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Does production risk suppress the demand for credit? We implemented a randomized field experiment to ask whether provision of insurance against a major source of production risk induces farmers to take out loans to adopt a new crop technology. The study sample was composed of roughly 800 maize and groundnut farmers in Malawi, where by far the dominant source of production risk is the level of rainfall. We randomly selected half of the farmers to be offered credit to purchase high-yielding hybrid maize and groundnut seeds for planting in the November 2006 crop season. The other half of farmers were offered a similar credit package, but were also required to purchase (at actuarially fair rates) a weather insurance policy that partially or fully forgave the loan in the event of poor rainfall. Surprisingly, take up was lower by 13 percentage points among farmers offered insurance with the loan. Take-up was 33.0% for farmers who were offered the uninsured loan. There is suggestive evidence...
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September 01, 2008
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Randomized experiments have become a popular tool in development economics research and have been the subject of a number of criticisms. This paper reviews the recent literature and discusses the strengths and limitations of this approach in theory and in practice. We argue that the main virtue of randomized experiments is that, owing to the close collaboration between researchers and implementers, they allow the estimation of parameters that would not otherwise be possible to evaluate. We discuss the concerns that have been raised regarding experiments and generally conclude that, although real, they are often not specific to experiments. We conclude by discussing the relationship between theory and experiments.
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September 01, 2008
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Participation of beneficiaries in the monitoring of public services is increasingly seen as a key to improving their efficiency. In India, the current government flagship program on universal primary education organizes both locally elected leaders and parents of children enrolled in public schools into committees and gives these groups powers over resource allocation, and monitoring and management of school performance. However, in a baseline survey we found that people were not aware of the existence of these committees and their potential for improving education. This paper evaluates three different interventions to encourage beneficiaries' participation through these committees: providing information, training community members in a new testing tool, and training and organizing volunteers to hold remedial reading camps for illiterate children. We find that these interventions had no impact on community involvement in public schools, and no impact on teacher effort or learning outco...
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August 01, 2008
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This paper surveys evidence from recent randomized evaluations in developing countries on the impact of price on access to health and education. Debate on user fees has been contentious, but until recently much of the evidence was anecdotal. Randomized evaluations across a variety of settings suggest prices have a large impact on take-up of education and health products and services. While the sign of this effect is consistent with standard theories of human capital investment, a more detailed examination of the data suggests that it may be important to go beyond these models. There is some evidence for peer effects, which imply that for some goods the aggregate response to price will exceed the individual response. Time inconsistent preferences could potentially help explain the apparently disproportionate effect of small short-run costs and benefits on decisions with long-run consequences.
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August 01, 2008
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July 01, 2008
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The current trend in antipoverty policy emphasizes mandated empowerment: the poor are being handed the responsibility for making things better for themselves, largely without being asked whether this is what they want. Beneficiary control is now being built into public service delivery, while microcredit and small business promotion are seen as better ways to help the poor. The clear presumption is that the poor are both able and happy to exercise these new powers. This essay uses two examples to raise questions about these strategies. The first example is about entrepreneurship among the poor. Using data from a number of countries, we argue that there is no evidence that the median poor entrepreneur is trying his best to expand his existing businesses, even if we take into account the many constraints he faces. While many poor people own businesses, this seems to be more a survival strategy than something they want to do. The second example comes from an evaluation of a program in Ind...
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June 01, 2008
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Using a pair of randomized evaluations, I evaluate a computer assisted learning program designed to reinforce students understanding of material presented in class. The program was implemented in both an in-school and out-of-school model allowing me to assess different strategies for integrating the technology into the existing schools. The effect of the program critically depends on the method of implementation. The program was a poor substitute for the teacher delivered curriculum and as a result, the in-school model caused students to learn significantly less than they otherwise would have learned (-0.57 standard deviations). When implemented as a complement to the normal program in the out-of-school model, however, the program generated average gains of 0.28 standard deviations reflecting small positive (but statistically insignificant) gains by most students and large positive gains by the weakest and older students in the class (from 0.4 to 0.69 standard deviations). The results...
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June 01, 2008
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Policymakers often prescribe that microfinance institutions increase interest rates to eliminate their reliance on subsidies. This strategy makes sense if the poor are rate insensitive: then microlenders increase profitability (or achieve sustainability) without reducing the poor's access to credit. We test the assumption of price inelastic demand using randomized trials conducted by a consumer lender in South Africa. The demand curves are downward sloping, and steeper for price increases relative to the lender's standard rates. We also find that loan size is far more responsive to changes in loan maturity than to changes in interest rates, which is consistent with binding liquidity constraints.
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June 01, 2008
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We exploit random assignment of gender quotas across Indian village councils to investigate whether having a female chief councillor affects public opinion towards female leaders. Villagers who have never been required to have a female leader prefer male leaders and perceive hypothetical female leaders as less effective than their male counterparts, when stated performance is identical. Exposure to a female leader does not alter villagers' taste preference for male leaders. However, it weakens stereotypes about gender roles in the public and domestic spheres and eliminates the negative bias in how female leaders' effectiveness is perceived among male villagers. Female villagers exhibit less prior bias, but are also less likely to know about or participate in local politics; as a result, their attitudes are largely unaffected. Consistent with our experimental findings, villagers rate their women leaders as less effective when exposed to them for the first, but not second, time. These ch...
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June 01, 2008
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Research has shown that advertising exposure and intensity can impact whether or not a consumer buys a product, but outside the laboratory very little is known about what affect the so-called ‘creative content’ of ads has on consumer demand. Nor do we know much about how important the effect of ad content is relative to that of price. In order to better understand these impacts, researchers developed a field study that varies both advertising content and price in the same setting. This method allows us first toexamine whether ad content affects consumer decisions, then to estimate how much it impacts demand relative to the effect of price. Researchers explore these questions with a South African “cash loan” lender and find that ad content has significant effects on demand, as well as some evidence that the impact of ad content is large relative to that of price.
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Brief
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May 30, 2008
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This special issue highlights an empirical approach that has increasingly grown in prominence in the last decade—field experiments. While field experiments can be used quite generally in economics—to test theories’ predictions, to measure key parameters, and to provide insights into the generalizability of empirical results—this special issue focuses on using field experiments to explore questions within the economics of charity. The issuecontains six distinct field experimental studies that investigate various aspects associated with the economics of charitable giving. The issue also includes a fitting tribute to one of the earliest experimenters to depart from traditional lab methods, Peter Bohm, who curiously has not received deep credit or broad acclaim. Hopefully this issue will begin to rectify this oversight.
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May 01, 2008
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Many policymakers advocate heavy subsidies to boost fertilizer use and raise agricultural productivity. In contrast, most economists assume that farmers already take advantage of potential profit opportunities, and argue that heavy subsidies are distortionary, environmentally unsound, regressive, and lead to politicization and inefficiency in fertilizer supply. In earlier work, we show that fertilizer is profitable for farmers in Western Kenya. Yet, usage is low, pointing to possible inefficiencies. In this paper, we build a model with a small fixed cost of purchasing fertilizer in which some farmers are present-biased and partially naïve. Farmers therefore procrastinate, postponing purchasing fertilizer until proceeds from the harvest are spent. Consistent with the model, small time-limited reductions in the cost of purchasing fertilizer at the time of harvest induce substantial increases in fertilizer use, as much as considerably larger price cuts later in the season. Such small time...
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May 01, 2008
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Indoor air pollution (IAP) caused by solid fuel use and/or traditional cooking stoves is a global health threat, particularly for women and young children. The WHO World Health Report 2002 estimates that IAP is responsible for 2.7% of the loss of disability adjusted life years (DALYs) worldwide and 3.7% in high-mortality developing countries. Despite the magnitude of this problem, social scientists have only recently begun to pay closer attention to this issue and to test strategies for reducing IAP. In this paper, we provide a survey of the current literature on the relationship between indoor air pollution, respiratory health and economic well-being. We then discuss the available evidence on the effectiveness of popular policy prescriptions to reduce IAP within the household.
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Working Paper
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February 01, 2008
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In much of the developing world farmers grow crops for local consumption despite export options that appear to be more profitable. This paper reports on a randomized controlled trial conducted by DrumNet in Kenya that attempts to help farmers adopt and market export crops. After one year, DrumNet services led to an increase in production of export crops and lower marketing costs, which translated into household income gains for new adopters. One year after the study, however, the exporter stopped buying from the farmers because they had not become certified to comply with European export requirements. DrumNet collapsed as farmers defaulted on their loans. The risk of such events may explain, at least partly, why many seemingly more profitable export crops are not adopted.   Full published paper is available here.
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Brief
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January 30, 2008
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The group liability contract feature is often named as key to the growth in lending markets for the poor. Group liability purports to improve repayment rates by providing incentives for peers to screen, monitor and enforce each other’s loans. However, group liability may create excessive pressure and discourage good clients from borrowing, jeopardizing both growth and sustainability. A Philippine bank removed group liability from randomly selected group-screened lending groups. After three years, we find no increase in default and larger groups, thus showing that banks can do just as well as peers at monitoring and enforcing loans and generating high repayment rates.
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Working Paper
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January 01, 2008
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We report results from a randomized evaluation of a merit scholarship program in Kenya in which girls who scored well on academic exams at the end of 6th grade had their school fees paid and received a cash grant for school supplies over the next two years. In the sample as a whole, girls eligible for the scholarship showed substantial gains in academic exam scores, and teacher attendance also improved significantly in program schools. There was also evidence of positive externalities: girls with low pre-test scores, who were unlikely to win scholarships, showed test score gains in program schools. We cannot reject the hypothesis that test score gains were the same for girls with low and high pre-test scores. We see no evidence for weakened intrinsic motivation or gaming, and effects persist after incentives were removed. There is also evidence of heterogeneity in program effects, suggesting the impact of incentives is context dependent. In one of the two study districts, test score ef...
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January 01, 2008
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This study designs a natural field experiment linked to a controlled laboratory experiment to examine the effectiveness of matching gifts and challenge gifts, two popular strategies used to secure a portion of the $200 billion annually given to charities. We find evidence that challenge gifts positively influence contributions in the field, but matching gifts do not. Methodologically, we find important similarities and dissimilarities between behavior in the lab and the field. Overall, our results have clear implications for fundraisers and provide avenues for future empirical and theoretical work on charitable iving.
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January 01, 2008
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Social scientists rely heavily on self-reported data. But can respondents be trusted to report the truth? In this paper, the authors compared survey self reports with administrative data and found that nearly 50% of recent borrowers did not report their high-interest consumer loans. Under-reporting appeared to be correlated with several characteristics, in particular gender. Relying strictly on self-reported data may lead to biased inference, and the authors outline some methodological implications for identifying impacts of credit access on borrower behavior and outcomes. Matching female surveyors to female respondents appears to be one low-cost mitigation strategy. The best strategy, however, is to avoid reliance on self-reported data by using lenders’ administrative data or the credit bureau, when feasible.
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Brief
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November 01, 2007
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We compare survey self-reports with administrative data and find that  50% of recent borrowers do not report their high-interest loans. Under-reporting appears to be correlated with several of interest, in particular gender: 62% of women, when interviewed by men, under-report whereas 42% of women interviewed by women under-report. On the other hand, 40% of men under-report, irrespective of the gender of the interviewer. As such relying strictly on self-reported data may lead to biased inference, and we outline some methodological implications for identifying impacts of credit access on borrower behavior and outcomes. Matching female surveyors to female respondents appears to be a low-cost mitigating strategy, but clearly the best strategy is to make sure one has administrative data from a lender to measure actual borrowing history.    Research brief also available here.
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November 01, 2007
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In stark contrast to bank debt contracts, most micro-finance contracts require that repayments start nearly immediately after loan disbursement and occur weekly thereafter. Even though economic theory suggests that a more flexible repayment schedule would benefit clients and potentially improve their repayment capacity, micro-finance practitioners argue that the fiscal discipline imposed by frequent repayment is critical to preventing loan default. In this paper we use data from a field experiment which randomized client assignment to a weekly or monthly repayment schedule and find no significant effect of type of repayment schedule on client delinquency or default. Our findings suggest that, among micro-finance clients who are willing to borrow at either weekly or monthly repayment schedules, a more flexible schedule can significantly lower transaction costs without increasing client default.
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November 01, 2007

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