Economist unpacks how digital training can help entrepreneurs escape poverty

Carefully designed digital training that combines video instruction and remote coaching helps entrepreneurs build skills, increase profits and ultimately move out of poverty, Keough School economist Alejandro Estefan has found. 

Estefan outlined the findings in a recent journal article published in the World Bank Economic Review. The study, for which Estefan was the lead author, provides evidence-based takeaways for employers and policymakers that can upskill workers and reduce poverty.

The study looked at low-income women who manage franchises for a large multinational food chain in Guatemala. Researchers used a randomized controlled trial to measure the results of a training program developed in partnership with the food chain and the Inter American Development Bank.

“The training helped these low-income entrepreneurs, many of whom had little formal business training, to run their businesses more effectively and increase profits,” Estefan said. “An important policy takeaway is that digital training can bring disadvantaged adults up to speed with complex technical knowledge in the workplace. This has implications for helping developing countries, for empowering adults in underserved communities, and for helping workers who lose their job because of trade policies or technological shifts.” 

The training provided each participant with approximately 30 video modules, delivered through a smartphone app, as well as remote meetings with a business consultant. It taught participants key marketing, finance and inventory concepts, helping them increase sales and profits. 

Importantly, the study underscored the importance of basic digital literacy and access to high-speed internet service. It also found that remote coaching helped participants complete the program.

Estefan credited fellow Keough School economist Paul Winters, one of his co-authors, for helping to design and implement the study, thanks in part to his expertise in rural poverty and development. 

“Paul was crucial at the conception stage of the project in bringing together an international development bank and a multinational company and convincing both to conduct an impact evaluation of this rigor,” Estefan said. “He had an important influence in the design and the conception of this undertaking, and in working with our stakeholders.” 

This project shows that smart policy and smart training can work. It is a low-cost investment that can alleviate poverty.

Estefan collaborated with Winters as well as co-authors Martina Improta of the University of Genoa and Romina Ordoñez of the Inter American Development Bank on the article, which aims to deepen scholarship on digital training. “Although previous literature has shown modest impacts for in-person business training in developing countries,” he said, “few papers have looked into the effectiveness of digital training.” 

Ultimately, Estefan said, worker training will continue to be an important way to address global poverty. 

“This project shows that smart policy and smart training can work,” Estefan said. “It is a low-cost investment that can alleviate poverty.”

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