Marc F. Bellemare Posts

Last week as part of this new series of posts on concepts in development economics I covered the idea that heterogeneity is part and parcel of developing-country markets, and that heterogeneity can drive outcomes to the point of causing economic underdevelopment and persistent poverty.

This week, I wanted to talk about nonseparability, which is probably one of my favorite things to teach when I teach development.

In case you missed it, my article (gated; email me for a copy) with Lindsey Novak looking at whether participation in contract farming leads to improvements in food security was published in the American Journal of Agricultural Economics this summer.

Here is the abstract:

Contract farming has often been associated with an increase in the income of participating households. It is unclear, however, whether contract farming increases other aspects of household welfare. We use data from six regions of Madagascar and a selection-on-observables design in which we control for a household’s marginal utility of participating in contract farming, which we elicited via a contingent valuation experiment, to show that participating in contract farming reduces the duration of a household’s hungry season by about eight days on average. Moreover, participation in contract farming makes participating households about 18% more likely to see their hungry season end at any time. Further, we find that these effects are more pronounced for households with more children, and for households with more girls. This is an important result as children—especially girls—often bear the burden of food insecurity.

In a previous post, I discussed the significance of our findings in greater detail.

For me, the study of contract farming is the gift that keeps on giving. Every time I finish a paper on the topic, I swear it is the last one, and yet I find myself currently working on four additional ideas I have on this topic…

I am teaching an undergraduate class on development microeconomics starting in a few weeks, so I have been reading and thinking about the field quite a bit in preparation for the semester.

One of the things I find striking is how economic theory has regretfully been given short shrift over the past few decades in development economics. This is likely almost entirely due to increases in computing power in the early 1990s,* which led to a much greater demand for data, which in turn fostered more systematic efforts at collecting household survey data in developing countries.**

This made the field of development economics much more empirical than it used to be, and the Credibility Revolution, combined with the rediscovery of randomized controlled trials, came as a one-two punch that pushed the field into almost exclusively empirical territory. And obviously, it didn’t help that the returns to empirical research were much larger than the returns to theoretical research, which had already declined considerably by then.

(To convince yourself of the foregoing, pick up an issue of the Journal of Development Economics from the early 1990s and compare it to one of the most recent ones; the theory-to-empirics ratio has virtually been inverted. Or just think about how the standard text for graduate development micro remains Bardhan and Udry–a book that was published in 1999!)