1. Jobs! Jobs! Jobs!: For quite a few years now, my mental model has been that most poor households are "frustrated employees, not frustrated entrepreneurs." In other words, most people aren't held back from their entrepreneurial dreams by lack of access to credit, but they are held back in their dreams of having a job by the lack of jobs. That view is tied heavily to the fact that most microenterprises don't grow at least in part because the owners don't appear to be trying to grow them. This week Chris Blattman and Stefan Dercon released a new working paper about an experiment in Ethiopia where they were able to compare factory jobs to grants for self-employment. They find, among many other details, that those who randomly receive factory employment leave the jobs quickly and those who receive grants for self-employment tended to stay in self-employment and out of the industrial sector. There is a lot going on in this paper so it requires careful reading and some thinking, but it will definitely alter at least my confidence level in my priors.
But the discussion of the new Blattman and Dercon paper revived my memory (hat tips to Rachel Glennerster and Asif Dowla) of this Heath and Mobarak paper on the positive impact of factory work in Bangladesh so there's multiple updating going on for me this week.
2. But Wait, There's More Jobs! Jobs! Jobs!: Karthik Muralidharan and Paul Niehaus have a new paper based off of one of the world's largest RCTs, the roll-out of the new and improved NREGA guaranteed work scheme in India. They find that the program raised incomes of poor households dramatically, but that most of the gains comes from pushing up private sector wage rates, not from income from the program itself. Jonathan Morduch notes that the jump in wages was a factor in the ultra-poor program he studied in Andhra Pradesh not having much impact (many participants left the program to take jobs).
The Muralidharan and Niehaus paper also brings to mind this earlier paper from Breza and Kinnan looking at something similar--how the availability or unavailability of microcredit in India to fund self-employment had generalized effects by altering wage rates. That paper is one of the reasons I believe in the "frustrated employees, not frustrated entrepreneurs" thesis, so now my brain hurts.