Beginning with the seminal article in 1971 by Lucas and Prescott, economists have examined investments under uncertainty in a variety of contexts. Becker et al. (1977) applied this concept to marriage suggesting that increased uncertainty in marriage (i.e., the likelihood of separation or divorce) reduces the incentive for spouses to invest in marriagespecific capital. Several studies have found that reducing the barriers to marital dissolution, through no-fault divorce laws for example, is associated with lower investments in marriage-specific goods (Landes, 1978; Johnson and Skinner, 1986; Peters, 1986; Lommerud, 1988; Lundberg and Rose, 1999; Stevenson, 2007).1 Similar studies have found that with greater uncertainty about paternity, 1 Other papers in economics have examined the impact of outside options in marriage and contracts affecting marital outcomes (Rasul, 2006; Rasul and Mathoushek, 2008; South and Lloyd, 1995). men are less willing to invest in their alleged offspring and more likely to divorce their wives (Alexander, 1974; Anderson et al., 2005). In this paper we examine the relationship between uncertainty and marriage stability in rural Malawi. In particular, we examine how uncertainty about a spouses’ HIV status, and thus the risk of HIV exposure, affects the likelihood of divorce.
Despite regulatory efforts designed to make it easier for firms to formalize, informality remains extremely high among firms in Sub-Saharan Africa. In most of the region, business registration in a national registry is separate from tax registration. This paper provides initial results from an experiment in Malawi that randomly allocated firms into a control group and three treatment groups: a) a group offered assistance for costless business registration; b) a group offered assistance with costless business registration and (separate) tax registration; and c) a group offered assistance for costless business registration along with an information session at a bank that ended with the offer of business bank accounts. The study finds that all three treatments had extremely large impacts on business registration, with 75 percent of those offered assistance receiving a business registration certificate. The findings offer a cost-effective way of getting firms to formalize in this dimension. However, in common with other studies, information and assistance has a limited impact on tax registration. The paper measures the short-term impacts of formalization on financial access and usage. Business registration alone has no impact for either men or women on bank account usage, savings, or credit. However, the combination of formalization assistance and the bank information session results in significant impacts on having a business bank account, financial practices, savings, and use of complementary financial products.
The canonical model of expenditure choices assumes that people are able to smooth their consumption. However, extensive empirical and theoretical work suggests that consumption smoothing is imperfect, so the precise timing of individuals’ income may affect their behavior. We report results from a randomized field experiment in Malawi that varied the timing of workers’ income receipt in two ways. First, payments were made either in weekly installments or as a monthly lump sum, in order to vary the extent to which workers had to save up to make profitable investments. Second, payments at a local market were made either on the weekend market day (Saturday) or the day before the market day (Friday), in order to vary the degree of temptation workers faced when receiving payments. We provide novel evidence that the frequency of payments matters for workers’ ability to benefit from high-return investment opportunities. Workers in the monthly group have more cash left in the week after the last payday when the lump sum payment was made. Moreover, they are 9.5 percentage points more likely than the weekly payment group (mean of 6.3%) to invest in a risk-free short-term “bond” that required a large payment and that was offered by the project in the week after the last payday. We argue that this result is driven by the lump sum group’s decreased savings constraints relative to the weekly payment group. In contrast, despite anecdotal evidence and suggestive survey data that, in this study’s context, market days increase the temptation to overspend, being paid at the site of the local market on Saturday compared to Friday did not strongly matter for expenditure levels or temptation spending
Compared to the number of randomized evaluations that have been conducted on cash transfers in Latin America, evaluations on cash grant interventions in African settings are few. However, the recent studies that have been conducted in Africa help to answer several key questions about cash grants.
In Malawi, we have continued our global tradition of rigorous, applicable research by building foundational research capacity and conducting evaluations in areas of pressing national concern. Examples of our research below offer promising insights into everyday issues that affect the lives of the Malawian poor.
An observed positive relationship between compensation and productivity cannot distinguish between two channels: (1) an incentive effect and (2) worker selection. We use a simplified Becker-DeGroot-Marschak mechanism, which provides random variation in piece rates conditional on revealed reservation rates, to separately identify the two channels in the context of casual labor markets in rural Malawi. A higher piece rate increases output in our setting, but does not attract more productive workers. Among men, the average worker recruited at higher piece rates is actually less productive. Local labor market imperfections appear to undermine the worker sorting observed in well-functioning labor markets.