News and Announcements

IPA and its partner organization J-PAL are working to improve the quality of education in post-conflict areas. Learn more about one recent experiment in this important field, and the successful results we found, here.

IPA Research Affiliate Antoinette Schoar, who has conducted several studies in SMEs, was cited in an Economist article exploring whether the continuing economic recession has changed attitudes toward firm investment and financial decisions.

Excerpt:

Past research has shown that exogenous shocks, such as recessions, can modify firm-level behaviour. This view is at odds with traditional theories which posit that firms base their financing decisions on sound economic analysis. But a firm is not a rational actor. It is shaped by its managers whose beliefs are coloured by past and present events. For instance, managers who lived through the Great Depression were scarred by the collapse in capital markets and preferred to rely on internal financing even when it was cheaper to borrow externally.

Interestingly, a firm’s aversion to capital markets can persist for decades after a recession. A recent paper by Antoinette Schoar and Luo Zuo, from MIT’s Sloan School of Management, concludes that managers who begin their career during a recession have a conservative management style when compared with their non-recession peers. The authors find that early career experiences are important and can influence firm-level decisions even decades later, when the “recession manager” becomes a CEO. The companies headed by these managers are reluctant to access public markets, have lower capital budgets and pay higher effective tax. If the pattern from previous downturns holds, then we can expect the next generation of business leaders to eschew capital markets in favour of self-sufficiency. Firms will invest less in capital-intensive projects and in research and development (R&D) to tightly control finances.

Check out the full article here.

Civil Society's Fundraising section printed this article announcing GiveWell's recognition of IPA as a standout organization:

"Other charities recognised as 'standout organisations' include GiveDirectly which offers a method to send money directly to the poor, and Innovations for Poverty Action, which carries out research on aid primarily in the developing world and advocates its use in decision-making. KIPP Houston, Nyaya Health, Prathamand the Small Enterprise Foundation are also recognised as standout organisations this year."

Full article.

John List, an IPA Research Affiliate, has been cited in a Boston Globe article exploring the psychological dynamics involved in people donating.

Excerpt:

Another prominent theory to emerge from the research is that people give because of social pressure. [...] Those aren’t the reasons we like to think of ourselves as donating, but experimental research on charity tends to support the notion that donating and thinking occupy separate realms. Jonathan Baron, a psychologist at the University of Pennsylvania, asked a group of participants which charity they’d rather give to: one that achieved its goals so efficiently that it could spend 20 percent of its money on advertising, or one that required more money to do the same amount of good, and thus spent less on promotion. Though the first charity was technically more efficient, people tended to favor the latter: What mattered to them was seeing more of their own money at work, Baron concluded, rather than the amount of good it did.

This conclusion is bolstered by the findings of John List, an economist at the University of Chicago, who tested the effectiveness of so-called matching programs, in which a major supporter agrees to match the contributions of individual donors. List expected to find that matching programs enticed people to give, by creating the (correct) impression that their money would go further. But List’s results were curious: While charities that offered a matching program did inspire more people to give than charities that didn’t, he was surprised to find that a higher matching ratio didn’t lead to larger donations. People whose donations would be quadrupled — a huge increase in the power of their gift — didn’t donate any more money than people whose donations would simply be doubled. “People get utility or satisfaction out of giving to a good cause. And they do not care how much public good is provided,” List said.

Read the full piece, which contains many thought-provoking insights.