Misperceptions of Career Incentives and Turnover: Evidence from Ethiopian Manufacturing Workers

High turnover rates are a major issue in industrialization of developing countries. In one of the major industrial parks in Ethiopia, we identify a key determinant of turnover from our pilot study – career incentives. Despite the importance of career incentives during job search, workers have substantial misperceptions of career incentives within the industrial park, and it is difficult for workers to learn the true career incentives from on-the-job experience. We propose an intervention that provides accurate information of promotion likelihood and salary after promotion to understand how the intervention might help workers learn about the career incentives, and to causally estimate the effect of misperceptions of career incentives on workers’ turnover. We plan to sample 1,200 new female young workers, randomly provide the information of the career path on 400 workers, and follow up workers after 45 days and 6 months to understand how misperceptions prevent workers from optimal job search, and the causal effect on long-run employment and welfare outcomes.