Africa

Africa / Agriculture / Crop Insurance / Development / Economics / Impact Evaluation / Insurance — No Comments
20
May 13

Managing Basis Risk with Multiscale Index Insurance

That’s the title of my article with Ghada Elabed, Michael Carter, and Catherine Guirkinger, which was just published online in Agricultural Economics. Here is the abstract:

Agricultural index insurance indemnifies a farmer against losses based on an index that is correlated with, but not identical to, her or his individual outcomes. In practice, the level of correlation may be modest, exposing insured farmers to residual, basis risk. In this article, we study the impact of basis risk on the demand for index insurance under risk and compound risk aversion. We simulate the impact of basis risk on the demand for index insurance by Malian cotton farmers using data from field experiments that reveal the distributions of risk and compound risk aversion. The analysis shows that compound risk aversion depresses demand for a conventional index insurance contract some 13 percentage points below what would be predicted based on risk aversion alone. We then analyze an innovative multiscale index insurance contract that reduces basis risk relative to conventional, single-scale index insurance contract. Simulations indicate that demand for this multiscale contract would be some 40% higher than the demand for an equivalently priced conventional contract in the population of Malian cotton farmers. Finally, we report and discuss the actual uptake of a multiscale contract introduced in Mali.

The article discusses the index insurance contract my coauthors and I have developed for and sold to cotton producer cooperatives in southern Mali. The rest of this post is more technical, as it goes into the details of the two contributions I’ve highlighted above. Continue reading →

Africa / Agriculture / Development / Economics / Land / Law and Economics / Policy — 2 Comments
15
May 13

Yes to Land Rights, but Land Titles Are No Silver Bullet

Some economists argue that ensuring people have titles to their land can ensure a feeling of security and boost production. … The greatest proponent of the argument is Hernando de Soto, a development economist who has managed to win praise from the likes of Bill Clinton and the libertarian Cato Institute.

There is plenty of evidence that land rights are connected to productivity, but new research out of Madagascar shows that it is not always the case.

Duke University researcher Marc F. Bellemare tested whether the land rights component of a $100 million Millennium Challenge Corporation (MCC) compact with the government of Madagascar. He found that the provision of formal land rights, meaning land titles, had not measurable impact on productivity when comparing farmers that did and did not benefit from the MCC compact.

Holding a land title is not sufficient if structures are not in place to enforce land ownership and dole it out.

From a very nice article by Tom Murphy on Humanosphere, which discusses the policy implications of my forthcoming Land Economics article on land rights in Madagascar. Continue reading →

Africa / Celebrities in Africa / Development / Economics / Impact Evaluation / Miscellaneous / Poverty — 1 Comment
01
May 13

Does International Child Sponsorship Work?

We have all seen the commercials on television. Many of them readily fall under the broad name of “poverty porn,” and most of them feature resigned-looking developing-world children set against a sad soundtrack. All of them ask us to help by sponsoring a child in a developing country.

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But does international child sponsorship work? In a new article (older, ungated copy here) in the Journal of Political Economy, Bruce Wydick, Paul Glewwe, and Laine Rutledge give an answer that is bound to surprise many development cynics:

Child sponsorship is a leading form of direct aid from wealthy country households to children in developing countries. Over 9 million children are supported through international sponsorship organizations. Using data from six countries, we estimate impacts on several outcomes from sponsorship through Compassion International, a leading child sponsorship organization. To identify program effects, we utilize an age-eligibility rule implemented when programs began in new villages. We find large, statistically significant impacts on years of schooling; primary, secondary, and tertiary school completion; and the probability and quality of employment. Early evidence suggests that these impacts are due, in part, to increases in children’s aspirations.

Africa / Development / Economics / Law and Economics / Politics — Comments Off
01
Apr 13

More on British vs. French Colonial Institutions

An email from Chuhang Yin, a former student of mine:

I just read your newest blog post and I am fascinated by this topic. I found a recent [Quarterly Journal of Political Science] paper by Alexander Lee and Kenneth Schultz at Stanford titled “Comparing British and French Colonial Legacies: A Discontinuity Analysis of Cameroon” and think it might be relevant. Their focus is on public goods and individual wealth, but not on land productivity. The abstract is here:

“Colonial institutions are thought to be an important determinate of post-independence levels of political stability, economic growth, and public goods provision. In particular, many scholars have suggested that British institutional and cultural legacies are more conducive to growth than those of France or other colonizers. Systematic tests of this hypothesis are complicated by unobserved heterogeneity among nations due to variable pre- and post-colonial histories. We focus on the West African nation of Cameroon, which includes regions colonized by both Britain and France, and use the artificial former colonial boundary as a discontinuity within a national demographic survey. We show that rural areas on the British side of discontinuity have higher levels of household wealth and local public provision of piped water. Results for urban areas and centrally-provided public goods show no such effect, suggesting that post-independence policies also play a role in shaping outcomes.”

Specifically about results:

“Using data from the 2004 Demographic and Health Survey of Cameroon, we compare communities near the former colonial border using both a regression discontinuity research design and a comparison of neighboring villages that straddle the boundary. We show that rural households on the British side have higher levels of wealth and are more likely to have access to piped water, a locally provided public good. These results do not hold for urban areas or for centrally-provided public goods like roads and education, suggesting that the effect of colonial-era differences can be attenuated by post-colonial policies.”

I also found a paper published in 2000 in Comparative Politics titled “Institutions, Context, and Outcomes: Explaining French and British Rule in West Africa” which might also be useful:

“I seek to solve this puzzle by tracing the origin of class formation in Ivory Coast’s and Ghana’s rural areas. Specifically, French and British colonial institutions generated different property rights and landholding patterns, forming the basis for different patterns of class formation.”

On page 258 to 260 the author discusses the differences of British and French institutions.

Africa / Agriculture / Development / Economics / Law and Economics / Policy — 3 Comments
28
Mar 13

Not Worth the Paper They Are Printed On

LandEconomicsLand Economics has now published my article on the productivity impacts of land rights in Madagascar, which is creatively titled “The Productivity Impacts of Formal and Informal Land Rights: Evidence from Madagascar.”

Here’s the abstract:

This paper studies the relationship between land rights and agricultural productivity. Whereas previous studies used proxies for soil quality and instrumental variables to control for the endogeneity of land titles, the data used here include precise soil quality measurements, which in principle allow controlling for the unobserved heterogeneity between plots. Empirical results suggest that formal land rights (i.e., land titles) have no impact on productivity, but that informal land rights (i.e., landowners’ subjective perceptions of what they can and cannot do with their plots) have heterogeneous impacts on productivity.

In other words, what I find is that no matter how you slice the data, land rights do not appear to have the beneficial effect many people seem to think they have. The emphasis is mine, for reasons that are perhaps best explained in the last paragraph of the paper:

[T]he US government’s Millennium Challenge Corporation signed a $110 million, four-year compact with the government of Madagascar in 2005 which included an important land tenure component, and whose goal was to “increase land titling,” and thus land security (Millennium Challenge Corporation 2010). But in a context where land titles do not seem to have improved agricultural productivity, the finding that land titles do not have such an impact is highly relevant for policy in that it helps knowing where to allocate aid dollars at the margin. Here, it looks as though aid might be better allocated to a reform of the legal framework within which agriculture takes place. Policy should be based on empirical evidence — not theoretical beliefs.

At the end of the day, the land titles in those data appear to be worth no more than the paper they are printed on.

What’s interesting to me about these findings, in light of my evolving research interests, is that many others find that land rights have beneficial effects on productivity. Generally speaking, however, it looks as though those beneficial effects of land titles are found in former British colonies in Africa. In former French colonies such as Madagascar, however, it looks as though land titles have no impact. This brings to mind a passage from Herbst’s States and Power in Africa:

France was notable for its unusually unsuccessful efforts to disrupt customary tenure during the colonial period, despite its sweeping laws that theoretically made wholesale changes in land tenure (…) France relied on administrative fiat to try to change customary tenure procedures.

Does anyone know of a study looking at the differential approaches to or impacts of British vs. French colonial institutions dealing with land tenure issues? I think there would be a neat paper to be written on that.

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