Fact of the Week: Ethiopian Youth Given $300 Start-up Grants at Random had 36 Percent Higher Wages After one Year, but no Effect After Five Years

May 6, 2019

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Source: Christopher Blattman, Stefan Dercon, and Simon Franklin, “Impacts of Industrial and Entrepreneurial Jobs on Youth: 5-year Experimental Evidence on Factory Job Offers and Cash Grants in Ethiopia,” April 2019, NBER Working Paper No. 25788, National Bureau of Economic Research.

Commentary: When attempting to evaluate the effect that a policy intervention can have on development or innovation, researchers and policymakers routinely look to short-term impacts, both out of urgency and because of the difficulty in maintaining contact with participants over several years. However, this cannot account for the possibility that gains from any one intervention could have unforeseen consequences or allow participants to overcome other barriers. A new study has demonstrated this, finding that one year after offering young Ethiopians training and $300 grants to create their own businesses, their earnings rose by 36 percent compared to a control group, but that after five years there was no significant difference in the earnings or health of the two groups.