Given that developing countries need to enhance labour productivity to catch up, effectively harnessing new technologies to generate productivity gains among small firms is important. This project wishes to examine the impact of adopting more advanced technology, on firm employment in Burundi. The authors will run an RCT with small firms from the textile sector in the country. They will estimate the short- and long-term impacts of having automatic sewing machines on (i) the number of lay-offs and hires of a firm, (ii) output per worker, and (iii) real wages. The results will advance the understanding of how technology adoption impacts employment in the least developed countries; and will assist policymakers in formulating policies that harness only the positive impacts of new technology.
The study assumes that technology affects labour via three channels: replacement, which refers to technology-induced job loss; reinstatement, which refers to technology-induced job creation; and real income effect, which refers to new technology increasing real wages thanks to increased productivity. The project aims to run an RCT with textile firms in Burundi to measure the relative importance of each of these channels. Specifically, out of 500 dressmaking firms, 300 will be randomly selected, and loaned both automatic sewing machines and power banks at a low cost. The authors will conduct three surveys: one before the intervention to collect baseline data on firms’ characteristics, one three months into the intervention measure the short run effects of technological adoption, and one nine months into the intervention which will collect the same variables as the second survey. To better understand the success of technological adoption in developing countries, data will be collected on the take-up and use intensity of the new technology. Parallelly, the study aims to examine the interaction between social norms surrounding employment and the beforementioned channels, by collecting data on employees’ individual characteristics and on their social ties. Upon completion, the final data set will be publicly available for analysis and provide detailed information on approximately 300 firms.
There currently is limited evidence regarding the impact of technology on real wages and employment in developing countries. This issue is especially notable in East Africa, with countries like Burundi often being underrepresented in these studies. This project presents important policy implications for developing countries seeking to implement advanced technologies into their manufacturing industries such as the textile and clothing industry. The results will identify the specific ways in which technology affects employment at the firm level and will be useful to develop strategies to mitigate adverse effects resulting from technology adoption. It is also crucial for policymakers to comprehend how the benefits of advanced technology will be distributed between capital owners and employees. Policies that promote equitable sharing of these benefits have the potential to make the adoption of more advanced technology sustainable.
