Farmers may grow crops for local consumption despite more profitable export options. DrumNet, a Kenyan NGO that helps small farmers adopt and market export crops, conducted a randomized trial to evaluate its impact. DrumNet services increased production of export crops and lowered marketing costs, leading to a 32% income gain for new adopters. The services collapsed one year later when the exporter stopped buying from DrumNet because farmers could not meet new EU production requirements. Farmers sold to other middlemen and defaulted on their loans from DrumNet. Such experiences may explain why farmers are less likely to adopt export crops.
While there is a fast-growing policy interest in offering financial products to help rural households manage risk, the literature is still scant as to which products are the most effective. In order to inform gender targeting of rural finance policy, this paper investigates which financial products best improve farmers’ productivity, resilience, and welfare, and whether benefits affect men and women equally. Using a randomized field experiment in Senegal and Burkina Faso, we compare male and female farmers who are offered index-based agricultural insurance with those who are offered a variety of savings instruments. We found that female farm managers were less likely to purchase agricultural insurance and more likely to invest in savings for emergencies, even when we controlled for access to informal insurance and differences in crop choice. We hypothesize that this difference results from the fact that although men and women are equally exposed to yield risk, women face additional sources of life cycle risk—particularly health risks associated with fertility and childcare—that men do not. In essence, the basis risk associated with agricultural insurance products is higher for women. Insurance was more effective than savings at increasing input spending and use. Those who purchased more insurance realized higher average yields and were better able to manage food insecurity and shocks. This suggests that gender differences in demand for financial products can have an impact on productivity, resilience, and welfare.
Hunger during pre-harvest lean seasons is widespread in the agrarian areas of Asia and Sub-Saharan Africa. We randomly assign an $8.50 incentive to households in rural Bangladesh to temporarily out-migrate during the lean season. The incentive induces 22% of households to send a seasonal migrant, their consumption at the origin increases significantly, and treated households are 8–10 percentage points more likely to re-migrate 1 and 3 years after the incentive is removed. These facts can be explained qualitatively by a model in which migration is risky, mitigating risk requires individual-specific learning, and some migrants are sufficiently close to subsistence that failed migration is very costly. We document evidence consistent with this model using heterogeneity analysis and additional experimental variation, but calibrations with forward-looking households that can save up to migrate suggest that it is difficult for the model to quantitatively match the data. We conclude with extensions to the model that could provide a better quantitative accounting of the behavior.
Small-scale farming remains the primary source of income for a majority of the population in developing countries. While most farmers primarily work on their own fields, off-farm labor is common among small-scale farmers. A growing literature suggests that off-farm labor is not the result of optimal labor allocation, but is instead driven by households' inability to cover short-term consumption needs with savings or credit. We conduct a field experiment in rural Zambia to investigate the relationship between credit availability and rural labor supply. We find that providing households with access to credit during the growing season substantially alters the allocation of household labor, with households in villages randomly selected for a loan program selling on average 25 percent less off-farm labor. We also find that increased credit availability is associated with higher consumption and increases in local farming wages. Our results suggest that a substantial fraction of rural labor supply is driven by short-term constraints, and that access to credit markets may improve the efficiency of labor allocation overall.
We partnered with a micro‐lender in Mali to randomize credit offers at the village level. Then, in no‐loan control villages, we gave cash grants to randomly selected households. These grants led to higher agricultural investments and profits, thus showing that liquidity constraints bind with respect to agricultural investment. In loan‐villages, we gave grants to a random subset of farmers who (endogenously) did not borrow. These farmers have lower – in fact zero – marginal returns to the grants. Thus we find important heterogeneity in returns to investment and strong evidence that farmers with higher marginal returns to investment self‐select into lending programs.
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.
In Kenya, 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 Kenyan poor.
In Uganda, 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 work below offer promising insights into everyday issues that affect the lives of the Ugandan poor.
Existing learning models suggest that the availability and informativeness of data determine the pace of learning. However, in learning to use a technology, there are often a staggering number of potentially important input dimensions. People with limited attention must choose which dimensions to attend to and subsequently learn about from available data. We use this model of “learning through noticing” to shed light on stylized facts about technology adoption and use. We show how agents with a great deal of experience may persistently be off the production frontier, simply because they failed to notice important features of the data that they possess. The model also allows for predictions on when these learning failures are likely to occur. We test some of these predictions in a field experiment with seaweed farmers. The survey data reveal that these farmers do not attend to pod size, a particular input dimension. Experimental trials suggest that farmers are particularly far from optimizing this dimension. Furthermore, consistent with the model, we find that simply having access to the experimental data does not induce learning. Instead, behavioral changes occur only after the farmers are presented with summaries that highlight previously unattended-to relationships in the data.
The investment decisions of small scale farmers in developing countries are conditioned by their financial environment. Binding credit market constraints and incomplete insurance can limit investment in activities with high expected profits. We conducted several experiments in northern Ghana in which farmers were randomly assigned to receive cash grants, grants of or opportunities to purchase rainfall index insurance, or a combination of the two. Demand for index insurance is strong, and insurance leads to significantly larger agricultural investment and riskier production choices in agriculture. The binding constraint to farmer investment is uninsured risk: When provided with insurance against the primary catastrophic risk they face, farmers are able to find resources to increase expenditure on their farms. Demand for insurance in subsequent years is strongly increasing with the farmer’s own receipt of insurance payouts, with the receipt of payouts by others in the farmer’s social network and with recent poor rain in the village. Both investment patterns and the demand for index insurance are consistent with the presence of important basis risk associated with the index insurance, imperfect trust that promised payouts will be delivered and overweighting recent events.
Can volunteer farmers effectively communicate information about conservation farming and nutrient management to other farmers? Does the social position and gender of these farmers affect their success in disseminating this knowledge?
This evaluation studies the effects of new ways to disseminate knowledge of conservation farming and nutrient management practices via the Ministry of Agriculture and Food Security (MoAFS) extension staff. We observe that volunteer farmers trained by MoAFS extension workers can effectively disseminate knowledge of conservation farming and nutrient management techniques to others in their villages. The largest gains in knowledge and usage took place when these communicators were similar to the average village member and where the communicators were offered moderate, in-kind rewards for good performance.
In 2013 IPA celebrated ten years of producing high-quality evidence about what works, and what does not work, to improve the lives of the poor. It was a year of celebration for our accomplishments. More so, it was a time to prepare our organization for the next phase as we continue to pursue our vision of a world with More Evidence and Less Poverty.
View an online version of the report at annualreport.poverty-action.org/2013annualreport/