profits required to repay training costs is likely lower.<sup>12</sup> For example, a firm with $500 in monthly profits would only need a 2 percent increase in monthly profits to recoup $250 worth of training costs over two years. The basic is that training costs may be justified by increases in profits which are far too small for existing studies to detect.

# _Impacts on Employment_

A further justification that policymakers sometimes make in subsidizing business training is that business growth may have broader benefits for others in the community through increasing employment opportunities. When it comes to programs working with microenterprises, the most direct employment impacts are likely to be for the owner him or herself – through increasing their chances of employment by increasing the likelihood of starting a new business and through reducing the chance of business failure. However, even in these cases, increases in self-employment are likely to be offset by reductions in wage employment (de Mel et al, 2012, Premaud et al, 2012).

Many of the studies working with microenterprises do not report impacts on employment of other workers, but those that do robustly show very small and statistically insignificant effects. Karlan and Valdivia (2011) find an increase of 0.02 workers, Valdivia (2012) a decrease of 0.06 workers from straight training and a similar decrease from training plus technical assistance, and Drexler et al. (2012) find an increase of 0.05 workers from standard training and decrease of 0.02 workers from the rule of thumb training. None of these impacts are statistically significant, but their point estimates suggest that no more than one in twenty microenterprises taking business training will hire an additional worker. Add to this the fact that the worker may leave another job (including exiting self-employment) to take this job, and the net employment creation impact of these training programs on people other than the worker trained is extremely minimal.

The one study to show a stronger employment effect is Glaub et al. (2012), which hints at the possibility of employment impacts when training larger firms. They find that employment in their treatment group grows from 7.9 employees at baseline to 10.7 at follow-up, whilst employment in the control group falls from 6.6 employees at baseline to 5.0 at follow-up, with this difference significant at the 5 percent level. Their sample is small, and they drop non-compliers to their treatment, so this is likely at overstatement of the effect, and more studies with larger firms are needed.

# _Impacts on Microfinance Institution Outcomes_

Since many of the studies have worked with microfinance clients, they have also looked at outcomes using administrative data from the microfinance organization. These data have the advantage of potentially being available with less attrition and over longer time periods, and are useful for assessing whether offering training is cost-effective for the microfinance organization. But they are less useful for telling us about how such training impacts firms. Karlan and Zinman (2011) find training resulted in a 4

> 12 If we account for opportunity costs and risk aversion, the desired returns would be higher. But a 25 percent increase in profits would provide a very reasonable return to microenterprise training, even after accounting for these costs.

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