by Dean Karlan
50 designed an RCT to find out. Shawn Cole, Xavier Giné, Jeremy Tobacman, Petia Topalova, Robert Townsend, and James Vickery. 2008. “Barriers to Household Risk Management: Evidence from India.” Mimeo, World Bank. The working paper is at http://www.hbs.edu/research/pdf/09-116.pdf (accessed 4/26/10).
Chapter 4
58 go beyond the tangible. The story of Mrs. Potosí comes from FINCA’s Web site. http://www.villagebanking.org/site/apps/nlnet/content2.aspx?c=erKPI2PCIoE&b=5004173&ct=7159949 (accessed 1/5/10).
59 to change lives. The newsletter featuring Marta’s story is available at: http://www.opportunity.org/wp-content/uploads/2010/06/Impact-2008-Spring. pdf (accessed 1/5/10). It appeared originally in Impact (spring 2008 edition), published by Opportunity International, 2122 York Road, Suite 150, Oak Brook, IL 60523. Janna Crosby, editor.
60 banking services to the poor. For the full story, told in his own words, see: Muhammad Yunus and Alan Jolis. 2003. Banker to the Poor: Micro-lending and the Battle Against World Poverty. New York: Public Affairs, hardcover pp. 20–29. ISBN 978-1-89162-011-9.
61 approaching $650 million. These figures are taken from Mix Market, a great source of industry data on microfinance: http://www.mixmarket.org/mfi/grameen-bank (accessed 3/7/10).
61 some 155 million borrowers. State of the Microcredit Summit Campaign Report 2009. Washington, DC: Microcredit Summit Campaign.
62 will eat for a lifetime. http://www.nytimes.com/2005/09/21/readersopinions/bono-questions.html (accessed 4/9/10).
65 82 percent APR yield. APR (for “annual percentage rate”) is the most common way to quote interest rates. It’s the way we usually talk about costs and returns for borrowing, saving, and investments. Credit card agreements, certificate of deposit accounts, car financing, and mortgages are just a few places where you’ll find APR being discussed. These microcredit interest rate figures are portfolio yield numbers, from publicly available accounting data. See, for example, http://www.themix.org for how these data are calculated.
67 that would serve everybody. Dean Karlan and Jonathan Zinman. January 2010. “Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts. “Review of Financial Studies, 23(1).
70 the poor really had. Suresh de Mel, David McKenzie, and Christopher Woodruff. 2008. “Returns to Capital: Results from a Randomized Experiment.” Quarterly Journal of Economics 123(4):1329—72. The same researchers are also replicating and expanding the study in Ghana and Sri Lanka with the help of IPA in the field.
72 less than $2.50 per day. http://www.globalissues.org/article/26/povertyfacts-and-stats (accessed 4/4/10).
73 returns were actually negative. For a more complete analysis of the gender results, see Suresh de Mel, David McKenzie, and Christopher Woodruff. 2009. “Are Women More Credit Constrained? Experimental Evidence on Gender and Microenterprise Returns.” American Economic Journal: Applied Economics, 1(3):1—32. This is the companion paper to the Quarterly Journal of Economics article cited above.
75 made entrepreneurial loans. Dean Karlan and Jonathan Zinman. 2010. “Expanding Microenterprise Credit Access: Using Randomized Supply Decisions to Estimate the Impacts in Manila.” Working Paper.
78 to conduct an RCT. Abhijit Bannerjee, Esther Duflo, Rachel Glennerster, and Cythia Kinnan. May 2009. “The Miracle of Microfinance? Evidence from a Randomized Evaluation.” Poverty Action Lab Working Paper 101.
Chapter 5
89 work on a given day. Colin Camerer, Linda Babcock, George Loewenstein, and Richard H. Thaler. 1997. “Labor Supply of New York City Cab Drivers: One Day at a Time.” Quarterly Journal of Economics 112(2):407—441.
92 self-employed or casual workers. http://www.wiego.org/stat_picture (accessed 3/30/10). Microcredit clients are doubly unlikely to be formally employed because so much of microcredit is directed toward individuals who own their own businesses.
93 skills they already know. . . . Muhammad Yunus and Alan Jolis. 2003. Banker to the Poor: Micro-Lending and the Battle Against World Poverty. New York: Public Affairs, p. 140.
94 Peruvian microlender FINCA Peru. FINCA Peru is not affiliated with FINCA International, the organization I worked with in El Salvador. It shares the name because it was originally founded as an arm of FINCA.
95 their weekly meetings. Dean Karlan and Martín Valdivia. “Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions.” Review of Economics and Statistics, forthcoming.
96 business training for its clients. http://personal.lse.ac.uk/fischerg/Assets/Drexler%20Fischer%20Schoar%20-%20keep%20it%20Simple.pdf.
97 enterprises in this study. Miriam Bruhn, Dean Karlan, and Antoinette Schoar. May 2010. “What Capital Is Missing from Developing Countries?” American Economic Review Papers & Proceedings.
104 same technique in a project. Dean Karlan and Jonathan Zinman. 2010. “A Methodological Note on Using Loan Application and Survey Data to Measure Poverty and Loan Uses of Microcredit Clients.” Working paper.
105 proceeds for consumption. October 2008. “The Unbanked: Evidence from Indonesia.” World Bank Economic Review 22(3):517—537.
Chapter 6
111 Ghana’s per capita annual income. The UN statistics division, reported here by UNICEF, states Ghana’s 2008 gross national income (GNI) per capita as $670: http://www.unicef.org/infobycountry/ghana_statistics.html#69 (accessed 5/7/10).
114 Who Is the Borrower? The economic jargon for this phenomenon is “adverse selection.” It was first explicitly written out in economics by Nobel laureate Joseph Stiglitz and Andrew Weiss. The paper is: Joseph Stiglitz and Andrew Weiss. June 1981. “Credit Rationing in Markets with Imperfect Information.” American Economic Review 71(3):393—410.
115 How Do We Know the Borrower Can Pay? The economic jargon for this phenomenon, where a lack of incentives to repay (e.g., not holding collateral) causes borrowers to try less hard to repay their loans or take bigger risks with borrowed funds, is “moral hazard in effort” or “ex-ante moral hazard.”
116 most employment in Ghana is informal. http://unstats.un.org/unsd/demographic/products/indwm/ww2005/tab5e.htm (accessed 3/30/10).
120 to children’s education. http://www.grameen-info.org/index.php?option=com_content&task=view&id=22&Itemid=109 (accessed 3/30/10).
124 3.7 million by 2004. Again, this is thanks to the Mix Market. The client figures for Grameen are found at http://mixmarket.org/node/3110/data/100636/products_and_clients.total_borrowers/usd/2000-2004 (accessed 4/26/10).
125 group-liability loans head-to-head. Xavier Giné and Dean Karlan. May 2010. “Group versus Individual Liability: Long Term Evidence from Philippine Microcredit Lending Groups.” Working Paper.
129 FINCA Peru’s loan clients. Dean Karlan. December 2005. “Using Experimental Economics to Measure Social Capital and Predict Financial Decisions.” American Economic Review 95(5):1688—1699.
134 better performance as clients. Dean Karlan. February 2007. “Social Connections and Group Banking.” Economic Journal 117:F52–F84.
136 frequency, group dynamics, and client default. Benjamin Feigenberg, Erica Field, and Rohini Pande. June 2010. “Building Social Capital through Microfinance.” Harvard Kennedy School Working Paper No. RWP10-019.
139 Kiva.org, the $2 million. From the Whole Planet Foundation’s 2009 annual report, available at http://www.wholeplanetfoundation.org/files/uploaded/WPF_2009_Audited_Financials.pdf (accessed 3/25/10).
141 most of the time—it’s savings. Stuart Rutherford’s The Poor and Their Money is a wonderful quick read that talks a lot about this basic idea, and also makes the point that what the poor need more than anything is a way of making small deposits and large withdrawals. The order isn’t quite so important to them, in many cases.
Chapter 7
149 for either saving or borrowing. The Financial Access Initiative offers a wealth of information about banking and other financial services in the developing world and beyond. This particular figure is the subject of one of
their informative focus notes, available at http://financialaccess.org/sites/default/files/110109%20HalfUnbanked_0.pdf (accessed 4/26/10).
149 western Kenya in 2006. Pascaline Dupas and Jonathan Robinson. September 2010. “Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya.” Working Paper.
155 SEED, the savings account. Nava Ashraf, Dean Karlan, and Wesley Yin. May 2006. “Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines.” Quarterly Journal of Economics 121(2):635—672.
158 a little nudge. A “nudge” is a tweak that changes our decisions without changing the underlying alternatives we have to choose from. An example of a nudge is changing the order of food in a buffet line: If you put the fruit before the brownies, people will probably choose more fruit. Thaler and Sunstein coined the term nudge and wrote a fascinating book about using nudges to help us make the choices we want to make. Richard Thaler and Cass Sunstein. 2008. Nudge: Improving Decisions About Health, Wealth, and Happiness. New Haven: Yale University Press.
159 employees’ saving progress. Shlomo Benartzi and Richard Thaler. February 2004. “Save More Tomorrow: Using Behavioral Economics to Increase Employee Savings.” Journal of Political Economy 112.1, Part 2: S164–S187. This study, in contrast with most of the other studies discussed in this book, was not implemented with a randomized control trial. The paper discusses the selection biases that would have to be present to pose serious concerns, and they are fairly stark and odd, thus leaving the reader (at least me) quite convinced of their findings. An important question does remain: Does the increase in retirement savings come at the cost of lower current consumption, or higher debt? If the latter, then this could be a smudge to the nudge.
163 Bolivia, Peru, and the Philippines. Dean Karlan, Maggie McConnell, Sendhil Mullainathan, and Jonathan Zinman. April 2010. “Getting to the Top of Mind: How Reminders Increase Saving.” Working Paper.
164 people were also 6 percent. This figure of 6 percent is calculated from Table 4, Panel A, Column 3 of the paper cited above, as follows. The effect of receiving a reminder on the likelihood of reaching one’s savings goal was estimated at 3.1 percent. Across the entire sample, 54.9 percent of people reached their goals. So the reminders constitute a (3.1/54.9=)5.6 percent improvement.
164 Peter Orszag, and Emmanuel Saez. Esther Duflo, William Gale, Jeffrey Liebman, Peter Orszag, and Emmanuel Saez. November 2006. “Savings Incentives for Low- and Middle-Income Families: Evidence from a Field Experiment with H & R Block.” Quarterly Journal of Economics 121(4):1311—1346.
165 an RCT on retirement savings. Emmanuel Saez. 2009. “Details Matter: The Impact and Presentation of Information on the Take-up of Financial Incentives for Retirement Saving.” American Economic Journal: Economic Policy 1(1):204–228.
Chapter 8
167 over a billion of the world’s poor are farmers. WB World Development Report 2008, p.1. http://siteresources.worldbank.org/INTWDR2008/Resources/WDR_00_book.pdf
170 evaluate DrumNet with an RCT. Nava Ashraf, Xavier Giné, and Dean Karlan. November 2009. “Finding Missing Markets (and a Disturbing Epilogue): Evidence from an Export Crop Adoption and Marketing Intervention in Kenya.” American Journal of Agricultural Economics 91(4).
172 a simple RCT to find out. Esther Duflo, Esther, Michael Kremer, and Jonathan Robinson. 2008. “How High Are Rates of Return to Fertilizer? Evidence from Field Experiments in Kenya.” American Economic Review 98(2):482–488.
176 price/service combination highest. Richard Thaler. 1991. The Winner’s Curse: Paradoxes and Anomalies of Economic Life. New York: Free Press, p. 69.
176 pull on them as well. Shlomo Benartzi and Richard Thaler. 2001. “Naïve Diversification Strategies in Defined Contribution Saving Plans.” American Economic Review 91(1):79—98.
177 following a major earthquake. M. H. Bazerman. 1986. Judgment in Managerial Decision Making. Hoboken, NJ: John Wiley & Sons, Inc., p. 19.
178 likelihood of an event happening. Amos Tversky and Daniel Kahneman. 1973. “Availability: A Heuristic for Judging Frequency and Probability.” Cognitive Psychology 5:207–232.
179 Africa on this and other projects. Esther Duflo, Michael Kremer, and Jonathan Robinson. July 2009. “Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya.” NBER Working Paper No. 15131.
181 adopt new tools and techniques. Timothy Conley and Christopher Udry. March 2010. “Learning About a New Technology: Pineapple in Ghana.” American Economic Review 100(1):35—69.
184 For promised joy! The lines come from Robert Burns’s poem “To a Mouse.” The actual (older) Scots text is: “The best laid schemes o’ Mice an’ Men,/ Gang aft agley,/An’ lea’e us nought but grief an’ pain,/For promis’d joy!”
185 grandparents had for ages. DrumNet does continue to operate, but not in that area, and not working on those crops.
186 track the sales of fish over time. Robert Jensen. August 2007. “The Digital Provide: Information (Technology), Market Performance, and Welfare in the South Indian Fisheries Sector.” The Quarterly Journal of Economics 122(3):879—924.
188 the story of the challenger. Michael Kremer. August 1993. “The O-Ring Theory of Development.” The Quarterly Journal of Economics 108(3):551—575.
Chapter 9
192 and greater gender equality. Educated people have better jobs, better health, and greater gender equality. “Education and the Developing World.” Center for Global Development, 2006.
198 children around the world aren’t in school. “Education and the Developing World.” Center for Global Development, 2006.
199 a simple solution with an RCT. David Evans, Michael Kremer, and Muthoni Ngatia. 2008. “The Impact of Distributing School Uniforms on Children’s Education in Kenya.” Mimeo.
202 Progresa’s impact on schools enrollment. T. Paul Schultz. 2004. “School Subsidies for the Poor: Evaluating the Mexican Progresa Poverty Program.” Journal of Development Economics 74(1):199–250.
203 to design an evaluation. Felipe Barrera-Osoria (World Bank), Marianne Bertrand (University of Chicago), and Francisco Pérez (GI Exponential). 2010. “Improving the Design of Conditional Transfer Programs: Evidence from a Randomized Education Experiment in Colombia.” American Economic Journal: Applied Economics, forthcoming.
204 counterparts in the control group. These figures come from the paper cited in the previous endnote, Table 3, Column 7 as follows. The control group’s average attendance rate of .786 implies an absence rate of .214. Treatment effects of attendance increases of .025, .028, and .055 for the basic program, first variation, and second variation represent decreases in absence of (.025/.214=)11.6 percent, (.028/.214=)13.1 percent, and (.055/.214=)25.7 percent, respectively.
205 the second more than tripled it! Evaluating the impact of school-based deworming on student health and attendance in Kenya. These figures come from the same paper, Table 7, Column 6, as follows. For the first variation, a treatment effect of .094 on the control group mean of .205 represents a 46 percent increase in tertiary enrollment. For the second variation, a treatment effect of .487 on the control group mean of .205 represents a 237 percent increase in tertiary enrollment.
206 is about twenty cents per pill. http://Web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTHEALTHNUTRITIONANDPOPULATION/EXTPHAAG/0,contentMDK:20785786~menuPK:1314819~pagePK:6422 9817~piPK:64229743~theSitePK:672263,00.html (accessed 3/31/10).
207 in western Kenya in 1998. Edward Miguel and Michael Kremer. 2004. “Worms: Identifying Impacts on Education and Health the Presence of Treatment Externalities.” Econometrica 72(1):159–217.
208 preschool students in Delhi, India. Gustavo Bobonis, Edward Miguel, and Charu Puri-Sharma. 2006. “Iron Deficiency Anemia and School Participation.” Journal of Human Resources 41(4):692—721.
209 higher incomes in the long run. Hoyt Bleakley. 2007. “Disease and Development: Evidence from Hookworm Eradication in the American South.” Quarterly Journ
al of Economics 122:73–117.
209 rolling in from Kenya. Sarah Baird, Joan Hamory Hicks, Michael Kremer, and Edward Miguel. “Worms at Work: Long-run Impacts of Child Health Gains.” Working Paper.
212 school-age children. http://data.un.org/Data.aspx?q=India+population+age+5-14&d=PopDiv&f=variableID:20;crID:356 (accessed 3/31/10). This figure comes from a query of the UNdata online database, a useful resource for country-level statistics on economics, demographics, health, education, and more. The quarter-billion figure is the 2005 estimate for India population ages five to fourteen (returned 246,293,000).
212 couldn’t do basic arithmetic. Pratham Organization. 2006. Annual Status of Education Report 2005. Mumbai: Pratham Resource Center.
215 affected students’ learning. Abhijit Banerjee, Shawn Cole, Esther Duflo, and Leigh Linden. 2007. “Remedying Education: Evidence from Two Randomized Experiments in India.” Quarterly Journal of Economics 122(3):1235–1264.
217 designed another RCT. Esther Duflo, Pascaline Dupas, and Michael Kremer. November 2008. “Peer Effects and the Impact of Tracking: Evidence from a Randomized Evaluation in Kenya.” American Economic Review, forthcoming.
218 A 2005 survey. Pratham Organization. 2006. Annual Status of Education Report 2005. Mumbai: Pratham Resource Center.
220 village education into gear. Abhijit Banerjee, Rukmini Banerji, Esther Duflo, Rachel Glennerster, and Stuti Khemani. February 2010. “Pitfalls of Participatory Programs: Evidence from a Randomized Evaluation in Education in India.” American Economic Journal: Economic Policy 2(1):1–30.
Chapter 10
227 scheduled operating hours. Abhijit Banerjee, Angus Deaton, and Esther Duflo. 2004a. “Wealth, Health, and Health Services in Rural Rajasthan.” AER Papers and Proceedings 94(2):326—330.
228 evaluate it with an RCT. Abhijit Banerjee, Esther Duflo, and Rachel Glennerster. 2007. “Putting a Band-Aid on a Corpse: Incentives for Nurses in the Indian Public Health Care System.” Journal of the European Economics Association 6(2–3):487–500.