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Actors, Markets, and Institutions in Developing Countries: A micro-empirical approach

Final Report Summary - AMID (Actors, Markets, and Institutions in Developing Countries: A micro-empirical approach)




The Actors, Markets, and Institutions in Developing Countries: A micro-empirical approach (AMID) is a four-year project running from 1 September 2008 to 31 August 2012, involving five European universities and four Associate Partners. AMID is a network that intends to produce the next generation of research scholars working on development issues in Europe through combining intellectual resources from across Europe with first-rate training offered by the partners involved in the project.

During the course of the project, AMID has achieved its goals and objectives, including: (a) formal coursework with emphasis on rigorous empirical methods, and exposure to other disciplines in PhD courses, workshops and summer schools; (b) active participation in data collection and field projects in developing countries, attained through participation in (often multidisciplinary) team research projects and internships with industry partners and NGOs; (c) opportunities to forge relationships with faculty and students throughout Europe through exchanges, workshops, and virtual networks.

KEY ACHIEVEMENTS

The research projects of the recruited researchers evolved around three distinct work packages:

• WP1 - Human capital and policy evaluation
• WP 2 - Market access for the poor
• WP 3 - Institutions: Micro evidence

Partner 1 – BU

WP1 - In the first period At Bocconi, Katja Kaufmann has been working on two research projects, the first in collaboration with Orazio Attanasio – (UCL), focussing on educational choices, subjective expectations and credit constraints; and the second on the income gradient of college attendance in Mexico. In addition, Kaufmann and Eliana La Ferrara have worked on the implementation of Bolsa Familia, a cash transfer programme adopted in Brazil. La Ferrara has worked on the role of exposure to TV programmes in affecting household decisions (in particular, fertility and marital dissolution) in Brazil. Andreas Madestam has worked on the impact of the introduction of free primary education in Cambodia. Elsa Artadi, Martina Bjorkman and Eliana La Ferrara have worked on poverty and human trafficking in the Philippines. Artadi has also worked on fertility choices and female labour market participation in Sub-Saharan Africa. In the second period the team has worked towards achieving the objectives of this Work Package by endeavouring to understand the determinants of human capital accumulation, on the demand and on the supply side. On the demand side, the focus of their research has been on intra-household decision making and the analysis of policies aimed at incentivising children’s enrolment and attendance (e.g. conditional cash transfers).On the supply side, they have analysed study inputs that may affect the returns to education, e.g. teacher quality and performance, as well as the provision of health services. WP2 -In the first period, Maelys de la Rupelle (ESR) has initiated a project on migration decisions and family planning policies in China This research, using a natural experiment design, brings new elements to the relationship between family planning policies and market access for the poor. Martina Bjorkman and Project Coordinator Eliana La Ferrara have worked on the role of social links in explaining the performance of joint liability contracts in Mexico. Andreas Madestam has worked on the relationship between farm productivity and land inequality. He has also worked on credit markets, notably on the role of moneylenders and on the increasing use of individual liability (as opposed to joint liability) in microfinance. In the second period the team has focused on two key assets of poor people, namely land and credit. They have undertaken a study of land markets in a historical and contemporary perspective. WP3 - Maelys de la Rupelle has done research on institutions’ long term impacts by focusing on land inequality in China, and has shown that inequalities reflect social norms and past institutional reforms, exploiting the fact that places crossed by the Red Army during the Long March experienced more radical change afterwards. Martina Bjorkman has worked on local accountability and increasing the effectiveness of public service delivery. Eliana La Ferrara has worked on the measurement of ethnic diversity. She has also analyzed the effectiveness of international institutions in preventing conflict (through arms embargoes). Finally, she has studied the impact of conflict occurring in poor countries on asset markets in developed economies. Elsa Artadi has worked on the relationship between institutions, foreign aid and civil wars in Africa. In the second period Bocconi’s focus in Work Package 3 has been on understanding how social networks shape formal and informal institutions, and the role of the media in situations of weak governance.

Partner 2- PSE

The central objective of WP1 was to understand barriers to human capital accumulation and to relate that understanding to possible policy interventions. From an economic point of view, income is likely to be a major determinant of education and a series of papers have looked into variants of this relationship. For instance, Cogneau and Jedwab have used changes in the price of cocoa to elicit the impact of Ivorian cocoa growers’ incomes. Other papers use randomized conditional cash transfer experiments to elicit this relationship. In Nicaragua, Macours and al. targeted transfers to parents of very young children, whereas in Malawi, de Hoop and al. targeted young girls. Both find significant impacts. Gurgand and al. have studied a private scheme that offers student loans to potential South African students and found that access to such loans increases significantly actual enrolment into higher education. Other research has considered the impact of conflict on human capital formation. For WP2 Somville has produced an original work, both theoretical and empirical, on the question of savings. His research had several significant policy implications. Hartwig has run an impact evaluation of a unified social health insurance plan in Rwanda.

In WP3 Several papers have looked into the inefficiency of property right institutions. Macours et al. have shown the inefficiency of land co-ownership in Eastern Europe. In another paper, Macours and her co-authors show that insecurity of land property rights in the Domican Republic limits the size of the rental market and encourages landlords to contract only with tenants with whom they have close social links. A different strand of research has looked into social norms. Some research has analyzed the role of such norms within the family or in the private sphere. Other papers have looked at norms outside the family.

Partner 3 – FUNDP

FUNDP

At FUNDP researchers also contributed to all areas of the project in the following way. In WP1Plamen Nikolov’s experimental projects addressed how parents respond to an exogenous shock related to an older RCT with folic acid (affecting cognitive development and child health). He investigated how and whether parents respond to reinforcing or offsetting through parental responses the biological benefit of the RCT intervention. Marianna Battaglia and Lara Lebedinski investigated the impact of the Roma Teaching Assistant Programme in Serbia in its first year of introduction on the following schooling outcomes: marks, absences and probability to drop out. In another study Marianna Battaglia and Lara Lebedinski used first-hand collected data to examine how a remedial education programme for primary school-age children affects parental aspirations about their kids' future.

Three Researchers under FUNDP have contributed to objectives of WP2 Leblois assessed the risk mitigation capacity of weather index-based insurance for cotton growers. He compared the capacity of various weather indices coming from different sources (daily rainfall, temperatures and satellite imagery) to increase the expected utility of a representative risk-averse farmer. Leblois also focused on the long-standing debate by exploiting the particularly interesting institutional history of SubSaharan African cotton markets to estimate the impact of market structure on output and productivity. Giorgia Barboni studied the flexibility in the repayment mechanisms addressing the downfalls of strict repayment schedules which might also inhibit entrepreneurship and force borrowers to undertake low-risk. P. Nikolov worked on an experimental projects in Tanzania "Is Risk Tolerance Time Inconsistent" addresses sub-optimal investment in agricultural products. His paper shows results from a pilot field experiment in Kenya exploring a behavioral economics topic of how choice architecture can affect the amount of risk people take.

In WP3 the role of institutions in development is the major focus of JP Platteau’s research agenda. Over the last years, he has particularly investigated the role of religion, especially Islam, in shaping institutions and markets. Another aspect of the research carried out in Namur is the examination of the negative effects of traditional institutions as they constrain the aspirations, the behaviour or the development of major actors in developing economies. In this context, a major effort has been made by JM Baland and C Guirkinger to understand how the traditional family solidarity in Africa can be a serious impediment to growth, by over-taxing the successful entrepreneurs and inducing them to hide part of their savings and wealth. Baland has studied the role of governance in development and examined the sustainability and organisational design in informal saving groups in Kenya. He has also studied decentralization and forest degradation in India. Vincenzo Verardi has estimated the costs of social conflict in Bolivia.

Partner - LSE

During the period covered by the AMID project, researchers at the LSE have made several contributions to all three work packages. In Work Package 1 Oriana Bandiera and coauthors analysed a key challenge for the effective delivery of public services , namely incentive schemes that motivate final providers such as teachers and health workers. Oriana Bandiera, Robin Burgess and others evaluated a training program for adolescent girls in Uganda. Robin Burgess debated that tropical deforestation accounts for almost one-fifth of greenhouse gas emissions worldwide and threatens the world’s most diverse ecosystems. In WP2 Oriana Bandiera and Robin Burgess studied whether basic entrepreneurship programme can transform the economic lives of the poor. Greg Fischer and Maitreesh Ghatak analyze the theoretical underpinnings of high-frequency repayment, afeature in nearly all microfinance contracts that has been largely overlooked by theorists. In WP3 Timothy Besley and Torsten Persson (IIES) went beyond the typical economists’ assumption that the state has sufficient institutional capacity to support markets and levy taxes. They develop a framework where .policy choices in market regulationand taxation are constrained by past investments in the legal and fiscal capacity of the state. In addition Timothy Besley and Maitreesh Ghatak explored the consequences of creating and improving property rights so that fixed assets can be used as collateral. Oriana Bandiera and Gilat Levy analyzde whether political outcomes in local democracies are determined by the preferences of the median -typically poor-agents or whether they reflect the wishes of the wealthy elites. Gerard Padro and others investigate the effects of introducing elections on public goods and redistribution in rural China.

Partner - SU

Participants from the IIES, Stockholm University node, have made important contributions in all three main themes of the AMID program. On WP1 Martina Bjorkman and team leader Jakob Svensson have written two articles on the impact of policies to enhance local accountability in primary health provision. Closely related, Bilal Siddiqi (ESR) and co-authors, have worked on a large scale RCT with aim of testing various ways to improve service delivery incentives in the health sector in Sierra Leone. Team member Masayuki Kudamatsu looked to answer the question “To what extent have weather fluctuations in Africa affected infant mortality over the last fifty years?” Results suggest that infants born in areas with epidemic malaria, who experience worse malarious conditions during the time in utero than the site-specific seasonal means, face a higher risk of death. Team member Tessa Bold produced a set of important papers on education. ESR Lucia Corno and ESR Sonya Krutikov has written a set of highly policy relevant papers on the determinants and impact of HIV in Southern Africa. Together with Martina Bjorkman (Bocconi node) and team leader Jakob Svensson, and Damien de Walque, Lucia Corno has also completed the first draft of a paper evaluating an innovative approach to reduce the spread of HIV in Lesotho. In WP 2 Jakob Svensson and David Yanagizawa have worked on information asymmetries and market activity, gathering evidence from Uganda's agricultural market. Simon Quinn (ESR) has been working on a project entitled “Identification of Discrete Ordered Choices and their Consequences for Discrete Ordered Regressors: Estimating the shape of the education-earnings relationship in Tanzania”. In another paper by Simon Quinn uses a company law reform in Morocco as a natural experiment to study the value of corporate governance for bank credit. Andrea Guariso has written a very policy relevant paper, “The Rwandan coffee sector: out of the ordinary”, studying the transformation of the Rwandan coffee sector from a supplier of ordinary coffee to a player on the market for specialty coffee. On WP 3 Jakob Svensson, Martina Bjorkman, and David Yanagizawa, study the market for fake antimalarial medicine. In a paper with Bard Harstad, “Bribes, Lobbying, and Development”, Jakob Svensson has also analyzed the difference between lobbying and corruption as forms of influence-seeking activities, and the long term consequences of these two activities. In very interesting piece, “Kill thy Neighbor: The Effects of Militia Presence on Civilian Participation in the Rwandan Genocide”, Andrea Guariso and co-author, estimates the effects of organized violence on civilian participation in the Rwandan Genocide in 1994. Bilal Siddiqi, jointly with co-authors, have in a series of papers explored the effectiveness of new, and untested, interventions to strengthen post-conflict legal institutions, including community reconciliation programs, in Sierra Leone and Liberia. Finally, Tessa Bold and co-authors have written an important paper “Interventions & Institutions: Experimental Evidence on Scaling up Education Reforms in Kenya”, on the fundamental question about scaling up RCTs and institutional constraints.

TRAINING AND NETWORKING

The key feature of the AMID training programme is that it aims to jointly develop the broad skills and general tools for research used in the disciplines involved in this project and the more specific skills required for a deep understanding of development issues. All research fellows in the AMID programme have been very well integrated into the research programme of the network. They had beneficial interactions with other post-docs and students, and participated actively in the scientific activity of their host institution. Furthermore, they have been encouraged to travel and establish collaborations with other network nodes. They have also attended and presented their work at major network meetings as well as international conferences and workshops related to the AMID network’s research activity. They have considerably enlarged their expertise and acquired complementary skills: presentation skills and knowledge of the language of the host country. Many of them were also in charge of organising research seminars acquiring both organisational and teaching skills. Where necessary, all Career Development Plans were established on time and have been followed closely during the reporting year.

DISSEMINATION

The dissemination of project results to public takes place through a combination of channels, including AMID website http://amid.cepr.org/ publications and presentation of papers at the conferences and workshops organised for the project and at other meetings organised by CEPR and network partners.