We develop a dynamic trade model with spatially distinct labor markets facing varying exposure to international trade. The model captures the role of labor mobility frictions, goods mobility frictions, geographic factors, and input-output linkages in determining equilibrium allocations. We show how to solve the equilibrium of the model and take the model to the data without assuming that the economy is at a steady state and without estimating productivities, migration frictions, or trade costs, which can be difficult to identify. We calibrate the model to 22 sectors, 38 countries, and 50 U.S. states. We study how the rise in China’s trade for the period 2000 to 2007 impacted U.S. households across more than a thousand U.S. labor markets distinguished by sector and state. We find that the China trade shock resulted in a reduction of about 0.55 million U.S. manufacturing jobs, about 16% of the observed decline in manufacturing employment from 2000 to 2007. The U.S. gains in the aggregate, but due to trade and migration frictions, the welfare and employment effects vary across U.S. labor markets. Estimated transition costs to the new long-run equilibrium are also heterogeneous and reflect the importance of accounting for labor dynamics.
Large and regular seasonal price fluctuations in local grain markets appear to offer African farmers substantial intertemporal arbitrage opportunities, but these opportunities remain largely unexploited. Small-scale farmers are commonly observed to “sell low and buy high,” rather than the reverse. In a field experiment in Kenya, we show that credit market imperfections limit farmers’ abilities to move grain intertemporally. Providing timely access to credit allows farmers to buy at lower prices and sell at higher prices, increasing farm revenues and generating a return on investment of 29%. To understand general equilibrium (GE) effects of these changes in behavior, we vary the density of loan offers across locations. We document significant effects of the credit intervention on seasonal price fluctuations in local grain markets, and show that these GE effects shape individual-level profitability estimates. In contrast to existing experimental work, the results indicate a setting in which microcredit can improve firm profitability, and suggest that GE effects can substantially shape microcredit’s effectiveness. In particular, failure to consider these GE effects could lead to underestimates of the social welfare benefits of microcredit interventions.
Colombia’s national early childhood strategy launched in 2011 aimed at improving the quality of childcare services offered to socio-economically vulnerable children, and included the possibility that children and their childcare providers could transfer from non-parental family daycare units to large childcare centers in urban areas. This study seeks to understand whether the offer to transfer and the actual transfer from one program to the other had an impact on child cognitive and socioemotional development, and nutrition, using a cluster-randomized control trial with a sample of 2767 children between the ages of 6 and 60 months located in 14 cities in Colombia. The results indicate a negative effect of this initiative on cognitive development, a positive effect on nutrition, and no statistically significant effect of the intervention on socioemotional development. We also explored the extent to which these impacts might be explained by differences in the quality of both services during the transition, and report that quality indicators are low in both programs but are significantly worse in centers compared to community nurseries.
Between 1981 and 2013, the share of the global population living in extreme poverty fell by 34 percentage points. This paper argues that such rapid reductions will become increasingly hard to achieve for two reasons. First, the majority of the poor now live in middle-income countries where the benefits of growth have often been distributed selectively and unequally. Second, a reservoir of extreme poverty remains in low-income countries where growth is erratic and aid often fails to reach the poor. If the international community is to most effectively leverage available resources to end extreme poverty, it must ensure that its investments in institutions and physical infrastructure actually provide the poor the capabilities they need to craft an effective pathway out of poverty. We term the human and social systems that are required to form this pathway "invisible infrastructure" and argue that an effective domestic state is central to building this. By corollary, ending extreme poverty will require both expanding state capacity and giving the poor power to demand reforms they need by solving agency problems between citizens, politicians, and bureaucrats.
Three decades of sustained growth have contributed to a halving of Indian poverty rates. Yet one in every four Indians is still classified as being extremely poor and lives on less than US$1.90 a day (Narayan and Murgai 2016).1 Further, income inequality in India is fast rising with limited changes in the well-being of many poor rural households. How can public policy in India best respond to the economic needs of its poor rural citizens?
Can small search costs that constrain information acquisition and monitoring across the administrative hierarchy provide a substantive explanation for poor bureaucratic performance in the developing world? In collaboration with the Indian Ministry of Rural Development and two major states, we conducted a field experiment in which a random sample of bureaucrats were given access to an internet- and mobile-based management and monitoring platform for wage payments associated with the world’s largest workfare program. The platform did not make new information available, but lowered costs of accessing information about the status of pending payments and helped identify subordinate employees who needed to take action. Our experiment also randomly varied which level of the administrative hierarchy had e-platform access – senior and/or immediate managers. Overall, we find delays are 29% lower in areas where search costs are reduced for intermediate management alone. Across all treatment arms, areas with above median pre-period delays see delay reductions. While supervisor-only information provision is most impactful, we find evidence that app usage by intermediate supervisors reduces delays, and this usage is higher when senior officials also have e-platform access, suggesting complementarities across the administrative hierarchy are non-trivial. The extent of delay reductions achieved through minimal usage of the tool point to important service delivery improvements enabled by technology now widely available in capacity constrained settings. The authors are from Evidence for Policy Design (Dodge and Troyer Moore), Brown University (Neggers), and Harvard University (Pande). We thank Kartikeya Batra for field work and research assistance, and the J-PAL Governance Initiative and Gates Foundation for financial support.
As an intrinsic part of the classic microfinance model, group meetings are intended to employ social capital to ensure timely repayment. Recent research suggests that more frequent meetings can increase social capital among first-time clients. Using randomized variation in group meeting frequency for 174 microfinance groups in India, we demonstrate that social capital gains associated with more frequent meetings continue to accrue across multiple lending cycles. However, these effects are reduced when group members differ in their borrowing history. In addition, clients who start with low levels of empowerment report higher social capital gains when matched with similar clients. We discuss how current microfinance policy debates overlook the creation of social capital, including through repayment meeting frequency, and we encourage regulators to undertake a holistic understanding of microfinance’s impacts.
Although in theory elections are supposed to prevent criminal or venal candidates from winning or retaining office, in practice voters frequently elect and reelect such candidates. This surprising pattern is sometimes explained by reference to voters’ underlying preferences, which are thought to favor criminal or corrupt candidates because of the patronage they provide. This article tests this hypothesis using 2010 data from the Indian state of Uttar Pradesh, where one in four representatives in the state legislature have a serious criminal record and where political corruption is widespread. Contrary to the voter preference hypothesis, voters presented with vignettes that randomly vary the attributes of competing legislative candidates for local, state, and national office become much less likely to express a preference for candidates who are alleged to be criminal or corrupt. Moreover, voters’ education status, ethnicity, and political knowledge are unrelated to their distaste for criminal and venal candidates. The results imply that the electoral performance of candidates who face serious allegations likely reflects factors other than voters’ preferences for patronage, such as limited information about candidate characteristics or the absence of credible alternative candidates with clean records.
Relative to backward firms, technologically-advanced firms source inputs from other advanced firms. These sourcing patterns lead to a magnification effect of technology adoption. A firm that adopts higher-technology increases the relative supply and demand for higher-technology inputs. As a result, it positively influences the technology of other firms in its production chain. Using data from a Colombian manufacturing survey, we provide evidence that advanced firms disproportionately value advanced inputs. More novel, we provide suggestive evidence that technological advancements in some firms increase the technology of other firms indirectly linked to them through a common input market.
Do the repayment requirements of the classic microfinance contract inhibit investment in high-return but illiquid business opportunities among the poor? Using a field experiment, we compare the classic contract which requires that repayment begin immediately after loan disbursement to a contract that includes a two-month grace period. The provision of a grace period increased short-run business investment and long-run profits but also default rates. The results, thus, indicate that debt contracts that require early repayment discourage illiquid risky investment and thereby limit the potential impact of microfinance on microenterprise growth and household poverty.
Disclosure laws for politicians exist in over a hundred countries. But can public disclosures about politician performance and qualifications influence electoral accountability in settings characterized by weak institutions and less educated populations? In the run-up to the 2008 elections in Delhi we implemented a field experiment where we provided slum dwellers with newspapers containing report cards giving information on candidate qualifications and legislator performance obtained under India’s disclosure laws. Access to report cards increased voter turnout; this effect is larger when incumbent performance is worse. We also observe reductions in the incidence of cash-based vote buying and electoral gains for better performing incumbents. Finally, we observe significant voter sophistication in the use of information – voters make comparisons across spending categories and candidates to overcome political agency problems and reward better performing incumbents.