rural income dynamics and poverty reduction in thai villages from 1987 to 2004 this article aims to examine the factors contributing to the increase in household income and the corresponding reduction in poverty in rural thai villages from 1987 to 2004 by employing household panel data it is found that there has been a significant structural shift of household income away from farm to nonfarm income sources as well as a reduction in the income gap and the difference in poverty incidence between favorable and unfavorable regions such decreases in poverty and its regional gap have been associated with the declining importance of income accrued to farm land measured by farm size and the availability of irrigation and with the increasing importance of human capital measured by the proportion of working members who have graduated from post lower secondary schools such findings indicate that the success in rural poverty reduction in thailand has resulted from the development of the rural nonfarm sector coupled with the improvement of the schooling levels of the rural population

communication structure and coalition proofness experimental evidence abstract the paper analyzes the role of the structure of communication i e who is talking with whom in a coordination game we run an experiment in a three player game with pareto ranked equilibria where a pair of players has a profitable joint deviation from the pareto superior equilibrium we show that specific communication structures lead to different coalition proof equilibria in this game results match the theoretical predictions subjects communicate and play the pareto superior equilibrium when communication is public when pairs of players exchange messages privately subjects play the pareto inferior equilibrium even in these latter cases however players beliefs and choices tend to react to messages despite the fact that these are not credible

shaping beliefs in experimental markets for expert services guilt aversion and the impact of promises and money burning options in a credence goods game with an expert and a consumer we study experimentally the impact of two devices that are predicted to induce consumer friendly behavior if the expert has a propensity to feel guilty when he believes that he violates the consumer s payoff expectations i an opportunity for the expert to make a non binding promise and ii an opportunity for the consumer to burn money in belief based guilt aversion theory the first opportunity shapes an expert s behavior if an appropriate promise is made and if it is expected to be believed by the consumer by contrast the second opportunity might change behavior even though this option is never used along the predicted path experimental results confirm the behavioral relevance of i but fail to confirm ii

norms and contracting we argue that contracts establish the norms of a relationship and that individuals incur disutility when deviating from these norms in a laboratory experiment we allow agents to make simple contracts before they play one of four games and the most effective contract always includes an unenforceable handshake agreement to take the first best action in three games a contract with only this handshake agreement is at least weakly optimal the handshake is particularly effective in games with strategic complements our results highlight an explanation for contractual incompleteness establishing a norm can effectively substitute for weak enforceable restrictions this paper was accepted by brad barber teck ho and terrance odean special issue editors

income dynamics in tamil nadu india from 1971 to 2003 changing roles of land and human capital this article examines the changing role of physical and human capital in income dynamics in tamil nadu india using detailed daily records of farming households from 1971 to 2003 we find that income growth until the early 1990s is attributed to the rice green revolution and the associated development of nonrice farm sector further growth after the 1990s became possible due to the rapid nonfarm sector development that has been stimulated by the liberalization of indian economy since 1991 in accordance with this change in income structure the importance of physical and human capital has changed human capital was important in the early 1970s to take advantage of the rice green revolution technology once the new technology became standard among farmers human capital became an insignificant factor the importance of human capital has revived in a different manner in recent years firstly because it has increased farmers access to nonfarm job opportunities and secondly because farm management has become more knowledge intensive in the face of increasing scarcity of labor and water the contribution of physical capital increased during the green revolution period while it started declining after that the changing mechanism is characterized as the shifting importance from physical to human capital in accordance with the changing engines of income growth from the green revolution to the development of nonfarm sector

ex ante and ex post labor supply response to risk in a low income area abstract this paper tests for ex ante and ex post labor supply responses to weather risk for rural indian farm households the analysis uses panel data on 2115 households spanning 13 states in rural india merged with a 22 year series of district level rainfall data ex ante households facing riskier distributions of rainfall are more likely to participate in the labor market ex post unexpectedly bad weather and low rainfall increase labor force participation

targeting maps an asset based approach to geographic targeting summary proper targeting of policy interventions requires reasonable estimates of the benefits of the alternative options to inform such decisions we develop an integrated approach stemming from the small area estimation literature that estimates the marginal returns to a range of assets across geographically defined subpopulations we create a series of maps that can be overlaid with traditional poverty maps to identify strong candidate areas for intervention though an efficiency equity tradeoff sometimes exists we apply our method using recent ugandan data results are consistent with independent empirical findings and suggest asset specific transfer schemes would improve with a spatially targeted strategy

promises and expectations abstract we investigate why people keep their promises in the absence of external enforcement mechanisms and reputational effects in a controlled laboratory experiment we show that exogenous variation of second order expectations promisors expectations about promisees expectations leads to a significant change in promisor behavior we provide evidence that a promisor s aversion to disappointing a promisee s expectation leads her to behave more generously we propose and estimate a simple model of conditional guilt aversion that is supported by our results and nests the findings of previous contributions as special cases

the economics of poverty traps and persistent poverty an asset based approach abstract longitudinal data on household living standards open the way to a deeper analysis of the nature and extent of poverty while a number of studies have exploited this type of data to distinguish transitory from more chronic forms of income or expenditure poverty this paper develops an asset based approach to poverty analysis that makes it possible to distinguish deep rooted persistent structural poverty from poverty that passes naturally with time due to systemic growth processes drawing on the economic theory of poverty traps and bifurcated accumulation strategies this paper briefly discusses some feasible estimation strategies for empirically identifying poverty traps and long term persistent structural poverty as well as relevant extensions of the popular foster greer thorbecke class of poverty measures the paper closes with reflections on how asset based poverty can be used to underwrite the design of persistent poverty reduction strategies

welfare dynamics in rural kenya and madagascar this paper presents comparative qualitative and quantitative evidence from rural kenya and madagascar in an attempt to untangle the causality behind persistent poverty we find striking differences in welfare dynamics depending on whether one uses total income including stochastic terms and inevitable measurement error or the predictable structural component of income based on a household s asset holdings our results suggest the existence of multiple dynamic asset and structural income equilibria consistent with the poverty traps hypothesis furthermore we find supporting evidence of locally increasing returns to assets and of risk management behaviour consistent with poor households defence of a critical asset threshold through asset smoothing

using evidence of household income diversification to inform study of the rural nonfarm labor market in africa abstract the labor market literature in developing countries has seldom drawn on the studies of rural household income diversification this paper draws on such studies to inform future study of the rural nonfarm labor market in africa the review of evidence provides some surprising departures from traditional images of nonfarm activities of rural households among the most striking is the dominant importance in the majority of case study areas of nonfarm wage labor as compared to self employment of nonfarm sector earnings as compared to farm sector wage earnings and of local nonfarm earnings as compared to migration earnings the most worrying finding was the poor distribution of nonfarm earnings in rural areas despite the importance of these earnings to food security and farm investments this poor distribution implies significant entry barriers and market segmentation it is probable that this will lead over time to an increasingly skewed distribution of land and other assets in rural africa

do changes in the labour market take families out of poverty determinants of exiting poverty in brazilian metropolitan regions using survival models we test whether short term changes in the labour market affect poverty duration data are from the brazilian monthly employment survey such a monthly dataset permits more accurate estimations of events than using annual data but its panel follows households for a short period then methods that control for both right and left censoring should be used the results are as follows households with zero income are not those with the lowest chances of exiting changes in aggregate unemployment do not affect poverty duration and increasing wages in the informal sector has a negative effect on poverty duration

determinants of income mobility and household poverty dynamics in south africa this article analyses household income mobility among africans in south africa s most populous province kwazulu natal between 1993 and 1998 compared to industrialised and most developing countries mobility has been quite high as might have been expected after the transition in south africa this finding is robust when measurement error is controlled for when disaggregating the sources of mobility it is found that demographic changes and employment changes account for most of the mobility observed which is related to rapidly shifting household boundaries and a very volatile labour market in an environment of high unemployment using a multivariate analysis it can be seen that transitory incomes play a large role four types of poverty traps are found associated with large initial household size poor initial education poor initial asset endowment and poor initial employment access that dominate the otherwise observed regression towards the mean

rural income and poverty in a time of radical change in malawi abstract malawi is one of the poorest countries in africa there is widespread though not universal agreement about the shape of poverty in the country and the policy challenge this sets agriculture continues to be the most obvious means to stimulate broad based rural growth and to provide levels of food security and income needed for the majority rural population a longitudinal study over a decade during which radical policy and political changes occurred provides the data and basis for discussing the appropriate policy directions for reducing poverty

are schooling and roads complementary evidence from income dynamics in rural indonesia summary we examine the impact of spatial connectivity on household income growth and non agriculture labor supply in indonesia by combining household panel data and village census data during the period of 1995 2007 our empirical results show that the impacts of improved local road quality on income growth and the transition to non agricultural labor markets depend on household education and distance to economic centers in particular post primary education significantly increases the benefit from the improvement of local spatial connectivity in remote areas promoting labor transition to non agricultural sectors education and local road quality are complementary mutually increasing non agricultural labor supply and income in remote areas in contrast the initial landholding size does not affect the benefit from improved road quality

few opportunities much desperation the dichotomy of non agricultural activities and inequality in western kenya summary using data from western kenya we confirm the existence of a dichotomous non agricultural sector the poverty and inequality implications of the differently motivated diversification strategies only partly correspond to expected patterns while high return activities are indeed confined to richer households low return activities constitute an important income source for households across the entire income distribution finally we examine the wider implications of our findings for rural livelihoods we find that only engagement in high return non agricultural activities is significantly associated with increased agricultural productivity it seems that such high return activities play a key role in triggering cumulative effects of relative livelihood success

does the nonfarm economy offer pathways for upward mobility evidence from a panel data study in ethiopia summary empirical studies across many developing countries routinely document a positive correlation between participation in rural nonfarm employment and households wealth or income this paper explores whether nonfarm employment leads to higher consumption expenditure growth in ethiopia we find that 1 households consumption expenditure growth is positively correlated with the initial share of nonfarm income 2 the growth elasticity of nonfarm income share is higher for wealthier households and 3 the main source of growth for nonfarm participants comes from the higher rates of return participants enjoy on their human and physical capital

rural livelihood diversification in sub saharan africa a literature review abstractthis article provides a comprehensive review of the literature on the nature and evolution of rural livelihood diversification in sub saharan africa and the situation regarding smallholders it reveals mixed findings about the causes and consequences of livelihood diversification on rural smallholders adopting this strategy a lot of evidence from the literature suggests that it is relatively better off smallholders with sufficient assets who achieve successful livelihood diversification mainly by exploiting opportunities and synergies between farm and nonfarm activities because of asset constraints increase in incomes and wealth based on livelihood diversification has not yet benefitted the large majority of smallholders

bare promises an experiment abstract is truth value of a statement what lying aversion is all about we propose an experimental test and find only limited support in this context with bare promises we also test for guilt aversion and again find only limited support

promises in contract design in this paper we propose a new channel of contract design to boost efficiency if deviating from one s own words induces a self imposed moral burden the optimal contracting procedure with regard to cheap talk shall assign the responsibility for installing the nonbinding promise in the contract to whoever has the residual right to break such promise in the spirit of grossman and hart 1986 and hart and moore 1990 to study whether a worker s own promise of effort level governs his real choice of effort in a gift exchange game we implement four treatments in our experiments by varying two factors 1 who the firm or the worker takes the position of the proposer to propose the contract and 2 whether the proposed contract includes a nonbinding specification of the worker s effort level our key finding is that when it is the worker who proposes the contract and the contract includes the worker s promised effort level both the worker s actual effort choice and the aggregate profits are significantly higher than in each of the

charitable contributions and intergenerational transfers abstract this paper investigates the effects of bequest taxes and the income of children on the lifetime charitable contributions of parents using matched income tax records for parents and children the results show a positive elasticity of 0 6 for contributions with respect to the tax price of bequests the paper also finds that the income of children affects the amount that parents contribute to charity the results show a positive elasticity of up to 0 14 for contributions by parents with respect to the income of children implying that when children are better off parents are likely to increase charitable giving

guilty conscience and incentives with performance assessment errors this study examines the effects of guilty conscience on incentive in the situation where an agent performance assessment has errors there are two types of assessment error undervaluation and overvaluation in overvaluation agents will not correct the assessment because their wages would then decrease although agents will want their undervaluation corrected principals will not correct the error due to increased wage cost hence correcting errors is complicated however this type of selfish behavior by agents and principals produces feelings of guilt particularly when others trust them in this situation a high incentive is desirable for conscientious people with a strong sense of guilt or for nonconscientious people who do not feel guilt but it is undesirable for intermediate type people who are conscientious only to a certain extent jel d03 d82 j41

rural poverty dynamics in kenya structural declines and stochastic escapes we use panel survey data and household event histories to explore patterns of rural poverty dynamics in kenya over the period 2000 2009 we find substantial mobility across poverty categories using economic transition matrices drawing on asset based approaches we distinguish stochastic from structural poverty transitions few households successfully escaped poverty through asset accumulation up to 35 of the upwardly mobile while a large proportion of households up to 66 declining into poverty experienced structural transitions using household event histories we find significant differences across structural poverty transition classes in livelihood strategies household level shocks and other factors

the economics of poverty traps and persistent poverty empirical and policy implications the moral and economic imperatives to intervene in poverty traps motivate the identification of poverty traps and their structural causes so as to inform the design of appropriate policy responses however empirical identification remains challenging because of poverty traps complexity after reviewing mechanisms that can generate poverty traps we focus on one multiple financial market failures emphasising its heretofore underappreciated testable implications including specific behaviours that are rational only in the presence of a poverty trap we therefore recommend tests for these behaviours rather than more econometrically challenged efforts to directly test for poverty traps in estimated asset dynamics

asset smoothing consumption smoothing and the reproduction of inequality under risk and subsistence constraints abstract a growing literature asks whether low wealth agents can accumulate assets over time or whether they are trapped in poverty this paper develops a stochastic dynamic programming model with endogenous asset price risk to explore savings and portfolio decisions in a resource poor environment characterized by risk and subsistence constraints optimal portfolio strategies are found to bifurcate despite divisible assets and fully rational agents wealthier agents acquire a higher yielding portfolio and pursue conventional consumption smoothing poorer agents acquire a less remunerative portfolio and pursue asset smoothing rather than consumption smoothing asset based risk coping thus results in positive correlation between initial wealth and portfolio rate of return

income and asset poverty among pastoralists in northern kenya abstractin this study we use household panel data collected in marsabit district of northern kenya to analyse the patterns of livelihood sources and poverty among pastoralists in that area we estimate income poverty using imputed household income relative to the adjusted poverty line and asset poverty using a regression based asset index and tropical livestock units tlu per capita our results indicate that keeping livestock is still the pastoralists main source of livelihood although there is a notable trend of increasing livelihood diversification especially among livestock poor households the majority of households over 70 are both income and livestock poor with few having escaped poverty within the five year study period disaggregating income and asset poverty also reveals an increasing trend of both structurally poor and stochastically nonpoor households the findings show that the tlu based asset poverty is a more appropriate measure of asset poverty in a pastoral setting

bequest behavior and the effect of heirs earnings testing the altruistic model of bequests that parents transfer resources to children because of altruistic concern is a reasonable a priori assumption however economic theories of altruistic transfers have produced many counterintuitive conclusions and consequently much debate when applied to bequests these theories predict that inheritances will compensate for earnings differences between siblings as well as between parents and children this paper tests these implications using a new data set centered on federal estate tax returns little support can be found for an altruistic theory of bequests this finding has implications for macroeconomic policy government transfer programs and inequality copyright 1996 by american economic association

the hidden cost of raising voters expectations reference dependence and politicians credibility abstract two politicians compete to get elected each politician is characterized by a valence which is unobservable to the electorate and can take one of two values high or low the representative voter prefers politicians with high valence but random shocks may lead him to appoint a low valence politician politicians make statements concerning their valence if the voter is a standard expected utility maximizer politicians statements lack any credibility and no information transmission takes place by introducing reference dependence and loss aversion we show that truthful communication is possible in equilibrium and we characterize the conditions under which it can arise intuitively these behavioral biases introduce a cost of overstating one s valence as overstatements may shift the electorate s preferences toward better skilled opponents

migration remittances and capital accumulation evidence from rural mexico this paper studies the link between migration remittances and productive assets accumulation for a panel of poor rural households in mexico over the period 19972006 in a context of nancial markets imperfections migration may act as a substitute for imperfect credit and insurance provision through remittances from migrants and thus exert a positive eect on investment however it may well be the case that remittances are channelled towards increasing consumption and leisure goods exploiting within family variation and an instrumental variable strategy we show that migration indeed accelerates productive assets accumulation moreover when we look at the eect of migration on consumption of non productive assets durable goods we nd instead a negative eect our results then suggest that

brother can you spare a dime peer pressure in charitable solicitation abstract while the effects of peer pressure in charitable giving have been of considerable interest to social scientists there is little empirical evidence on the magnitude of these effects a correlation between giving or volunteering by one s peers and one s own giving can be driven by self selection into groups common shocks that inspire both the solicitor to ask and the individual to give or social influence using data from a university this paper analyzes whether alumni are more likely to give and give larger amounts when they are solicited by someone with whom they have social ties freshman year roommate assignments and the structure of the university s giving campaigns are used to overcome problems of selection and common shocks social ties play a strong causal role in the decision to donate and the average gift size additionally a solicitor s request is much more effective if he or she shares characteristics such as race with the alumnus being solicited

can simple prompts increase bequest giving field evidence from a legal call centre we report the findings of a field study demonstrating the importance of non pecuniary mechanisms for bequest giving we show that a prompt to leave money to charity that includes social emotional factors made during the will making process increases by 50 per cent the proportion of wills that include a charitable bequest in terms of magnitude we show that this is one third of the effect of a 40 estates tax at the threshold we find little response to either prompts or tax price changes among people with children indicating that for many leaving money to their children appears to preclude leaving money to charity

asset versus consumption poverty and poverty dynamics in rural ethiopia several studies have shown conceptually that assets form a more robust basis for identifying the poor than do flow variables like expenditures or income asset based poverty classification can be used to distinguish structural from stochastic poverty and can enable projection of poverty dynamics through time nonetheless little work has empirically compared poverty measurement based on assets and expenditures to indicate the practical implications of the choice of poverty measure this article uses panel data between 1994 and 2004 from ethiopia to generate asset and expenditures based poverty classifications asset dynamics are then explored to test for the existence of multiple asset index equilibria that could constitute evidence of poverty traps results provide evidence of multiple equilibria and show that the asset based poverty classifications predict future asset and expenditures poverty status more accurately than expenditures based measures the findings confirm that the asset based measure could be used to more carefully target poverty interventions

the rural non farm sector issues and evidence from developing countries abstract the rural non farm sector has traditionally been viewed as a low productivity sector which produces low quality goods it is often expected to wither away as a country develops recent years have seen a shift away from this position towards recognition that the rural non farm sector can and often does contribute to economic growth rural employment poverty reduction and a more spatially balanced population distribution this paper reviews the literature on the conceptual and empirical underpinnings of this more recent perspective focussing on the experience in developing countries the paper documents the size and heterogeneity of the sector pointing to evidence that in many countries the sector is expanding rather than declining the issues associated with measuring the sector s economic contribution are discussed followed by empirical assessments for several countries and regions the distributional impact of non farm earnings is examined and it is found that a pro poor impact while by no means inevitable can be considerable the sector s trajectory over time in different settings is reviewed and the scope for and experience of various policy interventions is discussed

land inheritance and market transactions in uganda studies on the role of nonmarket land transactions remain limited this paper addresses two questions is land inheritance driven by underdeveloped land markets how does land inheritance influence land disposal and acquisition we use a switching regression model on household data from rural uganda we find that the initially landless or near landless households due to little or no land inheritance obtain land through land markets while those that are land rich dispose of land through land sales and bequests the results suggest that a process of land equalization is unfolding within the sample

wealth risk and activity choice cattle in western tanzania abstract imperfect credit markets force households to use their savings for investment profitable activities often require lumpy investments limiting entry by poorer households resulting in increasing welfare differences in tanzania cattle are a profitable but lumpy investment and a liquid asset for consumption smoothing richer households own substantial cattle herds while poorer households specialize in low return low risk activities a dynamic programming model and simulations are presented to analyze entry into asset accumulation under income risk the evidence suggests that households with lower endowments are less likely to own cattle and returns to their endowments are lower

why do people keep their promises an experimental test of two explanations numerous psychological and economic experiments have shown that the exchange of promises greatly enhances cooperative behavior in experimental games this paper seeks to test two theories to explain this effect the first posits that individuals have a preference for keeping their word the second assumes that people dislike letting down others payoff expectations according to the latter account promises affect behavior only indirectly because they lead to changes in the payoff expectations attributed to others i conduct an experiment designed to distinguish between and test these alternative explanations the results demonstrate that the effects of promises cannot be accounted for by changes in payoff expectations this suggests that people have a preference for promise keeping per se

loopholes undermine donation an experiment motivated by an organ donation priority loophole in israel article i nfo giving registered organ donors priority on organ waiting lists as has been implemented in israel and singapore pro vides an incentive for registration and has the potential to increase the pool of deceased donor organs however the implementation of a priority rule might allow for loopholes as is the case in israel in which an individual can reg ister to receive priority but avoid ever being in a position to donate organs we experimentally investigate how such a loophole affects donation and find that the majority of subjects use the loophole when available the existence of a loophole completely eliminates the increase in donation generated by the priority rule when information about loophole use is made public subjects respond to others use of the loophole by withholding donation such that the priority system with a loophole generates fewer do nations than an allocation system without priority 2013 published by elsevier b v

introduction to the special issue on the role of nonfarm income in poverty reduction evidence from asia and east africa in this special issue we present seven studies that collectively attempt to investigate the role of non farm income in long term and short term poverty reduction in asia and africa the first four studies out of the seven use long term panel data over two decades in the philippines thailand bangladesh and india these studies show drastic increases in non farm income shares and corresponding declines in poverty levels over time especially in the philippines and thailand education levels of household members and returns to education also increased significantly in these countries the remaining three studies use cross sectional and short term panel data from ethiopia kenya and uganda these african studies show high proportions of poor households and low shares of non farm income that are somewhat comparable to the situation in the 1980s described in the asian studies without the green revolution that provided stable farm income and potential financial resources to invest in children education in asia it is not clear if african farm households can follow the asian examples

charitable bequests and taxes on inheritances and estates aggregate evidence from across states and time this paper examines the impact of wealth transfer taxes on charitable bequests we exploit the fact that federal and state taxes on estates and inheritances vary over time states and real wealth levels the effects of taxes are estimated using pooled cross sectional data spanning several decades based on aggregated information from federal estate tax returns under several different specifications we find evidence of a strong incentive effect of estate and inheritance taxes on charitable bequests

a note on the effects of taxation on charitable giving over the life cycle and beyond recent changes in the federal budget have sparked debate concerning the substitution of charitable activity for some types of government expenditures the extent to which private replacement is successful depends upon two factors the ability of charities to substitute their services for those reduced by the government and the ability of charities to garner more contributions as income and estate tax rates are reduced this analysis will concentrate only on the latter factor in particular this analysis will deal with the following questions will a reduction in income and estate tax rates have a predictable effect on the level of charitable contributions over the life cycle and the level of charitable bequests if the reduction in tax rates reduces charitable contributions over the life cycle will there be an offsetting rise in charitable bequests that is will the reduction in tax rates affect only the timing of charitable giving this question of timing is particularly important since successful replacement of government programs by charitable activity requires that current contributions rise the literature dealing with the effects of taxation on charitable giving does provide some information concerning these questions for example a number of authors including feldstein and clotfelter 1976 feldstein and taylor 1976 schwartz 1970 and taussig 1967 have measured the impact of the deductibility of charitable contributions under the income tax although the effects of the after tax cost of contributing one minus the marginal tax in the simplest case vary widely the best evidence appears to be given by feldstein and clotfelter 1976 who find that the elasticity of charitable contributions with respect to the after tax cost of giving is around 1 5 feldstein and clotfelter also find that the elasticities of contributions with respect to a measure of permanent income and to net worth are both positive these results imply that reducing income tax rates should result

exploring poverty traps and social exclusion in south africa using qualitative and quantitative data abstract recent theoretical work hypothesises that a polarised society like south africa will suffer a legacy of ineffective social capital and blocked pathways of upward mobility that leaves large numbers of people trapped in poverty to explore these ideas this paper employs a mix of quantitative and qualitative methods novel econometric analysis of asset dynamics over the 1993 98 period identifies a dynamic asset poverty threshold that signals that large numbers of south africans are indeed trapped without a pathway out of poverty qualitative analysis of this period and the period 1998 2001 more deeply examines patterns of mobility and confirms the continuation of this pattern of limited upward mobility and a low level poverty trap in addition the qualitative data permit a closer look at the specific role played by social relationships while finding ample evidence of active social capital and networks these are more helpful for non poor households for the poor social capital at best helps sta

poverty status and the impact of formal credit on technology use and wellbeing among ethiopian smallholders summary this paper examines the impact of formal credit largely microfinance on the use of improved technology and on consumption and asset growth across households in different degrees of asset poverty using data from rural ethiopia the analysis finds no relationship between participation in microfinance programs and the use of technologies or consumption growth among the poorest households even though the use of certain technologies like fertilizer contributes to their asset accumulation over time for other households microfinance has positive effects on both consumption and asset growth as well as on the use of improved technology the findings imply variation in constraints faced by different classes of poor households and suggest the value of asset based poverty classifications in identifying target groups for poverty interventions

global value chains large scale farming and poverty long term effects in senegal this paper presents panel data evidence on the impact of expansion of global value chains and large scale export oriented farms in developing countries over almost a decade we estimate the income effects of wage employment on large scale farms in the horticultural export sector in senegal using data from two survey rounds covering a seven years period of rapid expansion of the sector we estimate average income effects as well as heterogeneous income effects using fixed effects and quantile fixed effects regressions we find that poverty and inequality reduced much faster in the research area than elsewhere in senegal employment in the horticultural export sector is associated with higher household income and the income effect is strongest for the poorest households expansion of the horticultural export sector in senegal has been particularly pro poor through creating employment that is accessible and creates substantial income gains for the poorest half of the rural population these pro poor employment effects contrast with insights in the literature on increased inequality from rural wage employment

smoothing consumption by smoothing income hours of work responses to idiosyncratic agricultural shocks in rural india while research has demonstrated that farm households in developing economies are able to protect consumption from idiosyncratic crop shocks little evidence shows how this is achieved this paper examines the extent to which labor markets allow households to shift labor from farm to off farm employment and the extent to which such a shift explains the observed lack of correlation between consumption and idiosyncratic crop shocks the empirical analysis uses a novel measure of the idiosyncratic crop income shock which utilizes information on start of season cropping choices to more accurately estimate household expectations of weather

let s talk how communication affects contract design we study experimentally how the ability to communicate affects the frequency andeffectiveness of flexible and inflexible contracts in a bilateral trade context where sellers canadjust trade quality after observing a post contractual cost shock and a discretionary buyertransfer in the absence of communication we find that rigid contracts are more frequent andlead to higher earnings for both buyer and seller by contrast in the presence of communication flexible contracts are much more frequent and considerably more productive both for buyers andsellers also both buyer and seller earn considerably more from flexible with communicationthan rigid without communication our results show quite strongly that communication a normalfeature in contracting can remove the potential cost of flexibility disagreements caused byconflicting perceptions we offer an explanation based on social norms

in the eye of the storm the welfare impacts of a hurricane summary the impact of a large covariant shock namely hurricane mitch is examined in the context of household asset holdings in rural nicaragua utilizing household panel data from the period it is found that the hurricane did not have an adverse impact on the ownership of productive assets among the affected households on average on the other hand nonproductive asset holdings seem to have been significantly reduced a further examination confirms that the shock affected the poorest households disproportionally especially in terms of nonproductive assets finally this study presents strong suggestive evidence of a geographical poverty trap within the shock affected areas of the country

the determinants of nonfarm income diversification in rural peru abstract this paper shows that in peruvian rural areas there has been substantial growth over the past decade in household employment outside of own farming at present 51 of the net income of rural households comes from these off farm activities and thus they certainly cannot be considered as marginal the reasons households diversify their incomes are several access to public assets such as roads and private assets such as education and credit is an important factor in diversification increasing access to these assets will help rural households to increase their self employment as well as wage employment in the nonfarm sector

supermarkets and agricultural labor demand in kenya a gendered perspective abstract many developing countries are experiencing a rapid expansion of supermarkets new supermarket procurement systems could affect farming patterns and wider rural development while previous studies have analyzed farm productivity and income effects possible employment effects have received much less attention special supermarket requirements may entail intensified farm production and post harvest handling thus potentially increasing demand for hired labor this could also have important gender implications because female and male workers are often hired for distinct farm operations building on data from a recent survey of vegetable farmers in kenya a double hurdle model of hired labor use is developed and estimated farmer participation in supermarket channels increases the likelihood of hiring labor by 20 and demand for hired labor by 61 a gender disaggregation shows that positive employment effects are especially pronounced for female laborers who often belong to the most vulnerable population groups rural employment generation can be an important vehicle for poverty reduction

one kind of freedom poverty dynamics in post apartheid south africa abstract a 1993 south african living standards survey documented the legacy of apartheid in the form high levels of inequality and human insecurity drawing on a 1998 re survey of households in the 1993 study this paper explores whether this legacy has been superseded or whether apartheid s end has been only one kind of freedom that has left households in a poverty trap from which they cannot escape after proposing a theoretically grounded dynamic poverty typology that distinguishes stochastic from structural poverty transitions the paper goes on to estimate that significant numbers of the south african poor are potentially trapped in a structural poverty trap and lack the means to escape poverty over time

persistent poverty in north east ghana abstract this paper explores local poverty and wealth inequality in the upper east region of northern ghana in the period from 1975 89 land was not scarce and the social management of household membership and household labour were critical to household security but this social management was not independent of wealth status there was a virtuous circle between wealth and household labour supply and a vicious circle between poverty and small household size poverty traps existed so that those with too little labour and too little wealth engaged in strategies which entrenched them in poverty

financial education and behavioral finance new insights into the role of information in financial decisions recent empirical evidence based on surveys and experimental activities within the fields of behavioral finance and financial education has offered economists new empirically based insights into how individuals use information in making financial decisions specifically the importance of information in financial decisions may be reduced or eliminated by psychological aspects of the individual such as a state of overconfidence that is individual or shared with a group or by the individual s limited ability to process complex and abundant information this paper aims to complement this emerging body of literature by studying how individuals perceive and process information when making financial decisions we review these contributions and suggest a number of broad guidelines that can provide a framework for future discussion of this topic within financial decision theory

nonfarm employment agricultural shocks and poverty dynamics evidence from rural uganda this article examines the role of off farm employment in poverty reduction over a short period of time by using panel data from 894 rural ugandan households in 2003 and 2005 taking advantage of the unique off farm labor supply and income data we analyzed how households respond to negative agricultural shocks especially through off farm labor supply and income to mitigate crop income loss our analysis indicates that the flexibility of labor time allocation varies across off farm jobs and that only low skilled and low wage jobs tend to be used to mitigate negative shocks especially among the asset poor

vulnerability seasonality and poverty in ethiopia most studies examining the dynamics of welfare have found large fluctuations in consumption over relatively short periods suggesting substantial short run movements in and out of poverty the consequence is that cross section poverty research may not be able to identify the poor in this study we explore this short run variability further we use a data set on a panel of 1450 households in different communities in rural ethiopia surveyed thrice over 18 months on average year to year poverty is very similar however we find high variability in consumption and poverty over the seasons and year by year econometric analysis suggests that consumption is affected by idiosyncratic and common shocks including rainfall and household specific crop failure while households respond to seasonal incentives related to changing labour demand and prices the results imply that a larger number of households are vulnerable to shocks than implied by the standard poverty statistics while some of the non poor in the

cluster sample methods in applied econometrics inference methods that recognize the clustering of individual observations have been available for more than 25 years brent moulton 1990 caught the attention of economists when he demonstrated the serious biases that can result in estimating the effects of aggregate explanatory variables on individual specific response variables the source of the downward bias in the usual ordinary least squares ols standard errors is the presence of an unobserved state level effect in the error term more recently john pepper 2002 showed how accounting for multi level clustering can have dramatic effects on t statistics while adjusting for clustering is much more common than it was 10 years ago inference methods robust to cluster correlation are not used routinely across all relevant settings in this paper i provide an overview of applications of cluster sample methods both to cluster samples and to panel data sets

learning about the prospects for mobility economic and political dynamics following fundamental policy reform abstract the political left turn in latin america which lagged its transition to liberalized market economies by a decade or more challenges conventional economic explanations of voting behavior this paper generalizes the forward looking voter model to a broad range of dynamic possibly non concave income processes under full information the model implies support for redistributive policies materializes rapidly if few prospects of upward mobility are present in contrast modeling voters evolving beliefs about an unknown income dynamic process shows a slow and polarizing shift toward redistributive preferences simulation using fitted income dynamics suggests that this imperfect information perspective accounts for latin america s right to left political shift and offers additional insights about political dynamics in the face of economic polarization

can observers predict trustworthiness abstract we investigate whether experimental subjects can predict behavior in a prisoner s dilemma played on a tv show subjects report probabilistic beliefs that a player cooperates before and after the players communicate subjects correctly predict that women and players who make a voluntary promise are more likely to cooperate they are able to distinguish truth from lies when a player is asked about her intentions by the host subjects are to some extent able to predict behavior their beliefs are 7 percentage points higher for cooperators than for defectors we also study their bayesian updating beliefs do not satisfy the martingale property and display mean reversion

ten years of q squared implications for understanding and explaining poverty summary over the past decade there have been a number of initiatives to promote a more systematic integration of quantitative and qualitative or q squared approaches to poverty analysis in the global south and a large body of literature had emerged the objective of the article is to present a selective review of this empirical work with a view to demonstrate the value it has added for understanding and explaining poverty the evidence strongly suggests that q squared approaches have aided our understanding of the characteristics of the poor and the causes of poverty

behavioural and material determinants of production relations in agriculture in this essay we develop a framework for analysing the major institutions governing the production and exchange of output and the primary factors of production in rural areas the analysis incorporates general considerations of risk and information constraints jointly with the principal material attributes of agriculture and of agricultural production factors the framework is used to analyse barriers to the existence of the major intertemporal and factor markets it is applied specifically to land scarce environments for which it provides an internally consistent explanation for many of the well documented institutional features of such settings in addition the analysis provides new implications for among other phenomena the inter relationships among ownership holdings operational scale family size and factor productivity for the scarcity of animal rental markets and use of animals as collateral for the renting out of land by small landowners and for the existence of plantations for certain crops

non farm activity household expenditure and poverty reduction in rural vietnam 2002 2008 summary diversifying into non farm activities has been suggested as an effective way out of poverty for rural households in developing countries using the vietnamese household living standards surveys of 2002 2004 2006 and 2008 we test this claim and investigate the effect of non farm sector involvement on poverty and expenditure growth our endogeneity corrected estimates show that an additional household member involved with non farm activity reduces the probability of poverty by 7 12 and increases the household expenditure by 14 over a two year period our findings also indicate that non farm involvement reduces the hours worked on farm but not the household agricultural income

regional agricultural endowments and shifts of poverty trap equilibria evidence from ethiopian panel data we examine changes in patterns of equilibria over time and across regions applied to the ethiopia rural household survey we revisit incidence of multiple equilibria using new nonparametric techniques and examine single equilibria that remain stagnant below the poverty line using quantile regressions we identify differences across the income distribution we introduce the empirical analysis of sequences of equilibria we identify a single equilibrium in 1994 1999 but find a second higher equilibrium emerging in 1999 2004 evidencing a shift from unimodal toward a bimodal asset distribution the most deprived region exhibits a low level stagnant equilibrium despite significant rural income growth nationwide

guilt in games a clear conscience is a good pillow why does this old proverb contain an insight the emotion of guilt holds a key psychologists report that the prototypical cause of guilt would be the infliction of harm loss or distress on a relationship partner roy baumeister arlene m stillwell and todd f heatherton 1994 245 june price tangney 1995 moreover guilt is unpleasant and may affect behavior to render the associated pangs counterfactual baumeister stillwell and heatherton state if people feel guilt for hurting their partners and for failing to live up to their expectations they will alter their behavior to avoid guilt in ways that seem likely to maintain and strengthen the relationship avoided guilt is the down of the sound sleeper s bolster how can guilt be modeled how are human interaction and economic outcomes influenced we offer a formal approach for providing answers start with an extensive game form which associates a monetary outcome with each end node say that player i lets player j down if as a result of i s choice of strategy j gets a lower monetary payoff than j expected to get before play started player i s guilt may depend on how much he lets j down player i s guilt may also depend on how much j believes i believes he lets j down we develop techniques to analyze equilibria when players are motivated in part by a desire to avoid guilt the intellectual home for our exercise is what has been called psychological game theory this framework originally developed by john geanakoplos david pearce and ennio stacchetti 1989 and recently extended by battigalli and dufwenberg 2005 henceforth b d allows players utilities to depend on beliefs about choices states of nature

strategic communication with lying costs i study a model of strategic communication between an uninformed receiver and an informed but upwardly biased sender the sender bears a cost of lying or more broadly of misrepresenting his private information the main results show that inflated language naturally arises in this environment where the sender almost always claims to be of a higher type than he would with complete information regardless of the intensity of lying cost there is incomplete separation with some pooling on the highest messages the degree of language inflation and how much information is revealed depend upon the intensity of lying cost the analysis delivers a framework to span a class of cheap talk and verifiable disclosure games unifying the polar predictions they make under large conflicts of interest i use the model to discuss how the degree of manipulability of information can affect the trade off between delegation and communication copyright 2009 wiley blackwell

third party assessments in trust problems with conflict of interest an experiment on the effects of promises is it possible to elicit reliable assessment from an assessor having a conflict of interest e g a professor that writes a recommendation letter for a formal phd student we propose an experimental test and show that compared to a not incentivized assessment a promise to give a truthful assessment reduces misreporting to the same extent as an incentivized assessment i e when the assessor gains higher payoff if the assessment is correct

assessing the impact of nerica on income and poverty in central and western uganda persistent food shortage and poverty in sub saharan africa ssa are major development issues new rice for africa nerica was developed to boost crop yield and income of rural households in ssa although its high yielding traits have become fairly well known there is no empirical analysis of its impact on income and poverty by taking the case of uganda where a nerica promoting program was initiated as one of the major poverty eradication measures this study attempts to compare actual income with the hypothetical income without nerica we found that introduction of nerica decreases poverty to a significant extent without deteriorating income distribution

the impact of shocks on gender differentiated asset dynamics in bangladesh abstractthis study investigates changes in assets owned by the household head his spouse or jointly in response to shocks in rural agricultural households in bangladesh with household survey panel data looking at changes within households over time we find that weather shocks adversely affect the asset holdings of household heads relatively strongly while predicted negative shocks more strongly lead to assets of both spouses being drawn down the results furthermore suggest that jointly owned assets are not easily sold in response to shocks and that women s asset holdings and coping strategies are shaped by their lower involvement in agriculture