Giacomo De Giorgi

The Price Effects of Cash versus In-Kind Transfers

This paper compares how cash and in-kind transfers affect local prices. Both types of transfers increase the demand for normal goods, but only in-kind transfers also increase supply. Hence, in-kind transfers should lead to lower prices than cash transfers, which helps consumers at the expense of local producers. We test and confirm this prediction using a program in Mexico that randomly assigned villages to receive boxes of food (trucked into the village), equivalently-valued cash transfers, or no transfers. The pecuniary benefit to consumers of in-kind transfers, relative to cash transfers, equals 11% of the direct transfer.

Understanding Social Interactions: Evidence from the Classroom

There is a large literature on social interactions and still little is known about the economic mechanisms leading to the high level of clustering in behavior that is so commonly observed in the data. In this paper we present a model in which agents are allowed to interact according to three distinct mechanisms, and we derive testable implications on the mean and the variance of the outcomes within and across groups. The empirical tests allow us to distinguish which mechanism(s) generates the observed patterns in the data. In our application we study the performance of undergraduate students and we find that social interactions take the form of mutual insurance. Such a result bears crucial policy implications for all those situations in which social interactions are important, from teamwork to class formation in education and co-authorship in academic research.

Business Literacy and Development: Evidence from a Randomized Controlled Trial in Rural Mexico

The poor in developing countries often run small enterprises, typically with low earnings, although lacking basic business skills. We offer a business skills course to female entrepreneurs in rural Mexico. We find that those randomly assigned to treatment have larger profits and revenues, serve a greater number of clients, and are more likely to use formal accounting techniques. These effects persist in the medium run. We present a simple model to interpret our results: we find that low-quality entrepreneurs appear slightly more likely to quit their business posttreatment and that the positive impacts of the treatment are increasing entrepreneurial quality.

Village Economies and the Structure of Extended Family Networks

Abstract This paper documents how the structure of extended family networks in rural Mexico relates to the poverty and inequality of the village of residence. Using the Hispanic naming convention, we construct within-village extended family networks in 504 poor rural villages. Family networks are larger (both in the number of members and as a share of the village population) and out-migration is lower the poorer and the less unequal the village of residence. Our results are consistent with the extended family being a source of informal insurance to its members.

Credit Growth and the Financial Crisis: A New Narrative

A broadly accepted explanation for the 2007-09 financial crisis emphasizes the growth in lending to subprime households during the preceding boom. According to this view, the resulting rise in insolvencies and foreclosures caused the financial crisis, leading to a decline in housing values and a broad contraction in credit. This paper studies the evolution of household borrowing and delinquency between 1999 and 2013, using a large administrative panel of credit file data. Our findings suggest an alternative narrative that challenges the large role of subprime credit. We show that credit growth between 2001 and 2007 is concentrated in the middle and high quartiles of the credit score distribution. Borrowing by individuals with low credit score is virtually constant for all debt categories during the boom. We also find that the rise in defaults during the financial crisis is concentrated in the middle and upper quartiles of the credit score distribution, and the fraction of defaults to the lowest quartile of of the credit score distribution sizably drops during the crisis. We discuss the broader implications of these findings for the role of housing collateral in the propagation of the crisis.

The Gender Gap in Mathematics: Evidence from Chile

Using a large administrative data set from Chile, we find that on average boys perform better than girls in math. In this article, we document several features of boys versus girls’ relative performance in math. First, we note that the gender gap appears to increase with age (doubles between fourth grade and eighth grade). Second, we test whether commonly proposed explanations such as parental background and investments, unobserved ability, and classroom environment (including teacher gender) help explain a substantial portion of the gap. While none of these explanations help in explaining a large portion of the gender gap, we show that boys and girls differ significantly in perceptions about their own ability in math. Conditional on math scores, compared to boys, girls are much more likely to state that they dislike math or find math difficult. We highlight differences in self-assessed ability as areas for future research that might lead to a better understanding of the gender gap in math.

Consumption and investment in resource pooling family networks

This paper examines a novel motive for resource pooling in family networks in rural economies: to relax credit constraints and facilitate investment in non-collateralizeable assets for which credit market imperfections are most binding. We thus complement established literature examining risk-sharing motives for resource transfers within family networks, as well as motives based on kinship tax obligations. We do so exploiting the Progresa program data, in which family networks can be identified, households are subject to large exogenous resource inflows, and detailed responses on consumption and an array of investments can be tracked in a household panel over five years. We find that for every dollar that accrues to the family network through Progresa transfers, food consumption expenditures increase by around 65c for both households eligible for Progresa and ineligible members of the same family network. Hence the marginal propensity of families to invest/save out of every dollar is around .35, and we document how this is channeled towards easing credit constraints poorer network members face in financing non-collateralizable investments into their childrens human capital. We show these consumption and investment benefits of being embedded within a family network are sustained five years after households first experience resource transfers from Progresa. Hence the interplay between resource inflows and resource pooling by family networks can place network members on sustained paths out of poverty.

Business Cycle Fluctuations and the Distribution of Consumption

This paper sheds new light on the interactions between business cycles and the consumption distribution. We use CEX consumption data and a factor model to characterize the cyclical dynamics of the consumption distribution. We first establish that our approach is able to closely match business cycle fluctuations of consumption from the National Account. We then study the responses of the consumption distribution to TFP shocks and economic policy uncertainty shocks. Importantly, we find that the responses of the right tail of the consumption distribution, mostly comprising higher educated individuals, to shocks that drive cyclical fluctuations are larger and quicker than in other parts of the distribution. We note that the cost of business cycle fluctuations is larger than the one found using aggregate consumption, and that the shocks we analyze reduce consumption inequality on impact.

SME Registration Evidence from a Randomized Controlled Trial in Bangladesh

Informality is pervasive in developing countries. In Bangladesh, the majority of firms are informal and as such they might not have access to prime markets, while lowering the tax base. The authors implemented an information campaign on registration, including both the step-by-step procedures and the potential benefits from registration. They find that the treatment made firms more aware of the procedures, but had no impact on actual registration. The results point toward potentially low benefits and high indirect costs of registration as the main barriers to formality (e.g. access to markets, taxation, labor and product regulations).

The Gender Gap in Mathematics: Evidence from a Middle-Income Country

Using a large administrative data set from Chile, we find that, on average, boys perform better than girls in mathematics. In this paper, we document several features of their relative performance. First, we note that the gender gap appears to increase with age (it doubles between fourth grade and eighth grade). Second, we test whether commonly proposed explanations such as parental background and investment in the child, unobserved ability, and classroom environment (including teacher gender) help explain a substantial portion of the gap. While none of these explanations help in explaining a large portion of the gender gap, we show that boys and girls differ significantly in perceptions about their own ability in math. Conditional on math scores, girls are much more likely to state that they dislike math, or find math difficult, compared to boys. We highlight differences in self-assessed ability as areas for future research that might lead to a better understanding of the gender gap in math.