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

88 Pages Posted: 27 Sep 2016  

Christopher Blattman

University of Chicago, Harris School of Public Policy; National Bureau of Economic Research (NBER)

Stefan Dercon

University of Oxford - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: September 26, 2016

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.

JEL Classification: J24, O14, F16, J81, O17

Suggested Citation

Blattman, Christopher and Dercon, Stefan, Occupational Choice in Early Industrializing Societies: Experimental Evidence on the Income and Health Effects of Industrial and Entrepreneurial Work (September 26, 2016). Available at SSRN: https://ssrn.com/abstract=2843595 or http://dx.doi.org/10.2139/ssrn.2843595

Christopher Blattman (Contact Author)

University of Chicago, Harris School of Public Policy ( email )

1101 East 58th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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Stefan Dercon

University of Oxford - Department of Economics ( email )

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Oxford, OX1 3BJ
United Kingdom
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44 1865 271094 (Fax)

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