Returns to Work Experience: An Experimental Approach

Susan Godlonton, University of Michigan

This paper estimates the returns to short term work experience in a developing country setting. I exploit exogenous variation in acquired (short-term) work experience induced by an experiment that randomized individuals’ outside options of employment during a recruitment process. I find the following key results. First, there is no statistically significant impact of short-term work experience on employment. Second, individuals do earn a return to the short term work experience – those who were randomly assigned to work experience subsequently earn approximately $3.6 - $5 more per day. This is a large return translating into a 50 to 70 percent increase in wages that persists eight months after acquiring the short term work experience. Third, I find that the estimated returns are larger and more persistent among those who performed worst on a high stakes numeracy and literacy test.