The aim of this paper is twofold. Building on Andreoni (2018), we first aim to evaluate the current incentive structures that cause existing inefficiencies and encourage rule-breaking behaviour. Second, we seek to test empirically a number of institutional design strategies for the sector that would better align the incentives of private- and public-sector stakeholders and thereby reduce misallocation of resources and increase employers’ compliance with tax and labour law to overcome the low-productivity trap. We hypothesise that the successful alignment of incentive structures has to take into account the different and potential
conflicting objectives of skills provision pursued by public-sector stakeholders and must also account for the heterogeneities in skills needs and capabilities of different types of productive organisations in Tanzania. We rely on in-depth stakeholder interviews and data
obtained from various government sources for the first objective. For the second objective, we conduct three Discrete Choice Experiments (DCEs) complemented by a comprehensive questionnaire of a sample of 209 Tanzanian establishments. This approach enables us to uncover latent preference structures differentiated by observable characteristics of the
surveyed firms.
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