Firm Commitment Failure in General Skill Provision

In Simple Words

Imagine an auto repair shop owner promising an apprentice that they will learn engine diagnostics, but instead using them solely for manual tire changing. Because the apprentice cannot enforce the promise or verify the curriculum, they refuse to invest time in the apprenticeship unless an independent school oversees the lessons.

Research question

In informal labor markets lacking enforceable contracts, enterprise owners cannot credibly commit to providing transferable, general skill training. Consequently, youth refuse to accept wage cuts or pay fees without guarantees of portable skill acquisition.

Participants

N = 731 informal firms and 1,842 youth across 7 urban localities in Côte d'Ivoire.

Study Design

Double-sided RCT evaluating training participation under monitored dual training contracts combining classroom and firm instruction.

Results

Combining external classroom instruction (180 hours/year) with monitored apprenticeship contracts led to a 48.4 percentage point increase in training participation (p < 0.0001) and a 10.83 month increase in training duration over the control group mean of 2.93 months.

Takeaway

Complement informal enterprise apprenticeships with mandated, externally monitored theoretical coursework to guarantee general skill delivery and overcome firm commitment failures.

Read alongside the research

Plain-English glossary

Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.

Percentage points

The difference between two percentages.

ExampleA rise from 40% to 50% is 10 percentage points. Relative to the starting value, that is a 25% increase.

Office for National Statistics · Percentages ↗Read more about percentage points →

Randomized controlled trial

A study that uses chance, like drawing lots, to decide who receives each option being compared. Researchers compare the groups’ outcomes to estimate the effect of those options.

ExampleA lottery assigns volunteers to a training programme or a comparison group. Researchers then compare their outcomes.

GET-IT glossary · Randomized study ↗Read more about randomized controlled trial →

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