Sonia Laszlo

Bribery: Who Pays, Who Refuses, What are the Payoffs?

We provide a theoretical framework for understanding when an official angles for a bribe, when a client pays, and the payoffs to the clients decision. We test this framework using a new data set on bribery of Peruvian public officials by households. The theory predicts that bribery is more attractive to both parties when the client is richer, and we find empirically that both bribery incidence and value are increasing in household income. However, 65% of the relation between bribery incidence and income is explained by greater use of officials by high-income households, and by their use of more corrupt types of official. Compared to a client dealing with an honest official, a client who pays a bribe has a similar probability of concluding her business, while a client who refuses to bribe has a probability 16 percentage points lower. This indicates that service improvements in response to a bribe merely offset service reductions associated with angling for a bribe, and that clients refusing to bribe are punished. We use these and other results to argue that bribery is not a regressive tax.

Self-employment earnings and returns to education in rural Peru

This article estimates the returns to education for households who derive part of their income from household based non-farm self-employment ventures in rural Peru. While education is an individual level variable, earnings are observed at the household level. This asymmetry complicates both the estimation and the interpretation of the returns to education. This article is the first jointly to incorporate three channels through which education affects household earnings. Education affects earnings through the marginal productivity of labour (worker effect), labour allocation across activities (between-activity allocative effect) and its production externality effect (spillover effect). The results suggest that the between-activity allocative effects of education dominate the returns. This article also makes novel use of economic geography to proxy for the role that access to markets plays in determining these returns. In particular, altitude is a strong predictor of activity choice and the returns to education in this mountainous country.

Measurement Error in Access to Markets

Microeconometric studies increasingly utilize travel times to markets as a determinant of economic behaviour. These studies typically use self-reported measures from surveys, often characterized by measurement error. This paper is the first validation study of access to markets data. Unique data from Peru allow comparison of self-reported variables with scientifically calculated variables. We investigate the determinants of the deviation between imputed and self-reported data and show that it is non-classical and dependent on observable socio-economic variables. Our results suggest that studies using self-reported measures of access may be estimating biased effects. Copyright (c) Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2008.

Health, aging and childhood socio-economic conditions in Mexico

We investigate the long-term effect of childhood socio-economic conditions on the health of the elderly in Mexico. We utilize a panel of individuals aged 50 and above from the Mexican Health and Aging Survey and find that the conditions under which the individual lived at the age of 10 affect health in old age, even accounting for education and income. This paper contributes to the literature of the long-term effects of childhood socio-economic status by being the first, to our knowledge, to consider exclusively the case of the elderly in a developing country.

Factors affecting the innovation potential of smallholder farmers in the Caribbean Community

Abstract The need for domestic smallholder farming systems to better support food and nutrition security in the Caribbean is a pressing challenge. The Caribbean Community (CARICOM) faces complex socio-ecological challenges related to historical legacies of plantation agriculture, small population sizes, geographic isolation, jurisdictional diversity, and proneness to natural disasters, all of which underscore the importance of fostering system-wide innovation potential. This paper explores the factors that are impacting the innovation potential of smallholder farming households in four CARICOM small island developing states (St. Lucia, St. Kitts-Nevis, Trinidad and Tobago, and Guyana) using data collected through producer household surveys, focus groups, and key informant interviews. Results indicate that a systemic lack of access to finance, markets, and knowledge networks is perceived as limiting smallholder innovation potential in the region. Compounding these challenges was a pervasive lack of trust reported between actors and institutions throughout the agricultural innovation system, hindering the potential for collective action. Our findings point to the need for more decentralized governance approaches that are capable of establishing stronger relationships between actors and institutions to enhance knowledge flows in support of regional rural development and food and nutrition security objectives.

Experimental Economics: A Revolution in Understanding Behaviour

What is the best compensation package to offer employees? How should choice among investments in pension plans be structured? Should a government use auctions to sell natural resources? Is it possible to design a market to reduce non-point source pollution in Quebecs watersheds? What holds people back from trying technologies that are completely new to them? Over the last two decades a revolution has occurred in the advancement of our ability to answer questions such as these. This revolution is called experimental economics. Experimental economics is the use of a controlled laboratory environment to understand decisions people make. In an economics experiment, people make decisions in a laboratory. They are paid according to the outcome of their decisions, and their decisions are analyzed to determine the effect of an institutional or environmental change that is being tested. Through the analysis of behaviour in controlled economics experiments, much has been learned about behaviour when outcomes are uncertain: for example, new notions about preferences toward risk and consumption over time have been developed. Much has also been learned about how people behave in strategic environments: for example, bidding behaviour in auctions is better understood, and the strategies people use as they learn how to trust each other have been observed. The purpose of this report is to describe the methodology of experimental economics and to detail its major uses. We will focus on the ability to measure behaviours in a wide variety of situations important to organizations. We will show, with examples from our own work, how feedback between the laboratory and the field can result in new understanding of decisions in an effort to affect the cycle of poverty in a developing country in fundamentally new ways. What is the best compensation package to offer employees? How should choice among investments in pension plans be structured? Should a government use auctions to sell natural resources? Is it possible to design a market to reduce non-point source pollution in Quebecs watersheds? What holds people back from trying technologies that are completely new to them? Over the last two decades a revolution has occurred in the advancement of our ability to answer questions such as these. This revolution is called experimental economics. Experimental economics is the use of a controlled laboratory environment to understand decisions people make. In an economics experiment, people make decisions in a laboratory. They are paid according to the outcome of their decisions, and their decisions are analyzed to determine the effect of an institutional or environmental change that is being tested. Through the analysis of behaviour in controlled economics experiments, much has been learned about behaviour when outcomes are uncertain: for example, new notions about preferences toward risk and consumption over time have been developed. Much has also been learned about how people behave in strategic environments: for example, bidding behaviour in auctions is better understood, and the strategies people use as they learn how to trust each other have been observed. The purpose of this report is to describe the methodology of experimental economics and to detail its major uses. We will focus on the ability to measure behaviours in a wide variety of situations important to organizations. We will show, with examples from our own work, how feedback between the laboratory and the field can result in new understanding of decisions in an effort to affect the cycle of poverty in a developing country in fundamentally new ways.