G²LM|LIC - Can Temporary Financial Incentives for Female Industrial Workers Lead to Long-Term Retention and a Better Allocation of Talent?

A G²LM|LIC Research Project conducted by the University of Oxford. In this project, the research team studies whether worker turnover contributes to the misallocation of talent in low-income countries. To this end, they will experimentally evaluate the impacts of offering financial incentives for worker retention in the context of a female-dominated occupation in the nascent garment manufacturing industry in Ethiopia. Our main hypothesis is that many of the young female workers who quit the position have not spent enough time on the job to learn the true quality of the match, which, for some of them, may be high. Standard economic theory argues that worker turnover is an essential part of the process through which economies achieve an efficient allocation of talent: new hires are uncertain about the quality of the match with their employer and they quit their job when they become convinced that it is a poor match (Jovanovics, 1979). However, there are several reasons to expect that quitting decisions may be made before the quality of the match has been fully revealed. First, workers do not internalize the costs that high levels of turnover impose on the firm: more resources have to be devoted to recruitment, planning production and meeting deadlines becomes more difficult, and the investment in training the worker is lost. In markets where access to informal work opportunities is relatively easy, this can create an asymmetry between the cost of turnover to the worker and the cost of turnover to the firm. Second, early signals about the quality of the match may be misleading. Workers may eventually adjust to many features of the work environment that are initially perceived as disamenities, but often underestimate the extent of this adjustment (a phenomenon called “projection bias”, e.g., see Loewenstein et al., 2003). Workers that leave their job early – which represent the bulk of the turnover problem faced by firms (Jovanovics, 1979; Donovan et al., 2019) – may thus be quitting sooner than optimal. This can be particularly detrimental for young, female workers that have recently migrated and are only weakly attached to the labor market and thus have noisy priors about match quality in different jobs. The team plans to make three contributions to the literature. First, they will contribute to the literature on the allocation of talent by testing whether labor turnover – a process that is typically associated with improved allocative efficiency – may be partly driven by suboptimal decisions that destroy good matches. This is particularly important in the context of the allocation of talent of young female workers from low-income backgrounds, who often face the largest barriers to finding well-matched positions (Hsieh et al., 2019). Second, they will contribute to the literature on worker retention in developing countries, which has recently documented that turnover rates are higher than in richer economies (Donovan et al., 2019), especially in blue-collar occupations (Blattman and Dercon, 2018). Finally, they will contribute to the literature on structural behavioral economics (Della Vigna, 2019), by experimentally identifying and quantifying in the field a bias in belief formation that is currently supported by evidence from the lab and by observational studies (Loewenstein et al., 2003). The research team works in a particularly interesting context: the Hawassa industrial park, the flagship economic project of the current government, where a number of foreign investors have recently started producing garment-manufacturing products. This is a new activity in this area, and most workers are new to the industry. Further, standard factory-floor positions, which make up the bulk of the workforce of the firms in the park, are virtually only taken up by young women. They have identified a firm in the park that is willing to randomize certain features of their payment scheme. They have already collected some data on the workers of the firm and have run a small pilot. In the experiment, the team will randomize the timing of a retention bonus offered to workers. The first group of workers will be offered a bonus that is paid after three months on the job, which incentivizes them to complete the initial training (which lasts for 2 months). A second group will be offered a bonus that is paid after seven months on the job, which incentivizes workers to spend a significant amount of time on the production line. Our key empirical test will be whether the late bonus generates higher retention in the long term (i.e., after the seventh month of tenure) compared to the early bonus. They will collect detailed belief data to support our interpretation and to rule out alternative explanations (e.g., search costs that rise with tenure or gains in job-specific skills). Second, they will study whether workers in the late retention bonus group have higher levels of earnings and work satisfaction, one year after the offer of...

牛津大学进行的G²LM|LIC研究项目。在此项目中，研究团队探讨员工流动是否会导致低收入国家人才配置不当。为此，他们将在埃塞俄比亚新兴的以女性为主导的服装制造业中，对提供员工保留的财务激励措施的影响进行实验性评估。我们的主要假设是，许多离职的年轻女性工人尚未在岗位上工作足够的时间，以了解匹配的真实质量，而对于其中一些人来说，这种匹配可能很高。标准经济理论认为，员工流动是经济实现人才高效配置过程的一个重要组成部分：新员工对其雇主匹配的质量不确定，当他们确信这是一次糟糕的匹配时，就会辞职（Jovanovics，1979年）。然而，有几种原因预期离职决策可能在匹配质量完全揭示之前就被做出。首先，工人没有将高离职率给企业带来的成本内部化：必须投入更多资源进行招聘，规划生产和满足截止日期变得更加困难，对工人的培训投资也付诸东流。在那些获取非正式工作机会相对容易的市场中，这可能在工人离职成本与企业离职成本之间造成不对称。其次，关于匹配质量的早期信号可能是误导性的。工人可能会逐渐适应工作环境中的许多最初被视为不愉快的特征，但往往低估这种调整的幅度（称为“投射偏差”，例如，参见Loewenstein等人，2003年）。因此，提前离职的工人——他们代表了企业面临的大多数离职问题（Jovanovics，1979年；Donovan等人，2019年）——可能会比最佳时机更早地离职。这对最近移民且对劳动力市场只有较弱依附关系的年轻女性工人尤其有害。这些女性工人对在不同工作中匹配质量的先验信息可能存在噪声。研究团队计划对文献做出三项贡献。首先，他们将通过对劳动流动——这一通常与提高配置效率相关的过程——是否可能部分由破坏良好匹配的次优决策驱动进行测试，从而丰富关于人才配置的文献。这在低收入背景的年轻女性工人的人才配置背景下尤为重要，她们往往面临寻找匹配职位的最大学术障碍（Hsieh等人，2019年）。其次，他们将丰富关于发展中国家员工保留的文献，该文献最近记录了离职率高于富裕经济体（Donovan等人，2019年），尤其是在蓝领职业中（Blattman和Dercon，2018年）。最后，他们将通过在实地实验性地识别和量化当前由实验室证据和观察性研究（Loewenstein等人，2003年）支持的信念形成偏差，从而丰富关于结构性行为经济学的文献。研究团队在一个特别有趣的环境中工作：霍莎工业开发区，这是当前政府的旗舰经济项目，最近有外国投资者开始生产服装制造产品。这是该地区的一项新活动，大多数工人都是行业新手。此外，构成园区企业劳动力主体的标准工厂岗位几乎只由年轻女性担任。他们已经确定园区内一家愿意对其支付方案的一些特征进行随机化的企业。他们已经收集了一些关于该企业员工的数据，并进行了小规模的试点。在实验中，团队将对提供给工人的保留奖金的发放时间进行随机化。第一组工人将在工作三个月后获得奖金，这激励他们完成最初的培训（持续2个月）。第二组将在工作七个月后获得奖金，这激励工人花更多的时间在生产线上。我们的关键实证检验将是晚发放的奖金是否比早发放的奖金在长期（即任期第七个月后）产生更高的保留率。他们将收集详细信念数据以支持我们的解释，并排除其他解释（例如，随着任期增长而上升的搜索成本或特定于工作的技能收益）。其次，他们还将研究在晚发放保留奖金组中，工人在提供奖金后一年内的收入和工作满意度是否更高。