Labor Drops : Experimental Evidence on the Return to Additional Labor in Microenterprises
The majority of enterprises in many developing countries have no paid workers. This paper reports on a field experiment conducted in Sri Lanka that provided wage subsidies to randomly chosen microenterprises to test whether hiring additional labor...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/635781482172997729/Labor-drops-experimental-evidence-on-the-return-to-additional-labor-in-microenterprises http://hdl.handle.net/10986/25827 |
| Summary: | The majority of enterprises in many
developing countries have no paid workers. This paper
reports on a field experiment conducted in Sri Lanka that
provided wage subsidies to randomly chosen microenterprises
to test whether hiring additional labor would benefit such
firms. In the presence of labor market frictions, a
short-term subsidy could have a lasting impact on firm
employment. Using 12 rounds of surveys to track dynamics
four years after the end of the subsidy, the study finds
that firms increased employment during the subsidy period,
but there was no lasting impact on employment,
profitability, or sales. Two supplementary interventions and
treatment heterogeneity suggest the lack of impact is not
due to complementarities with capital or management skills,
and detailed survey data help rule out a number of
theoretical mechanisms that could result in sub-optimally
low employment. The study concludes that the urban labor
market facing microenterprises does not have large frictions
that would prevent own-account workers from becoming employers. |
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