“Why do People Stay Poor?”, with Oriana Bandiera, Robin Burgess, Maitreesh Ghatak & Anton Heil
Abstract: There are two views as to why poverty persists. The poverty traps view emphasizes how individuals with identical underlying parameters can end up with different standards of living because they face unequal access to opportunities. The convergence view emphasizes how individuals end up with different standards of living because they have the same opportunities but different underlying parameters. We use data collected for a randomized control trial of an asset transfer program on 23,000 individuals from across the village wealth distribution and across four waves between 2007 and 2011 in Bangladesh to differentiate between these two views. We find evidence that is consistent with the poverty traps view. We identify a threshold level of capital such that individuals with initial capital below the threshold remain trapped in poverty whereas those above move beyond the poverty threshold and escape poverty. For individuals close to the poverty threshold the asset transfer is sufficient for them to successfully take on a new and more remunerative occupational activity (livestock rearing) whereas for those further away they fail to do this and fall back into poverty where they remain reliant on itinerant wage labor. We use data from control villages to show that (i) there is a missing mass around the threshold, and (ii) differences in individual productivity or random shocks to productive assets cannot explain the response to the program. We test three possible mechanisms underlying the trap - nutritional, behavioural and technological, and find evidence only for the last. We discuss the implications of having to cross a poverty threshold to escape poverty for anti-poverty policies.
“Strategic Fire Setting: Evidence from 100,000 Forest Fires in Indonesia”, with Robin Burgess & Benjamin Olken
Abstract: Fire is often used for land clearing in the developing world, but once set fires may burn out of control. This creates a local environmental externality: if others own the area burned by a spreading fire, those who set the fires may not internalize the full damage risk. We explore how failing to internalize this risk drives the extensive forest fires in Indonesia, which burned over 2.5 million hectares in 2015 alone. We merge 15 years of daily satellite data over time and space to construct, for over 100,000 unique fires, the point of ignition and the extent to which each fire spread. We exploit the fact that fires are more likely to spread on windy days, combined with maps of property boundaries in the entire Indonesian forest system, to identify areas where fires are more likely to spread to others' property, to identify strategic fire setting behavior. We estimate that fires would be reduced by between 22 and 48 percent if the full local damage risk was internalized. Fire setters do distinguish among whose land they would burn: for example, fire setters seem to avoid the risk of burning national parks, which is most likely to lead to government sanctions. Voluntary certification systems, in particular the Roundtable on Sustainable Palm Oil (RSPO), reduce the overall use of fires but do not affect the degree to which owners internalize the costs of fires on neighbors. Similarly, we find much less use of fire in local election years, but this affects the level of fires, not the degree to which property owners internalize the fire externality. The results suggest penalizing owners for the damage spreading fires cause to others, for example through an effective tort system or enforcement regime, could considerably reduce forest fires.
“Economic Conditions in Early Childhood and the Inter-generational Transmission of Poverty”, with Oriana Bandiera, Robin Burgess, Mushtaque Chowdhury & Imran Rasul
Abstract: The economic conditions children experience during their early years can have permanent impacts on cognitive and non-cognitive traits that shape their outcomes later in life. This might be key to explaining the persistence of poverty across generations. The aim of this project is to establish whether this chain can be broken. This will be achieved via a large-scale RCT designed to evaluate an innovative anti-poverty program targeting women in the poorest areas of Bangladesh. We build on our existing work demonstrating that this program transformed the economic lives of the beneficiaries from 2007-2014, in order to determine whether these benefits carried over to the next generation. We aim to track all the children of the beneficiaries who were aged 0-10 at treatment date, test their outcomes against those of their counterparts in control villages and assess how the effect of treatment depends on their age at exposure to the program. The findings will shed light on the dynamics of poverty and inform cost-benefit analyses of anti-poverty programs.
Endline survey in progress (June - October 2018)
“Evaluating the Dar es Salaam Bus Rapid Transit System”, with Gharad Bryan, Melanie Morten & Bilal Siddiqi
Midline survey complete (October 2017)