A Firm of One's Own: Experimental Evidence on Credit Constraints and Occupational Choice

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Date and Time: 
Monday, October 10, 2016
2:00 pm – 3:30 pm
Pamela Jakiela*
University of Maryland

We conducted a randomized evaluation of two labor market interventions targeted to young women aged 18 to 19 in three of Nairobi's poorest neighborhoods.  One treatment offered eligible you women a bundled intervention designed to simultaneously relieve credit and human capital constraints; a second treatment arm provided women with an unrestricted cash grant, but no training or other guidance.  Both treatments have economically large and statistically significant impacts on income over the medium-term (6-9 months after the end of the interventions), but these impacts dissipate in the second year after the program.  We show that our results are consistent with a model in which savings constraints prevent women from smoothing consumption after receiving large transfers - even in the absence of credit constraints, and when participants have no intention of remaining in entrepreneurship.  We also show that participants hold remarkably accurate beliefs about the impacts of the treatments on occupational choice.