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3ie-LIDC Seminar Series 'Can basic entrepreneurship transform the economic lives of the poor?'

Wednesday, October 24, 2012 - 17:00 to 18:30


Wednesday 24th October 2012

Time: 5 - 6.30 pm
Venue: LIDC, 36 Gordon Square, London

Speaker: Oriana Bandiera, LSE

The world's poorest people lack both capital and skills and typically engage in insecure and often seasonal occupations where they labor for others. The non-poor, in contrast, tend to be employed in running their own businesses or in secure wage employment. Whether the lack of capital and skills determines occupational choice and poverty is however unknown. We provide causal evidence by conducting a randomized evaluation of a program that provides assets and training to the poorest women in rural Bangladesh. A simple theoretical model of occupational choice under capital constraints makes clear that the effect of assets transfers and training on occupational choice is generally ambiguous. We find that the program transforms the occupational choices of the treated poor women as they spend 92% more hours in self-employment running their new livestock businesses and 26% fewer hours in insecure wage labor. The change in occupation is associated with an increase in earnings (38%), productivity (15%), per capita expenditures (15%) and self-reported life satisfaction. Quantile treatment estimates suggest that the program effects on earnings and PCE are very heterogeneous but positive at all deciles. Despite its large outlay, the cost benefit analysis reveals that the program is preferable to a cash transfer. The magnitude of the effects is such that four years after the start of the program treated women begin to resemble middle class women in the rural communities that we study on dimensions such as livestock holdings, time devoted to self-employment, regularity of economic activity, and per capita expenditure.
Oriana Bandiera is Professor of Economics and Director of STICERD at the London School of Economics and Political Science. Oriana is fellow of CEPR, BREAD and IZA, co-director of the research programme in State Capabilities within the International Growth Centre at the LSE, and on the board of editors of the Journal of Economic Literature, Economic Journal and Journal of Development Economics. Her research focuses on the study of contracts and incentives in a broad range of organizations and countries. Her work has been published in leading academic journals such as the American Economic Review, Econometrica and the Quarterly Journal of Economics. She is the 2011 recipient of Carlo Alberto medal, awarded biennally to an Italian economist under the age of 40 for “outstanding research contributions to the field of economics.”

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