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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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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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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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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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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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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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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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November 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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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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September 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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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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August 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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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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July 01, 2009
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In order to study the impact of microcredit on entrepreneurs in Manila, the authors worked with a lender in Manila who undertook an expansion by randomly accepting some marginally credit-worthy loan applications. The researchers conducted a follow-up survey to measure the effects of this credit expansion on borrowing, business, and social outcomes. Compared to marginally credit-worthy applicants who did not receive approval of their loans, there is some evidence that the business profits of those in the treatment group increased. Households given the opportunity to borrow invested less in the target business, spent less on labor, and substituted away from formal insurance. These effects were stronger for male and higher-income entrepreneurs. Together, the results suggest that microcredit works broadly through risk management and investment at the household level, rather than directly through business investment as is typically claimed.
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Brief
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July 01, 2009
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It gives me great pleasure to present Innovations for Poverty Action’s first annual report. Despite the world financial crisis, IPA grew remarkably in 2009. This year we managed about $18 million in research grants, a 40 percent increase from 2008. This comes partly from the inclusion of new researchers, partly from the increase in projects with existing researchers, and last but not least the inclusion of scale-up efforts into IPA’s core activities. In just eight years we’ve grown from a small group of researchers into an established organization, managing more than 200 research projects in 31 countries with a staff of over 250. Today, more than 30 research affiliates — professors at some of the leading institutions of higher education in the world — turn to us to implement and manage their projects. For our researchers and our donors, the greatest satisfaction comes from knowing that the value of our work will continue to increase many times over through more effective anti-poverty p...
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Annual Report
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July 01, 2009
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This paper studies the economic and health impacts of the 2007 Kenyan Presidential Election crisis. Over the two months of civil conflict that immediately followed the election, we observe sizeable downfalls in income, expenditure, and consumption for a broad segment of the rural population. This suggests households were unable to smooth over the shock. We also find that the crisis increased the likelihood that women who supply transactional sex chose to engage in unprotected sex, increasing the risk of HIV/AIDS transmission. These results suggest that social unrest is an important channel through which political instability can affect long-term outcomes and development.
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June 01, 2009
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This paper presents a randomized field experiment on community-based monitoring of public primary health care providers in Uganda. Through two rounds of village meetings, localized nongovernmental organizations encouraged communities to be more involved with the state of health service provision and strengthened their capacity to hold their local health providers to account for performance. A year after the intervention, treatment communities are more involved in monitoring the provider, and the health workers appear to exert higher effort to serve the community. We document large increases in utilization and improved health outcomes—reduced child mortality and increased child weight—that compare favorably to some of the more successful community-based intervention trials reported in the medical literature
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May 01, 2009
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Agencies engaged in humanitarian efforts to prevent the further spread of HIV have emphasized the importance of voluntary counseling and testing (VCT), and most high-prevalence countries now have facilities that offer testing free of charge. The utilization of these services is disappointingly low, however, despite high numbers reporting that they would like to be tested. Explanations of this discrepancy typically rely on responses to hypothetical questions posed in terms of psychological or social barriers; often, the explanation is that people fear learning that they are infected with a disease that they understand to be fatal and stigmatizing. Yet when we offered door-to-door rapid blood testing for HIV as part of a longitudinal study in rural Malawi, the overwhelming majority agreed to be tested and to receive their results immediately. Thus, in this paper, we ask: why are more people not getting tested? Using an explanatory research design, we find that rural Malawians are respons...
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April 15, 2009
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This paper examines the accuracy of corruption perceptions by comparing Indonesian villagers reported perceptions about corruption in a road-building project in their village with a more objective measure of 'missing expenditures' in the project. I find that villagers' reported perceptions do contain real information, and that villagers are sophisticated enough to distinguish between corruption in a particular road project and general corruption in the village. The magnitude of the reported information, however, is small, in part because officials hide corruption where it is hardest for villagers to detect. I also find that there are biases in reported perceptions. The findings illustrate the limitations of relying solely on corruption perceptions, whether in designing anti-corruption policies or in conducting empirical research on corruption.
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March 11, 2009

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