Goal Paper  Improve our understanding on whether business training can improve business practices and firm outcomes (sales, profits, investment) of poor self employed women in Sri Lanka. Can it also help activate women into self employment?

Identification Strategy  Focus on two groups: Current Enterprises (624 women) - Women operating a business at the time of the baseline - and Potential Enterprises (628 women) - Women out of the LF but expressed a desire to re- enter the labor force by opening a business.  Each group is randomly selected into treatment 1 (training alone); treatment 2 (training plus capital grant) and control. (and magnitude of the transfer is v. significant USD 130 compared with average USD 1/day).  Randomization achieved balance in most observable characteristics between treatment and control.

Findings  Currently Self-Employed- Significant and persistent improvements in business practices following training.  Training alone does not appear to affect sales, profits, or investment levels, the combination of training and cash grants has a positive and significant effect on all business outcomes. But effects short lived… (become zero 16 months after trainings)  Potential Enterprises - Training increases the likelihood of becoming a self employed and opening a business, but not to have changed the ultimate rate of entry.  The training plus grant combination has a similar effect, though the combined treatment also appears to induce a larger percentage of women to attempt to open a business earlier. Profits and sales are higher among enterprises in the treatment groups in the fourth round of the survey.

Constraints to Employability Should be Matched by Different Interventions BarriersPotential measures Job Relevant Skills Barriers Basic/Techi cal/Life skills/Mism atches Increase access to training programs: Technical, life skills, and on-the-job Provide information to inform education decisions Job Search Barriers Job matching Intermediation through job centers and employment offices Financial assistance for job search SignalingEquivalency education programs Skills certification mechanisms (e.g. National Qualification Frameworks)

BarriersPotential measures Lack Labor DemandDirect job creation (e.g. public works programs) Wage and employment subsidies Entrepreneurship/Start Up Constraints Entrepreneurship and self-employment Trainings Microcredit; Start up loans and grants Constraints to Employability Should be Matched by Different Interventions (II)  Good diagnostic is essential for effective matching with right set of programs…. But we need evidence on what works for whom…  Paper sheds light into this (urban context/poorest women in SL)…

Some evidence from developed countries but ….  Developing and developed countries differ in important ways:  Less institutional capacity in developing countries may call for different approaches.  Large informal sector calls for programs that help move the population towards the formal sector.  Extrapolating on the efficacy of “activation”/employability programs from evidence on developed countries is likely not be appropriate.

Suggestions (I) 1. Cost effectiveness. Discussion on the rates of return (costs and benefits) of the program (alternative assumptions on duration/depreciation). Most important for Bank clients. 2. Heterogeneity of Returns. Moving beyond the black-box on whether programs works on not to increase incoems. To whom does it work best? For which sub-groups of women is it more cost effective? 3. Program Take Up & Implications. Approximately 65% of the women in the two groups take up the trainings (and grants) but if effects are positive and large…. What are major market failures? Ultimately what is important to design good policy! (risk aversion, lack information,….)

Suggestions (II) 3. Looking at Additional Outcomes. (A) Measures of employment creation at the firm level (B) Measures of the extensive margin of participation in the labor market. In Argentina, women were more likely in the short run to accumulate the self employment with other wage activities. 4. Aggregating up to the bigger picture… Start having rigorous experiments on the formal business trainings (some coupled with access to credit/grants) in different regions/contexts of the world (Karlan& Valdivia, LAC, Bruhn&Zia, ECA, De Mel et al, SA…). Plausible that differences explained by differences in target groups (possibly more credit constrained?); or quality of the trainings? How to reconcile with De Mel et al (2008) showing paper showing zero returns to capital to women? Is it all about complementarities between training and capital ? 5. Role of Information in Promoting best choices. Stand alone analysis … No evidence?