VoxDev Development Economics

Entrepreneurship across the world is highly male dominated. While the amount of subsistence entrepreneurship in developing countries leads to a slightly more equal gender balance, female entrepreneurs in these countries tend to choose sectors where other women are. In this VoxDevTalk, Nava Ashraf and Ed Glaeser discuss their work with Alexia Delfino investigating how gender norms and weak rule of law put female entrepreneurs at a disadvantage. Fear of expropriation by men leads them to work in less profitable industries, such as tailoring or food production, where they can collaborate with other women rather than with men. A survey of the manufacturing sector in Zambia, for example, revealed that almost all of the gap in earnings between male and female entrepreneurs could be explained by female entrepreneurs entering low-paid industries. Relatively equal gender norms that increase women’s bargaining power and decent rule of law for contract enforcement can encourage more women to become entrepreneurs and to branch out to more profitable industries.

When faced with onerous procedures to apply for a job, potential applicants can be expected to weigh the costs of applying on their time and energy against the probability of their getting the job and the eventual benefits. It is widely believed that if recruiters raise the costs of applying for a job, only the most suited and driven candidates can be expected to apply. In this VoxDevTalk, Stefano Caria shares insights from his paper with Girum Abebe and Esteban Ortiz-Ospina, in which the authors start from the assumption that the cost of applying for a job may be higher for the best applicants. Through their field experiment in Ethiopia, they find that employers find better applicants when they reimburse the applicants for submitting their application and appearing for the selection test. Moreover, they are also able to find high-quality candidates from relatively disadvantaged backgrounds who would have been otherwise deterred by the costs of applying.

When workers are supplied to a company through a temp agency, they earn less than the permanent employees they end up working with. Since work place surveys usually do not capture the pay of outsourced labour, there is insufficient data on the pay differential between contract workers and full-time workers. In this VoxDevTalk, Simon Jäger of MIT discusses a new paper where he and his co-authors estimate how much firms differentiate pay premia between regular and outsourced workers. They overcome the above measurement challenge by using a unique, Argentinian administrative dataset, featuring links between user firms (the workplaces where temp workers perform their labour) and temp agencies (their formal employers). They estimate that temp agency workers receive 49% of the workplace-specific pay premia earned by regular workers in user firms: the midpoint between the benchmark for insiders and the competitive spot-labour market benchmark.

Incentivising people to lead healthier lives by means of monetary payments is a simple and cost-effective intervention, but are there ways to tweak that basic incentive contract to make it work particularly well for people who are impatient (those who discount future benefits for immediate gain)? In this VoxDevTalk, Rebecca Dizon-Ross discusses a randomised experiment that varied the design of payment incentives: bundling payments over time meaningfully increased effort among the impatient relative to the patient; in contrast, increasing payment frequency had limited efficacy, which suggests limited impatience over payments. 

Relationships between groups are vital in village economies, but do these social structures affect the success of development policies? If resources are delivered by someone from the community, does the social relationship between that agent and the people who could benefit from the success of the intervention matter? In this VoxDevTalk, Oriana Bandiera discusses an experiment in Uganda that addresses these questions. Randomly selecting one of two viable candidates to deliver an agricultural extension programme in rural Ugandan villages, she and her co-authors find that delivery agents favour their own social ties over ex-ante identical farmers connected to the other (unselected) candidate and that this is inconsistent with output maximisation or targeting the poorest. Favouritism disappears when both potential delivery agents belong to the same social group. Using the randomised allocation of the programme across villages, they show how unobserved social structures explain the variation in in delivery rates and programme effectiveness that they often observe in the data.

Across the developing world, many girls face difficulties in persuading their parents to enrol them in secondary education. Whilst financial incentives have often been analysed as a means to encourage female school enrollment, there has been little focus on the role of negotiation skills. In this VoxDevTalk, Kathleen McGinn discusses an innovative experiment in Zambia, which assesses the impact of negotiation skills on female educational outcomes. Fascinatingly, the researchers find that teaching negotiation skills significantly increased female educational outcomes, particularly for high-ability girls. 

By 2050, the world’s urban population is estimated to reach nearly seven billion, driven mainly by urbanisation in developing countries. Despite this growth, development economists have often chosen to focus on rural areas. In this VoxDevTalk, Ed Glaeser discusses a new paper that brings together research into urbanisation in the developing world. He argues that policymakers should not try to slow migration into cities, given the benefits of urbanisation that existing research has shown. These benefits include higher productivity and wages over the long-term.     

Across the world, women face invisible barriers that prevent them from taking up education and work. This is particularly the case in conservative societies such as in Punjab, Pakistan. In this VoxDev Talk, Asim Khwaja discusses an experiment in Punjab, Pakistan, that assessed the take-up rates of a vocational training programme for women. The researchers found that despite high interest, few women actually took up the programme. This low take-up rate was largely explained by social barriers that prevented women travelling to neighbouring villages (where the trainings were held). However, if group transport could be secured through a male from the village, then take-up increased dramatically.      

Editors’ note: This podcast was updated on 25.08.2020  How can policymakers solve the problem of non-payment of utility bills while still maintaining access to water and sanitation services? In the developing world, urban settings often struggle to provide basic needs, including water and sanitation. Often, the challenge lies in the cost of the last mile between the main infrastructure and individual households. In this VoxDev talk, Paul Gertler discusses an innovative experiment targeted at improving payment of utility bills in slums in Nairobi, Kenya. The researchers find that shaming landlords who failed to pay their bills did not subsequently increase payments. However, a credible threat of cutting water services was enough to ensure that landlords made their utility payments. Read "Pipe dreams: Enforcing payment for water and sanitation services in Nairobi’s slums" by Aidan Coville, Sebastian Galiani, Paul Gertler, and Susumu Yoshida here.

Why do trade barriers remain high in developing countries despite the significant potential to drive economic growth through trade? Advanced economies have mostly removed tariffs and other barriers to trade. By contrast, in many developing countries such barriers remain in spite of the huge potential to drive economic growth through trade. In this VoxDev talk, David Atkin and Amit Khandelwal discuss their new paper on trade in developing economies. They argue that we think about trade policy often through neoclassical models that emphasise perfect competition. Whilst this way of thinking may suit environments in advanced economies, it does not resemble the realities on ground in developing countries.     Read “How distortions alter the impact of international trade in developing countries” by David Atkin and Amit Khandelwal here.