Beats the Alternative
By Amy Willis
If you were a poor person in a poor country, would you prefer steady work in a factory or to be your own boss, buying and selling in the local market? That’s the opening question for this week’s episode, in which host Russ Roberts welcomes back Chris Blattman of the University of Chicago to discuss his research on employment alternatives in poor countries. The results Blattman and his colleague found surprised him, and me, too.
If we assume that a long queue for job openings in a factory means that such employment beats the other alternatives, what do we miss?
1. Blattman notes that one-time cash transfers to people in poor countries do have the effect of raising the individual’s income, yet without any discernible effect on economic growth. Why is that the case? To what extent does this suggest that such aid programs are misguided?2. Blattman’s project is described as taking the line of (qualified) applicants for factory jobs in Ethiopia and dividing them in thirds. What happened to the members of each group, and what was the effect of their experimental treatments? Which effects(s) surprised you the most, and why?
3. Blattman’s current project is described as starting with the following idea: that “firms not only help achieve growth, but…might actually be tools of poverty mitigation.” What did Blattman mean by this, and to what extent was this hypothesis born out in his research? What implications do his findings have for development aid going forward?
4. In one of the most popular Feature Articles ever, economist Ben Powell makes his case in favor of sweatshops. How does this compare to Blattman’s, and whose arguments do you find more convincing, and why?