Showing papers by "Stefan Dercon published in 2012"

Growth and Chronic Poverty: Evidence from Rural Communities in Ethiopia

Abstract: What keeps some people persistently poor, even in the context of relative high growth? In this article, we explore this question using a 15-year longitudinal data set from Ethiopia. We compare the findings of an empirical growth model with those derived from a model of the determinants of chronic poverty. We ask whether the chronically poor are simply not benefiting in the same way from the same factors that allowed others to escape poverty, or whether there are latent factors that leave them behind? We find that this chronic poverty is associated with several initial characteristics: lack of physical assets, education and ‘remoteness’ in terms of distance to towns or poor roads. The chronically poor appear to benefit from some of the drivers of growth, such as better roads or extension services, in much the same way that the non-chronically poor benefit. However, they appear to have lower growth in this period, related to time-invariant characteristics, and this suggests that they face a conside...

Political Connections and Social Networks in Targeted Transfer Programs: Evidence from Rural Ethiopia

Abstract: Despite increasingly large scale social protection programs in Africa, we have limited evidence on the local political economy of their allocation. We investigate community-based processes for food aid allocation and the role of political and social networks, using the case of Ethiopia in the aftermath of a serious drought in 2002. Local political authorities are in charge of food transfers, in terms of free food aid or Food for Work programs. We find that although targeting is clearly imperfect, free food aid is responsive to need as well as targeted to households with less access to support from relatives or friends. We also find a strong correlation with political connections: households with close associates in official positions have more than a 12% higher probability of obtaining free food than households that are not well connected. This effect is large: someone without political connections has the same probability of getting food aid as someone more than twice as rich but with these conne...

Child Development and Economic Development: Lessons and Future Challenges

Abstract: Young Lives is a longitudinal study of childhood poverty, following the lives of 12,000 children in 4 countries (Ethiopia, the state of Andhra Pradesh in India, Peru and Viet Nam) over 15 years. The children are grouped in 2 cohorts – an older cohort, born in 1994-95, and a younger cohort, born in 2000-01. The study has followed the children since 2001, over the years leading up to the financial, food and energy price crisis of 2009, when all four of the Young Lives study countries had been experiencing rapid economic growth, in common with many other developing countries.

The transmission of International Commodity Prices to Domestic Producers

Abstract: Using detailed data from three simultaneous surveys of producers, traders, and exporters, this paper examines the transmission of international coffee prices through the domestic value chain in Uganda. We find that fluctuations in the international coffee price are reflected in prices paid by exporters and large traders. However, prices paid at the market level need not reflect prices actually received by farmers, This apparent lack of price transmission may be due to seasonal changes and to the fact that producers are more likely to sell at the farm gate when prices go up. We also find some evidence that he number of itinerant coffee buyers increases when prices rise.

Nonlinear Dynamics of Livestock Assets: Evidence from Ethiopia

Abstract: Recent research on the intertemporal dynamics of poverty using microeconomic data often hints at the existence of poverty traps, where some find themselves trapped at a low-level stable equilibrium while others enjoy a higher stable equilibrium. Without a sizable positive shock to well-being, those trapped at the low equilibrium will not automatically outgrow destitution, but merely fluctuate around that low-level equilibrium. Given the dramatic policy consequences implied by such a theory, knowledge about the location of the different equilibria would be extremely helpful. In this paper, we explore the possibilities of threshold-type models to identify those crucial parameters. We illustrate the method by searching for traps in the dynamics of livestock asset holdings in rural Ethiopia. We find evidence of distribution-dependent dynamics and multiple equilibria for tropical livestock units.

Offering Rainfall Insurance to Informal Insurance Groups: Evidence from a Field Experiment in Ethiopia

Abstract: We show theoretically that the presence of basis risk in index insurance makes it a complement to informal risk sharing, implying that index insurance crowds-in risk sharing and leading to a prediction that demand will be higher among groups of individuals that can share risk. We report results from rural Ethiopia from a first attempt to market weather insurance products to existing informal risk-sharing groups. The groups were offered training on risk management and the possible benefits of holding insurance. Among those trained we randomized the content of training, with some sessions focusing on the benefits of informally sharing basis risk. Our results suggest benefits from marketing index-based insurance with an emphasis on informally sharing basis risk, at least in terms of uptake. Specifically, and consistent with learning informed by the theoretical results, we found that members of groups whose leaders had received training that emphasized risk-sharing had considerably higher uptake.

School Meals as a Safety Net: An Evaluation of the Midday Meal Scheme in India

Abstract: Despite the popularity of school meals, little evidence exists on their effect on health outcomes. This study uses newly available longitudinal data from the state of Andhra Pradesh in India to estimate the impact of the introduction of a national midday meal program on anthropometric z-scores of primary school students, and investigates whether the program ameliorated the deterioration of health in young children caused by a severe drought. Correcting for self-selection into the program using a non-linearity in how age affects the probability of enrolment, we find that the program acted as a safety net for children, providing large and significant health gains for children whose families suffered from drought.

Is Green Growth Good for the Poor

Abstract: The developing world is experiencing substantial environmental change, and climate change is likely to accelerate these processes in the coming decades. Due to their initial poverty and their relatively high dependence on environmental capital for their livelihoods, the poor are likely to suffer most due to their low resources for mitigation and investment in adaptation. Economic growth is essential for any large-scale poverty reduction. Green growth, a growth process that is sensitive to environmental and climate change concerns, can be particularly helpful in this respect. The paper focuses on the possible trade-offs between the greening of growth and poverty reduction, and it highlights the sectoral and spatial processes behind effective poverty reduction. High labor intensity, declining shares of agriculture in GDP and employment, migration, and urbanization are essential features of poverty-reducing growth. The paper contrasts some common and stylized green-sensitive growth ideas related to agriculture, trade, technology, infrastructure, and urban development with the requirements of poverty-sensitive growth. It finds that these ideas may cause a slowdown in the effectiveness of growth to reduce poverty. The main lesson is that trade-offs are bound to exist; they increase the social costs of green growth and should be explicitly addressed. If they are not addressed, green growth may not be good for the poor, and the poor should not be asked to pay the price for sustaining growth while greening the planet.

School Meals as a Safety Net: An Evaluation of the Midday Meal Scheme in India

Abstract: Despite the popularity of school meals, little evidence exists on their effect on health outcomes. This study uses newly available longitudinal data from the state of Andhra Pradesh in India to estimate the impact of the introduction of a national midday meal program on anthropometric z-scores of primary school students, and investigates whether the program ameliorated the deterioration of health in young children caused by a severe drought. Correcting for self-selection into the program using a non-linearity in how age affects the probability of enrolment, we find that the program acted as a safety net for children, providing large and significant health gains for children whose families suffered from drought.

Nonlinear dynamics of livestock assets: Evidence from Ethiopia

Abstract: Recent research on the intertemporal dynamics of poverty using microeconomic data often hints at the existence of poverty traps, where some find themselves trapped at a low-level stable equilibrium while others enjoy a higher stable equilibrium. Without a sizable positive shock to well-being, those trapped at the low equilibrium will not automatically outgrow destitution, but merely fluctuate around that low-level equilibrium. Given the dramatic policy consequences implied by such a theory, knowledge about the location of the different equilibria would be extremely helpful. In this paper, we explore the possibilities of threshold-type models to identify those crucial parameters. We illustrate the method by searching for traps in the dynamics of livestock asset holdings in rural Ethiopia. We find evidence of distribution-dependent dynamics and multiple equilibria for tropical livestock units.

Is green growth good for the poor

Abstract: The developing world is experiencing substantial environmental change, and climate change is likely to accelerate these processes in the coming decades. Due to their initial poverty, and their relatively high dependence on environmental capital for their livelihoods, the poor are likely to suffer most due to their low resources for mitigation and investment in adaptation. Economic growth is essential for any large-scale poverty reduction. Green growth, a growth process that is sensitive to environmental and climate change concerns, is often seen to be particularly helpful in this respect, leading to a win-win in growth and poverty reduction terms, with additional gains for the cause of greening the planet and avoiding further disastrous environmental change. This paper argues that such a view ignores important trade-offs in the nature of"green growth"strategies, stemming from a poor understanding of the sector and spatial processes behind effective poverty reduction. High labor intensity, declining shares of agriculture in gross domestic product and employment, migration, and urbanization are essential features of poverty-reducing growth. The paper contrasts some common and stylized green-sensitive growth ideas related to agriculture, trade, technology, infrastructure, and urban development with the requirements of poverty-sensitive growth. It finds that they may well cause a slow-down in the effectiveness of growth in reducing poverty. The main lesson therefore is that trade-offs are bound to exist; they increase the social costs of green growth and should be explicitly addressed. If not, green growth may not be good for the poor and the poor should not be asked to pay the price for sustaining growth while greening the planet.

Live Aid Revisited: Long-Term Impacts of the 1984 Ethiopian Famine on Children

Abstract: In 1984, the world was shocked at the scale of a famine in Ethiopia that caused over half a million deaths, making it one of the worst in recent history. The mortality impacts are clearly significant. But what of the survivors? This paper provides the first estimates the long-term impact of the famine twenty years later, on the height of young adults aged 19-22 years who experienced this severe shock as infants during the crisis. An innovative feature of the analysis is that famine intensity is measured at the household level, while impacts are assessed using a difference-in-differences comparison across siblings, and compared with an IV cross-section, using rainfall as an instrument for the shock. We find that by adulthood, affected children who were aged of 12-36 months at the peak of the crisis are significantly shorter than the older cohort, and their unaffected peers, by at least 5cm. There are no significant effects on those in utero during the crisis, and we cannot rule out that for this cohort, the selection effect dominates scarring. Indicative calculations show that for the affected group such height loss may lead to income losses of around 5% per year over their lifetime. The evidence also suggests that the relief operations at the time made little difference.

Aid and Agency in Africa: Explaining Food Disbursements Across Ethiopian Households, 1994-2004

Abstract: We study the distribution of food aid in Ethiopia between 1994 and 2004 using data from the Ethiopian Rural Household Survey. Over this period village leaders had considerable discretion in disbursing aid subject to official guidelines and periodic monitoring. We use a principal-agent model and household panel data for approximately 940 households to understand biases in the allocation of aid. The model shows that correlations between aid and observed measures of need are not a good measure of targeting because agents have incentives to distort allocations within targeted classes. Consistent with the model, we find that the aid recipients match official criteria but disbursements are negatively correlated with determinants of need that are not easily observable by monitoring agencies, namely pre-aid consumption, self-reported power and involvement in village-level organizations. Our results suggest informal structures of power within African villages influence the extent to which food aid insulates some of the world's poorest families from agricultural shocks but also that policy guidelines do constrain permissible deviations from need-based allocations.

Density versus Quality in Health Care Provision

Abstract: Usage of health facilities in Ethiopia is among the lowest in the world; raising usage rates is probably critical for improving health outcomes. The government has diagnosed the principal problem as the lack of primary health facilities and is devoting a large share of the health budget to building more facilities. But household data suggest that usage of health facilities is sensitive not just to the distance to the nearest facility but also to the quality of health care provided. If the quality of weak facilities were raised to that currently provided by the majority of facilities in Ethiopia, usage would rise significantly. National data suggest that given the current density and quality of service provision, additional expenditure on improving the quality of service delivery will be more cost-effective than increasing the density of service provision. The budget allocation rule presented in the article can help local policymakers make decisions about how to allocate funds between improving the quality...

Political Connections and Social Networks in Targeted Transfer Programs: Evidence from Rural Ethiopia

Abstract: Despite increasingly large scale social protection programs in Africa, we have limited evidence on the local political economy of their allocation. We investigate community-based processes for food aid allocation and the role of political and social networks, using the case of Ethiopia in the aftermath of a serious drought in 2002. Local political authorities are in charge of food transfers, in terms of free food aid or food-for-work programs. We find that although targeting is clearly imperfect, free food aid is responsive to need, as well as targeted to households with less access to support from relatives or friends. We also find a strong correlation with political connections: households with close associates in official positions have more than 12 % higher probability of obtaining free food than households that are not well connected. This effect is large: someone without political connections has the same probability of getting food aid than someone more than twice as rich, but with these connections. The correlation with political connections is specifically strong in the immediate aftermath of the drought. Payment for food-for-work is also about a third higher for those with political connections. Although these programs appear to be responsive to need, in future it is crucial to look more closely at the local political economy of these programs.

Undernutrition and Psychosocial Competencies: Evidence from Four Countries

Abstract: Both cognitive and non-cognitive skills matter to understand a child's opportunities and outcomes in adulthood However, it is unclear how non-cognitive skills are acquired and what the role played by household investments is in this process Motivated by suggestions from the medical literature and by the recent literature on human skill formation, this paper uses longitudinal data from children growing up in developing countries to study the role of early nutritional history in shaping this type of skills We link height-for-age at the age of 7 to 8 to a set of psychosocial competencies measured at the age of 11 to 12 that are known to be correlated with earnings during adulthood: self-efficacy, self-esteem and aspirations We find that height-for-age predicts the three observed psychosocial measures Auxiliary estimations suggest that the relationship found is unlikely to be mediated by the effect that undernutrition can have on academic performance

rainfall insurance to informal insurance groups: evidence from a eld experiment in Ethiopia

Abstract: We show theoretically that the presence of basis risk in index insurance makes it a complement to informal risk sharing, implying that index insurance crowds-in risk sharing and leading to a prediction that demand will be higher among groups of individuals that can share risk. We report results from rural Ethiopia from a rst attempt to market weather insurance products to existing informal risk-sharing groups. The groups were oered training on risk management and the possible benets of holding insurance. Among those trained we randomized the content of training, with some sessions focusing on the benets of informally sharing basis risk. Our results suggest benets from marketing index-based insurance with an emphasis on informally sharing basis risk, at least in terms of uptake. Specically, and consistent with learning informed by the theoretical results, we found that members of groups whose leaders had received training that emphasized risk-sharing had considerably higher uptake.