An Extremely Interesting Three Way Experiment

News Blog readers know that the CLAHRC WM Director is always on the look-out for interesting randomised trials in health care and elsewhere. He has David Satterthwaite to thank for this one – an RCT carried out among applicants for low level jobs in five industries in Ethiopia.[1] The applicants (n=1,000), all of whom qualified for the job on paper, were randomised to three conditions:

  1. Control;
  2. Accepted into the industrial job;
  3. Given training in entrepreneurship and about $1,000 (at purchasing power parity).

Surprisingly, the industrial jobs, while producing more secure incomes, did not yield higher incomes than the control group and incomes were highest in the entrepreneur group. On intention-to-treat analysis the industrial jobs resulted in worse mental health than experienced in the entrepreneurial group, and physical health was also slightly worse. Many left the jobs in firms during the one year follow-up period. In qualitative interviews many said that they accepted industrial jobs only as a form of security while looking for other opportunities.

The authors, aware that rising minimum wages or increasing regulations have costs to society, are cautious in their conclusions. The paper is interesting nevertheless. The CLAHRC WM Director would like to do an RCT of paying a minimum wage vs. a slightly higher wage threshold to determine effects on productivity and wellbeing, positing an effect like this:

065-dcv-fig-1

— Richard Lilford, CLAHRC WM Director

Reference:

  1. Blattman C & Dercon S. Occupational Choice in Early Industrializing Societies: Experimental Evidence on the Income and Health Effects of Industrial and Entrepreneurial Work. SSRN. 2016.
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s