Unformatted text preview: at serves the poor is very low 46 Table 5: Economics environment of the poor: Basic infrastructure
Percent of Households with:
In-House
Toilet/
Tap Water
Latrine
Electricity
Living on less than $1 a day
Rural
Cote d'Ivoire
Guatemala
India - Udaipur
India - UP/Bihar
Indonesia
Mexico
Nicaragua
Pakistan
Panama
Papua New Guinea
Peru
South Africa
Tanzania
Timor Leste
Urban
Cote d'Ivoire
Indonesia
Mexico
Nicaragua
Pakistan
Panama
Papua New Guinea
Peru
South Africa
Tanzania
Timor Leste
Living on less than $2 a day
Rural
Cote d'Ivoire
Guatemala
India - Udaipur
India - UP/Bihar
Indonesia
Mexico
Nicaragua
Pakistan
Panama
Papua New Guinea
Peru
South Africa
Tanzania
Timor Leste
Urban
Cote d'Ivoire
Indonesia
Mexico
Nicaragua
Pakistan
Panama
Papua New Guinea
Peru
South Africa
Tanzania
Timor Leste 11.8%
37.7%
0.0%
1.9%
5.6% 27.1%
50.5%
0.0%
3.4%
30.5% 12.3%
9.9% 59.0%
28.5%
37.7%
95.2% 1.7%
29.7%
4.4%
0.7%
2.3% 58.9%
91.6%
31.3% 1.6%
15.7% 11.3%
34.7% 29.3%
50.4% 67.5%
82.7% 28.7%
73.8%
44.2%
12.1%
9.1% 53.6% 15.7%
36.3%
0.0%
2.0%
8.5% 31.6%
51.1%
0.5%
5.7%
40.1% 17.3%
12.6% 63.9%
33.1%
54.2%
92.8% 1.0%
26.1%
7.0%
1.5%
5.4% 60.5%
96.7%
42.8% 65.9%
92.8%
29.3% 4.6%
20.5% 14.6%
57.9% 66.2%
55.4% 88.4%
86.2%
89.1%
70.4% 16.0%
67.5%
59.1%
21.2%
29.5% 69.8%
97.3%
34.6% 45.1%
29.9%
8.3%
8.7%
96.9%
99.0%
16.4%
55.5%
0.0%
2.0%
12.2%
5.6%
1.1%
8.8%
9.1%
100.0%
95.5%
30.2%
95.2%
28.7%
59.5%
15.1%
14.2%
46.9% 68.1%
29.2%
15.2%
10.7%
89.0%
99.0%
27.3%
61.1%
10.1%
1.8%
16.3%
10.5%
1.3%
11.0%
18.6%
99.1%
96.6%
70.6%
95.2%
81.1%
16.0%
72.4%
34.2%
23.2%
69.1% Understanding the lives of the poor
(1) Very little access to efficient markets and quality infrastructure
(2) Usually cultivate land they own - no more and no less
owes to agency problems associated with renting out land
typically own too little land relative to amount of family labour
should buy more land
lack of access to credit 48 (3) No access to formal insurance
second job outside of agriculture insures against agricultural risk
risk spreading
no specialization
(4) Cannot raise capital
multiple jobs
few skills and little capital
very small scale entrepreneurship 49 Questions
(A) Why not eat more?
Eat more:
improve BMI but only better until next attack of disease which
cannot insure against unless save
(B) Why not invest in schooling?
Could send their children to higher quality schools?
parents illiterate themselves 50 (C) Why don’t poor save more?
Spend less on alcohol or festivals?
difficult to save at home (D) Why not migrate for longer?
rely on social networks 51 Poor but Rational?
Want to develop policies which will improve the lives of the poor
To understand if these policies can be successful
need to understand how the poor would behave in response to
these policies
Standard economic models of human behavior
neo-classical homo-economicus
Assumes individuals are:
rational
forward-looking
internally consistent 52 Do the poor behave differently than the rich?
Should we have different models of human behavior?
Is it just that poverty changes the set of options available to individuals?
Given the same set of options all individuals would make the
same choices 53 Poor but efficient
Poverty changes set of options available to individuals
Poverty affects behavior but decision making is neo-classical
(rational, forward-looking, internally consistent)
Poor have bad lives but there is nothing special about them
They just do the best they can under the difficult circumstances life has
placed them in 54 Their fields are just as productive as those of large landlords
just cannot be as productive given their constraints (nothing to
do with their behavior or choices)
Understanding poverty is about understanding the different constraints 55 Poor but not necessarily efficient
Being poor means being cut off from many opportunities that were
available to others
While poor and rich are rational (same behavior and choices if they were
given same set of constraints)
Markets left to themselves may not produce an efficient outcome
Understanding poverty is about understanding market inefficiencies 56 The poor and rich behave differently
Poor are different because they are desperate
They having nothing to lose
They cannot be made fully responsible for their actions
They cannot thus be given the same opportunities as others
need different behavioral models?
explains persistence of poverty? 57 Puzzles of Behavior
Example of insurance
How should we explain?
Poor face a very risky environment
Typically live in a close-knit community
Therefore enforcement should be easy
cost of being caught is high (on the boarder of subsistence)
easy to get caught (information flows easily)
exertion of sanctions is possible 58 Households suffer shocks at different times (cow dies, sickness in the
family, crop failure, etc)
large scope for insurance
village institution can be seen as efficient
village institution may well do better than more formal modern
institution
If individuals have good information on what others are doing and have
strong reason to stay together
should be insuring each other 59 Problem:
Evidence suggests that not even household members insure each other
even against variation in incomes that they can all observe
Household members don’t realistically have option of leaving household
Household members have strong sanctions at their disposal
Also evidence that household members hide income from one another
Intra-household sharing arrangements seem to resist explanations based
only on information and incentives
imperfect observability
moral hazard
limits on self-enforcing insurance schemes 60 Is it because of norms and social customs?
If so then need to understanding why these norms and arrangements
emerge
which problems they solve
how they are sustained
requires a deeper understanding of decision-making of
individuals and groups 61 Agricultural investment example
Why don’t farmers adopt a profitable chemical fertilizer?
does not require a large investment
not due to high fixed costs to learning 62 Successful program was a commitment device:
Purchase fertilizer for farmers just post harvest
Two choices for when fertilizer is delivered
(1) right away
(2) when needed
Option (2) increased adoption 63 Farmers committed themselves to not using the fertilizer for something
else (not selling it)
Did farmers value opportunity to commit their money to fertilizer?
Would they have done the same for other goods?
Protecting cash against themselves or family or neighbours? 64 MIT Department of Economics : Esther Duflo : Books 2 of 2 http://econ-www.mit.edu/faculty/eduflo/publications Books Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty
by Abhijit V. Banerjee and E
sther Duflo
Publication date: April 2011
Website: http://www.pooreconomics.com/ Le Développment Humain (Lutter contre la pauvrete, volume 1)
by Esther Duflo
2010, Paris: Le seuil
2011, Italian translation: Feltrinelli La polique de l'autonomie (Lutter contre la pauvrete, volume 2)
by Esther Duflo
2010, Paris: Le seuil
2011, Italian translation: Feltrinelli Expérience, science et lutter contre la pauvreté
by Esther Duflo
2009, Paris: Fayard
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