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Are Small Firms Labor Constrained? Experimental Evidence from Ghana

Author

Listed:
  • Morgan Hardy
  • Jamie McCasland

Abstract

We report the results of a field experiment that randomly placed unemployed young people as apprentices with small firms in Ghana and included no cash subsidy to firms (or workers) beyond in-kind recruitment services. Treated firms experienced increases in firm size of approximately half a worker and firm profits of approximately 10 percent for each apprentice placement offered, documenting frictions to novice hiring. We interpret the program as providing a novel worker screening technology to firms, as (voluntary) worker participation included nonmonetary application costs, echoing the widespread use of an entrance fee mechanism for hiring apprentices in the existing labor market.

Suggested Citation

  • Morgan Hardy & Jamie McCasland, 2023. "Are Small Firms Labor Constrained? Experimental Evidence from Ghana," American Economic Journal: Applied Economics, American Economic Association, vol. 15(2), pages 253-284, April.
    • Handle: RePEc:aea:aejapp:v:15:y:2023:i:2:p:253-84
    DOI: 10.1257/app.20200503
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    Citations

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    Cited by:

    1. Kerwin, Jason & Rostom, Nada & Sterck, Olivier, 2024. "Striking the Right Balance: Why Standard Balance Tests Over-Reject the Null, and How to Fix It," IZA Discussion Papers 17217, Institute of Labor Economics (IZA).
    2. Kiss, Andrea & Garlick, Robert & Orkin, Kate & Hensel, Lukas, 2023. "Jobseekers' Beliefs about Comparative Advantage and (Mis)Directed Search," IZA Discussion Papers 16522, Institute of Labor Economics (IZA).
    3. Frohnweiler, Sarah & Adongo, Charles A. & Beber, Bernd & Lakemann, Tabea & Priebe, Jan & Lay, Jann, 2024. "Effects of skills training on employment and livelihood outcomes: A randomized controlled trial with young women in Ghana," Ruhr Economic Papers 1095, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. Lukas Hensel & Kate Orkin & Andrea Kiss & Robert Garlick, 2023. "Jobseekers' beliefs about comparative advantage and (mis)directed search," CSAE Working Paper Series 2023-11, Centre for the Study of African Economies, University of Oxford.
    5. SAWADA Yasuyuki & TANAKA Mari, 2024. "Family Labor, Enforcement, and Product Quality: Evidence from the Lao textile industry," Discussion papers 24061, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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