Impacts of industrial and entrepreneurial jobs on youth: 5-year experimental evidence on factory job offers and cash grants in Ethiopia

Abstract

We study two interventions for poor and underemployed Ethiopian youth: a $300 grant to spur self-employment, and a job offer to an industrial firm. Each one is designed to help overcome two common barriers to employment: financial market imperfections and matching frictions. We find significant impacts on occupational choice, income, and health in the first year. After five years, however, we see no evidence of long run effects of either intervention. The grant led short-run increases in self-employment, productivity and earnings, but these appear to dissipate over time as recipients exit their businesses. Worrisomely, offers of factory work had no effect on employment or earnings, but led to serious adverse effects on health after one year. Evidence of these effects is gone after five years as well, however. These results point to convergence in most outcomes, and suggest that one-time and one-dimensional interventions may struggle to overcome barriers to wage- or self-employment.