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  3. 2025
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  5. Employment in Developing Countries: Barriers and Impacts
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Employment in Developing Countries: Barriers and Impacts

Paper Session

Sunday, Jan. 5, 2025 8:00 AM - 10:00 AM (PST)

Hilton San Francisco Union Square, Union Square 13
Hosted By: Econometric Society
  • Chair: Supreet Kaur, University of California-Berkeley

Women’s Employment, Husbands’ Economic Self-Interest and Domestic Violence

Deniz Sanin
,
University of South Carolina

Abstract

This paper presents evidence that providing employment opportunities to women decreases domestic violence when the husband has economic self-interest in the wife’s work capacity. I use the government-induced rapid expansion of the coffee mills in Rwanda in the 2000s, which increased the value of coffee farmer couples’ output and provided wage employment
for women. Since the mill operates only during the harvest months, the husband’s cost of incapacitating his wife changes within the year. This variation, in conjunction with monthly
administrative records on domestic violence hospitalizations, provides a way to distinguish the incapacitation cost mechanism from the rise in women’s bargaining power and household income, which are identified by multiple rounds of household survey data.

Can Cash Transfers Facilitate Occupational Upgrading in Frictional Markets?

Paul Pornpawit Brimble
,
University of Michigan
Robert James Garlick
,
Duke University
Kate Orkin
,
University of Oxford

Abstract

We show how large, one-time, unconditional cash transfers given to poor households can lead to persistently higher income and consumption by facilitating occupational upgrading. In rural Kenya, capital and labour market frictions distort household decision-making, leading to suboptimal resource allocation and potentially to persistent poverty cycles. These frictions contribute to poor households typically owning limited productive assets and being primarily engaged in crop agriculture and light-livestock activities. Cash transfers enable households to alleviate these frictions, achieving occupational upgrading by channelling investments into heavy-livestock farming and non-farm enterprises. This diversification into higher-value, capital-intensive and non-agricultural sectors drives technology adoption, enterprise expansion, and increased productivity. The increase in productive capital assets and capital-labour complementarity within the household production function leads to higher labour demand, enabling more efficient labour allocation and raising the household’s shadow wage. As a result, households increase their total labour supply as they move towards an optimal and efficient market equilibrium. We complement these findings by directly testing if households behave as though they face frictionless markets. We find that untreated households' labour use in their farms and enterprises depend on their labour endowments, which is not consistent with frictionless markets. However, cash transfer recipients behave as though markets are complete. These results demonstrate that cash transfers do more than relax budget constraints; they address structural market frictions, enabling households to achieve efficient capital and labour allocation. By facilitating occupational upgrading and fostering rural economic development, cash transfers provide a powerful tool for poverty alleviation.

Spousal Insurance Around the World

Annika Bacher
,
BI Norwegian Business School
Kevin Donovan
,
Yale University
Philipp Gruebener
,
Washington University-St. Louis
Lukas Nord
,
University of Pennsylvania
Todd Schoellman
,
Federal Reserve Bank of Minneapolis

Abstract

We provide new evidence on the relationship between intra-household insurance and gender differences in labor market turnover across countries. We use new harmonized microdata from rotating panel labor force surveys to study joint transitions among married households across 35 countries. We show that cross-country differences in exit among married women are primarily accounted for by different exit rates from marginal jobs (low-paying wage work, self-employment). Married women are more likely to enter these jobs when their spouses leave employment, implying a larger ``added worker effect'' in developing countries, except in countries with high female employment barriers. We interpret these patterns through the lens of a model with labor market frictions, intra-household risk sharing, and learning-on-the-job. The model is consistent with additional novel empirical evidence on cross-country differences in lifecyle patterns in the added worker effect. We use the model to show that this spousal insurance channel substantially increases the cost of restricting female employment both through its distortionary direct effect on women and indirect spillovers onto male employment decisions by eliminating his spouse's ability to insure risky, but potentially high lifetime earning, jobs.

All in the Family: Kinship Pressure and Firm-Worker Matching

Nicholas Swanson
,
University of California-Berkeley

Abstract

The modal firm in low- and middle-income countries has no employees that are not family members. While this is often attributed to informational or contractual frictions, an alternate view is that pressure to offer financial assistance to extended family in the form of employment may distort employers' hiring decisions. I design three field experiments - conducted with both urban firms and agricultural employers in Zambia - to test whether pressure impacts firm hiring and productivity. In the first experiment, urban firms are offered the chance to receive a 3-month subsidy for hiring a full-time permanent employee. A subset of firms is randomized to receive plausible deniability in their hiring decision: receiving a poster that suggests the firm may not have been eligible for the subsidy if it hired a relative. This increases the probability of choosing to hire a non-related employee by 11 percentage points. In the second experiment I show it is socially costly for employers to hire a non-relative: when they have plausible deniability, the subsidy required to get a firm to choose a non-relative rather than a relative falls substantially - equivalent to 4 percent of total monthly profits. This effect is concentrated among firm owners that report higher redistributive pressure at baseline. In the third experiment I show that in maize shelling, the same worker is more likely to shirk when working for a related employer, leading relatives to be 7 percent less productive than non-relatives. Consistent with higher moral hazard problems with relatives, employers report that firing a relative would lead to social penalties. In the urban sample, treatment effects are higher among firms that report more difficulty verifying worker effort at baseline. These findings suggest that social pressure to hire relatives may distort the composition of employment as well as productivity in developing countries.
JEL Classifications
  • O1 - Economic Development