Servicing Development
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POLICY ANALYSIS
Servicing Development: Productive Upgrading of
Labor-Absorbing Services in Developing Economies
Dani Rodrik | Rohan Sandhu
Harvard John F. Kennedy School of Government, Harvard University, Cambridge, Massachusetts, USA
Correspondence: Dani Rodrik (dani_rodrik@[Link])
Received: 18 September 2024 | Revised: 29 January 2025 | Accepted: 30 January 2025
Funding: This work was supported by William and Flora Hewlett Foundation.
Keywords: growth strategy | industrial policy | services
ABSTRACT
Manufacturing generates very little employment in the developing world. Urban jobs are predominantly informal, unproductive,
and in services. It seems unlikely that manufacturing will be able to absorb the new increments to the labor force or create more
productive jobs for those that are already stuck in petty services. Raising productivity in services has been traditionally difficult,
but is now necessary to achieve long-term growth in the standard of living. We discuss and provide evidence for four broad strat-
egies: (a) incentivizing large, productive firms to expand their employment; (b) enhancing productive capabilities of smaller firms
through the provision of public inputs; (c) providing workers or firm's technologies that explicitly complement low-skill labor; (d)
vocational training with “wrap-around” services to enhance job seekers' employability, job retention, and eventual promotion.
JEL Classification: O40, O17, O25
1 | From Manufacturing to Labor-Absorbing industrialization. The conventional recipe for low-income coun-
Services tries such as those of Sub-Saharan Africa is to replicate these ex-
periences, by removing obstacles to (or actively promoting) rapid
The future of developing countries lies in services. Enhancing industrialization so their firms can plug into global manufactur-
productivity in labor-absorbing services in particular must be ing value chains. Today, even advanced economies are engaged
an essential priority, for reasons of both growth and equity. In in industrial and other policies to reinvigorate their manufac-
this paper we provide a broad overview of what such a strategy turing sectors, weakened by decades of competition with China.
might look like, drawing on a wide range of existing programs
on which it might build. There are good reasons why manufacturing is distinctive and
may deserve special attention. In advanced economies, man-
Emphasizing a services-driven model may seem odd in view ufacturing contributes a disproportionate share of R&D and
of the phenomenal success that countries such as South Korea, innovation and therefore plays a particularly important role
Taiwan, and China have had with the strategy of export-oriented in driving economy-w ide productivity growth. In developing
industrialization. Indeed, historically industrialization has been countries, formal manufacturing sectors reliably exhibit “un-
the main vehicle for modern economic growth. The aptly-named conditional” labor productivity convergence to the technological
Industrial Revolution in Britain was itself the product of the ap- frontier. Manufacturing establishments that are very far from
plication of new technologies to manufactures such as cotton the frontier experience especially rapid productivity growth,
textiles. Almost all subsequent and sustained cases of economic even in economic environments characterized by bad policies or
catch-up, from the United States to Japan, were the result of disadvantageous external conditions (Rodrik 2013). Moreover,
© 2025 Durham University and John Wiley & Sons Ltd.
Global Policy, 2025; 0:1–13 1 of 13
[Link]
manufacturing is tradable, meaning that firms do not face firms that are absorbing labor are predominantly small, infor-
domestic demand constraints; for smaller economies, and es- mal, and productively stagnant (Diao et al. 2024). It is also the
pecially developing countries, this means that their manufactur- reason why countries such as Bangladesh that have done excep-
ing firms can expand virtually without limit, driving economic tionally well in certain manufacturing segments, such as ready-
growth. made garments, are now finding it very difficult to diversify and
move into more sophisticated segments (as East Asian countries
Historically, manufacturing presented an additional advan- eventually did). As virtually every report on Bangladesh argues,
tage for developing economies—and this one was critical in the country requires a significant investment in skills and new
enabling rapid economic growth through industrialization. technologies if it is to continue building on its manufacturing
Many if not most segments of manufacturing did not demand success. True as far as it goes, this recommendation is also an
significant skills from production workers, beyond some man- implicit acknowledgement that manufacturing is no longer
ual dexterity, punctuality, learning on the job, and ability to the growth escalator it once was: what made industrialization
work with others. Machinery and equipment could be im- special in the first instance was that it allowed productive up-
ported from abroad (and eventually produced at home with grading within the limited resource endowments of low-income
the requisite capabilities in place). Governance and regula- countries.1
tory requirements from the state were either similarly mini-
mal, or when more extensive, could be provided in a targeted More broadly, all over the developing world we now see a pattern
manner (through special zones or customized policy regimes, of structural change that is very different from what the usual
for example) without requiring economy-w ide institutional process of economic development is supposed to look like. As
improvements. In short, industrialization needed resources young workers flock to urban areas from the countryside, they
which were plentiful in poor countries (cheap, unskilled find very little employment in manufacturing (unlike earlier
labor) and economized on resources that were scarce (educa- eras, whether under Latin American-style import-substitution
tion, physical capital, high-quality institutions). This in turn or East-A sian style export-promotion). The urban jobs that are
meant that industrialization faced few constraints on the sup- created to employ them are predominantly informal, precarious,
ply side either: manufactures could expand rapidly without unproductive, and in services. While we might be tempted to
driving costs up and profitability down, at least until coun- argue that this reflects errors in government policy, the consid-
tries reached middle-income stage. erations above suggest there is something more structural, be-
yond the government's ability to control, that is at play. In the
The features summarized in the previous paragraph no longer years ahead, manufacturing will neither be able to absorb the
describe the realities of today's manufacturing (Rodrik 2016). new increments to the labor force, where the labor force is still
It is well documented that innovation in manufacturing has growing rapidly (as in the low-income countries of sub-Saharan
taken a predominantly skill-biased form, reducing demand for Africa), nor create more productive jobs for those that are al-
workers with relatively low levels of education (Acemoglu and ready stuck in petty services.
Restrepo 2022). In many manufacturing segments, new tech-
nologies such as automation, robots, and 3D printing serve to This brings us back to the opening sentence of this paper. The
directly substitute physical capital for labor. Of course, given future of developing countries is in services in the sense that,
their relative factor prices, firms in developing countries have that is where the jobs will be. Those jobs need to be productive
the incentive to use more labor- intensive techniques. But ones, for reasons of both economic growth and equity. Economic
they face a limited range of factor substitution possibilities. growth requires that we move people from less productive to
Competing in the global marketplace requires employing pro- more productive activities. If services are the preponderant
duction techniques that cannot differ significantly from those source of new employment, they have to be more productive
employed in the frontier countries, because the productivity than the rest of the economy in order for aggregate incomes
penalty would be otherwise too high. The need to produce ac- to rise. And as for equity, the only sustainable way to lift peo-
cording to the exacting quality standards set by global value ple at the bottom of the income distribution is to provide them
chains restricts how much unskilled labor can substitute for with better paying jobs. Those jobs will have to be in services,
physical capital and skilled labor (Rodrik 2022). The rising whether we like it or not (Rodrik and Stiglitz 2024).
skill-and capital-intensity of manufacturing in turn means
that globally competitive, formal segments of manufacturing Here we face a conundrum though. We do not know much
in developing countries have lost the ability to absorb signifi- about how to raise productivity in labor-absorbing services.
cant amounts of labor. They have effectively become “enclave” While some services, such as banking, IT, and business pro-
sectors, not too different from mining, with limited growth cess outsourcing (BPO) are both productively dynamic and
potential and few positive effects on the supply side of the rest tradable, they are not going to be labor-absorbing for the
of the economy. same reason that manufacturing is not. These are relatively
skill-
intensive services which, even under the best of cir-
This is why countries, such as Ethiopia, that were not so long cumstances, will not provide the answer to the challenge of
ago touted as the next manufacturing miracles, have been un- productive job creation. 2 In India and the Philippines, two
able to experience manufacturing-led growth. While overall countries where these types of services have been successful
manufacturing output and employment shares have increased (IT in India and BPO in Philippines), the bulk of employment
in Ethiopia, the aggregate statistics hide a discomforting pro- continues to be generated by informal services. The chal-
ductive dualism: the productive and mostly large firms are es- lenge is to increase productivity in labor-absorbing services,
sentially not creating any employment, while the manufacturing such as retail, care, personal and public services, where we
2 of 13 Global Policy, 2025
have had limited success, in part because such services have productivity. In this paper, we sidestep these questions, focus-
never been an explicit target of productive development pol- ing directly on strategies that enhance productivity regardless
icies. Industrial policies, as the name makes clear, typically of firms' formality status.
focus on fostering innovation, investment, and productivity
in manufacturing. But if developing countries are going get The plan of the paper is as follows. In the next section we pro-
richer under present conditions, they will have to adapt these vide a typology of different strategies for creating productive em-
policies to labor-absorbing services. ployment in services. Section III briefly summarizes our cases.
Section IV provides more details on four of the cases, as illustra-
Services have traditionally been the laggards of productivity. tions of the four strategies in our typology. Section V presents a
Will Baumol's (2012) famous “cost disease” argument is predi- discussion and some preliminary conclusions.
cated on slow productivity growth in services and explains why
the relative prices of services rises as the rest of the economy
become more productive. In manufacturing, the labor units 2 | A Typology of Strategies for Productivity
required to produce steel or cars has been slashed drastically Enhancement
over time, especially if we adjust for quality improvements. But
it takes just as long today for a barber to cut a customer's hair There are four broad strategies for expanding productive em-
or a conductor to lead the orchestra through a Beethoven sym- ployment in services. The first focuses on established, large,
phony as it did centuries ago. As we mentioned previously, tech- and relatively productive incumbent firms, and entails work-
nological catch-up has been far easier for developing countries ing with them to incentivize them to expand their employ-
in manufacturing than in labor-absorbing services. The broad ment, either directly or through their local supply chains.
historical record suggests it will be difficult to achieve compara- These firms could be large retailers, platforms such as ride-
ble rates of productivity growth in areas such as care, education, sharing services, or even manufacturing exporters (with po-
retail, or public services. But if we are right about the eroding tential to generate upstream linkages with service providers).
power of industrialization as a growth strategy, there is no al- The second strategy focuses on smaller firms (which consti-
ternative other than making services productivity an explicit tute the bulk of firms in developing countries) and aims to
government priority. enhance their productive capabilities through the provision
of specific public inputs. These inputs could be management
The literature on this paper's themes is not large, in part be- training, loans or grants, customized worker skills, specific
cause the term productive upgrading is not typically associated infrastructure, or technology assistance. Given the heteroge-
with services. It tends to be used in connection with tradable neity of firms in this segment, ranging from micro-enterprises
sectors of the economy, such as manufacturing or agricul- and self- proprietorships to mid-size firms, policies in this
tural supply chains. The recent survey by Verhoogen (2023) domain require a differentiated approach, to respond to the
on firm-level upgrading focuses almost entirely on manufac- distinct needs of firms of different size. Given the numbers
turing firms. Magruder (2018) surveys experimental evidence involved, often they also require a mechanism for selecting
on technology adoption in agriculture. But there is other work among the most promising, since most such firms are unlikely
that, while not explicitly focused on services, covers some as- to become dynamic and successful.
pects of the approaches described above, such as training or
fostering entrepreneurship. McKenzie and Woodruff (2014) The third strategy focuses on the provision, to workers directly
and Quinn and Woodruff (2019) survey experimental inter- or firms, of digital tools or other forms of new technologies that
ventions—such as the provision of grants or management explicitly complement low-skill labor. The objective here is to
training—aimed at improving entrepreneurship among enable less educated workers to do (some of) the jobs tradition-
smaller firms, including microenterprises. Many of the firms ally reserved for more skilled professionals and to increase the
covered in these experiments are in services. Carranza and range of tasks they can perform. The fourth and final strategy
McKenzie (2024) discuss job training policies in developing is centered on less-educated workers and combines vocational
countries. Kremer et al. (2021) present a compendium of in- training with “wrap-around” services, a range of additional
terventions, some in services, that have been evaluated that assistance programs for job seekers to enhance their employ-
hold promise for scaling up. We have drawn on this literature ability, job retention, and eventual promotion. Modeled after
in selecting our cases. Project Quest and other similar sectoral workforce development
schemes (Katz et al. 2022), these training programs typically
Since the bulk of firms in services is informal, this paper also work closely with employers, both to understand their needs and
relates to the extensive literature on informality (Chen 2012; to reshape their human resource practices to maximize employ-
La Porta and Shleifer 2014; Portes and Haller 2010). This lit- ment potential. In different ways, these strategies all aim to in-
erature scrutinizes the reasons for informality and its con- crease productivity and/or employment possibilities in services
sequences for economic performance. In general, there is a for workers with limited skills.
two-way relationship between informality and productivity.
Firms with little opportunity to expand may not be able to We want to explore the potential of these kinds of programs to
afford the costs of formality, such as registration and taxes. address the productive service jobs conundrum. To that end,
But barriers to formality may also serve as obstacles to firm this paper centers around 20 different initiatives from around
expansion and productive upgrading, by hindering access to the developing world, encompassing illustrations from each of
credit markets, technology, and new markets for example. the four strategies we just described. Our cases do not consti-
So informality can be both a cause and a consequence of low tute a random sample. They have been selected among those
3 of 13
that are well-documented to indicate the range of programs that 4 | Illustrative Cases
is already in place. Our goal is to highlight the richness of ex-
perimentation and to suggest that there is already a reservoir In this section, we provide summaries of four of the twenty initia-
of practice on what might be called productive development tives. These case descriptions are meant to serve as illustrations
policies for labor-absorbing services on which future efforts can of the four broad strategies we outlined previously. The first case
build and expand. We shall draw some provisional conclusions represents an intervention focused on established, large incum-
from our cases at the end of the paper. bent firms (Uber and Ola), and their partnership with the state
government of Haryana, India, to expand employment. The sec-
Not all of the programs we will summarize have been formally ond case focuses on the provision of public inputs, such as man-
or rigorously evaluated; and among those that have, not all have agement training and financing to small enterprises in Nigeria,
been successful. We are more interested in suggesting a general through a business plan competition called Youth Enterprise With
direction for future development policy than to pass judgment Innovation in Nigeria (YouWiN!). The competition element of this
on what kind of programs work best. We suspect that local con- intervention enabled self-selection of the most promising and dy-
text matters greatly—as it does in general, but even more so namic small enterprises. The third case summarizes the use of
when it comes to the kind of service activities that are our focus. new technologies to complement less-skilled labor to enhance the
Even programs that produce superlative results in one setting tasks workers can perform. In this case, frontline health workers,
may prove difficult to replicate in others. called Accredited Social Health Activists (ASHAs) in Jhansi, India
were provided a mobile phone-based multimedia job aid. This mo-
Moreover, regardless of the success of individual programs, it is bile application served as a combination of a self-learning, client
important to bear in mind the scale of the challenge a services- management, decision support, and reporting tool for ASHAs.
oriented development strategy faces. A randomized policy in- Our final case focuses on labor market intermediation provided by
tervention that increased earnings of low-income workers by, Harambee in South Africa, where less-educated workers are pro-
say, 20% would normally be judged a great success (assuming vided vocational training combined with wrap-around services,
reasonable program costs). Even if it were successfully scaled up including psychometric data, career counseling, and internships,
to the economy at large, this gain would not make up even 1% to enhance employability.
of the income gap that currently exists between a country like
Ethiopia and the U.S. Real success will require greater ambition,
continuous experimentation, and the cumulation of a very wide 4.1 | A. Saksham Saarthi Partnership With Uber
range of different programs. and Ola in Haryana
In 2018, the state of Haryana in India faced a youth unemploy-
3 | A Brief Description of Cases ment rate of 9.2%. In July of that year, the state government
launched a unique public-private partnership—called Saksham
We cataloged 20 initiatives from around the world to study their Saarthi—with taxi aggregators Uber and Ola, to increase em-
respective approaches, experiences, and results. Table 1 provides ployment opportunities for youth in the state.3 The partnership
a summary. These are initiatives that have been well-documented was based on mutual benefit rather than a financial obligation,
in the academic and/or policy literature. Our cases represent a enabling the government to address youth unemployment and
range of geographies: eight of these initiatives are from Africa, the taxi aggregators to expand their services in the state.
eight from South and East Asia, four from Latin America, and
one from Europe. The initiatives vary based on the type of imple- Saksham Saarthi, which translates to “capable charioteer/
menter, the goals of the program, and nature of intervention. Not driver,” was initiated via a Memorandum of Understanding
all of them have been formally evaluated. Several of these initia- (MoU) between the Government of Haryana and taxi aggrega-
tives are administered by multistakeholder coalitions, with actors tors Ola and Uber. Both companies responded to a request for
from government, social enterprises, and multilateral or bilateral ‘expressions of interest’ from the government's Department of
funders. In 11 cases, the lead implementer is an international de- Employment. The Government of Haryana provided the compa-
velopment actor, including multilateral agencies such as the World nies targeted access to their database of registered unemployed
Bank and UNICEF or large non-profit organizations such as Plan youth, enabling the companies to more efficiently recruit new
International and Swisscontact. In seven cases, the government drivers. In return, Ola and Uber were requested to provide peri-
(either national or subnational) was a lead player; in four, a social odic employment targets to the government; but these numbers
enterprise was a lead implementing agent. were intentionally flexible with no penalty if stated targets are
not met.
We distinguish programs in the table according to whether they
target (a) employment creation, (b) productivity improvement, The partnership is predicated on a consistent feedback loop
or (c) both. We have tried to identify interventions on both the between the partners, through regular calls and meetings,
demand and supply sides of the labor market, to unpack their to maintain good faith and goal alignment. The government
mechanisms and approaches. The specific approaches include also uses its existing resources such as media campaigns and
business competitions, training, technology tools, financial as- jobs fairs held by district employment offices to publicize the
sistance, internships, and addressing policy barriers. In many program.
cases, partnership between different stakeholders—as opposed
to policy or “innovation”—was the primary value add of the While the program hasn't been formally evaluated, intermediate
initiative. reporting reveals several positive trends:
4 of 13 Global Policy, 2025
TABLE 1 | Summary of 20 programs.
Formal or
Objective information
Dates of Strategy (Employment/ Public evaluation
Name of program Region operation typea productivity) Lead agency sector role Partners Mechanisms results Source
Ridesharing cab driver South 2018– Type 1 Employment Government Lead agency Large firms Unemployment Successful Muglur
program (Saksham Asia present (Uber and Ola) data sharing; (informal) et al. (2019)
Saarthi) policy
barriers; Firm
recruitment
Shortening Supply Latin 2016–2018 Type 3 Productivity Social None None Technology tool Partially Iacovone and
Chains for Fruit and America Enterprise successful McKenzie (2022)
Vegetable Vendors in (Formal)
Bogota (Agruppa)
Wage subsidies to South 2008–2014 Type 2 Employment Global None None Financial Not successful De Mel
microenterprises in Sri Asia Development assistance (formal) et al. (2019)
Lanka Actor
Apprenticeship training Africa 2012–2016 Type 4 Both Government Lead agency Trade Internships Partially Hardy
in Ghana associations, successful et al. (2019)
think tank (formal)
Business plan Africa 2011–2017 Type 2 Both Government Lead agency MSMEs, Business Successful McKenzie (2017)
competition in Nigeria private firms, competition (formal)
think tanks,
educational
institutions
Recruiting and training Africa 2010– Type 3/ Employment Government Lead agency Think tanks, Training Successful Ashraf
community health present Type 4 international (informal) et al. (2020)
workers in Zambia aid agencies
Software for community South 2012– Type 3 Productivity Government Lead agency Private firm Training; Successful Hamilton and
health workers in India Asia present (Qualcomm) technology tool (informal) Bora (2015)
Harambee Africa 2011— Type 4 Employment Social Collaborator Philanthropy, Training; Successful Carranza
present Enterprise Global Technology (informal) et al. (2022)
Development tool;
Agency unemployment
data sharing;
firm
recruitment
(Continues)
5 of 13
TABLE 1 | (Continued)
6 of 13
Formal or
Objective information
Dates of Strategy (Employment/ Public evaluation
Name of program Region operation typea productivity) Lead agency sector role Partners Mechanisms results Source
Kuza Africa 2014–2017 Type 2 Both Global Partner County Training; Successful ILO 2016
Development government, internship; (informal)
Actor Community- unemployment
based data sharing;
organizations, firm
private sector recruitment;
firms policy barriers
U-LEARN II Africa 2016–2021 Type 2 Both Global Partner Philanthropy, Training; Firm Yes (informal) Lefebvre
Development Businesses, Local recruitment et al. (2018)
Actor government
authorities,
Directorate
of Industrial
Training
Youth Building the Latin 2015–2017 Type 4 Both Global Collaborator Government Unemployment Yes (informal) Kleijn
Future (YBF) America Development (Colombia data sharing; et al. (2017)
Actor National Trainings; firm
Training Service recruitment
and Mayors),
Philanthropy
New Employment Latin 2012–2018 Type 4 Both Global Partner Private firms, Training; No (informal) Romero and
Opportunities (NEO) America Development Government technology Barbarasa (2017)
Actor of Panama; tool; firm
intermediaries recruitment
(Chamber of
Commerce,
industry
associations),
training
institutions; and
civil society
(Continues)
Global Policy, 2025
TABLE 1 | (Continued)
Formal or
Objective information
Dates of Strategy (Employment/ Public evaluation
Name of program Region operation typea productivity) Lead agency sector role Partners Mechanisms results Source
Generation India South 2015–2020 Type 4 Employment Social Collaborator Community Training; Yes (formal) Romero and
Asia Enterprise based internship; firm Barbarasa (2017)
organizations, recruitment;
larger firm financial
employers assistance
UPSHIFT Europe 2014–2018 Type 2/ Both Global Collaborator Government Training; Yes (formal) Romero and
Type 4 Development ministries, NGOs financial Barbarasa (2017)
Actor assistance
Kenya Youth Africa 2016–2021 Type 4 Both Global Partner Government; Training; Yes (informal) Romero and
Employment and Development Businesses (trade internships; Barbarasa (2017)
Opportunities Project Actor associations) financial
(KYEOP) assistance
Little Giants Program Asia 2018– Type 2 Productivity Government Lead agency Universities, Selection (using Mixed Brown
present local think a ‘pyramid (informal) et al. (2023)
tanks, financial cultivation
institutions system’);
(e.g., Beijing subsidies;
Stock Exchange, training; policy
People's Bank support
of China)
Open Network for Digital South 2021– Type 3 Productivity Government Lead agency National Stock Open network Pilot in ONDC (2022)
Commerce (ONDC) Asia present Exchange, banks e-commerce progress
platform
World Class Suppliers Latin 2009– Type 1 Productivity Large Partner Codelco Collaboration Mixed Navarro (2018)
Program America present firm (BHP (Chile's state- between large (formal)
Billiton) owned mining firms and
firm), Chilean suppliers;
economic selection
development of high-
organization, performing
private suppliers;
foundations mentorship
and consulting
support; market
linkages
(Continues)
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• Job creation: Between July 2018 and April 2019, 24,000
Bai et al. (2021)
youth were on-boarded by Ola and Uber in Haryana and
et al. (2023)
Bandiera
the opportunity to drive bike taxis with these aggregators
Source
was created.
• Policy reform: As part of the program, the Government of
Haryana implemented policy changes to reduce the admin-
istrative burden of obtaining commercial licenses, which
information
Yes (formal)
evaluation
Formal or
are required to operate a taxi in the state. This included
(formal)
results
Mixed
reducing the processing time from 4 to 2 weeks, standard-
izing the application and requirements, and allowing non-
resident migrants to apply for commercial licenses. These
changes were piloted in the district of Gurugram with plans
matching; firm
Mechanisms
about product
E-Commerce
information
to scale to the entire state.
platform for
recruitment
SMEs (for
Training;
exports);
quality
• Market expansion: The program has facilitated Uber
and Ola's introduction and expansion of two-wheel/bike
taxi services in Haryana. Although not a stated goal of
the program, this could also serve to benefit the govern-
ment and public by increasing the availability of low-cost
Researchers
researchers,
transportation, contributing positively to local economic
Academic
Partners
SMEs
development.
4.2 | A. Youth Enterprise With Innovation in
Nigeria (YouWiN!)
sector role
1: Collaboration with large firms; Type 2: Public inputs to smaller firms; Type 3: Technology provision; Type 4: Vocational training.
Public
None
None
Youth Enterprise With Innovation in Nigeria (YouWiN!), a busi-
ness plan competition for young entrepreneurs, was launched
in 2011, with the aim of encouraging innovation and job cre-
Lead agency
ation through the creation of new businesses and expansion of
Development
Private firm
(Aliexpress)
existing businesses.4 The program was developed as a collab-
Global
Actor
oration between the Ministries of Finance, Communication
Technology, and Youth Development, with support from the
U.K. Department for International Development (DFID) and the
World Bank. At the time YouWin! was implemented, 99.6% of
(Employment/
productivity)
Employment
Productivity
firms had < 10 workers. Multiple market failures and informa-
Objective
tional asymmetries prevented individuals with good ideas from
accessing finance. Female entrepreneurs faced even more diffi-
culties to secure funding.
The competition was implemented over multiple stages, com-
Strategy
Type 1
Type 4
typea
prising an initial application, a 4-day training, submission of
detailed business plans, evaluation and selection, and disburse-
ment of grants. At the outset, awareness about the program
was created through several outreach programs, including a
operation
Dates of
high-profile launch by the President, roadshows, rallies, and
2021
2012
social media campaigns. At the first stage, applicants submit-
ted basic information about their business. This was scored
along various parameters (including, quality and viability
Region
Africa
of business ideas and number of jobs created) by an indepen-
Asia
dent evaluator. Subsequently, successful applicants were in-
vited to a short training on preparing a business plan, which
was scored by the Enterprise Development Center (EDC) of
TABLE 1 | (Continued)
the Pan-A frican University and the professional services firm
Job search expectations
AliExpress Global E-
PricewaterhouseCoopers (PwC). The program also had a re-
Commerce Platform
Name of program
gional dimension; applications were sourced and selected from
geographical zones, and winners were linked to banks, financial
institutions, and mentors in their respective regions.
in Uganda
Successful applicants were notified and eligible to receive up to
aType
10 million naira (around $7000) in grants, depending on their
8 of 13 Global Policy, 2025
business plans. The disbursement of each tranche of the award easy-to-use format. The content on the app was sourced from
was conditioned on the firm's performance on specific mile- national government repositories. Upon registration, mSakhi
stones, such as business and job creation and opening of corpo- generated a home visit schedule for each beneficiary and pro-
rate bank accounts. The partnership between the government vided a set of audio-v ideo guided instructions for counseling,
and independent external monitors enabled easier tracking of assessment, and referral specific to each visit. ASHAs entered
“problem awardees.” Winners received one-on-one mentoring beneficiary data such as names and village information into the
from seasoned local entrepreneurs and business managers. An app during home visits. Data was stored in a centralized data-
additional bootcamp session provided deeper training on topics base, which was integrated with existing government systems
such as business planning and management, operations, finance for real-time tracking of both ASHAs and beneficiaries.
and accounting, and communication (including business writ-
ing and public speaking). The initial pilot studied over 140 ASHAs, covering more than
80,000 beneficiaries in the Bahraich and Jhansi districts of Uttar
Evaluations of the program reveal that it has had significant im- Pradesh. The results indicate that adoption of the technology
pact on the rate of business start-up, employment, profit, and contributed to improved knowledge, skills, and productivity of
survival of existing firms (McKenzie 2017). It has been able to ASHAs. In 2015, the mSakhi app scaled to five districts of Uttar
accurately identify high potential entrepreneurs who invest in Pradesh. In 2018, the app was also scaled to other functions, like
innovation, physical, and human capital in a largely informal screening people over 30 years of age for non-communicable dis-
Nigerian economy. More than 9 billion naira was awarded to eases like diabetes and hypertension in the state of Jharkhand.
winners through the program. The success of the initial pilot led Surveys conducted by the implementing partners of the program
to its replication in subsequent years. Some of its key successes highlight the following:6
include:
• Higher productivity: The initial pilot results highlight that
• Better visibility of smaller businesses: YouWiN! has funded for the ASHAs treated, average monthly usage per ASHA
1200 businesses between 2011 and 2014. The Government increased from 52 min at start-up to 121 min at endline.
has also created websites by industry and zone to boost the ASHAs gained confidence in using the application as a
visibility of growing businesses. As per a survey in 2013, counseling tool. Having a mobile phone enabled them to
more than 85% of the awardees felt that the websites were quickly access counseling messages without carrying heavy
useful (Aina 2016). flipbooks during visits.
• Mechanism for identifying high potential entrepreneurs: • Improved knowledge: ASHAs showcased significant im-
McKenzie (2017) finds that the program attracted entrepre- provements in knowledge of critical RMNCH (reproductive,
neurs who invest in higher innovation, resulting in higher maternal, newborn, child, and adolescent) topics along with
sales and profits, even during periods of economic crises greater recall of at least six critical newborn conditions war-
(e.g., in 2016). ranting referral.
• Higher job creation: the competition had a positive impact • Improved Skills: ASHAs were able to deliver complete
on individuals starting new businesses as well as those counseling messages with all critical steps using mSakhi:
growing their existing business. Notably, winning firms giving the message, explaining its importance, and using
were also more likely to have 10 or more workers. Overall, a counseling tool during their interaction with the benefi-
the competition created 7027 jobs (McKenzie 2017). ciary. ASHAs who used the mSakhi app were also able to
correctly identify sick newborns needing immediate refer-
ral and those needing home-based treatment more often
4.3 | The Manthan Project in Uttar Pradesh, India than ASHAs who did not use the app during the pilot.
In 2012, the Manthan Project provided Accredited Social Health • Better tracking: mSakhi enabled better monitoring of ASHAs
Workers (popularly known as ASHA workers or ASHAs) in two by their supervisors (ANMs) and Medical Administrator of
districts of the state of Uttar Pradesh, India, a mobile phone-based the Community Health Centre of Baragaon along with timely
multimedia job aid called mSakhi.5 This project was initiated as intervention to improve health outcomes. Seamless integra-
a collaboration between the Bill and Melinda Gates Foundation, tion with the Government's Mother–Child Tracking System
Qualcomm, IntraHealth International, and the Government of (MCTS) and the Health Management Information System
Uttar Pradesh, with the objective of enhancing the training sup- (HMIS), also led to better tracking of beneficiaries and com-
port provided to ASHAs to improve maternal and newborn health munity practices regarding maternal and newborn health.
outcomes in Uttar Pradesh. Despite the establishment of routine
training procedures, ASHAs struggled with inadequate knowl-
edge and skills, lack of supervisory support, and onerous reporting 4.4 | Harambee Youth Employment Accelerator in
requirements. In addition, from a personnel management perspec- South Africa
tive, there was no mechanism for coordination between ASHAs
and auxiliary nurse midwives (ANMs) who provided additional South Africa has some of the world's highest rates of unem-
support to ASHAs during home visits. ployed youth, at 61% (Chutel 2023). The social enterprise
Harambee, established in 2011, has been one of the most cele-
The mSakhi app sought to address these challenges by com- brated solutions to this crisis. It was founded by private equity
bining self-learning, client management, and reporting in an firm Yellowwoods Capital, has partnered with the National
9 of 13
Treasury and subnational governments, and received funding jobs as well, rather than simply training workers (Carranza
and support from USAID and a variety of global private phil- and McKenzie 2024). The interventions we study help us un-
anthropic organizations. Its goal is to target two key drivers of cover some of the underlying mechanisms and approaches to
youth unemployment: (1) poor education leading to youth who affect the demand side of labor markets, and in some cases,
lack employable skills, and (2) reliance of most South African the intermediation space.
firms on their own limited social networks for recruitment
and biases against ‘unskilled’ workers from poor backgrounds The programs we study show that interventions focusing on the
(Altbeker 2015). demand side tend to outperform solely supply-side strategies.
Successful demand-side interventions take several forms. A key
Harambee operates a Youth Employment Accelerator Program feature that emerges is the need for close coordination between
that aims to: (1) recruit unemployed youth, (2) assess and develop governments and firms. For example, Haryana's Saksham
youth skills and competencies, (3) partner with employers on job Saarthi job creation program enabled the state government
matching and creation, and (4) support youth in the job search to make data on unemployed youth available to large existing
process through trainings and tools (skills certifications, refer- firms, to expand employment. While the government didn't im-
ence letters). It leverages mobile networks and data analytics pose any explicit conditionalities or employment targets for the
to reach and match excluded, poor youth to long-term employ- firms, the partnership served as an avenue for the government to
ment opportunities. This includes partnerships with employers better understand the firms' operational challenges and provide
to rethink the skills they are looking for and to recruit using public inputs. Among other changes, the government reduced
Harambee's platforms. It also includes conducting door-to-door the administrative burden of obtaining commercial licenses to
and social media outreach to get the most excluded youth to join operate taxis in the state, by cutting the processing time in half,
the platform. Harambee conducts standardized skills assess- changing application requirements, and allowing non-resident
ments of jobseekers and analyzes psychometric and other data migrants to apply for commercial licenses. The program also en-
to better match them with jobs and provide job-specific training abled an expansion of Uber and Ola's two-wheel and bike taxi
to prepare them for success and retention in their roles. services. Such productivity-enhancing policy interventions are
likely to have downstream impacts on employment.
Harambee reports the following key outcomes to measure its
overall impact (Harambee 2023): Another demand-side approach involves appropriately targeting
SMEs and providing intensive coaching, mentoring, and incu-
• Job creation: 3.8 million jobseekers have been supported bation services. Nigeria's YouWIN! Program sought applications
through the program and 1.2 million opportunities enabled. from firms with business plans. This multi-round application
process was evaluated along a range of parameters—job creation
• Partnerships: 1386 employer partners.
goals, viability of ideas, management skills and experience, and
profitability. Winners of this program received financial sup-
In addition, formal evaluations have generated evidence to sup-
port (conditioned on milestones), entrepreneurship training,
port the following outcomes of Harambee's interventions:
and targeted mentoring. UPSHIFT in Kosovo similarly selected
• Information: Providing job seekers with certified informa- youth groups to receive seed funding for start-up projects. These
tion on their skills assessments that they can share with groups were then provided incubation support, access to men-
prospective employers led to increases in employment (+5.2 tors, equipment, and co-working spaces.
percentage points), hours worked (+20%), earnings (+34%),
and the likelihood of obtaining a formal job with a contract The goal here isn't to just provide SMEs financial support and in-
(+2 percentage points) (Carranza et al. 2022). centives, though that is a crucial element of these programs. The
long-term effects of such interventions depend on their ability
Reference letters: Providing job seekers with a reference let- to enhance firms' productivity and entrepreneurial capabilities.
ter template that they can share with prospective employers By contrast, the provision of a wage subsidy to urban microen-
increased the likelihood an employer would respond to them terprises in Sri Lanka in 2009 had limited impacts on long-term
(+60%) (Roode 2021). employment and profitability. De Mel et al. (2019) conclude that
it wasn't labor market imperfections per se that prevented these
microenterprises from hiring more.
5 | Conclusion and Takeaways
Focusing on productivity is key, both in targeting firms that
Traditionally, jobs initiatives have been framed in terms of have the capacity to grow and enhancing their capabilities. The
skilling and workforce development policies. However, re- competition element of YouWIN! and UPSHIFT allow the more
search over the past decade has found that such policies have dynamic firms to self- select. China's Little Giants program,
limited impacts on employment and earnings and that they which focuses on the high-tech manufacturing sector, serves as
are seldom cost- effective (McKenzie 2017; Blattman and a case study for the targeting of SMEs more broadly. We also
Ralston 2015). This traditional approach is rooted in the no- include it among the programs we study given its potential sup-
tion that policy should address training shortcomings while ply chain effects. The program is a part of a support framework
letting firms create jobs. However, creating employment at the that classifies SMEs as Innovative, Specialized, Little Giants,
scale we need requires more active productivity-enhancing and Manufacturing Champions. The first two categories are
labor market strategies on the demand side of labor markets as determined at the provincial level and the latter at the national
well. Policy interventions need to focus on creating productive level, with a goal of identifying 1 million ‘Innovative SMEs’ and
10 of 13 Global Policy, 2025
10,000 ‘Little Giants’ by 2025. Brown et al. (2023) describe this capacity on sectoral development strategy and skills councils.
as a continuous competition- based process, involving multi- The private sector involvement also required a $3:$1 match,
level evaluation and cultivation at the national and local levels. which could be in-cash or kind.
The program has also brought in national and local banks and
financial institutions, large firms to serve as clients and men- The ‘training’ in these programs is just one element in a suite
tors, and universities and research institutions. of concomitant interventions. Three common themes emerge
across these programs. First, they provide important wrap-
A third approach we studied includes providing new technolo- around services, ranging from career counseling and intern-
gies to complement less-skilled labor to enhance the tasks work- ships to transportation stipends for workers to increase job
ers can perform. As the mSakhi case reveals, a well-designed retention. Second, and relatedly, several of these programs are
technological intervention combining self-learning, client man- localized, implemented at the county and city levels, rather
agement, and reporting in an easy-to-use format can produce than nationally. And finally, these require a variety of stake-
greater adoption, higher productivity, and improved knowledge holders to work in concert.
and skills among community health workers. This app-based
support not only provided continuous, on-the-job training and This final theme is generalizable across all four of the strat-
resources to the health workers, but was also integrated with egies we have identified. These programs are fundamentally
their day-to-day management and reporting systems. implementation intensive, requiring coordination of a range
of inputs, a multitude of incremental steps, and real-time
Employment problems are likely to be less effective if the produc- monitoring. Accordingly, successful interventions are pred-
tivity component is neglected. The Zambian government created icated on partnerships. Coordination between governments
a new Community Health Assistant (CHA) position both as a and firms, and intermediary institutions (like Chambers of
public employment program and to plug gaps in the delivery of Commerce and civil society) are critical. The success of pro-
health services in rural areas. CHAs are provided training for a grams also depends on coordination across government de-
year before they return to work in their communities. Research partments, including local agencies which are able to respond
finds that bad management and governance and inconsistent su- iteratively. For instance, in Haryana, while there was a high-
pervision adversely affected the performance of the CHAs (Zulu level partnership between the state government and Uber and
et al. 2015; Shelley et al. 2016). The contrast with the mSakhi Ola, action at the district level was critical to help address con-
intervention highlights the importance of interventions that can straints to the firms' productivity.
serve as skill-enhancing complements to workers on the job and
be effectively integrated with their day-to-day needs. Our goal in this paper wasn't to formally assess the effective-
ness of different types of programs. Even when successful,
Our case studies reveal that the training programs that work are programs of the type discussed here are unlikely to travel well.
often led by social enterprises and are combined with other types Accordingly, we are skeptical that this is a domain where ‘best
of labor market intermediation and wraparound services. This is practices’ can be formulated and disseminated—at least for the
consistent with Alfonsi et al. (2020) that finds training interven- moment. The more important priority is to multiply such inter-
tions that are most effective are those that are intensive, target ventions, foster policy experimentation, and scale initiatives that
specific sectors, and rely on selecting high-quality training in- seem locally successful.
stitutions. Among our cases, the U-Learn II program in Uganda
offered comprehensive training to unemployed youth around Nevertheless, our review highlights some of the critical systemic
technical skills, financial literacy, and life skills. Notably, the aspects that have to be in place. It underscores the need to think
program partnered with large firms to offer youth internships about productive employment generation within a larger sys-
and training in fields related to supply-side challenges faced by tem. The supply and demand sides of labor markets are equally
firms. In Kenya, the Mombasa County Government established important, and successful programs tend to address both.
Labor Market Information and Training Centers (LMTCs) to Productive employment creation requires enhancing the skills
provide competency development trainings, career counseling, of both workers and firms, as well as the provision of the inter-
and internships. Notably, these centers worked with local sup- mediation services that connect the two sides of labor markets.
pliers of consumer goods to create—and fill—micro-distributor
jobs to deliver goods to the thousands of small retailers across
Mombasa County (ILO 2016).
Acknowledgments
To be effective, training programs require significant labor mar- We are grateful to the Hewlett Foundation for support to the
ket intermediation and coordination with firms to understand Reimagining the Economy project, and to Natasha Khwaja and Samira
Mathur for research assistance.
employment needs, co- design training, establish apprentice-
ships and internships, and in some cases, to rethink the skills
they are looking for (as in the case of Harambee's intervention). Conflicts of Interest
Additionally, successful training interventions also tend to tar- The authors declare no conflicts of interest.
get specific sectors. For instance, Panama's New Employment
Opportunities (NEO) program sought to address the skills gap
across construction, logistics, and tourism—sectors it identified Data Availability Statement
as having the highest need for trained personnel. Notably, the The data that support the findings of this study are available from the
initiative also brought the private sector on board in a formal corresponding author upon reasonable request.
11 of 13
Endnotes Carranza, E., R. Garlick, K. Orkin, and N. Rankin. 2022. “Job Search
1 Vietnam stands out as a possible exception, a country that has managed and Hiring With Limited Information About Workseekers' Skills.”
American Economic Review 112, no. 11: 3547–3583.
to rapidly expand output, exports, and employment in manufacturing,
replicating many of the features of earlier East Asian experiences. As Carranza, E., and D. McKenzie. 2024. “Job Training and Job Search
we argue in Rodrik and Stiglitz (2024), Vietnam had several distinctive Assistance Policies in Developing Countries.” Journal of Economic
advantages. The country's geographical proximity to China and other Perspectives 38, no. 1: 221–244.
East Asian exporters made it a natural landing spot for firms from
Chen, M. A. 2012. “The Informal Economy: Definitions, Theories and
those countries when their labor costs began to rise. This positioned
Policies.” In WIEGO, Working Paper 1. Women in Informal Employment:
the country as the leading beneficiary of the Trump tariffs on China,
Globalizing and Organizing (WIEGO).
and eventually the U.S. emphasis on “friend-shoring.” But in Vietnam
too, integration into the world economy through inward direct invest- Chutel, L. 2023. One Year in the Infuriating and Humiliating Search for
ment has made increasing demand on skills. ‘Skill shortages’ (and a Job in South Africa. New York Times 11 November.
consequent problems of “job hopping” and “employer poaching”) are
De Mel, S., D. McKenzie, and C. Woodruff. 2019. “Labor Drops:
reported to be among the most important constraints export-oriented
Experimental Evidence on the Return to Additional Labor in
foreign investors such as Samsung face.
Microenterprises.” American Economic Journal: Applied Economics 11,
2 The book by Rajan and Lamba (2024) on India provides an interesting no. 1: 202–235.
complement to our line of argument. Like us, these authors emphasize
Diao, X., M. Ellis, M. McMillan, and D. Rodrik. 2024. “Africa's
that manufacturing will play a much smaller role in driving growth.
Manufacturing Puzzle: Evidence From Tanzanian and Ethiopian
But their focus is mainly on tradable services.
Firms.” World Bank Economic Review: 1–33. [Link]
3 This case study is based on Muglur et al. (2019). harvard.e du/public ation s/a frica s-m anufa ctur i ng-puzzle- e vidence-
4 This tanzanian-and-ethiopian-f irms.
case study is based on McKenzie (2017) and Aina (2016).
5 This Hamilton, M., and G. Bora. 2015. “Evidence-Based Scale-Up of mSakhi
case study is based IntraHealth International (2013) and Kumar
Community Health Worker mHealth System in Uttar Pradesh, India.”
et al. (2013).
Annals of Global Health 81, no. 1: 31.
6 See: Qualcomm (2015) and IntraHealth International (n.d.).
Harambee. 2023. “Our Impact.” [Link] ww.harambee.co.za/impact/.
Hardy, M., I. Mbiti, J. McCasland, and I. Salcher. 2019. “The
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