WT Week 5 Flashcards
Motivation
Manufacturing growth and the lives of Bangladeshi women (Heath and Mobarak, 2015)
To understrand the effect of proximity to garment factories for women in Bangladesh on fertility, marriage age, and education. This aims to fill evidence gap of welfare efffects of access to factory jobs for women. Media discussion of factory deaths/fires has led to concerns from activists, with US looking to restrict/boycott garments from Bangladesh. Any export restrictions would hurt the same workers they look to protect.
Theory
Manufacturing growth and the lives of Bangladeshi women (Heath and Mobarak, 2015)
“Raises the opportunity cost of being married and having children, impacting marriage and childbearing decisions.
Attractive manufacturing jobs require basic maths and literacy, which could improve school enrollment. Manufacturing expansion often associated with increases in female labour force participation.”
Special settings
Manufacturing growth and the lives of Bangladeshi women (Heath and Mobarak, 2015)
Rapid growth of the garment sector in Bangladesh since 1980. With 80% of the 4M workers being female. In a country where women traditionally work within the home only.
Empirical design
Manufacturing growth and the lives of Bangladeshi women (Heath and Mobarak, 2015)
“Examine age at marriage and age at first birth for girls with greater lifetime exposure to factory jobs
Control for persistent differences between garment-proximate and control villages, as well as differences over time in garment-proximate villages
To test for increased education, assessed effect of exposure to garment factor jobs on total years of educational attainment; with additional comparisons for the male siblings to show that the effect has been larger for girls than boys
Retrospective data on entire history of annual school enrollment decisions for each girl to test whether effects of the garment industry on schooling are strongest for younger girls”
Motivation
Breza et al. 2021
to measure the extent of excess labor supply and labor market rationing (workers willing and able to work but can’t find jobs) in Indian local labor markets
Data
Manufacturing growth and the lives of Bangladeshi women (Heath and Mobarak, 2015)
“Retrospective data from 1395 households across 60 villages
Outcomes measured with respect to whether villages are within commuting distance of garment factories, and to the date on which first factories opened near each village”
Key findings
Manufacturing growth and the lives of Bangladeshi women (Heath and Mobarak, 2015)
“Confirm causal relationship between rise of the garment industry with declining fertility, increasing age at marriage, and increasing educational attainment.
15% of women in Bangladesh between 16-30 work in the industry.
Experienced rapid increases in girls’ educational attainment over last 30 years, both in absolute terms and relative to boys.
Likelihood of marriage and childbirth at early ages (12-18) drops sharply for girls exposed to the garment sector.
Girls gain 1.5 extra years of education relative to brothers in median garment-proximate village (50% increase in female attainment versus control villages); increases whether or not mother/older sister worked in factories.
Increased deamnd for skills in factories offering jobs for women is likely to increase enrollment rates. In addition to any effects from changes in family wealth.
Girls (5-9) more likely to stay enrolled when factories are built within a commutable distance to their village.
Delays in marriage and childbirth from choosing to work in factories rather than marry/education (17-23 year olds); therefore small negative effect on school enrolment for 17-18 –> Exposure to factory jobs makes 10-23 year olds 17% more likely to have doen wage work outside the home (79% higher than control group)”
Interpretation / policy implications
Manufacturing growth and the lives of Bangladeshi women (Heath and Mobarak, 2015)
“Garment sector has significantly lowered the risk of early marriage and childbirth
Increased educational attainment for girls
Might explain some of the remarkable progress in improving women’s lives
Policy implication: paper suggests that education policy in developing countries is closely tied to trade policy or industrial policy; enrollments strongly respond to arrival of jobs (especially if jobs reward education)
Manufacturing growth improves welafare for young women, as can avoid early marriage and chidlbirth (which have inter-generational consequences)”
Special settings
Breza et al. 2021
significant % of population either underemployed or engaged in low-productivity self-employment in developing countries like India
Empirical design
Breza et al. 2021
“researchers created temporary month-long jobs and randomly assigned these positions to 24% of the local labor force - hiring shock
- measure impact of shock on wages and employment levels.
- The study was conducted across various months to account for seasonal variations in labor demand. Impact in peak vs lean seasons.”
Key findings
Breza et al. 2021
“In peak months, local wages increased by 5.0%, and the local aggregate employment decreased by 22%. Tight labour market with most people already employed. Additional jobs led to higher wages and reduced local employment due to people switching to the temporary jobs.
- in lean months, the hiring shocks did not alter wages or aggregate employment in the local markets. Indicates that over a quarter of the labor supply is rationed - underutilisation.
- At least 24% of self-employment among casual workers in lean months was not by choice but due to the inability to find wage employment - challenges traditional labour market measurements.”
Interpretation / policy implications
Breza et al. 2021
“strong case for governmental employment programs e.g workfare programs to provide employment opportunities during periods of low demand - helps absorb excess labor supply
- Given % of self-employment in lean months that is not by choice, should support small businesses e.g improved access to credit, business training”
Theory
Breza et al. 2021
Research going back to Lewis (1954) argues that low employment reflects extremely high involuntary unemployment, indicating large distortions. However, other work has shown that these labor markets adjust rapidly to changing market conditions (e.g., Rosenzweig 1988). Thus, low wage work might instead be the outcome of reasonably well-functioning labor markets, where workers are simply choosing other activities such as self-employment. These two possibilities have drastically different implications for the labor market equilibrium.
data
Breza et al. 2021
This paper empirically assesses the extent to which labor supply exceeds labor demand in equilibrium. We define a worker as rationed if (i) she would prefer wage employment at the current market wage over what she is doing (i.e., the worker is not on her labor supply curve), and (ii) the worker is employable at that wage (i.e., from the employer’s perspective, her marginal product is weakly above the current wage). A rationed worker may be involuntarily unemployed, or engaged in another activity such as self-employment.
Aim
Anderson and McKenzie (2022) Improving business practices and the boundary of the
entrepreneur: an randomized experiment comparing training, consulting insourcing and
outsourcing
They aim to test the relative effectiveness of business training, consulting, insourcing, and
outsourcing workers in improving business practices.
Setting:
Anderson and McKenzie (2022) Improving business practices and the boundary of the
entrepreneur: an randomized experiment comparing training, consulting insourcing and
outsourcing
Small firms in Nigeria (2-15 employees). The Growth and Employment (GEM) project was a multiyear
program in Nigeria funded by the World Bank, with the objective of increasing firm growth and
employment by improving the investment climate and directly by offering programmes to improve
the performance of firms.
Their experiment works with firms that attended induction workshops held in Abuja and Lagos from
March to December of 2016. To qualify, firms needed to pass a second screening step demonstrating
that they (i) were not already insourcing or outsourcing both their marketing function and their
finance function, (ii) had between two and 15 workers, and (iii) received a score of 5.0–8.0 (out of
10) in terms of their baseline business practices.
Data:
Anderson and McKenzie (2022) Improving business practices and the boundary of the
entrepreneur: an randomized experiment comparing training, consulting insourcing and
outsourcing
They used surveys at 1 and 2 years after the start of the interventions, which included
measurements of the 41 different business practices, representing traditional activities
(finance, accounting, marketing etc).
They used multiple measures of sales, profits, and employees to proxy for firm growth
Empirical/econometric methodology:
Anderson and McKenzie (2022) Improving business practices and the boundary of the
entrepreneur: an randomized experiment comparing training, consulting insourcing and
outsourcing
They randomly assigned a sample of 753 firms into a control group and four treatment groups:
- Training: 25 hours online and 12 day in-class training
- Consulting: firms receive 88 hours of support from business consultants
- Insourcing: firm is linked to a HR service provider who help the firm to recruit an accounting
or marketing specialist to join the firm as a full-time employee
- Outsourcing: firm is linked to an accounting or marketing service provider who are
contracted by the firm to carry out relevant business functions
They estimate the ITT effect of being offered one of the four treatments using the following
Identifying assumption: That randomisation is successful.
Results:
Anderson and McKenzie (2022) Improving business practices and the boundary of the
entrepreneur: an randomized experiment comparing training, consulting insourcing and
outsourcing
The training treatment does not have a significant impact on business practices or on firm growth.
Insourcing, outsourcing, and consulting treatments all result in statistically significant improvement
on a range of business practices, and these effects persist well over a year after the interventions
ended.
The insourcing and outsourcing interventions also result in an increase in product innovation
activities.
2 years after the intervention, the outsourcing treatment results in a statistically significant increase
in profits and sales.
Insourcing and outsourcing both dominate business training and do at least as well as consulting at
half the cost.
None of the treatments change employment.
Given these benefits, the question arises of why more firms do not use a marketplace for business
services on their own. Firms report several informational frictions, as well as concerns about their
ability to finance the initial costs and uncertainty about the expected returns. Also, with family-run
firms, there may be pressure to hire relatives for positions instead of going to the market. They find
that alleviating information and quality concerns in this way does not (on its own) seem to be
sufficient to get more firms to use professional business services.
They find that none of the treatments have no significant impact on the amount of hours worked, or
the number of areas the entrepreneur works in. The insourced and outsourced treatments do not
appear to significantly crowd out the entrepreneur spending time on her business and that they
seem to complement rather than substitute for the entrepreneur’s time.
Weaknesses:
Anderson and McKenzie (2022) Improving business practices and the boundary of the
entrepreneur: an randomized experiment comparing training, consulting insourcing and
outsourcing
The survey answers may not be reliable – but the survey was conducted independently and not
associated with the GEM project and surveyors were trained only to record the firm doing the
practice if they could provide evidence.
Policy implications:
The support provided by the insourcing or outsourcing programme helps overcome the firm’s
constraints, and revealed preference suggests that many firms find it beneficial (1/3 continue to pay
for the same treatment even when the subsidy ends). This highlights the need government policy
aimed at improving the efficiency and reach of marketplaces for business services. There are several
reasons why public funds should be used to improve the management skills and business capabilities
in private firms:
- Improving skills and strengthening capabilities of firms are critical for innovation and
productivity and that the government has a direct interest in doing this as a way of
increasing overall economic performance
- Better business practices are associated with higher sales growth and employment growth
- This support may be offered as part of a strategy to support and grow specific sectors that
are considered to have broader benefits to the economy
