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To Test or Not to Test

Many folks always ask me what the impact of randomized trials are on development. We at Innovations for Poverty Action and the M.I.T. Jameel Poverty Action Lab are dedicated to randomized trials to help push forward evidence-based policymaking. Yet what is the evidence that evidence shifts views? Not always so easy to do. I’ve done some work on the donor side, which I’ve reported on here before.  Here is a meta-study that uses two of my studies that found fairly different results. One found that access to credit in South Africa led to increased income, the other found that access to credit in the Philippines had no discernible impact on income.

The researchers sent off about 1,500 mailers to microfinance institutions around the world, telling them about the positive study, the negative (or non-positive, technically) study, or a placebo (no mention of a study), and asked them if they wanted to participate in a randomized trial to measure the impact of their organization.  They then saw which microfinance leaders responded, and whether they responded favorably or negatively. Read More »





Freakonomics: What Went Right? Responding to Wrong-Headed Attacks

Warning: what follows is a horribly long, inside-baseball post that most people will likely have little interest in reading, and which I had little interest in writing. But it did need to be written. Apologies for the length and the indulgence; we will soon return to our regular programming.

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I. Going on the attack is generally more fun, profitable, and attention-getting than playing defense. Politicians know this; athletes know it; even academics know it. Or perhaps I should say that especially academics know it?

Given the nature of the Freakonomics work that Steve Levitt and I do, we get our fair share of critiques. Some are ideological or political; others are emotional.

We generally look over such critiques to see if they contain worthwhile feedback, or point to an error in need of correction. But for the most part, we tend to not reply to critiques. It seems only fair to let critics have their say (as writers, we’ve already had ours). Furthermore, spending one’s time responding to wayward attacks is the kind of chore you’d rather skip in order to get on with your work.

But occasionally an attack is so spectacularly ridiculous, so riddled with errors and mangled logic, that it’s worth addressing.

The following essay responds to two such attacks. The first one was relatively minor, a recent blog post written by a Yale professor. The second was more substantial, an essay by a pair of statisticians in American Scientist. Feel free to skip ahead to that one (at section III below), or buckle up for the whole bumpy ride. Read More »





Cash Transfers: The Key to Keeping the World’s Working Kids in School?

A new paper from Eric V. Edmonds and Norbert Schady finds that cash transfer programs in developing countries may keep kids in school and out of the labor force. From the abstract:

Poor women with children in Ecuador were selected at random for a cash transfer equivalent to 7 percent of monthly expenditures. The transfer is greater than the increase in schooling costs at the end of primary school, but it is less than 20 percent of median child labor earnings in the labor market. Poor families with children in school at the time of the award use the extra income to postpone the child’s entry into the labor force. Students in families induced to take-up the cash transfer by the experiment reduce their involvement in paid employment by 78 percent and unpaid economic activity inside their home by 32 percent.

Read More »





Does Raising the Minimum Wage Increase Unemployment?

Conventional wisdom holds that instituting or raising the minimum wage will increase unemployment. But a recent paper by Jeremy Magruder, an economist at Berekley, finds the opposite effect. Magruder examines the case of Indonesia in the 1990s, “where real minimum wages rose rapidly in a varied way and then dropped quickly with the inflation rate in the South East Asian financial crash.” Here’s an excerpt:

When minimum wages rose in one district relative to their neighbors, that district observed an increase in formal sector employment and a decrease in informal employment. It also observed an increase in local expenditures, which is consistent with the hypothesized mechanism of the big push: that local product demand increases labor demand. Moreover, this increase was only observed in local industries which can be industrialized and do supply local demand, supporting the model further. Tradable manufacturing firms saw no growth in employment, and un-tradable, but non-industrializable services saw an increase in informal employment.

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International Aid and Mobile Cash Transfers

We’ve blogged before about the many applications of mobile phone technology in developing countries, especially when it comes to mobile banking. In much of the developing world, particularly in Africa, mobile phones are thriving in remote villages, while access to electricity, clean water, schools and government services is weak at best; yet cellular service is strong.

A new research paper by Jenny C. Aker, Rachid Boumnijel, Amanda McClelland and Niall Tierney analyzes the effectiveness of yet another mobile application gaining strength in the developing world: cash transfer programs. After a drought in Niger in 2009 and 2010, Concern Worldwide, an international NGO, provided “unconditional cash transfers to approximately 10,000 households during the ‘hungry season,’ the five-month period before the harvest and typically the time of increased malnutrition.”

Instead of distributing cash in the usual way, the NGO conducted a randomized experiment: one-third of targeted villages received a monthly cash transfer through a mobile system called zap; another third received manual cash transfers, and the remaining third received manual cash transfers plus a mobile phone. Read More »





The Economics of Economics Blogs

Last week, the World Bank blog Development Impact wrote about the influence of economics blogs on downloads of research papers. It included Freakonomics.com, as well as 5 other blogs — Aid Watch, Chris Blattman, NYT’s Economix, Marginal Revolution, and Paul Krugman. Using stats from Research Papers in Economics, it found spikes after blogs cover a paper. For us, it found a 450-470 increase in abstract views and downloads. Check out their cool graph: Read More »





Global Poverty Shifting Toward Middle Income, Failed States

A new report from The Brookings Institution examining global poverty rates since 2005 notes two primary trends: poor people are increasingly found in middle-income countries and in fragile states.

Brookings notes the obvious success of the one:

Over the past decade, the number of countries classified as low-income has fallen by two fifths, from 66 to 40, while the number of middle-income countries has ballooned to over 100. This means 26 poor countries have grown sufficiently rich to surpass the middle-income threshold. Among those countries that have recently made the leap into middle-income status are a group of countries – India, Nigeria and Pakistan – containing large populations of poor people. It is their “graduation” which has brought about the apparent shift in poverty from the low-income to middle-income country category.

 

And troubling failure of the other: Read More »





The New and Improved Coup d’etat

Sometime around 1991, the standard coup d’etat morphed into something else entirely, according to a new paper by Nikolay Marinov and Hein Goemans: “[W]hereas the vast majority of successful coups before 1991 installed the leader durably in power, after that the picture reverses, with the majority of coups leading to competitive elections.” Read More »