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

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  • Christopher Blattman
  • Stefan Dercon

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.

Suggested Citation

  • Christopher Blattman & Stefan Dercon, 2016. "Occupational Choice in Early Industrializing Societies: Experimental Evidence on the Income and Health Effects of Industrial and Entrepreneurial Work," NBER Working Papers 22683, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22683 Note: DEV
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    1. repec:oup:wbrobs:v:32:y:2017:i:2:p:127-154. is not listed on IDEAS
    2. 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.
    3. repec:eee:wdevel:v:97:y:2017:i:c:p:330-348 is not listed on IDEAS

    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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