Arjan Verschoor

Choice under Uncertainty: Evidence from Ethiopia, India and Uganda

We review experimental evidence collected from risky choice experiments using poor subjects in Ethiopia, India and Uganda. Using these data we estimate that just over 50% of our sample behaves in accordance with expected utility theory and that the rest subjectively weight probability according to prospect theory. Our results show that inferences about risk aversion are robust to whichever model we adopt when we estimate each model separately. However, when we allow both models to explain portions of the data simultaneously, we infer risk aversion for subjects behaving according to expected utility theory and risk-seeking behaviour for subjects behaving according to prospect theory.

Job Recruitment Networks and Migration to Cities in India

Abstract Economists have focused on job search and supply-side explanations for network effects in labour transactions. This paper develops and tests an alternative explanation for the high prevalence of network-based labour market entry in developing countries. In our theoretical framework, employers use employee networks as screening and incentive mechanisms to improve the quality of recruitment. Our framework suggests a negative relationship between network use and the skill intensity of jobs, a positive association between economic activity and network use and a negative relationship between network use and pro-labour legislation. Furthermore, social identity effects are expected to intensify when compared to information-sharing and other network mechanisms. Using data from an all-India Employment Survey, we implement a novel empirical strategy to test these relationships and find support for our demand-side explanation.

Intra-household efficiency: an experimental study from Ethiopia

An experimental design using treatments of a voluntary contribution mechanism is used to test household efficiency. Efficiency is decisively rejected in all treatments contrary to the assumption of most household models. Information on initial endowments of spouses improves efficiency only in some treatments suggesting that the impact of information is context dependent. Actual and expected contribution rates of spouses are systematically different; husbands´ (wives´) expectations of their wives´ (husbands´) contributions are higher (lower) than actual contributions. These errors imply that equilibrium in a game theoretic framework is unlikely. Statistical tests indicate other considerations than efficiency are likely important.

Autonomy or efficiency: An experiment on household decisions in two regions of India

Dyson and Moore (1983) posit that women in South India enjoy relatively more agency than in the North. Their conclusions have become part of the standard picture of Indian rural society. In this paper, we examine using experimental data the implications of the regional contrast in female autonomy for the efficiency of family decision-making. We take a sample of 1200 couples from one rural and one urban area in the north of India (Uttar Pradesh) and one area in the south (Tamil Nadu) that are often taken to exemplify differences in the autonomy of women and the nature of marital relationships. Generally, we find large-scale and robust evidence of inefficiency and the hiding of assets when this is possible. Men invest more and are more generous to their partners. Women are more willing to invest in a common pool when their income is earned through working and when assets are publicly observable. Regarding the focus of our paper, we find continuing significant differences between North and South and we find relatively little evidence that urban living is associated with changes in the nature of marital behaviour. There are some differences between response to treatment but the key and striking difference between the North and the South is that in both rural and urban sites in the former region household efficiency is considerably greater than in the latter, which does on the face of it suggest a tradeoff between autonomy and efficiency.

Caste Dominance and Economic Performance in Rural India

Using household panel data for rural India covering 1993–94 and 2004–5, we test whether scheduled castes (SCs) and other minority groups perform better or worse in terms of income when resident in villages dominated by (i) upper castes or (ii) their own group. Theoretically, upper-caste dominance comprises a potential “proximity gain” and offsetting group-specific “oppression” effects. For SCs and other backward classes (OBCs), initial proximity gains dominate negative oppression effects because upper-caste-dominated villages are located in more productive areas: once agroecology is controlled for, proximity and oppression effects cancel each other out. Although the effects are theoretically ambiguous, we find large, positive own-dominance or enclave effects for upper castes, OBCs, and especially SCs. These village regime effects are restricted to the Hindu social groups. Combining pathway and income source analysis, we close in on the mechanisms underpinning identity-based income disparities; while education matters, landownership accounts for most enclave effects. A strong postreform SC own-village advantage turns out to have agricultural rather than nonfarm or business origins. We also find upper-caste dominance to inhibit the educational progress of other social groups, along with negative enclave effects on the educational progress of Muslim women and scheduled tribe men.

Globalization and Poverty Trends across Regions: The Role of Variation in the Income and Inequality Elasticities of Poverty

The call for the eradication of poverty is stronger now than ever before. The World Bank and IMF, the UN and in particular UNDP, all development banks and nearly all multilateral and bilateral aid agencies profess themselves to be concerned principally with reducing the number and proportion of people who live in conditions of absolute poverty. However, in the case of some of the organizations mentioned, the professed concern with poverty reduction has not made much difference to their policy recommendations. Despite poverty reduction being the central objective, the principal focus of the policies that are pursued in the name of poverty reduction is on promoting economic growth. Poverty reduction is more popular than ever, but so is economic growth, with the difference that growth is no longer seen as an end in itself but as a means to an end, expressed succinctly in the title of Dollar and Kraay (2002), ‘Growth Is Good for the Poor’.

Gender and trade aspects of labour markets

Abstract We provide a comprehensive up-to-date review of the large body of theory and evidence on the linkages between trade liberalisation and gender inequality in income, as well as two of the latters key underlying determinants: wages and employment. On balance, the evidence for developing countries points to an overall beneficial impact of trade expansion on female employment, both relative to male employment and in absolute terms, although largely concentrated in unskilled manufacturing. By contrast, the bulk of the evidence suggests a widening gender wage gap as a result of freer trade.

The Lion’s Share: An Experimental Analysis of Polygamy in Northern Nigeria

Using samples of polygamous and non-polygamous households from villages in rural areas south of Kano, Northern Nigeria we test basic theories of household behaviour. Husbands and wives play two variants of a voluntary contributions game in which endowments are private knowledge, but contributions are public. In one variant, the common pool is split equally. In the other treatment the husband allocates the pool (and wives are forewarned of this). Most partners keep back at least half of their endowment from the common pool, but we find no evidence that polygynous households are less efficient than their monogamous counterparts. We also reject a strong form of Bergstrom’s model of polygyny in which all wives receive an equal allocation. In our case, senior wives often receive more from their husbands, no matter what their contribution. Thus the return to contributions is higher for senior wives compared to their junior counterparts. When they control the allocation, polygynous men receive a higher payoff than their monogamous counterparts. We speculate on the implications of this pattern of investment and reward for the sustainability of polygynous institutions.

How Good is Growth for the Poor? The Role of the Initial Income Distribution in Regional Diversity in Poverty Trends

Using panel data of 58 developing countries for the period 1980-1998, this study shows that the responsiveness of the

A test of the experimental method in the spirit of Popper

2 a day poverty headcount measure to changes in mean income and inequality significantly decreases with initial inequality and the ratio poverty line over mean income - taken as proxies for the initial density of income near the poverty line.Variations in these proxies account for the large crossregional differences in the income elasticity of poverty during the 1980s and 1990s.We find that the income elasticity of poverty in the mid 1990s equals -1.31 on average and ranges from -0.71 for Sub-Saharan Africa to -2.27 for the Middle East and North Africa, and that the Gini elasticity of poverty equals 0.80 on average and ranges from 0.01 in South Asia to 1.73 in Latin America.While variation in income growth accounts for most of the variation in poverty reduction across regions, the impact of variations in inequality and in elasticities of poverty is almost always too large to be ignored, and in particular in Eastern Europe and Central Asia.