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This article presents the results from an experimental evaluation of a voluntary health insurance program for informal sector workers in Nicaragua. Costs of the premiums as well as enrollment location were randomly allocated. Overall, take-up of the program was low, with only 20% enrollment. Program costs and streamlined bureaucratic procedures were important determinants of enrollment. Participation of local microfinance institutions had a slight negative effect on enrollment. One year later, those who received insurance substituted toward services at covered facilities and total out-of-pocket expenditures fell. However, total expenditures fell by less than the insurance premiums. We find no evidence of an increase in health-care utilization among the newly insured. We also find very low retention rates after the expiration of the subsidy, with less than 10% of enrollees still enrolled after one year. To shed light on the findings from the experimental results, we present qualitative...
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June 30, 2010
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This paper uses a public economics framework to review evidence from randomized trials on domestic water access and quality in developing countries and to assess the case for subsidies. Water treatment can cost-effectively reduce reported diarrhea. However, many consumers have low willingness to pay for cleaner water; few households purchase household water treatment under retail models. Free point-of-collection water treatment systems designed to make water treatment convenient and salient can generate take-up of approximately 60%at a projected cost as low as $20 per year of life saved, comparable to vaccine costs. In contrast, the limited existing evidence suggests that many consumers value better access to water, but it does not yet demonstrate that better access improves health. The randomized impact evaluations reviewed have also generated methodological insights on a range of topics, including (a) the role of survey effects in health data collection, (b) methods to test for sunk-...
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June 15, 2010
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Objective To assess the efficacy of modest non-financial incentives on immunisation rates in children aged 1-3 and to compare it with the effect of only improving the reliability of the supply of services.   Design Clustered randomised controlled study.   Setting Rural Rajasthan, India.   Participants 1640 children aged 1-3 at end point.   Interventions 134 villages were randomised to one of three groups: a once monthly reliable immunisation camp (intervention A; 379 children from 30 villages); a once monthly reliable immunisation camp with small incentives (raw lentils and metal plates for completed immunisation; intervention B; 382 children from 30 villages), or control (no intervention, 860 children in 74 villages). Surveys were undertaken in randomly selected households at baseline and about 18 months after the interventions started (end point).   Main outcome measures Proportion of children aged 1-3 at the end point who were partially or fully immunised.   Results Among children a...
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May 19, 2010
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This article presents an experiment in which 49 Indonesian villages were randomly assigned to choose development projects through either representative-based meetings or direct election-based plebiscites. Plebiscites resulted in dramatically higher satisfaction among villagers, increased knowledge about the project, greater perceived bene?ts, and higher reported willingness to contribute. Changing the political mechanism had much smaller effects on the actual projects selected, with some evidence that plebiscites resulted in projects chosen by women being located in poorer areas. The results suggest that direct participation in political decision making can substantially increase satisfaction and legitimacy.
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May 01, 2010
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Identity theft is a common crime the world over. In developing countries, the damage caused by identity theft and identity fraud goes far beyond the individual victim, however, and ultimately creates a direct impediment to progress, particularly in credit markets. Recent research reveals that biometric technology can help reduce these problems.
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May 01, 2010
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Female “empowerment” has increasingly become a policy goal, both as an end to itself and as a means to achieving other development goals. Microfinance in particular has often been argued, but not without controversy, to be a tool for empowering women. Here, using a randomized controlled trial, we examine whether access to and marketing of an individually held commitment savings product lead to an increase in female decision-making power within the household. We find positive impacts, particularly for women who have below median decision-making power in the baseline, and we find this leads to a shift toward female-oriented durables goods purchased in the household.
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March 30, 2010
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This paper shows how the productive interplay of theory and experimental work has furthered our understanding of credit markets in developing countries. Descriptive facts motivated a body of theory, which in turned motivated experiments designed to test it. Results from these experiments reveal both the success and the limits of the theory, prompting new work to refine it. We argue that the literature on credit can be a template research in other domains.
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Working Paper
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March 01, 2010
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Firms spend billions of dollars developing advertising content, yet there is little field evidence on how much or how it affects demand. We analyze a direct mail field experiment in South Africa implemented by a consumer lender that randomized advertising content, loan price, and loan offer deadlines simultaneously. We find that advertising content significantly affects demand. Although it was difficult to predict ex ante which specific advertising features would matter most in this context, the features that do matter have large effects. Showing fewer example loans, not suggesting a particular use for the loan, or including a photo of an attractive woman increases loan demand by about as much as a 25% reduction in the interest rate. The evidence also suggests that advertising content persuades by appealing “peripherally” to intuition rather than reason. Although the advertising content effects point to an important role for persuasion and related psychology, our deadline results do no...
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February 10, 2010
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What capital is missing in developing countries? We put forward “managerial capital”, which is distinct from human capital, as a key missing form of capital in developing countries. And it has also been curiously missing in the research on growth and development. We argue in this paper that lack of managerial capital has broad implications for firm growth as well as the effectiveness of other input actors. A large literature in development economics aims to understand the impediments to firm growth, particularly small and medium enterprises. Standard growth theories have explored the importance of input factors such as capital and labor in the production function of firms and countries.
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Working Paper
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January 01, 2010
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Expanding access to commercial credit is a key ingredient of development strategiesworldwide. There is less consensus on the role of consumer credit, particularly when extended at high interest rates. Popular skepticism about “unproductive” and “usurious” lending is fueled by academic work highlighting behavioral biases that induce overborrowing. We estimate the impacts of expanding access to consumer credit at 200% APR using a field experiment and follow-up survey and administrative data. The randomly assigned marginal loans produced significant net benefits for borrowers across a wide range of outcomes. There is also some evidence that the marginal loans were profitable.
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January 01, 2010
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We conducted a field experiment to measure the effect of exposure to newspapers on political behavior and opinion. Before the 2005 Virginia gubernatorial election, we randomly assigned individuals to a Washington Post free subscription treatment, a Washington Times free subscription treatment, or a control treatment. We find no effect of either paper on political knowledge, stated opinions, or turnout in post-election survey and voter data. However, receiving either paper led to more support for the Democratic candidate, suggesting that media slant mattered less in this case than media exposure. Some evidence from voting records also suggests that receiving either paper led to increased 2006 voter turnout.
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December 01, 2009
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Information asymmetries are important in theory but difficult to identify in practice. We estimate the presence and importance of hidden information and hidden action problems in a consumer credit market using a new field experiment methodology. We randomized 58,000 direct mail offers to former clients of a major South African lender along three dimensions: (i) an initial “offer interest rate” featured on a direct mail solicitation; (ii) a “contract interest rate” that was revealed only after a borrower agreed to the initial offer rate; and (ii) a dynamic repayment incentive that was also a surprise and extended preferential pricing on future loans to borrowers who remained in good standing. These three randomizations, combined with complete knowledge of the lender's information set, permit identification of specific types of private information problems. Our setup distinguishes hidden information effects from selection on the offer rate (via unobservable risk and anticipated effort),...
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November 01, 2009
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In the context of widespread efforts to reduce school fees, an increasing share of the costs of schooling come in the form of school materials and opportunity costs. We evaluate the impact of an educational intervention in which a Kenyan non-governmental organization distributes school uniforms to children in poor communities. The NGO used a lottery to determine who would receive uniforms. We use winning the lottery as an instrumental variable to identify the impact of receiving a uniform. We find that giving a school uniform reduces school absenteeism by 44% for the average student, and 62% for students who did not previously own a uniform. The program also raised test scores for recipients by 0.25 standard deviations in the year after inception.
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Working Paper
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November 01, 2009
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I elicit causal effects of spousal observability and communication on financial choices of married individuals in the Philippines. When choices are private, men put money into their personal accounts. When choices are observable, men commit money to consumption for their own benefit. When required to communicate, men put money into their wives' account. These strong treatment effects on men, but not women, appear related more to control than to gender: men whose wives control household savings respond more strongly to the treatment and women whose husbands control savings exhibit the same response. Changes in information and communication interact with underlying control to produce mutable gender-specific outcomes.
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Published Paper
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September 01, 2009
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Until recently rigorous impact evaluations have been rare in the area of finance and private sector development. One reason for this is the perception that many policies and projects in this area lend themselves less to formal evaluations. However, a vanguard of new impact evaluations on areas as diverse as fostering microenterprise growth, microfinance, rainfall insurance, and regulatory reform demonstrates that in many circumstances serious evaluation is possible. The purpose of this paper is to synthesize and distil the policy and implementation lessons emerging from these studies, use them to demonstrate the feasibility of impact evaluations in a broader array of topics, and thereby help prompt new impact evaluations for projects going forward.
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Working Paper
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August 01, 2009
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Several microfinance organizations have begun using a management tool, developed by Assessing the Impact of Microenterprise Services (AIMS) at the United States Agency for International Development (USAID), to assess impact. This tool recommends comparing veteran members to new members of a microcredit program, and attributes any difference to the impact of the program. The tool introduces a potential source of bias into estimates of impact by not instructing organizations to include program dropouts in their calculations. This paper uses data from a longitudinal study in Peru of Mibanco borrowers and non-borrowers to quantify some, but not all, of the biases in the cross-sectional approach. In these data, not including dropouts overestimates the impact of the credit program. Furthermore, we find that the sample composition shifted over the two years (i.e., the characteristics of those who join), introducing further bias into a cross-sectional impact assessment. Note that the “reestima...
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August 01, 2009
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In this study, we evaluate how well various systems for identifying and targeting assistance to the poorest of the poor actually identify the poorest. Firstly, we consider the methods used to identify households eligible for participation in assistance programs administered by the Indian government. Secondly, we evaluate Participatory Rural Appraisals (PRAs) as a mechanism to identify exceptionally poor households. Finally, we investigate whether additional verification of information gathered in PRAs improves targeting. For each method of targeting, we examine whether the households identified by that process are more disadvantaged according to several measures of economic well-being than households which were not identified. We conclude that PRAs and PRAs coupled with additional verification successfully identify a population which is measurably poorer in various respects, especially those which are more readily observed. The standard government procedures, however, do not appear to...
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July 18, 2009
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This paper uses a microfinance field experiment in two Lima shantytowns to measure the relative importance of social networks and prices for borrowing. Our design randomizes the interest rate on loans provided by a micro-finance agency, as a function of the social distance between the borrower and the cosigner. This design effectively varies the relative price (interest rate differential) of having a direct friend versus an indirect friend as a cosigner. After loans are processed, a second randomization relieves some cosigners from their responsibility. These experiments yield three main results. (1) As emphasized by sociologists, connections are highly valuable: having a friend cosigner is equivalent to 18 per cent of the face value of a 6 month loan. (2) While networks are important, agents do respond to price incentives and switch to a non-friend cosigner when the interest differential is large. (3) Relieving responsibility of the cosigner reduces repayment for direct friends but ha...
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Working Paper
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July 01, 2009
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Economic theory predicts that in a first-price auction with equal and observable valuations, bidders earn zero profits. Theory also predicts that if valuations are not common knowledge, then since it is weakly dominated to bid your valuation, bidders will bid less and earn positive profits. Hence, rational players in an auction game should prefer less public information. We are perhaps more used to seeing these results in the equivalent Bertrand setting. In our experimental auction, we find that individuals without information on each other’s valuations earn more profits than those with common knowledge. However, given a choice between the two sets of rules, approximately half the individuals preferred to have the public information. We discuss possible explanations, including showing that there is a correlation between ambiguity aversion and a preference for having more information in the auction.
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July 01, 2009

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