Innovations for Poverty Action
Principal Investigator: Markus Goldstein
Youth employment and micro, small and medium sized enterprise (MSME) development are often in the public debate. Governments in Africa have recently introduced a number of programs to promote employment via these mechanisms, but the understanding of which interventions are most effective and for which types of individuals they have an impact is limited. Furthermore, women face particular barriers such as social and cultural norms to entry and continuing in the labor market, as well as in growing businesses. In order to design gender sensitive policy, further understanding of the reasons for gender inequalities in earnings and productivity and evidence on how to effectively close the gender gap is necessary. The research team is studying these aspects through two randomized controlled trials in a fragile state in West Africa, Togo.
Cost-effectiveness of Youth employment programs
The impact evaluation compares different public policy responses to youth unemployment. The randomized experiment of the government’s pilot program Aide à l’Insertion et au Développement de l’Embauche (AIDE) compares three different interventions. The first intervention is an internship in a private or parastatal company for six to 12 months. The second is an internship that comes with a training voucher that provides interns with a specific training to reinforce the skills that are essential to the firm. The third intervention is a soft skills training offered to people who do not receive an internship. The program objectives are to provide on-the-job training to increase the chance of integrating the job market and better respond to companies’ needs.
This study aims to understand the impact of the three interventions on the youth employability, job outcomes, standard of living, and psychological well-being. We will focus on understanding if the impact of the different interventions varies based on the gender of the youth, their level of education or their area of study. Furthermore, we will estimate which intervention is most cost-efficient for helping youth integrate into the job market.
Alternative training programs for small-scale entrepreneurship
In a review of impact evaluations of business training programs, McKenzie and Woodruff (2013) note that several impact evaluations of traditional managerial based trainings have seen fewer or no significant effects on women when compared to men. At the same time, some studies have shown encouraging results from different styles of training based on either changing the behavior of the entrepreneurs or on using rule of thumb based training.
While management programs have shown mixed effects, we will test in Togo an alternative intervention aiming to expand entrepreneurship. In this study, we will compare through a government program the effects of two types of training: traditional managerial skills training using IFC Business Edge methodology, and an innovative entrepreneurial training program focused on personal initiative. In addition to extensive classroom learning, both of these training programs for informal firms will include 4 months of in-situ one-on-one mentoring to ensure that the lessons from the classroom training are adequately applied by the entrepreneurs. The proposed evaluation will test and compare the impacts of these two types of training on firms, as well as versus a pure control group. This research will demonstrate which type of human capital development best determines firm performance, and if women respond differently to a different type of training than men. Furthermore, our research will expand upon the literature that tests the effects of human capital development on firms by examining the channels through which these programs have an effect and by understanding the impacts of training on household welfare and power relations.
Policy implications of this research
The results will enable us to provide detailed policy recommendations for ongoing and new programs to combat youth unemployment and support MSME development in Togo and in the region. This work program will also inform gender sensitive active labor market and enterprise development policies. The cost-benefit analysis of youth employment program will guide policy makers to expand the most effective interventions, discontinue costly ineffective programs and maximize the impact of limited government resources. By knowing which types of interventions are most effective for increasing women’s integration into the labor force and improving their earnings, the results will help better target programs and design policies that work toward closing the gender gap. The Government of Togo has expressed a commitment to maximizing the impact of their policies through a solution-oriented policy approach and is waiting for the results of the impact evaluation to implement the second phase of the interventions.