Skills and Liquidity Barriers to Youth Employment: Medium-term Evidence from a Cash Benchmarking Experiment in Rwanda

TL;DR

This study compares workforce training and cash transfers for young adults in Rwanda, showing both improve entrepreneurship but face barriers like credit access, with long-term effects on assets, well-being, and employment.

Contribution

It provides medium-term evidence on the distinct and combined impacts of training and cash transfers on youth employment and entrepreneurship in Rwanda.

Findings

Training improves productive time use and assets.

Cash transfers increase savings and subjective well-being.

Both interventions boost entrepreneurship but face credit barriers.

Abstract

We present results of an experiment benchmarking a workforce training program against cash transfers for underemployed young adults in Rwanda. 3.5 years after treatment, the training program enhances productive time use and asset investment, while the cash transfers drive productive assets, livestock values, savings, and subjective well-being. Both interventions have powerful effects on entrepreneurship. But while labor, sales, and profits all go up, the implied wage rate in these businesses is low. Our results suggest that credit is a major barrier to self-employment, but deeper reforms may be required to enable entrepreneurship to provide a transformative pathway out of poverty.