Are Small Firms Labor Constrained? Experimental Evidence from Ghana

Tuesday, 24 October, 2017
Hardy and McCasland (2017) report the results of a field experiment that randomly placed unemployed young people as apprentices with small fi rms in Ghana. They find that firms that were offered apprentices by the program experienced increases in both fi rm size and pro ts over the two years of the study window. Moreover, they present evidence of heterogeneity in these returns as a function of (unobserved) worker ability. This final result highlights the importance of screening in fi rms' hiring decisions, and echoes the widespread use of an entry fee mechanism to hire apprentices in our baseline labor market.