Tackling Youth Unemployment: Evidence from a Labor Market Experiment in Uganda

81 Pages Posted: 23 Jul 2020 Last revised: 16 Aug 2020

See all articles by Livia Alfonsi

Livia Alfonsi

University of California Berkeley

Oriana Bandiera

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Vittorio Bassi

University of Southern California - Department of Economics

Robin Burgess

London School of Economics (LSE) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Imran Rasul

University College London - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Munshi Sulaiman

BRAC-Africa

Anna Vitali

University College London

Date Written: June 2020

Abstract

We design a labor market experiment to compare demand- and supply-side policies to tackle youth unemployment, a key issue in low-income countries. The experiment tracks 1700 workers and 1500 firms over four years to compare the effect of offering workers either vocational training (VT) or firm-provided training (FT) for six months in a common setting where youth unemployment is above 60%. Relative to control workers we find that averaged over three post-intervention years, FT and VT workers: (i) enjoy large and similar upticks in sector-specific skills, (ii) significantly improve their employment rates, and, (iii) experience marked improvements in an index of labor market outcomes. These averages, however, mask differences in dynamics: FT gains materialize quickly but fade over time, while VT gains emerge slowly but are long-lasting, leading VT worker employment and earning profiles to rise above those of FT workers. Estimating a job ladder model of worker search reveals the key reason for this: VT workers receive significantly higher rates of job offers when unemployed thus hastening their movement back into work. This likely stems from the fact that the skills of VT workers are certified and therefore can be demonstrated to potential employers. Tackling youth unemployment by skilling youth using vocational training pre-labor market entry, therefore appears to be more effective than incentivizing firms through wage subsidies to hire and train young labor market entrants.

Keywords: Apprenticeship, Human Capital, Labor Mobility, Training

JEL Classification: J2, M5

Suggested Citation

Alfonsi, Livia and Bandiera, Oriana and Bassi, Vittorio and Burgess, Robin and Rasul, Imran and Sulaiman, Munshi and Vitali, Anna, Tackling Youth Unemployment: Evidence from a Labor Market Experiment in Uganda (June 2020). CEPR Discussion Paper No. DP14973, Available at SSRN: https://ssrn.com/abstract=3650086

Livia Alfonsi (Contact Author)

University of California Berkeley ( email )

732 University Hall #3310
Berkeley, CA 94701
United States

Oriana Bandiera

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7519 (Phone)
+44 20 7055 6951 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Vittorio Bassi

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States

Robin Burgess

London School of Economics (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

HOME PAGE: http://econ.lse.ac.uk/staff/rburgess/index_own.html

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Imran Rasul

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
+44 20 7679 5853 (Phone)
+44 20 7916 2775 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Munshi Sulaiman

BRAC-Africa ( email )

Liberia

Anna Vitali

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

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