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1st IZA/DFID GLM-LIC Research Conference on New Research on Labour Markets in Low-Income Countries, Oct. 22-24, 2015, Washington, D.C.


1st IZA/DFID GLM|LIC Research Conference on New Research on Labour Markets in Low-Income Countries, October 22, 2015 - October 24, 2015, Washington D.C.

GLM-LIC is targeted at addressing an important gap in research, and focuses on various labour markets issues in low income countries (LICs). Over a period of five years, promising research and capacity building activities in the field are selected for funding with the overall objective to improve the understanding of labour markets in LICs and their relevance for economic growth, and to help local decision makers with the design and implementation of labour related policies.

In addition to producing various publications, GLM-LIC also hosts a number of workshops and conferences: At the 1st IZA/DFID GLM-LIC Research Conference on New Research on Labour Markets in Low-Income Countries members of the research projects came together. They gave presentations about their work, progress of the projects and newly gained insights of growth and labour markets in low-income countries. The conference, therefore, offered the platform for many interesting talks and discussions.

Hereinafter the conference output is illustrated by an overview of some of the presentations of the conference days, October 22, 2015 until October 24, 2015. This is complementing what we have covered on the newsletter.

1.

Transitions to Adulthood: Education, Skills, and Labour Market Outcomes in Madagascar and Senegal: This project under the lead of David E. Sahn (CERDI, Cornell University) will analyse long-term longitudinal data from Madagascar and Senegal to examine the dynamics of transitions into workforce of a cohort of young men and women. The team of researchers will rely on achievement test score data collected in early childhood, adolescence, and early adulthood, as well as measures of non-cognitive skills among the young adults, to explore the links between education duration and quality, skills and family background, and subsequent labour market outcomes. Additionally, using detailed information on parental backgrounds as well as on economic and health events during childhood, the team will investigate the extent to which these factors condition young people’s well-being in adulthood, and in particular, the mechanisms through which poverty persists across generations.

The team will use longitudinal data on cohorts of youth from Madagascar and Senegal that were initially tested in school in second grade, then interviewed at age 13-16 and finally reinterviewed at age 21-24, in late fall 2011. The unusually long duration of the panel, the detailed year-by-year event histories, and the specialized nature of the surveys will enable us to overcome the limitations affecting most previous work on these issues in Africa. The project team will be able to estimate the determinants of the timing and occurrence of behaviours, particularly leaving school and entering the labour market, as well as related behaviours such as migration, marriage, and childbearing.

The study is broadly designed to impact living standards in Africa by providing guidance to policymakers, donor agencies, and non-governmental organizations on policies to improve the possibilities for young people, especially women, to lead productive lives, and to reduce the persistence of poverty from one generation to the next. More specifically, the aim is to increase the knowledge of the process of skills accumulation, and their impacts and determinants in low income settings in multiple ways.

David E. Sahn argued, that among the most salient of their findings is that, personality appears to affect labour market outcomes, the policy implications of this finding are not precise enough to make a statement if personality cannot be affected by external influences. Using information on the sample individuals’ maternal and paternal grandparents as well as on childhood homes and parental characteristics, the project can begin to dissect how much of the personality traits can be explained through genetics, how much through environment, and how much through the interaction between the two.

2.

B. Kelsey Jack and Felix Masiye (Tufts University, University of Zambia) put their research focus on the situation in Zambia. The project “Food Constraints, Yield Uncertainty and “Ganyu” Labour” examines the situation for Small-scale farming. The aim is to identify the causal impact of short-term labour in the farming sector. The work within the project will conduct a cluster randomized controlled trial in Zambia’s Eastern Province. As part of the trial, randomly selected clusters of households will be provided with access to loans of either cash or maize during the farming season. Conceptually, maize loans have three main advantages over cash loans: first, this allows to directly address the lack of food as primary reason for external labour supply named by farmers in focus groups; second, the team of the project conjectures that the provision of maize will lower the likelihood of additional resources being used for conspicuous consumption; and third, the team expects default rates on maize loans to be substantially lower due to the wide availability and observability of stored maize at the end of the harvesting season. The comparison of the cash and maize loan programmes with respect to repayment rates, labour supply and total economic outcomes will allow the team to assess the importance of the in-kind nature of the credit.

The main objective of the maize loan intervention and the main scope of the project is to identify the degree to which short term credit constraints affect farming households’ labour supply choices in the short-run, and the degree to which these effects translate into lower farm productivity and yields in the medium- or the long-run. Two stages of intervention will be implemented. In the first phase of the proposed intervention (year I), maize loans will be offered to a selected group of farmers without prior announcement in the middle of the agricultural season (January). This first intervention will allow the team to estimate the short-term effects of loosening existing credit constraints on labour supply and agricultural productivity. Since all major farming decisions (area of cultivation, crops planted) are already in place at the time of the intervention, the primary adjustments the team expects to see is an increase in on-farm labour supply.

In the second phase of the intervention (year II), the loan programme will be announced to selected farmers prior to the initiation of field work (September), which will allow the project team to directly investigate the degree to which anticipated credit constraints affect the production plan chosen by farms in terms of plot size and crop mix. The team of researchers will observe how farmers adjust on the extensive margin, through changes to the area of cultivation and to the types of crops planted. Regular measurement of wages within the study villages and on neighbouring large farms will help to identify the general labour market impacts of the intervention.

Kelsey Jack addressed the question if seasonal incomes and capital market frictions lower agricultural productivity. Jack mentioned, that short run loans increase agricultural productivity. They allow for substitution away from consumption smoothing strategies like fewer meals and off-farm labour. She concluded, that availability of short run loans are potentially leading to substantial welfare gains for households.

3.

Taryn Dinkelman and Grace Kumchulesi (Dartmouth College, University of Malawi) focus their research on the project “Labour migration and structural change in rural labour markets: Evidence from Malawi”. The project collates, digitizes and uses individual-level and aggregate Census data from the 1940s through 1990s to investigate whether these large migration flows and corresponding cash inflows through deferred pay schemes affected the employment patterns of men and women over the long­ term.  It will be important whether women worked more in the wake of male outmigration, or whether remittances enabled them to work less. The census data will allow the evaluation of typically male and female jobs (type of employer, occupation and industry) and whether they have changed in response to labour migration.

In addition to collecting Census data for the quantitative analysis administrative data on the location of mine recruiting stations in Malawi will be collected to measure which areas were easy to migrate away from. Additionally, mining records on the flows of remittances back to Malawi in each year will be used to capture the new access to capital that rural economies could exploit. And, available agricultural input and output data will be digitalized and used to investigate whether labour migration had negative effects on farm yields or positive impacts on farming.

One of the key questions in development economics is how poor rural areas transition from homogenous, agricultural economies to more diverse and modern economies. Taryn Dinkelman addressed in her presentation whether labour exports can unleash capital accumulation which are required to start reallocation of labour across sectors. For example, part of the research question will be to ask whether remittance flows (that vary over space and time in the opposite direction to male outflows) facilitated the shift of women into the labour force and of men into non-farm work, and whether specific skills accumulated through mine work in different periods may have assisted in these shifts.

4.

Asim Khwaja (Harvard Kennedy School) and Jacob N. Shapiro (Princeton University) work together on the project “Punjab Economic Opportunity Program: Evaluating markets for skill acquisition and employment” in Pakistan which focuses on skills development in low-income countries (LICs).The project supports the Punjab Economic Opportunities Programme (PEOP) a DfID funded programme being implemented in Punjab, Pakistan, that gathers comprehensive household, employer, trainer and market-level data in order to establish the current level of skill acquisition and take stock of skill mismatches and obstacles faced by individuals in acquiring skills, trainers and employers in providing skills, and employers in effectively utilizing these skills.

The evaluations will be carried out through randomized controlled trials to ensure rigorous and empirically sound results. The project aims to identify skill shortages and mismatches and evaluate the impact of skills provision on labour market outcomes as well as examine how these outcomes vary by trainee age, gender and urban versus rural location. It is also important to examine how skill training supply can be made to respond better to market demands, and to learn about which approaches best encourage skill formation and deployment in both employment and self-employment opportunities.

The activities have focused mainly on three activities from the PEOP project portfolio: Skills for Jobs (SFJ), which studies issues related to skills training targeted at urban men; Skills for Market (SFM), which studies skills training provision for rural women; and ‘big push’, which will study the impacts of providing training to entire rural economic value chains.

5.

Nina Pavcnik and Brian Mc Caig (Dartmouth College, Wilfrid Laurier University) work together on the project “Structural change, international trade, and labour markets in a low-income country: Evidence from Vietnam”.  The first part of this project will examine the consequences of export opportunities induced by the U.S.-Vietnam Bilateral Trade Agreement (BTA) on the employment and productivity of enterprises in Vietnam using the longitudinal Enterprise Survey that spans the period of trade reform.

The project will first analyse how declines in export costs affect employment across heterogeneous firms and the contribution of incumbents and new entrants, such as foreign-invested firms, toward employment growth. In addition, it will examine the channels through which the BTA might have increased aggregate industry productivity: the reallocation of labour and market shares to high productivity firms, the entry of initially highly productive firms (e.g., foreign-invested enterprises), and within-firm productivity improvements. Combined with the completed and ongoing work, the proposed research will provide a fuller picture of the microeconomic mechanisms through which export opportunities stimulate jobs and productivity in the enterprise sector in a low-income country.

The second part of the project will contribute to the scarce literature on this topic and use the longitudinal component of nationally representative household survey data that covers all sectors (including agriculture and services) and employment in all employers (including self-employment) to analyse transitions of individuals and household businesses between the household business and enterprise sectors over almost a decade of a structural change (2002-2008). In sum, the household datasets thus allow the project to follow individuals over time, follow businesses over time, and to match the business to the most knowledgeable household member for most years. This is a very rich dataset in comparison to data available in most low-income countries.

6.

Supreet Kaur and Emily Breza (Columbia University, Columbia Business School) work on their project “Wage Compression in Low Income Labour Markets” which concentrates on the labour market situation in India. The project aims to create a baseline survey to capture the previous wage and employment history of each worker. Then teams will be randomized into treatment groups. In addition, the results will provide insight on whether distortions from norms can be mitigated by firm policies.  The information treatments vary whether workers are provided with a justification for the reason for wage dispersion. The testing is about whether effort distortions are lower when information about team member is also revealed. The implications of wage compression on employment and firm output are potentially substantial, and have policy relevance.

In addition, if there is wage compression, a shift from informal casual labour arrangements to formal full-time employment could actually hurt workers and reduce firm output and profits. The researchers will engage with organizations that have bearing on policy, such as the World Bank PREM unit and with policymakers in LICs, to solicit input on the study design.

7.

Simon Franklin (University of Oxford), Stefano Caria (University of Oxford) presented their project "The Effect of Information Provision and Transport Vouchers in Addis Ababa". Addis Ababa is an ideal place to study the costs of job search. Ethiopia is currently enjoying impressive economic growth; however, Addis Ababa still has large numbers of urban unemployed. The foremost aim of this study is to estimate the impact of the job search interventions on the probability of transitioning from joblessness to employment. Further, by comparing the impacts of the treatments the project seeks to uncover whether it is a lack of information about job opportunities, or more generally lack of access to the city that creates the most significant search costs. This should shed light on the appropriateness of different policies to improve access to jobs for the unemployed in large Ethiopian and other African cities.

The project proposes a novel randomized Control Trial to evaluate two different policies to lower search costs for prospective workers: (i) the provision of transport vouchers and (ii) the provision of information about vacancies. Reduced search costs allow job seekers to increase overall search intensity and to raise reservation wages, leading to changes in the probability of employment and in the likely characteristics of jobs found. It will thus be investigated whether the impacts of the programmes are on both the individual search choices and on the labour market outcomes. The project will also measure spillovers to untreated individuals through social interaction and competition for jobs.

8.

Isaac Mbiti and Joan Harmony Hicks (Southern Methodist University, University of California – Berkeley) work on the project “Start-up capital for youth: Assessing the potential of small business grants and vocational training in Kenya” to provide better labour market conditions for young adults. The proposed project, Start-up Capital for Youth (SCY), will compare and contrast the relative efficacy of providing vocational training and small business start-up grants in Kenya. SCY will build on an earlier randomized evaluation of a vocational training voucher programme in Kenya that included nearly 2,200 young people. In the previous programme, a random half of programme participants were awarded a voucher that covered the cost of vocational training. SCY will support the analysis of the near-term impacts of vocational training, including an evaluation of the differential returns between private and public training and the impacts of training. Furthermore, this project will support an additional intervention which will randomly select half of the voucher winners and half of the non-winners to receive an unconditional cash grant that is sufficient to purchase toolkits or provide seed capital for their entrepreneurial ventures.

The randomized cross-cutting design of this project will allow the project to simultaneously estimate the impacts of vocational training, start-up grants, and the combination of both interventions. The use of randomization in treatment assignment will circumvent concerns about selection bias and confounding factors. Furthermore, detailed longitudinal data (the Kenya Life Panel Survey) covering nearly 15 years is available on all program participants, which will enable the exploration of heterogeneous treatment effects on different sub-populations in the sample. This panel data will also allow the team to closely examine the dynamics and patterns of youth employment outcomes. In addition to providing rigorous evidence on the near-term and medium to long term returns to vocational training for young African adults, a key contribution of this project will be to provide some of the first experimental evidence on the complementarities between vocational education and financial capital in Africa, by combining randomized interventions with high-quality longitudinal data.

9.

Pamela Jakiela and Owen Ozier (University of Maryland, World Bank) examine the situation for young women in Nairobi within their project “Girls Empowerment by Microfranchising: Estimating the Impacts of Microfranchising on Young Women in Nairobi”. They propose to evaluate the second wave of the Girls Empowered by Microfranchise (GEM) Project, to be implemented by the International Rescue Committee (IRC) in 2013. The IRC is experienced in youth employment programmes—having pioneered microfranchising in Sierra Leone—and has received funding for up to 525 young women in three Nairobi slums to participate in the second wave of the GEM programme.

The proposed evaluation estimates the impact of the IRC’s microfranchising programme on young women’s labour supply, income and expenditures, savings, empowerment and self-actualization, and overall well-being. Their proposed design allows for a comparison between the IRC’s microfranchising intervention and both a pure control group – who receive no entrepreneurial support – and a traditional cash grant treatment which provides capital but no entrepreneurial guidance or business plan.

The design also allows them to estimate spillover effects on pre-existing businesses. This novel aspect of their design addresses a major concern in evaluations of entrepreneurship and credit interventions. Estimates of direct effects may overstate overall social impacts if new enterprises adversely affect the profits of existing firms. To explore this question, the team proposes to collect panel data on pre-existing businesses in sectors and neighbourhoods in which the new microfranchises will operate, and in comparison sectors and neighbourhoods which will not be in direct competition with the microfranchises.

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