A Firm of One’s Own: Experimental Evidence on Credit Constraints and Occupational Choice
Results from a randomized evaluation of 2 labor market interventions targeted to young women in Nairobi’s poorest neighborhoods
This study presents results from a randomized evaluation of 2 labor market interventions targeted to young women aged 18 to 19 years in 3 of Nairobi’s poorest neighborhoods. One treatment offered participants a bundled intervention designed to simultaneously relieve credit and human capital constraints; a second treatment provided women with an unrestricted cash grant, but no training or other support. Both interventions had economically large and statistically significant impacts on income over the medium term (7 to 10 months after the end of the interventions), but these impacts dissipated in the second year after treatment. The 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. The study also shows that participants hold remarkably accurate beliefs about the impacts of the treatments on occupational choice.
This research was funded under the Private Enterprise Development in Low-Income Countries (PEDL) Programme
Brudevold-Newman, A., Honorati, M., Jakiela P. and Ozier, O. (2017) “A Firm of One’s Own: Experimental Evidence on Credit Constraintsand Occupational Choice”, World Bank Group. 46pp