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Ideas for growth
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BREAD 2021: Insights on labour and markets

The IGC hosted the BREAD Conference on Economics of Africa from 7-9 July and our new blog series explores key findings from research presented during the conference, including from the following publicly available papers on labour and markets. Some interesting findings are below.

Many countries in sub-Saharan Africa are growing rapidly, moving from largely informal and agriculture-based employment to industrialised economies with more formal employment structures. This presents exciting growth and entrepreneurship opportunities but also challenges in competing with industrialised economies. These publicly available papers address topics including entrepreneurship, vendor misconduct, and firm productivity that affect both employees and economies more broadly.

Making entrepreneurs: Returns to training youth in hard versus soft business skills (Chioda, Contreras-Loya, Gertler, and Carney 2021)

Finding: A 3-week mini-MBA in Uganda focused on a mix of hard- and soft-skills improved skills and led to higher earnings and entrepreneurship outcomes.

Young people at the end of secondary school were given the opportunity to participate in a full-time 3-week mini-MBA modeled on western programmes and adapted for Uganda. The programme consisted of either 75% hard skills and 25% soft skills, or vice versa. The programme improved skills and led to higher earnings of 32.1% and 29.8% among graduates of the hard skills and soft skills programme respectively as well as significantly larger profits and business capital investments for their self-started businesses.

Misconduct and reputation under imperfect information (Annan 2020)

Finding: Providing customers information about official transaction costs and a number to report suspected misconduct significantly decreases mobile money vendor misconduct in Ghana, with a subsequent increase in market activity, revenue, and customer welfare.

In Ghana, it is common for mobile money vendors to overcharge on transactions, which leads to customer mistrust. Customers were given access to information about what transaction costs should be, a number to report misconduct to authorities, or both. Each arm of the programme effectively decreased misconduct, with an overall misconduct reduction of 21 percentage points. The programme also led to higher market activity and revenues for vendors, as well as an increase in customer welfare. This was likely due to an increase in accuracy of customer beliefs about misconduct and vendor concern for reputation.

Africa’s manufacturing puzzle: Evidence from Tanzanian and Ethiopian firms (Diao, Elis, McMillan, and Rodrik 2021)

Finding: Firms in Tanzania and Ethiopia face a dichotomy between increasing productivity and increasing employment, possibly due to available technology.

In Tanzania and Ethiopia, there is a dichotomy in manufacturing between relatively large firms that increase productivity but not employment, and smaller firms that increase employment but not productivity. This is possibly due to available technology and production techniques that are necessary to compete on the global market but are also less suited to the local economies, meaning the firms end up being much more capital-intensive than would be expected.

Disclaimer: The views expressed in this post are those of the authors based on their experience and on prior research and do not necessarily reflect the views of the IGC.


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