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

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  • 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.

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  • 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
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    2. Blattman, Christopher & Dercon, Stefan, 2016. "Occupational choice in early industrializing societies: Experimental evidence on the income and health effects of industrial and entrepreneurial work," CEPR Discussion Papers 11556, C.E.P.R. Discussion Papers.
    3. 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).
    4. 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.
    5. 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.
    6. Marcel Fafchamps & Simon Quinn, 2017. "Aspire," Journal of Development Studies, Taylor & Francis Journals, vol. 53(10), pages 1615-1633, October.
    7. 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.
    8. 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).
    9. 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.
    10. Aalia Cassim & Kezia Lilenstein & Morne Oosthuizen & Francois Steenkamp, 2016. "Informality and Inclusive Growth in Sub-Saharan Africa," Working Papers 201602, University of Cape Town, Development Policy Research Unit.
    11. 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.
    12. 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.
    13. 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).
    14. 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," NBER Working Papers 22409, National Bureau of Economic Research, Inc.
    15. 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.
    16. 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.
    17. 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.
    18. Suchi Kapoor Malhotra & Howard White & Nina Ashley O. Dela Cruz & Ashrita Saran & John Eyers & Denny John & Ella Beveridge & Nina Blöndal, 2021. "Studies of the effectiveness of transport sector interventions in low‐ and middle‐income countries: An evidence and gap map," Campbell Systematic Reviews, John Wiley & Sons, vol. 17(4), December.
    19. Cai, Shu, 2020. "Migration under liquidity constraints: Evidence from randomized credit access in China," Journal of Development Economics, Elsevier, vol. 142(C).
    20. 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.
    21. 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).

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