Are Small Firms Labor Constrained? Experimental Evidence from Ghana

Journal Article
Published on 1 March 2022

This article is forthcoming at the American Economic Journal: Applied Economics.

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% 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 non-monetary application costs, echoing the widespread use of an entrance fee mechanism for hiring apprentices in the existing labor market.

Authors

Morgan Hardy

New York University, Abu Dhabi

Jamie McCasland

University of British Columbia