Research Economics

A Small Fee for Business Training Improves Course Attendance

, by Claudio Todesco
Diego Ubfal and coauthors verified it during an experiment in Jamaica

A vast amount of money is spent every year subsidizing free business training programs in developing countries. Their effectivness is unclear. Diego Ubfal, Development Economist at the Department of Economy, is studying this question with co-authors. "Most of the experiences of business training focuses on encouraging entrepreneurs to adopt good business practices," he says. The researchers conducted an experiment in Jamaica and found that programs focusing on soft skills have larger effects on personal initiative, profits and sale, but only in the short run. After 12 months, without any form of mentoring, the effects disappear. The authors asked whether charging for the programs would encourage attendence, more effort, adoption of the recommended practices.

They conducted another experiment in Jamaica. They elicited the willingness to pay in a incentivized way and then randomly varied the price charged for the program. The training was eventually provided only to micro-entrepreneurs whose willingness to pay was bigger than the price randomly assigned. By doing so, the researchers were able to assess the real willingness to pay and to test whether those who pay for the course are the ones who benefit more from it. The problem is that some people did not show up to pay. So, when they moved the experiment to Mexico, the researchers asked people to sign a commitment to pay and leave a deposit. "Now, we are collecting the follow-up survey to check the training effects, but we already have some results on attendance. Charging partially reduces the number of participants, with lower participation rates at a higher price, but it increases attendance at courses. Only 59% of people who were offered the program for free attended at least 5 classes (out of 10). This figure rises up to 90% among those who purchased the course at 50% of its cost. This could be important. Since most of these programs are offered for free by NGOs, making people pay at least a part of the cost would help these organizations to achieve sustainability."

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