IDEAS home Printed from https://ideas.repec.org/p/csa/wpaper/2015-11.html
   My bibliography  Save this paper

Location, search costs and youth unemployment: A randomized trial of transport subsidies in Ethiopia

Author

Listed:
  • Simon Franklin

Abstract

Do high costs of search affect the labour market outcomes of young job seekers living far away from the centre of cities? I randomly assign temporary and non-fungible transport subsidies to unemployed youth living in spatially dislocated areas of Addis Ababa, Ethiopia. Lowering transport costs increases the intensity of job search (during and after treatment), and increases the likelihood of finding permanent employment by 6 percentage points in the short run. Analysis of weekly phone call data show that search activity declines over time but the subsidies prevent this from happening in the treatment group. The subsidies reduce participation in temporary and informal work, suggesting an important role for alternative sources of income to support job seekers. I explain these results with a dynamic model of job search with savings, cash constraints and monetary search costs. The predictions of the model are quantitatively consistent with the estimated impacts on increased job search activity, and in turn the rates at which jobs are found. These results suggest that the cost of transport in large cities can lead to frictions in the matching of firms and workers and reinforce spatial inequality.

Suggested Citation

  • Simon Franklin, 2015. "Location, search costs and youth unemployment: A randomized trial of transport subsidies in Ethiopia," CSAE Working Paper Series 2015-11, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:2015-11
    as

    Download full text from publisher

    File URL: http://www.csae.ox.ac.uk/materials/papers/csae-wps-2015-11.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, February.
    2. Bruno Crépon & Esther Duflo & Marc Gurgand & Roland Rathelot & Philippe Zamora, 2013. "Do Labor Market Policies have Displacement Effects? Evidence from a Clustered Randomized Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 128(2), pages 531-580.
    3. Abhijit Banerjee & Sebastian Galiani & Jim Levinsohn & Zoë McLaren & Ingrid Woolard, 2008. "Why has unemployment risen in the New South Africa?1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(4), pages 715-740, October.
    4. Miriam Bruhn & David McKenzie, 2009. "In Pursuit of Balance: Randomization in Practice in Development Field Experiments," American Economic Journal: Applied Economics, American Economic Association, vol. 1(4), pages 200-232, October.
    5. Zenou,Yves, 2009. "Urban Labor Economics," Cambridge Books, Cambridge University Press, number 9780521698221, May.
    6. Martin Browning & Thomas F. Crossley & Eric F. Smith, 2007. "Asset Accumulation and Short Term Employment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 400-423, July.
    7. Victoria Hosegood & Anne Case & Cally Ardington, 2009. "Labor Supply Responses to Large Social Transfers: Longitudinal Evidence from South Africa," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 22-48, January.
    8. Pablo Ibarraran & Laura Ripani & Bibiana Taboada & Juan Villa & Brigida Garcia, 2014. "Life skills, employability and training for disadvantaged youth: Evidence from a randomized evaluation design," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-24, December.
    9. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2008. "Bootstrap-Based Improvements for Inference with Clustered Errors," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 414-427, August.
    10. Diego Puga, 2010. "The Magnitude And Causes Of Agglomeration Economies," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 203-219, February.
    11. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
    12. Alan B. Krueger & Andreas Mueller, 2011. "Job Search, Emotional Well-Being and Job Finding in a Period of Mass Unemployment: Evidence from High-Frequency Longitudinal Data," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 1-81.
    13. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-1248, September.
    14. Taryn Dinkelman, 2011. "The Effects of Rural Electrification on Employment: New Evidence from South Africa," American Economic Review, American Economic Association, vol. 101(7), pages 3078-3108, December.
    15. Raj Chetty, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 173-234, April.
    16. David Card & Raj Chetty & Andrea Weber, 2007. "Cash-on-Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 122(4), pages 1511-1560.
    17. Franklin, Simon, 2020. "Enabled to work: The impact of government housing on slum dwellers in South Africa," Journal of Urban Economics, Elsevier, vol. 118(C).
    18. World Bank, 2012. "World Development Report 2013 [Rapport sur le développement dans le monde 2013]," World Bank Publications, The World Bank, number 11843.
    19. Pieter Serneels, 2007. "The Nature of Unemployment among Young Men in Urban Ethiopia," Review of Development Economics, Wiley Blackwell, vol. 11(1), pages 170-186, February.
    20. Getinet, Astatike Haile, 2009. "The Nature of self-employment in Urban Ethiopia," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 17(1), pages 1-80, February.
    21. Wagner, Alfred, 1891. "Marshall's Principles of Economics," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 5, pages 319-338.
    22. Verick, Sher, 2011. "Giving Up Job Search During a Recession: The Impact of the Global Financial Crisis on the South African Labour Market," IZA Discussion Papers 6116, Institute of Labor Economics (IZA).
    23. McKenzie, David, 2012. "Beyond baseline and follow-up: The case for more T in experiments," Journal of Development Economics, Elsevier, vol. 99(2), pages 210-221.
    24. Raj Chetty, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 173-234, April.
    25. Wheeler, Christopher H., 2006. "Cities and the growth of wages among young workers: Evidence from the NLSY," Journal of Urban Economics, Elsevier, vol. 60(2), pages 162-184, September.
    26. Jeffrey R Kling & Jeffrey B Liebman & Lawrence F Katz, 2007. "Experimental Analysis of Neighborhood Effects," Econometrica, Econometric Society, vol. 75(1), pages 83-119, January.
    27. Fields, Gary S., 1975. "Rural-urban migration, urban unemployment and underemployment, and job-search activity in LDCs," Journal of Development Economics, Elsevier, vol. 2(2), pages 165-187, June.
    28. Erica Field, 2007. "Entitled to Work: Urban Property Rights and Labor Supply in Peru," The Quarterly Journal of Economics, Oxford University Press, vol. 122(4), pages 1561-1602.
    29. Pablo Ibarraran & Laura Ripani & Bibiana Taboada & Juan Villa & Brigida Garcia, 2014. "Life skills, employability and training for disadvantaged youth: Evidence from a randomized evaluation design," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-24, December.
    30. Groh, Matthew & Krishnan, Nandini & McKenzie, David & Vishwanath, Tara, 2012. "Soft skills or hard cash ? the impact of training and wage subsidy programs on female youth employment in Jordan," Policy Research Working Paper Series 6141, The World Bank.
    31. Galina Vereshchagina & Hugo A. Hopenhayn, 2009. "Risk Taking by Entrepreneurs," American Economic Review, American Economic Association, vol. 99(5), pages 1808-1830, December.
    32. World Bank, 2012. "World Development Report 2012 [Rapport sur le développement dans le monde 2012]," World Bank Publications, The World Bank, number 4391.
    33. Ihlanfeldt, Keith R., 1997. "Information on the Spatial Distribution of Job Opportunities within Metropolitan Areas," Journal of Urban Economics, Elsevier, vol. 41(2), pages 218-242, March.
    34. repec:idb:brikps:publication-detail,7101.html?id=58726 is not listed on IDEAS
    35. Phillips, David C., 2014. "Getting to work: Experimental evidence on job search and transportation costs," Labour Economics, Elsevier, vol. 29(C), pages 72-82.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David McKenzie, 2017. "How Effective Are Active Labor Market Policies in Developing Countries? A Critical Review of Recent Evidence," World Bank Research Observer, World Bank Group, vol. 32(2), pages 127-154.
    2. Christopher Blattman & Stefan Dercon, 2016. "Occupational Choice in Early Industrializing Societies: Experimental Evidence on the Income and Health Effects of Industrial and Entrepreneurial Work," Working Papers id:11361, eSocialSciences.
    3. Girum Abebe & Stefano Caria & Marcel Fafchamps & Paolo Falco & Simon Franklin & Simon Quinn, 2017. "Anonymity or Distance? Job Search and Labour Market Exclusion in a Growing African City," SERC Discussion Papers 0224, Spatial Economics Research Centre, LSE.
    4. Livia Alfonsi & Oriana Bandiera & Vittorio Bassi & Robin Burgess & Imran Rasul & Munshi Sulaiman & Anna Vitali, 2020. "Tackling Youth Unemployment: Evidence From a Labor Market Experiment in Uganda," Econometrica, Econometric Society, vol. 88(6), pages 2369-2414, November.
    5. Chakravarty, Shubha & Lundberg, Mattias & Nikolov, Plamen & Zenker, Juliane, 2019. "Vocational training programs and youth labor market outcomes: Evidence from Nepal," Journal of Development Economics, Elsevier, vol. 136(C), pages 71-110.
    6. Franklin, Simon, 2020. "Enabled to work: The impact of government housing on slum dwellers in South Africa," Journal of Urban Economics, Elsevier, vol. 118(C).
    7. Abebe, Girum & Caria, Stefano & Fafchamps, Marcel & Falco, Paolo & Franklin, Simon & Quinn, Simon & Shilpi, Forhad, 2017. "Matching firms and workers in a field experiment in Ethiopia," LSE Research Online Documents on Economics 86572, London School of Economics and Political Science, LSE Library.
    8. Ana I. Moreno-Monroy, 2016. "Access to public transport and labor informality," IZA World of Labor, Institute of Labor Economics (IZA), pages 274-274, July.
    9. Marcel Fafchamps & Simon Quinn, 2017. "Aspire," Journal of Development Studies, Taylor & Francis Journals, vol. 53(10), pages 1615-1633, October.
    10. Girum Abebe & Stefano Caria & Marcel Fafchamps & Paolo Falco & Simon Franklin & Simon Quinn, 2016. "Curse of Anonymity or Tyranny of Distance? The Impacts of Job-Search Support in Urban Ethiopia," CSAE Working Paper Series 2016-10, Centre for the Study of African Economies, University of Oxford.
    11. Sarah Baird & David McKenzie & Berk Özler, 2018. "The effects of cash transfers on adult labor market outcomes," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 8(1), pages 1-20, December.
    12. Chakravarty, Shubha & Lundberg, Mattias & Nikolov, Plamen & Zenker, Juliane, 2019. "Vocational training programs and youth labor market outcomes: Evidence from Nepal," Journal of Development Economics, Elsevier, vol. 136(C), pages 71-110.
    13. Abu-Qarn, Aamer & Lichtman-Sadot, Shirlee, 2019. "Connecting Disadvantaged Communities to Work and Higher Education Opportunities: Evidence from Public Transportation Penetration to Arab Towns in Israel," IZA Discussion Papers 12824, Institute of Labor Economics (IZA).
    14. Cai, Shu, 2020. "Migration under liquidity constraints: Evidence from randomized credit access in China," Journal of Development Economics, Elsevier, vol. 142(C).
    15. Aalia Cassim & Kezia Lilenstein & Morné Oosthuizen & Francois Steenkamp, 2016. "Informality and Inclusive Growth in Sub-Saharan Africa," Working Papers 201602, University of Cape Town, Development Policy Research Unit.
    16. Demachi, Kazue, 2017. "TVET as the last educational chance : employability and family background of Ethiopian urban youth," IDE Discussion Papers 671, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    17. Aniceto C. Orbeta Jr. & Vicente B. Paqueo, 2018. "Countering the Discriminatory Impact of Minimum Wages Against Disadvantaged Workers: Literature Review and Experimental Design Development," Working Papers id:12861, eSocialSciences.
    18. Jacomien van der Merwe & Stephan Krygsman, 2020. "The relationship between transport accessibility and employment duration," WIDER Working Paper Series wp-2020-56, World Institute for Development Economic Research (UNU-WIDER).
    19. Abebe, Girum & Caria, Stefano & Fafchamps, Marcel & Falco, Paolo & Franklin, Simon & Quinn, Simon, 2017. "Anonymity of distance? Job search and labour market exclusion in a growing African city," LSE Research Online Documents on Economics 86573, London School of Economics and Political Science, LSE Library.
    20. Le Gallo, Julie & L'Horty, Yannick & Petit, Pascale, 2017. "Does enhanced mobility of young people improve employment and housing outcomes? Evidence from a large and controlled experiment in France," Journal of Urban Economics, Elsevier, vol. 97(C), pages 1-14.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simon Franklin, 2018. "Location, Search Costs and Youth Unemployment: Experimental Evidence from Transport Subsidies," Economic Journal, Royal Economic Society, vol. 128(614), pages 2353-2379, September.
    2. Girum Abebe & Stefano Caria & Marcel Fafchamps & Paolo Falco & Simon Franklin & Simon Quinn, 2016. "Curse of Anonymity or Tyranny of Distance? The Impacts of Job-Search Support in Urban Ethiopia," CSAE Working Paper Series 2016-10, Centre for the Study of African Economies, University of Oxford.
    3. Abebe, Girum & Caria, Stefano & Fafchamps, Marcel & Falco, Paolo & Franklin, Simon & Quinn, Simon, 2017. "Anonymity of distance? Job search and labour market exclusion in a growing African city," LSE Research Online Documents on Economics 86573, London School of Economics and Political Science, LSE Library.
    4. Konstantinos Tatsiramos & Jan C. Ours, 2014. "Labor Market Effects Of Unemployment Insurance Design," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 284-311, April.
    5. Arash Nekoei & Andrea Weber, 2017. "Does Extending Unemployment Benefits Improve Job Quality?," American Economic Review, American Economic Association, vol. 107(2), pages 527-561, February.
    6. Simon Franklin, 2016. "Location, Search Costs and Youth Unemployment: Experimental Evidence from Transport Subsidies in Addis Ababa," SERC Discussion Papers 0199, Spatial Economics Research Centre, LSE.
    7. Matthew D. Webb & Arthur Sweetman & Casey Warman, 2016. "Targeting Tax Relief at Youth Employment," Canadian Public Policy, University of Toronto Press, vol. 42(4), pages 415-430, December.
    8. Picarelli, Nathalie, 2019. "There Is No Free House," Journal of Urban Economics, Elsevier, vol. 111(C), pages 35-52.
    9. repec:hrv:faseco:34330197 is not listed on IDEAS
    10. Elisa Guglielminetti & Rafael Lalive & Philippe Ruh & Etienne Wasmer, 2015. "Spatial search strategies of job seekers and the role of unemployment insurance," Sciences Po publications info:hdl:2441/4n249fe9fu9, Sciences Po.
    11. Bandiera, Oriana. & Buehren, Niklas. & Burgess, Robin. & Goldstein, Markus P., & Gulesci, Selim. & Rasul, Imran. & Sulaiman, Munshi., 2015. "Women’s economic empowerment in action : evidence from a randomized control trial in Africa," ILO Working Papers 994874053402676, International Labour Organization.
    12. Franklin, Simon, 2020. "Enabled to work: The impact of government housing on slum dwellers in South Africa," Journal of Urban Economics, Elsevier, vol. 118(C).
    13. Flórez, Luz A., 2017. "Informal sector under saving: A positive analysis of labour market policies," Labour Economics, Elsevier, vol. 44(C), pages 13-26.
    14. Serdar Birinci & Kurt Gerrard See, 2018. "How Should Unemployment Insurance vary over the Business Cycle?," 2018 Meeting Papers 69, Society for Economic Dynamics.
    15. Camille Landais & Pascal Michaillat & Emmanuel Saez, 2018. "A Macroeconomic Approach to Optimal Unemployment Insurance: Applications," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 182-216, May.
    16. Nakasone, Eduardo & Torero, Maximo, 2014. "Soap Operas for for Female Micro Entrepreneur Training," MPRA Paper 61302, University Library of Munich, Germany.
    17. Nicola Brandt, 2012. "Reducing Poverty in Chile: Cash Transfers and Better Jobs," OECD Economics Department Working Papers 951, OECD Publishing.
    18. Andrew C. Johnston & Alexandre Mas, 2018. "Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut," Journal of Political Economy, University of Chicago Press, vol. 126(6), pages 2480-2522.
    19. Brown, Alessio J.G. & Kohlbrecher, Britta & Merkl, Christian & Snower, Dennis J., 2021. "The effects of productivity and benefits on unemployment: Breaking the link," Economic Modelling, Elsevier, vol. 94(C), pages 967-980.
    20. Baum-Snow, Nathaniel & Ferreira, Fernando, 2015. "Causal Inference in Urban and Regional Economics," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 3-68, Elsevier.
    21. Raj Chetty & Amy Finkelstein, 2012. "Social Insurance: Connecting Theory to Data," NBER Working Papers 18433, National Bureau of Economic Research, Inc.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:csa:wpaper:2015-11. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/csaoxuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Julia Coffey (email available below). General contact details of provider: https://edirc.repec.org/data/csaoxuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.