In Simple Words
If a student receives a daily food and transport allowance directly from a government grant while working at an auto shop, the shop owner stops giving the student daily pocket money. The owner keeps those funds to offset the personal time spent teaching the student how to repair engines.
Observed apprentice groups in Cote d Ivoire firms
- Traditional apprentices in control firms
- Payment comparison group
- Formal apprentices
- Employer payments 4054 FCFA lower monthly
Adjusted observed apprentice comparison. Public stipends paid separately; this does not isolate a randomized employer response per apprentice.
See source →Research question
When public programs pay direct stipends to trainees, host microenterprises adjust their informal compensation practices. Enterprise owners reduce their own out-of-pocket allowances and eliminate entry fees, effectively capturing a portion of the public subsidy to offset training costs.
Participants
N = 674 informal enterprises evaluated at midline across 7 urban localities in Côte d'Ivoire.
Study Design
Employer-employee disaggregated OLS regression comparing firm-provided transport, food, bonus payments, and entry fees between formal and traditional apprentices.
Results
Host enterprise owners eliminated entry fees (-5,303 FCFA, p < 0.0001) and reduced direct transport and meal payments (-3,698 FCFA, p = 0.004) to formal apprentices, lowering their total wage bill per formal apprentice by 4,054 FCFA per month (p = 0.021) compared to traditional apprentices in control firms.
Takeaway
Track host-firm allowance reductions and fee adjustments in subsidized stipend programs to quantify the implicit transfer of public subsidies from trainees to enterprise owners.