Development

How well do social protection programs reach the poorest? We assess Ghana's LEAP program and show that community-based targeting may outperform proxy-based methods when evaluated against a marginal-utility benchmark. Download Paper Abstract We propose an alternative benchmark for evaluating the targeting accuracy of social protection programs based on the marginal utility of expenditure. Using this benchmark, we assess the targeting performance of Ghana’s Livelihood Empowerment Against Poverty (LEAP) program. We find that community-based targeting may yield more accurate targeting outcomes than proxy-based methods under a marginal-utility benchmark, because the latter better captures the welfare losses from poverty that standard consumption-based measures can miss. ...

How do transportation costs shape the geography of food processing? We model spatial procurement by a California tomato processor and estimate how energy prices affect the supply of processed foods. Download Paper Abstract Increased transportation and logistical costs in agricultural markets have affected the spatial allocation of production in the agricultural and food sectors of the economy. We develop a spatial model of farm product procurement by a food processor, designed to capture the effects of supply-chain disruptions on the spatial procurement of farm products in the processed food sector. We use detailed data on production and procurement by a large California tomato processor to estimate the key parameters of the model which allow us to calculate the price elasticity of supply for California tomato paste production and describe how changes in energy prices and transportation costs for primary agricultural products affect the supply of processed food. ...

Which model of risk sharing fits village data—full insurance, limited commitment, or self-insurance? We devise tests that work without interest rate data and find that Tanzanian villages look like self-insurance. Download Paper Abstract This paper studies informal risk-sharing regimes in a unified framework by examining intertemporal consumption behavior of rural households in Tanzania. We exploit a theoretically-consistent link between interest rates and cross-sectional consumption moments to test alternative risk-sharing models without requiring data on interest rates or assuming a restriction to eliminate the need for such data, which are often unavailable in developing economies. We specify tests that allow distinguishing among models even with temporal dependence in income shocks. Our analysis shows that the consumption pattern in rural Tanzania is consistent with the self-insurance regime, and that risk aversion varies substantially across districts. Imposing a strict condition on interest rates, as often done in prior literature, misses their intertemporal heterogeneity and biases the estimation of risk aversion. ...

Digital payment infrastructure is cheap and available, yet adoption remains low among Indian merchants. We find that demand-side factors—not supply-side barriers—explain the gap. Download Paper Abstract The availability of digital payment technologies has rapidly increased in the developing world as a cornerstone for financial inclusion. Despite significant efforts to promote digital payments, rates of adoption remain modest in some low-income countries, particularly India. We consider possible reasons for the low rates of adoption among merchants in Jaipur, India with small fixed-location store enterprises. Using survey data for 1,003 merchants, we find little evidence that supply-side barriers to obtaining necessary infrastructure or meeting prerequisite requirements to adopt digital payments explain the low level of adoption. Merchants can readily obtain the necessary infrastructure: 98.6% are feasible adopters, 97% have bank accounts, 79% possess internet-capable devices, and 96% demonstrate technological literacy. 54% already satisfy all requirements, yet only 42% have adopted digital payments. Our evidence suggests that low rates of adoption do not appear to be the result of supply-side barriers, but are due rather to demand-side factors, including insufficient customer demand and concerns that transaction records could increase tax liability. ...

GDP growth originating in agriculture benefits poorer households 3–4 times more than equivalent growth from non-agriculture. An earlier version of this result was featured in the World Development Report 2008. Download Paper Abstract Does the sectoral composition of aggregate economic growth affect poverty? We ask whether agricultural growth in developing countries increases the expenditures of poorer households more than growth in other sectors. While some reduced form analyses have tackled this question using either country-level time series data, regional panel data for one country, or cross-sectional country data, this paper is unusual in using panel data for many countries. We improve on much of the existing literature by devising an instrumental variables strategy to correct for the endogeneity of sectoral GDP growth, involving averaging over sectoral income growth rates for neighboring countries. Our principal finding from our instrumental variable estimator is that the estimated elasticities associated with growth in agricultural income are significantly greater than for non-agricultural income for all but the extreme top and bottom deciles. In the middle range of the income distribution the effect of a given GDP growth due to agriculture is 3–4 times larger than if it was due to non-agricultural activities. Having established that on average growth in GDP originating in agriculture is more beneficial for poorer deciles, we finally explore whether this is a pattern which holds across different groupings of countries. A second important finding is that there is heterogeneity across some groupings. Most particularly, we find that it is the poorest people in the poorest countries for whom agricultural income growth is the most beneficial. ...

Poorer households grow faster on average but bear much more risk. Using Lorenz curve data from 53 countries over 50 years, we find no evidence that this greater risk is related to globalization. Download Paper Abstract “Globalization” implies change, and uncertainty over future change may affect household welfare. We use 50 years of Lorenz curve data from 53 mostly developing countries. Treating each country-quintile-year combination as an observation, we first account for variation in consumption expenditures, finding that global shocks matter less than country-level shocks in explaining consumption growth variation. While poorer households experience faster consumption growth than wealthier ones, they also face significantly more risk. However, we find no evidence linking this greater risk to globalization. ...

Can modern credit markets crowd out informal insurance? Using data from an Indian village in transition, we find that "traditional" households exchange more in-kind transfers, while "modern" households rely more on formal markets. Download Paper Abstract Contractual interlinkages in rural developing communities may provide informal insurance when information is incomplete, potentially shaping resource distribution. The introduction of modern credit markets might undermine these informal arrangements, reducing their effectiveness as insurance. Using data from a transitional Indian village comparing households operating under “modern” and “traditional” regimes, we find that traditional households receive more frequent in-kind food and clothing transfers while making more frequent in-kind crop output payments to others. ...

Growth rates are not independent across countries. We use a novel measure of economic distance to estimate cross-country spillovers, and find they rival countries' own characteristics in explaining growth patterns. Download Paper Abstract Rates of long-run economic growth are not independent across countries. To account for this dependence we decompose the spatial covariance function of growth rates into a function of each country’s own observable characteristics, its unobservable characteristics, and cross-country spillovers. We use original data on economic distance to structure observed variation in countries’ long term growth rates. We use this structure to estimate the magnitude of economic interdependence among nations, and to give a nonparametric characterization of the relationship between economic distance and the magnitude of cross-country spillovers. These spillovers turn out to be quite important, accounting for more of the spatial covariance in growth rates than unobservable variables, and by some measures rivalling the importance of the country’s own observable characteristics. ...

When governments cannot directly enforce forest conservation, they may try to give villagers a share of the harvest. We compare this Joint Forest Management policy to a simple benchmark and ask who prefers which. Download Paper Abstract When monitoring or enforcement is difficult, governments may find it impossible to manage village forest commons directly. Village-level institutions might be better able to manage these commons, yet villagers’ management objectives may not coincide with those of the state. We consider the effects of two different government policies on the local management of village commons. One policy tool attempts to induce villagers to conserve forest commons by giving them a share of the timber harvest. We investigate whether this Joint Forest Management scheme is preferred either by the villagers or the government to a simple benchmark policy under which the government harvests at random. ...

Are firms credit-constrained, or do they just look that way? We develop methods to distinguish exogenous borrowing limits from endogenous constraints that arise from incentive problems. Download Paper Abstract Are firms and households constrained in the use of a productive input? Theoretical approaches to this question range from exogenously imposed credit allocation rules to endogenous market failures stemming from limited-commitment or moral-hazard problems. We develop and implement econometric methods that allow us to distinguish among these different sources of constraints. We apply these methods to Thai data on rice farmers and find evidence consistent with moral hazard but not with exogenous credit constraints. ...

Full risk sharing is rejected in Indian village data, but why? This paper tests whether private information about income explains the pattern of consumption allocations in ICRISAT villages. Download Paper Abstract Efficient risk sharing implies that consumption allocations depend only on aggregate resources, not on individual income. This prediction is rejected by data from ICRISAT villages in India. This paper considers the possibility that these departures from full risk sharing are due to private information about income. We derive the implications of private information for risk sharing and test these restrictions using data from three Indian villages. We find evidence that private information constrains risk sharing, and that an informationally constrained efficient allocation fits the data significantly better than either full risk sharing or autarky. ...

Dynamic common-property games are hard to solve. We develop computational methods for finding their equilibria and apply them to village forest management problems. Download Abstract We develop computational methods for finding the equilibria of dynamic games in which multiple agents exploit a common-pool resource. These methods allow us to characterize the set of subgame-perfect equilibria for a class of common property resource games, including games with heterogeneous players and asymmetric information. ...

Should you drain the swamp to build a shopping center? The answer depends on the discount rate, and this parable shows why the choice of rate matters so much for environmental cost-benefit analysis. Download Abstract We use a parable involving the decision to drain a swamp to build a shopping center to illustrate the importance of the discount rate in environmental cost-benefit analysis. The parable demonstrates that standard discounting practices can lead to decisions that are neither efficient nor sustainable, and that the choice of discount rate is itself an economic decision with important welfare implications. ...