Are Small Firms Labor Constrained? Experimental Evidence from Ghana

Working Paper
Published on 24 October 2017

Abstract

Hardy and McCasland (2017) report the results of a field experiment that randomly placed unemployed young people as apprentices with small firms in Ghana. They find that firms that were offered apprentices by the program experienced increases in both firm size and profits 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 firms' hiring decisions, and echoes the widespread use of an entry fee mechanism to hire apprentices in our baseline labor market.