Journal of Political Economy

A randomized experiment with small firms in Nigeria compared four ways of upgrading business practices: training the owner, hiring a consultant, insourcing a skilled worker, or outsourcing tasks to professionals. Insourcing and outsourcing both outperformed business training and matched consulting at about half the cost. The findings suggest firms can access marketing and finance skills through the market rather than the owner having to learn everything.

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Journal of Development Economics

Multi-faceted graduation programs have been very effective in lifting people out of poverty. These programs transfer productive assets, give regular training and coaching, regular cash transfers for consumption support and access to savings. Given their multifaceted nature, implementation costs are quite high. This paper therefore examines which components can lead to long-term effects and examine whether the asset transfer or the provision of a savings account with deposit collection could have similar effects to the multi-faceted program. The asset transfer on its own does not generate similar impacts, the savings account with deposit collection does have similar impacts but these are short-lived. 

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The World Bank Economic Review

As very few management training programs are cost-effective, this paper examines the cost-effectiveness of a mentorship program provided to Kenyan microentrepreneurs. The authors find that for each USD of spent on the program, the average profit increases by 1.63 USD. Compared to most other training programs, this program has a higher impact and a lower cost. The paper then discusses how the mentorship program performs better than standard classroom training to improve future interventions designed to increase managerial capacity.

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Campbell Systematic reviews

This is a systematic review of 40 rigorous evaluations of business-support interventions that target small and medium enterprises. The authors find that business-support interventions improve firm performances and create jobs but there is still lack of evidence on which interventions work best and why requiring more rigorous impact evaluations.

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 The World Bank Research Observer

This is a critical review of business training evaluations which in summary reports on most evaluations suffering from small sample sizes, a focus on short-term impact measurements as well as methodological limitations such as survey attrition. Even in the short-term the impacts on business survival rates are modest but several business training programs help prospective entrepreneurs to start their own businesses. Finally, trainees adopt some of the taught practices but there is little impact on profits or sales. Overall, there is only limited evidence to guide policymakers as it is unclear whether any observed effects are due to productivity gains or from drawing sales from competing businesses.

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Labour Economics

An RCT in Rwanda gave recent university graduates a two-week soft-skills course run by the University of Rwanda. The training sped up entry into work during the COVID-19 downturn, but the advantage faded within a year as the control group caught up. The gains worked mainly by helping participants build and use larger job-search networks.

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Journal of Political Economy

The paper estimates productivity gains from a soft skills training at the workplace among Indian garnment workers.The estimated gains are 13.5% on average with greater gains among trainees who work together and untreated coworkers benefitting indirectly. Despite these productivity gains, the results do not show significant effects on wages or retentions due to existing labor market frictions.

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World Development

This paper examines the effectiveness of two soft skills training programs targeting Jamaican entrepreneurs and documents short-run impacts on business outcomes but no significant impacts after one year. Further, the authors do not find any impacts for women and no impacts for a training that combines soft and hard skills. The soft skills training persistently improves both self-reported as well as incentivized measures of soft skills.

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The Quarterly Journal of Economics

This paper shows that social skills are increasingly rewarded in the US labor market as the share of jobs with human interactions grew and the share of less social jobs reduced. In particular jobs requiring math skills as well as social skills had high employment and wage growth. To gain a better understanding of these patterns, the paper also provides a theoretical model. Social skills can be essential to reduce coordination costs, allows workers to specialize and can make team work more efficient.

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Journal of Labour Economics

This six-year field experiment in urban Uganda tracked young job seekers offered vocational training and/or help being matched to firms. Training raised their optimism and pushed them to search harder and aim at better firms, while adding a matching service backfired, partly because employer callback rates were low. The two interventions therefore shaped job-search behaviour and outcomes in opposite directions over the long run.

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Journal of Development Economics

In Nepal, women were randomly assigned to train as community animal-health workers either through a traditional course requiring 35 days away from home or a hybrid distance-learning course with shorter stays plus a tablet-based curriculum at home. Distance learning lifted course-completion rates from 30% to 51%. Those trained remotely ended up just as knowledgeable and skilled, with comparable employment and long-run job performance.

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De Economist

This systematic review synthesises recent (2019–2024) randomized controlled trials of skills-training programs across sub-Saharan Africa, using PRISMA search and selection methods. It captures a wave of new experimental studies that earlier reviews missed. The authors find a more optimistic picture than before, with many recent training programs improving employment-related outcomes.

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American Economic Review: Insights

This field experiment in Ghana tested whether paying apprenticeship trainers based on their apprentices’ results improves training quality. Treated firm owners earned a reward tied to how their apprentices ranked on a skills test, while controls got a flat participation payment. Apprentices of incentivised trainers scored higher and, two years on, scored better on a skills test and earned more, mainly through higher self-employment profits.

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Journal of Development Economics

Working with a large Indian firm, the authors elicit job-seekers’ true preferences over jobs and show these vary widely, yet the placement officers matching people to jobs know little about them. Giving officers this preference information improves the matches job-seekers receive, even accounting for jobs being reshuffled between candidates. Treated workers land more-preferred jobs and keep them at three months, though the effect fades by six months.

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Journal of Development Economics

This RCT added two information sessions about real placement opportunities to India’s DDU-GKY vocational training program. Trainees who received the information were 18% more likely to stay in the jobs they were placed in. The effect seems to come from better selection: over-optimistic trainees were more likely to drop out before placement rather than take an ill-fitting job.

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Journal of Economic Perspectives

Drawing on recent impact evaluations, this review reassesses job training and job-search-assistance programs in developing countries. It argues there is still a role for governments, but that results hinge on design and delivery choices that are hard to scale. Crucially, the binding constraint is often too few firms with vacancies rather than too few skilled workers.

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The World Bank Research Observer

This article reviews the evidence of the effectiveness for a variety of Active Labor Market Policies in developing countries incl. vocational training, wage subsidies and search and matching assistance.  Despite of the positive theoretical expectations, many evaluations find no significant impacts on employment or earnings potentially due to fewer market failures in urban labor markets than expected. The authors therefore also present examples which seem to be more promising.

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The Review of Economic Studies

This articles examines the correlates of managerial characteristics with productivity using survey data on managers as well as detailed production data. The most relevant factor seem to be managerial attention and control. Managerial practices seem to enable faster learning-by-doing.

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American Economic Journal: Applied Economics

This articles examines the impacts of a randomized intervention offering consulting on management practices  after 9 years. Of the initially adopted management practices about 50% were still practiced in the treatment group plants and not in the control group plants. Several practices spread within firms but not across firms. The most commonly stated reasons for dropping certain practices included managerial turnover and lack of director time. 

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Oxford Review of Economic Policy

Earlier randomized controlled trials were unable to detect impacts of business trainings on profits or sales. This articles considers more recent evidence and shows that business trainings can increase profits and sales by 5-10 percent. While this corresponds to optimistic expectations, most of the field experiments do not have the statistical power to detect such changes. The review then proposes how business trainings can be designed more effectively and discusses scenarios in which programs can be scaled up effectively.

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American Economic Review

This paper examines the variation of management practices and the authors find that 40% of the variation in management practices stems from different plants within the same firm. Further, management practices explain about 20% of the variation in productivity. Thereby management practices are as relevant as human capital for example or even more relevant. Both business environment and learning  from extremely productive plants can improve management practices of existing firms.

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The Quarterly Journal of Economics

With a management field experiment, the authors examine whether differences in management practices can explain differences in productivity. The treatment consists of offering free management consulting services. Adoption of management practices raises productivity through improved quality, efficiency, reducing inventory and in the long run allowed firms to open more production plants. Profitable practices were apparently now adopted earlier as firms faced information constraints. Finally, barriers to market entry were relatively high and thereby relatively badly managed firms were able to survive.

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American Economic Review: Papers & Proceedings

This paper examines why firms in developing countries have relatively lower productivity and the authors focus on management practices, delegation of decision making and financial constraints. The authors find that firms in developing countries tend to be badly managed that financial constraints limit firms' growth and that delegation of decisionmaking is very limited because owners fear that managers may steal from them.

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The Journal of Politics

We identify the effects of employment on political participation by collaborating with 27 large companies in Ethiopia to randomly assign jobs to equally qualified female applicants. The job offers increase formal employment and earnings, but we can clearly reject any positive effects on political participation. We find no effects on political interest, raising issues, or protest activity, and we find negative effects on participation in community meetings. We further find that job offers reduce internal and external political efficacy, suggesting that employment may actually be politically disempowering. Our qualitative data suggest that several features of the jobs may contribute to lower political efficacy directly.

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American Economic Journal: Applied Economics

This paper examines the impact of being offered an industrial job compared to a startup grant plus entrepreneurial training compared to a pure control. The job offer doubles exposure to industrial work but most worker quit within a few months. Therefor it does not have any impact on employment or earnings. The applicants accepted the job to cope with temportary adverse shocks but at the same time the industrial work exposure led to health problems. With the business grant plus training, applicants preferred entrepreneurship compared to industrial labor.

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Annual Review of Economics

This review lays out how labour markets in poor countries differ from those in rich ones, organised around the striking fact that working-age people hold wage jobs only 20–50% of the time. It links this to involuntary unemployment masked by self-employment, frictions like wage rigidity and search costs, and workers’ reluctance to take available low-skill formal jobs. It also argues poverty itself can suppress labour supply, so weak employment is partly a symptom of underdevelopment.

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American Economic Review

A general equilibrium model with segmented labor markets is estimated using data from Peru. In equilibrium firms will have less market power in local labor markets with more self employment. As a result, policies that increase wage employment may inadvertently strengthen firms’ wage-setting power.

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Quarterly Journal of Economics

The authors build a harmonized dataset from rotating-panel labor force surveys covering 80 million people across 49 countries to compare how labor markets move at different levels of development. They find that labor market flows — job-finding rates, employment-exit rates, and job-to-job transitions — are far higher in poorer countries. Rather than signalling a healthy, dynamic market, this reflects a "slippery job ladder" where workers churn in and out of marginal employment without climbing into or holding onto better-paying jobs, with subsistence self-employment and worker selection playing key roles.

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American Economic Review

This paper examines experimentally the impacts of randomly hiring large shares of laborers in Indian villages in external month-long jobs outside the rural labor market. This external hiring shock increases wages and reduces local employment rates during time periods right before or after the main harvest seasons. During lean periods, wages and employment do not change but workers who are not hired are more likely to be employed in the external month-long work program. Many of those workers would have otherwise taken up self-employment but are better off when hired through the work program.

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Economic Journal

Individual panel data from six African countries are used to estimate a matching model for workers and firms, with unmatched workers staying in the subsistence sector. Costs of both workers and firms lead to wage dispersion and lack of competition. The authors apply the model to review a wide range of policy interventions.

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Journal of Development Economics

Using data from rural India (Jharkand) it is found that workers need compensation in form of higher wages to accept working non-farm, even within the same village. Thus it is not necessarily frictions and migration costs that hinder structural transformation and rural-urban migration.

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Quarterly Journal of Economics

A large-scale program targeted the poor in rural Bangladesh providing women with livestock, mostly cows, and training in raising the livestock. The program did not crowd out existing livestock businesses in the village, while it led to a decline in non-farm female labor supply (while total labor input increased) and as a result an increase in local wages.

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Econometrica

In a year-long experiment with 84 Bangladeshi apparel factories, 29 multinational buyers enforced a local mandate for worker-led occupational safety and health committees in half of them. Stronger committees produced small safety gains without hurting wages, employment or productivity. The improvements concentrated in better-managed factories, pointing to a complementarity between outside enforcement and a factory’s own internal capacity.

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American Economic Review

This paper examines the impacts of corrupt hiring for government jobs. Those who get hires pay on average a bribe corresponding to 17 monthly salaries but against what one would expect the hires are of the same quality as those who were hired based on mired. As jobs differ, correlations between wealth and quality of applicants can be positive and negative. However, in the setting examined the correlation was positive leading to relatively good performance of hires.

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Journal of Development Economics

This paper examines compliance with minimum wages in developing countries, and develops a model to show why governments may tolerate non-compliance. Many small firms would not be able to survive if they were to comply with minimum wage laws. Therefore, governments have an incentive to tolerate non-compliance. Further, worker complaints are the main motivation for governments to inspect firms for non-compliance. The paper provides a theoretical model to rationalise these observations. 

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Journal of Development Economics

This paper aims to examine jobseekers' preferences including their reservation wage and how much they value non-wage amenities. The authors use four different methods for elicitation using a job-matching center and find that the Discrete Choice Experiments work best and can be useful to guide policymakers as well as employers to design policies and compensation bundles considering both the reservation wage and non-wage amenities.

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International Labour Review

Decent work is defined as having a job at all that satisfy core labor standards and gives an income that can sustain a minimal standard of living. The trade-off between pay and labor standards along a decent work frontier is discussed, along with the difficult policy trade-offs that follow.

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Annual Review of Economics

This paper reviews experimental studies that examine the constraints on the growth of firms. Studies have shown that especially smaller firms face capital constraints and it is crucial to alleviate such capacity constraints. While urban labor markets for laborer with lower skill levels work reasonably well, labor markets for high-skilled laborers have frictions which affect firms. Managerial training delivered to small firms tends not to be effective. Demand shocks can effectively generate firm growth. Studies are most valuable when they are based on theories and complement existing evidence.

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American Economic Journal: Applied Economics

This paper examines the impact of a wage subsidy provided to small enterprises in Sri Lanka. The results show that firms increased employment during the subsidy period of 12 months and the wage subsidy increased business survival. However, there was no long-term impact on employment after the subsidy period. Further, profits and sales remained unchanged both during and after the subsidy period.

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Econometrica

In rural Bangladesh, where pre-harvest "lean seasons" bring widespread hunger, the authors randomly gave households a small ($8.50) incentive to send a member to temporarily migrate for work during the lean season. The incentive led 22% of households to send a seasonal migrant and significantly raised consumption back home. Strikingly, treated households were 8–10 percentage points more likely to migrate again one and three years later even without further incentives, suggesting that risk and the need for individual-specific learning, not just poverty, explain why so few households adopt this profitable strategy on their own.

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American Economic Review

This study traces how income earned by overseas migrants flows back to their origin communities and shapes long-run local development. Using exchange-rate shocks that raised the value of remittances sent home by Filipino migrants, the authors find that origin households increased investment in education and saw broad gains, with the benefits spilling over into the wider local economy. The work links international labor migration directly to human-capital formation and employment in sending areas, showing that migrant earnings can be an engine of development back home.

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American Economic Journal: Applied Economics

Winners and losers of a government lottery for men to migrate from Bangladesh to Malaysia on a temporary labor contract (typically semiskilled work at palm oil plantations) were interviewed five years later. Winners doubled household incomes leading to higher consumption, investments in land and housing, less entrepreneurial activity at home, delayed marriages, and improved participation of women in household decisions among the married.

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Journal of Economic Perspectives

Review of research on the difference between the large average rural-urban wage gap and the smaller benefits for the more productive people who in fact migrate to urban areas.

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Journal of Political Economy

Estimating a model of how households (from the ICRISAT panel) handled risk in rural India, it is found that domestic migration is a substitute for risk-sharing among households. As a result, better access to risk-sharing reduces migration, and migration reduces the need for risk-sharing. Similarly, it is found that MNREGA, the work-fare program, affects both risk-sharing and migration.

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