Recent conference highlights







Uncovering researchers’ implicit bias

I loved this post from the World Bank’s Let’s Talk Development blog on uncovering researchers’ own biases in survey design:

Last year, I was in Nairobi, Kenya … to set up the data collection efforts for a four-country study. One of the goals of this study was to replicate results from lab experiments that suggested poverty is a context that shapes economic decision-making amongst households.

One of our replication questions was a vignette proposed by Sendhil Mullainathan and Eldar Shafir in their book Scarcity. … Shafir and Mullainathan’s findings show that commuters in Princeton, NJ were more likely to say that they would travel to another store for a $50 discount when purchasing a $100 product than when purchasing a $1,000 product. Less affluent individuals at a soup kitchen in Trenton, NJ, however, did not display this kind of inconsistency. For them, the marginal utility of money remained constant, regardless of the cost of the hypothetical product.

With the aim of replicating this question in four developing countries, we took the vignette to … Nairobi. After spending two days field-testing this hypothetical scenario, I was surprised that most of the respondents, particularly those from low-income households, said that they would not travel for the discount. Why was everyone hesitant to travel, regardless of the discount amount? Why are they seemingly exhibiting the preferences of the more affluent in the US?

Somewhat surprised by this discrepancy, I asked multiple respondents’ the reasons behind their choice. One person replied quite plainly, “There is no guarantee that the product will still be there once I go across town. It’s very likely that the product is gone by the time I get there.” Of course! By assuming the availability of the product, we had let our own implicit biases, based on our mental models, influence the design of the question. Since the original question was conducted in the United States, a developed country, implicit in the question was the assumption that availability is generally not a problem. However, for the respondents from less affluent communities, this assumption was not explicit.

Forecasting the growth of municipal budgets in Africa

The Prepaid Economy has a good piece on the challenges of budgeting for rapid growth in major African cities.  I’m not sure how the figures in the graph below were derived, but it’s an interesting way of thinking about the relationship between current city size, population growth, and GDP growth.  Looks like Kinshasa won’t be overtaking Lagos as the largest city in sub-Saharan Africa any time soon if these population growth projections hold true.

municipal budgets

What’s the best way to pay people not to rebel?

Saumitra Jha recently gave a fascinating lecture at Berkeley’s comparative colloquium in which he discussed some of his current work on designing financial instruments that can promote political stability. He drew extensively on the case of Japan in the late 1800s, where the government granted bonds to ex-samurai who were opposed to its modernizing reforms, then encouraged the bondholders to invest in the national banking system.  This gave a potentially militant group a significant stake in political stability and financial modernization.  Jha’s description of this process is worth quoting at length:

The government created an innovative, ethnically-delimited asset – the bonds given to samurai — even while eliminating the privileges and obligations that had made this ethnic group distinct. It then took the ex-samurai, one [group] that was the most likely to engage in violence and enhance political risk, and gave them incentives to become local bankowners – a group with arguably the greatest incentives to avoid engaging in violent actions that would raise the political risk of their investments in local ventures (often rice and silk). By aligning the samurai’s interests against political risk, these financial innovations aligned their interests with not only the merchants who were their fellow merchant share-holders but society at large. Since all could benefit, and in fact the samurai had explicit stakes, as bankers, in the nation’s future, they also meant that the samurai could give up their arms and credibly share the gains that modernisation and reduced political risk provided.

This process also produced a truly phenomenal photo of samurai-turned-banker Eiichi Shibusawa, who’s known as the father of Japanese capitalism for his role in founding the Tokyo Stock Exchange and a number of other publicly held companies.

Eiichi_Shibusawa_transformationFrom Wikipedia

What I find fascinating here is the ways in which this process is both similar to and different from current debates about post-conflict power-sharing in Africa.  The idea behind consociationalism is that placing representatives of all contesting groups in power ought to give them a common interest in maintaining the stability of the state.  This appears to have worked out relatively well in Burundi for the last ten years.  Lemarchand is explicit about Bujumbura’s focus on maintaining interethnic stability even at the cost of good governance: “[the administration is] a top-heavy political machinery whose sole purpose is to provide as many jobs as are needed to meet the requirements of political stability.  The government is not meant to govern; its purpose is to offer an attractive alternative to rebellion” (2009, p. 149).  In a sense, then, this is simply a less efficient means of accomplishing what the samurai bonds did in Japan.

However, institutionalized power-sharing has often failed in Africa as well.  The prime case here is obviously the DRC, where the 2002 power-sharing accords got most – but not all – of the major rebel groups durably off the battlefield.  The Nkunda- and Ntaganda-centric set of groups which continually rebelled in the east were largely spurred on by Rwanda, but also presumably believed that they might get a better deal out of some future peace agreement.  Would a different benefit structure for ex-rebels – shares in banks as opposed to positions in the government – have led to a different outcome?  The Congolese central bank has been issuing bonds for several years now, and the banking sector is badly underdeveloped, so promoting investment (and of course concomitant regulatory mechanisms) there might indeed benefit everyone.  If readers have other examples of the strategic use of financial instruments to promote political stability, I’d love to hear about them.

Which African countries have the highest income tax rates?

Mark Anderson recently shared a link to an interesting map of tax rates on the average income for each country in Africa.  The original map is from an international relocation site called MoveHub.  I’m guessing this is about nominal tax rates and not effective tax collected.

Africa taxes

Which countries surprise you?  I for one would not have expected that Rwanda’s tax rates are higher than either Burundi’s or Uganda’s.


Malawi’s missing economic growth

Lise Rakner, who’s visiting Berkeley from the University of Bergen for the year, recently gave an interesting talk on how competitive elections haven’t done much to improve development outcomes in Malawi.  As a rough measure of this, I compared Malawi’s economic growth since the mid-1980s to its neighbors – Mozambique, Tanzania and Zambia.

GDP Per Cap(Data from the World Bank, via the Google Public Data Explorer. The graph looks different depending on whether you use current dollars or a PPP adjustment, but doesn’t change the fact that Malawi hasn’t grown as fast as the other two since 2000.)

I asked Lise what she attributed these divergent outcomes to, and her hypothesis was natural resources.  This clearly accounts for Zambia’s higher GDP, but doesn’t explain why every country except Malawi saw a steady increase in GDP since 2000.

All four of these countries are considered “partially free” by Freedom House, so it’s not clear that the political environment is substantially worse in Malawi than elsewhere.  They also looked very similar on the World Governance Indicators’ measures of government effectiveness, regulatory quality and rule of law in 2012.  (Look at the error bars on the estimates – they’re all overlapping.)

WGI(Data from WGI.  I didn’t include data from 2000 or earlier to keep the graph easy to read, but they looked fairly similar at that point as well.)

So what’s going on?  I don’t know Malawi at all, so any explanation would be appreciated!

Updates from PacDev

I had a great time at the Pacific Conference for Development Economics this weekend.  Sendhil Mullainathan really stole the show with an amazing keynote on his new book, Scarcity (which looks like essential reading for anyone interested in poverty issues), but there were also a number of fascinating studies on the political economy of conflict and post-conflict recovery.

  • Tarek Ghani presented some of his joint work with Michael Callen and Josh Blumenstock on the use of mobile money for salary payments in Afghanistan.  Given the amount of violence ongoing in the south of the country, there’s a premium on liquidity in case one has to suddenly flee, and the authors were interested in whether cash or mobile accounts better met this need.  They found that respondents who believed that higher rates of violence would occur in the future were less likely to hold a balance on their mobile accounts, preferring cash instead.  For all the potential of mobile money, there’s still a lot that implementors don’t understand about why people do (or don’t) decide to adopt it.
  • Bilal Siddiqi discussed results from a justice sector intervention in Liberia (joint with Justin Sandefur).  They framed the study with the observation that, while most Liberians prefer customary forms of dispute resolution to (expensive, inefficient) state courts, women are actually more likely to go to state courts when they’re suing men.  The implicit idea is that customary courts are less likely to rule in their favor.  The authors look at the effects of a legal aid program which made it easier for people to access state courts, and found that respondents who participated in the program were happier with their judicial outcomes and had better food security.