Labor Drops: Experimental Evidence on the Return to Additional Labor in Microenterprises
American Economic Journal: Applied Economics
vol. 11,
no. 1, January 2019
(pp. 202-35)
Abstract
A field experiment in Sri Lanka provided wage subsidies to randomly chosen microenterprises to test whether hiring additional labor benefits such firms, and whether a short-term subsidy can have a lasting impact on firm employment. Using 12 rounds of surveys to track dynamics four years after treatment, we find that firms increased employment during the subsidy period. Treated firms were more likely to survive, but there was no lasting impact on employment, and no effect on profitability or sales either during or after the subsidy period. There is some heterogeneity in effects; the subsidies have more durable effect on manufacturers.Citation
de Mel, Suresh, David McKenzie, and Christopher Woodruff. 2019. "Labor Drops: Experimental Evidence on the Return to Additional Labor in Microenterprises." American Economic Journal: Applied Economics, 11 (1): 202-35. DOI: 10.1257/app.20170497Additional Materials
JEL Classification
- C93 Field Experiments
- J22 Time Allocation and Labor Supply
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- J38 Wages, Compensation, and Labor Costs: Public Policy
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology
- O15 Economic Development: Human Resources; Human Development; Income Distribution; Migration
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