Subsidized Access to Productive Capital, Worker Productivity and Firm Profits

Policy Context

Across a wide range of sectors, in both developed and developing countries, workers’ earnings often hinge on their ability to finance productive assets – machines, vehicles, or tools that transform effort into higher‐value output.  When the upfront cost of acquiring such assets is prohibitive, both individual earnings and firm‑level performance can suffer. Researchers explore this problem inside one of India’s largest home‑services platforms, where fast, reliable travel is indispensable for reaching customers but is often out of reach for providers who lack private transport.

Study Design

Working with the platform, researchers randomly offered a one‑time subsidy that reduces the cash required for the down‑payment on a motorized scooter, the mobility asset most closely linked to productive capacity in this setting. The offer was extended to credit‑eligible female service providers. High‑frequency administrative data capture job acceptance, distance traveled, customer ratings, absenteeism, and the commission revenue each worker generates. A supplementary mechanism experiment separately varies liquidity and price discounts to gauge which lever drives investment decisions.

Results and Policy Lessons

Scooter adoption in the treatment group is 42 percentage points higher than in control – an exceptionally large demand response. Previously constrained treated workers perform more jobs per week, expand their service radius, and record higher daily earnings. Customer ratings improve, while absenteeism declines. Additional tasks completed by treated workers raise platform commission revenue enough to recoup the subsidy within a few months. Ongoing work will explore spillovers on family, role of liquidity vs. price ease, and analyze the firm’s post experiment scale-up of the subsidy scheme across different geographies.