Jeff Bloem is a MS student in Michigan State University’s Department of Agricultural, Food, and Resource Economics and is beginning a PhD in Applied Economics at the University of Minnesota in the fall. Leah Bevis is a PhD candidate at Cornell’s Dyson School, and beginning as an assistant professor at Ohio State University in the fall. Linden McBride is a PhD candidate at Cornell’s Dyson School.
This past weekend we had the opportunity to attend the 2016 Midwest International Economic Development Conference (MIEDC) in Minneapolis, Minnesota. Hosted alternatively by the University of Wisconsin-Madison and the University of Minnesota, MIEDC is a relatively small conference, and perhaps the most agriculture-focused of the regional development conferences. The quality of each session and each paper was extremely high, and presenters arrived from both coasts as well as from abroad. Topics included, but were not limited to, program evaluation, agriculture, migration & remittances, fertility & gender, poverty dynamics and health.
We were unable to attend every session at the conference (though we did try!), but we provide brief summaries of the key points of each paper that we did see presented. The summaries are listed by conference theme, but are in no particular order within each theme.
Impact Evaluation and Methodology
“From Randomization to Out-of-Sample Prediction: A Structural Approach to Counterfactual Treatment Assignment in the Presence of Endogenous Network Formation” – Alan Griffith
In recent decades applied economists have become very interested in studying the influence of peer effects. Attempts to understand these dynamics, however, have not sufficiently accounted for endogenous peer group formation conditional on group assignment. This may be concerning as ignoring endogenous social network formation, within assigned groups, may lead to critically biased estimates of peer effects. This paper models network formation within group assignment in the context of a girls’ extracurricular program in rural Rajasthan. The model developed in this paper suggests a creative method for using social network data to more accurately estimate heterogeneous peer effects.
“Migration, the Financial Crisis, and Child Growth in Rural Guatemala” –John Maluccio & co-authors
Migration to and receipt of remittances from the U.S. is an important source of income for many Guatemalan households. The authors treat the US financial crisis as a natural experiment with which to study the causal impact of migration on migrant-sending households. Using LSMS panel data from 2008 and 2012 and a triple difference model (the third difference being older and less-exposed children vs. younger and more-exposed children), they find that the well-being of migrant households declined more than that of non-migrant households (a 25% reduction in per capita expenditures) and that child anthropometric outcomes, in particular height for age scores, fell significantly for migrant-sending households during the crisis. These findings suggest that the benefits of migration may be short-lived.
“Internal Migration and Firm Growth: Evidence from China” – Marlon Seror & co-authors
The role of rural-to-urban migration in driving firm growth has been understudied. This paper examines this relationship using an incredibly rich dataset and plausibly exogenous instruments to examine the causal impact of migration on the value added and profits of urban firms in China, as well as on urban wages and unemployment. The authors find a negative and significant effect on wage employment as well as a positive and significant effect on urban natives’ self-employment. They also find that migration (significantly) increases firm profits and firm value added. Moreover, more financially constrained and productive firms gain more from migrant inflows, which shows that migration accelerates structural transformation.
“Price Risk and Migration: Evidence from Rural Ethiopia” – Yu Na Lee
In many developing countries rural-to-urban migration persists even when the expected income is lower in urban areas compared to rural areas. This paper investigates the role of staple commodity price risk on rural-to-urban labor migration in Ethiopia using ERHS data from the 1990s. Using several econometric specifications, it is found that labor migration from rural areas to urban areas may be a price risk management strategy, as households with a greater willingness to pay for price stability are more likely to migrate.
“Idiosyncratic Shocks, Risk Management and Welfare Dynamics in Rural Ghana” – Felix Naschold & co-authors
Despite the vast and growing literature surrounding covariate climate shocks, the poor are particularly vulnerable to idiosyncratic shocks, and most especially to health shocks. Idiosyncratic shocks, in contrast to covariate shocks, are insurable and thus can be managed at the local level. Using a long panel (1998-2009), this paper investigates how households in four rural villages outside of Accra, Ghana manage risk. In particular, this paper explores how four different strategies (self-insurance, social networks, insurance and credit, and income diversification) are used individually or jointly to manage idiosyncratic risk. In the face of substantial negative shocks, households enact incomplete risk management practices. Therefore, households that experience negative shocks often remain poor over time.
“Social Protection in the Face of Climate Change: Targeting Principles and Financing Mechanisms” – Sarah Janzen & Michael Carter
In the face of dramatic changes to weather patterns due to climate change, policymakers are faced with the question of how to most efficiently and effectively protect the poor and vulnerable from negative shocks. In particular, they must weigh the trade-offs between targeting the currently poor and those vulnerable to poverty for assistance or intervention. This paper develops a dynamic model of consumption and asset accumulation in the face of risk of negative economic shocks so as to assess these trade-offs by simulating the outcomes of prioritizing one group over another. The model showcases the implications of how various social protection policies are targeted among vulnerable and poor populations and finds that targeting the vulnerable (in lieu of the currently poor) reduces to the extent and depth of poverty in the long run but neglects the currently poor in the short-run. The authors show that the negative impacts on the currently poor of such a policy can be partially mitigated by asking the targeted vulnerable households to participate in an insurance scheme. In the absence of effective policy, weather shocks may have long term effects on poverty headcount and poverty gap measurements.
“Perception versus Reality: Life Satisfaction and Economic Position Relative to Neighbors” – Muhammad Faress Bhuiyan
Economists have typically held a strong preference for objective measurements when performing empirical analysis. In recent years, a growing movement within the economics profession has begun to measure subjective measurements of how individuals perceive reality. This paper examines how measurements of perceptions and reality of one’s neighbors’ well-being compare in a sample of the population in Bangladesh. Controlling for and measuring how individuals perceive reality may be important, as it is found that perceptions are often quite different from reality.
“Early Fertility and Labor Market Segmentation: Evidence from Madagascar” – Kira Villa
Women represent the majority of informal workers in the developing world, and especially in sub-Saharan Africa. This paper examines the causal effect of first birth timing on: (i) timing of entry into the labor market, and (ii) selection into various types of employment. Using a panel survey from Madagascar designed to capture the transition from adolescence to adulthood, the authors find that early childbearing increases the likelihood of working. However, women whose first birth occurred during adolescence largely select into low-quality, informal jobs – an effect that is partially, but not entirely, intermediated by schooling levels.
“Learning About Oneself: The Effects of Signaling Academic Ability on School Choice” – Veronica Frisancho
An individual’s ability is typically thought to determine an individual’s schooling choice. However real ability is unobservable, and individuals have to make schooling choices based on their perception of their own ability. As may be expected, individuals have very imprecise perceptions of their own ability. This paper examines the impacts of a field experiment in Mexico City that provides information on ability. It is found that providing feedback on actual academic performance substantially reduces both the gap between expected and actual performance and the variance of individual belief distributions.
“Hard Cash and Soft Skills: Experimental Evidence on Combining Scholarships and Mentoring in Argentina” – Alejandro Ganimian
Although conditional cash transfer programs are often successful in getting more kids to attend school, these programs often do not substantially impact student achievement. This paper presents evidence from a RCT in Argentina of a program that offered scholarships as well as non-academic mentoring to seventh graders. The program increased performance in math tests and reduced the total number of absences. These results are thought to be caused by a mechanism that, rather than increased student socio-emotional skills, increased school navigation skills. For example, treated students were more likely to ask teachers questions on homework and were more likely to catch up with assignments when absent from school.
In recent years, the topic of aspirations has been of growing interest among development economists. Although theoretical work suggests that the relationship between the aspirations gap and effort is characterized by an inverted U-curve, many studies assume increased aspirations necessarily increases effort. This paper seeks to find empirical evidence of the inverted U-curve of the aspirations gap, thereby suggesting the possibility of two types of aspirations failure: aspirations fatalism (too little of a gap) and aspirations frustration (too big of a gap). Using Young Lives survey data from India, this paper finds some evidence that aspirations that are too far away from the present reality don’t necessarily induce future-oriented behavior,, finding supporting evidence of existing theory.
This paper estimates the impact of armed conflict on subsequent health outcomes, comparing the impact on children exposed in utero versus after birth. The identification strategy relies on exogenous variation in the conflict’s geographic extent, and in the timing and the exposure of different birth cohorts while in utero or after birth. Results show war-exposed children subsequently have lower height-for-age Z-scores. Interestingly, effects of exposure in utero and after birth are comparable in magnitude. Disruptions in health care delivery and maternal stressors are potential mechanisms explaining the negative health effects for conflict-exposed children. The main part of the paper is focused on the difference between measuring war exposure at the region level versus using GPS data to more accurately capture a child’s exposure; the impacts of war exposure are 2-3 times larger when measured using the more accurate GPS data.
“Can Consulting Improve Health Care Management? Evidence from a Field Experiment in Nigeria” – David Evans & co-authors
This paper documents a massive field experiment conducted in 80 public healthcare centers in six Nigerian states, designed to evaluate the effects of a healthcare intervention done in partnership with the Nigerian government. While all treatment facilities received an assessment and initial feedback, half also received a detailed improvement plan and nine months of visits and implementation support. (Another group of centers served as control.) The light intervention showed no effects. Healthcare centers receiving the full intervention adopted a number of “easier” practices, but practices requiring more substantial effort were largely ignored.
“Poverty, Cognitive Capacity, and Crop Insurance Demand: Mixed-Method Evidence from Columbia” – Johnathan Bauchet
Services provided by microfinance institutions are increasingly complicated by a variety of products being offered simultaneously. A common finding is that take-up of financial services reduces as these services become bundled together and increasingly complicated. This paper presents results from a RCT in Columbia that investigates the impacts of bundling crop insurance with microloans to rural farmers. The authors find that unbundling the loan products does not significantly affect uptake of financial services. Additionally, it is observed that rural farmer recall regarding whether or not they bought crop insurance was relatively low.
“Who Supplies the Nutrients? The Puzzle of Crop Zinc Heterogeneity and Low-Zinc Market Crops in Uganda” – Leah Bevis
Micronutrient deficiencies impair the health and productivity of over 2 billion people worldwide, yet reliable estimates of these “hidden” deficiencies are scarce. This is partially because we often rely on food composition tables (FCTs) to calculate micronutrient intake, and these tables ignore the heterogeneity of food nutrient content. For instance, in rural Uganda, crops sampled at market are lower in zinc content than newly harvested crops sampled from homes. Children reliant on these market-purchased crops are therefore differentially vulnerable to zinc deficiency. This paper models crop zinc content for farms across Uganda using a unique dataset containing crop nutrient content and a larger, nationally representative panel dataset. It explores the spatial, household-specific, and time-varying factors that drive selection into the staple market, and therefore influence crop zinc content at market in any given season. The low zinc content of market crops is explained primarily by regional selection into market, but zinc content at market also shifts slightly over time as weather shocks shift the geography of suppliers.
“Predicting ‘success’? Procuring from farmers’ organizations under the World Food Programme Purchase for Progress Pilot”—Joanna Upton & Erin Lentz
The past two decades have seen a significant move toward local purchase of food for food assistance, including a more recent trend toward purchase directly from smallholder farmer organizations (FOs) in developing countries. The World Food Programme Purchase for Progress pilot (P4P) sought to engender positive impacts on local farmers and economies through local purchases, with such benefits predicated on the “success” (i.e. low- or no-default) of these purchases. This study examines the determinants of FO default. Preliminary findings—in Kenya and Tanzania—show that the primary driver of default is an increase in commodity prices in local markets between contract approval and delivery. Other features of contracts and of the FOs themselves are important as well, providing both generalizable and context-specifics insights to inform the ongoing debate in the food assistance community about whether, and when, procuring from smallholder farmers results in tradeoffs or synergies.
“Poverty, cognitive capacity, and crop insurance demand: Mixed-method evidence from Colombia” – Jonathan Bauchet & co-authors
As microfinance institutions proliferate across the developing world, they sell increasingly complex products that bundle loans, credit, and other services. This paper evaluates the “un-bundling” of a micro-loan application from a micro-insurance offer in the context of rural Columbia. While farmers were generally offered a variety of insurance products while applying for a loan, farmers within the treatment arm of this experiment were instead offered micro-insurance some weeks after their loan application. This un-bundling had little or no impact on the farmers’ understanding/recall of the product, and had little impact on uptake or coverage. However, recall in general was very low – most farmers misunderstood the insurance product, and many were unsure whether they had bought the product or not. This finding highlights the difference between initial “understanding” and later “recall” – even farmers who understand an insurance product at the moment of purchase may not recall the details of their coverage later. Policies that help to remind farmers of these details in later months and years will therefore improve welfare outcomes.
“Do Behavioral Explanations Account for the Inverse Close to the Edge: Productivity Relationship?” – Leah Bevis & Christopher Barrett
Across the world, smaller farms and smaller plots tend to be more productive per hectare. This paper uses unique, plot-level panel data from rural Uganda to show that conventional explanations (household shadow prices, measurement error and omitted variable bias) all fail to explain this “inverse relationship.” However, the relationship is completely explained by controlling for “edge effect,” the fact that productivity is higher in the peripheral area just inside the border of plot than in the interior core of the plot. This productivity differential could theoretically be driven by either biophysical mechanisms (higher levels of sunlight, water, or nutrients around the edges of plots) or behavioral mechanisms (higher labor intensity and different management styles around the edges of plots). While the authors are unable to test biophysical mechanisms, they do find evidence of a behavioral mechanism –labor intensity rises around the edges of plots. Farmers also appear to invest in plots according to their perception of plot size, illustrating that purely behavioral mechanisms can indeed influence productivity.
“The Dirt on Dirt: Soil Characteristics and Variable Fertilizer Returns in Kenyan Maize Systems” – Emilia Tjernstrom & co-authors
Low productivity and persistent poverty in rural sub-Saharan Africa is often linked to limited use of improved inputs, particularly fertilizer. This paper examines spatial heterogeneity in the returns to fertilizer in Central and Western Kenya, using unique panel data with soil fertility measurements and exogenous variation in fertilizer use. Returns to fertilizer are low, and vary with soil characteristics; ignoring this variability could lead to misleading recommendations for farmers not represented by regional averages. Additionally, the authors find that returns to high-quality, project-distributed fertilizer is higher than average. It may be that the low quality of store-bought fertilizer contributes to the uncertainty that farmers face when making input decisions, and to the low adoption rates in the region.
“Perceived, Measured and Estimated Soil Fertility: Implications for Farmer Management Practices in East Africa” – Linden McBride & co-authors
While farmers’ subjective soil quality assessments are readily available in many household surveys, the extent to which these subjective assessments correlate with actual soil chemistry is not clear. Should researchers rely on these data or undertake the expensive and time-consuming collection of local soil chemistry data? Could newly publicly available geo-spatial soils data help fill in gaps for both researchers and farmers? This paper looks at the correlations between various sources of soils data as well as the value of soils information in production function estimates using data from Kenya and Tanzania. The authors find that farmers’ subjective perceptions are largely correlated with yields and little else and that the inclusion/exclusion of any soils data does not change yield or marginal physical product of fertilizer predictions.
“The Long-Run Effects of Oil Wealth on Democracy and Fiscal Capacity” – Traviss Cassidy
The question of whether natural resource abundance is a country’s curse or blessing has long been of interest to economists. Identifying a clean causal relationship, however, is difficult since resource extraction is often endogenous to domestic economic and political conditions. This paper finds a clever instrument for the exogenous variation in resource wealth – the spatial distribution of sedimentary basins in the Earth’s crust that have the potential to produce hydrocarbons. The empirical results demonstrate that while oil production raises GDP, it has large negative effects on democracy (from the Polity IV database) and tax revenue, and these effects are concentrated in countries with weak institutions in 1950-1965.