects: 
wage labor
factories
employment
entrepreneurship
cash transfers
field experiment
JEL: 
J24
O14
F16
J81
O17
Document Type: 
Working Paper

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