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Occupational Choice in Early Industrializing Societies: Experimental Evidence on the Income and Health Effects of Industrial and Entrepreneurial Work

Christopher Blattman () and Stefan Dercon

No 10255, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: wage labor; factories; employment; entrepreneurship; cash transfers; field experiment (search for similar items in EconPapers)
JEL-codes: J24 O14 F16 J81 O17 (search for similar items in EconPapers)
Pages: 90 pages
Date: 2016-10
New Economics Papers: this item is included in nep-ent, nep-iue and nep-lma
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Related works:
Working Paper: Occupational choice in early industrializing societies: Experimental evidence on the income and health effects of industrial and entrepreneurial work (2016) Downloads
Working Paper: Occupational Choice in Early Industrializing Societies: Experimental Evidence on the Income and Health Effects of Industrial and Entrepreneurial Work (2016) Downloads
Working Paper: Occupational Choice in Early Industrializing Societies: Experimental Evidence on the Income and Health Effects of Industrial and Entrepreneurial Work (2016) Downloads
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