Agricultural technology adoption and persistence

A new paper (gated) by Michael Carter, Rachid Laagja and Dean Yang shows, using a randomized fertilizer subsidy, that reducing costs increases adoption, but also, somewhat in opposition to previous research and importantly, that adoption is persistent into the following season.

First, we provide one of the 􏰄first randomized controlled trials of the impact of an input subsidy program, and the 􏰄first to measure impacts on a range of important household outcomes beyond fertilizer use itself. The only previous study using randomized methods is Dufl􏰅o et al. (2011), who estimate impacts of fertilizer subsidies on fertilizer use alone (in rural Kenya). We show positive impacts of input subsidies (in Mozambique) on a range of outcomes beyond input use, including farm output, household consumption, assets, and housing quality.

Second, we 􏰄find positive e􏰃ffects of input subsidies that persist up to two annual agricultural seasons beyond the season in which the subsidies were off􏰃ered. This result contrasts with Du􏰅flo et al. (2011), who 􏰄find no persistent impact of either 􏰀heavy􏰁 (50%) subsidies for fertilizer or the 􏰀well-timed nudge􏰁 of o􏰃ffering free delivery at the time of the previous harvest. Both treatments raise fertilizer use in the season they are provided, but impacts are very close to zero and not statistically signi􏰄ficantly di􏰃fferent from zero in the next season.

Having spent a lot of time lately with a friend writing a book on fertilizer and the apparent failure to launch of Africa’s Green Revolution, my thoughts immediately go to whether the fertilizer available on the market is real and how perceptions of fake fertilizer are affecting the decisions of farmers to continue (or not) using fertilizer in their fields.

Luckily, a few people are looking into this and maybe we’ll have some answers soon.

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The impact of rainfall, directly

As a development and labor economist, it’s unusual to see colleagues concerned with the impact of rainfall, full stop, on anything. We’ve become so accustomed to seeing rainfall used as an instrumental variable, a pathway to causal results, rather than a driver of some effect in and of itself. A new working paper by David Levine and Dean Yang (gated), however, looks at rainfall itself, or rather deviations from mean rainfall levels, which is actually pretty important. If we’re going to use rainfall as an instrument, or think of it as an exogenous shock that can be modeled linearly (or non-linearly, but modeled nonetheless), then it’s a good idea to make sure those assumptiosn actually hold.

Abstract here:

We estimate the impact of weather variation on agricultural output in Indonesia by examining the impact of local rainfall shocks on rice output at the district level. Our analysis makes use of local meteorological data on rainfall in combination with government administrative data on district-level rice output in the 1990s. We find that deviations from mean local rainfall are positively associated with district-level rice output. 10% higher rainfall leads metric tons of rice output to be 0.4% higher on average. The impact of rainfall on rice output occurs contemporaneously (in the same calendar year), rather than with a lag. These results suggest that researchers should be justified in interpreting higher rainfall as a positive contemporaneous shock to local economic conditions in Indonesia.

Hunger seasons

This week’s events have reminded me why I don’t want to go back to school. As I struggle through writing an application essay and wonder whether I’m really too old for this, my thoughts turn to grandiose schemes of changing the world.

Last week, a colleague and I were discussing the seasonality of hunger in some farming communities, particularly in East Africa, or Sub-Saharan Africa. I was so pleased with myself, thinking about a “Hunger Season,” and my journalist brain got a little revved about how I could write a book about it, only to find this one: The Last Hunger Season: A Year in an African Farm Community on the Brink of Change.

My take so far, it’s a little grandiose and self-pat-on-the-back-y, but it’s well written and very well researched. It paints a fascinating and illuminating portrait of subsistence farmers in Kenya, going hungry, seasonally, for just the reasons my colleague and I had been discussing earlier. It’s definitely worth a read.

I hope to finish it this week, if my own grandiose essay writing doesn’t get in the way.

Weighing in on the soda ban

I’ve been only nominally present on the internet lately due to family stuff I won’t bore you with, but the last few days have seemed especially filled with vitriol towards Bloomberg’s soda ban.

I understand the detractors to be of a particular political bent, but I’ve been surprised by both the magnitude of the response and the apparent blinding nature of the issue. People I generally consider intelligent and levelheaded have, in my mind, totally missed the boat to have a larger conversation on policy.

Will Wilkinson, in the Economist, provides an account (invoking Jonathan Swift a bit) for his stance against paternalism, but sets up false dichotomies.

GIGANTIC sugared soft drinks are disgusting. Let’s just get that out of the way. Can we also agree that the high-calorie drinks rich people like to consume—red wine, artisanal beer, caramel frappuccinos, mango smoothies with wheatgrass and a protein boost—aren’t at all disgusting? At any rate, we yuppie pinot-drinkers know how to look after ourselves. In contrast, the wretched classless hordes, many of them being of dubious heritage, lack the refinement of taste necessary to make autonomy unobjectionable. Those who abuse their liberty, filling the sidewalks of our great cities with repulsive shuffling blimps, can’t expect to keep it, can they?

All those high-calorie drinks that rich people consume are consumed by rich people for a reason. Well, several, probably. They taste good (except wheatgrass, yuck), they confer some sort of status on the drinker (conspicuous consumption), and they’re expensive. Have you seen the price of Bordeaux lately? 2010 Chateau LaTour is $1500 a bottle. Why, you ask, despite there being a glut of many other wines on the market? It’s likely because Bordeaux is one of the few foreign wines that has been introduced to China. And the Chinese love their red wine. But we (the US government) don’t intervene and say we have to make sure that wine grapes are affordable and vintners stay in business, so let’s incentivize more wine grape growing in France or prevent the Chinese from demanding wine.

But I digress. These drinks are expensive because the market recognizes both their inherent qualities and conspicuous consumption qualities, identifies demand and supply, and provides at the equilibrium price. Every one of my principles students could show you a graph to that effect.

The difference is that we do intervene with corn, a primary ingredient in sugary sodas, which artificially holds down the price. Sugary sodas are not just cheap because of supply and demand; they’re cheap because government intervention, particularly subsidies for growing corn, keeps corn abundant and cheap.

Again, my principles students could all give you a list of reasons why those subsidies are in place: we care about food security and being able to provide our own food in case of a crisis; we want to preserve a rural way of life; we want to make sure farmland is used for farming and not housing developments. But also, subsidies become entrenched, often far beyond their usefulness. Farmers are used to the guaranteed income and don’t want to give them up. Companies who buy corn want corn cheap, so they lobby to keep the subsidies in place. Pop includes high fructose corn syrup as an ingredient, a cheap alternative to sugar. They want to keep the price of corn low so they keep their profit margins while keeping their product cheap.

Subsidies are hard to get rid of because they have the property of concentrated benefits/diffuse costs. A few people benefit a lot from subsidized corn (and indeed we all benefit a little from low prices on foodstuffs that have subsidized corn as an ingredient), and we all pay a little through our taxes to keep those prices low. Subsidies, in theory, should stay in place as long as the benefits to society outweigh the costs. And perhaps the soda ban shows that the costs (increased obesity as a result of soda consumption–though perhaps a tenuous link) are greater than the benefits to society as outlined above. Or Bloomberg’s just a paternalistic whack.

Is banning pop in larger than 16-oz bottles the right answer? Probably not. Can Bloomberg single-handedly change US farm policy? Absolutely not. So he does what is within his control. Is it paternalist? Yes, totally. But if we were really worried about paternalism, why didn’t I hear all of these people crowing about laws that seek to limit abortion rights and intimidate mothers and prevent access to birth control? Make a distressed rape victim listen to a lecture about her child’s beating heart, allow her doctor to withhold information from her, and make her wait three more days before having an abortion? Sure! But increase the cost of consuming something whose cost is artificially low and presents potentially harmful negative externalities? The nerve.

Related:

Claire Potter makes a similar argument in the Chronicle of Higher Education.

RCTs and placebo effects

A few weeks ago, a paper was posted on the CSAE 2012 Conference website that seemed to fly in the face of much of the current research that is happening in development economics. The advent of RCTs (randomized control trials) brought about a significant change in the way we do policy analysis, but also in the costs of it. This paper suggested that RCTs were capturing placebo effects. Just like when people believe they are taking curative medicines, they feel better, so do those benefiting from RCTs experience placebo effects from knowing they are part of an experiment.

The answer, according to the researchers, is to conduct a double-blind experiment, where neither the researchers nor the participants whether they were part of the treatment or control.

The paper garnered a lot of attention early on. I noticed many colleagues and others had the immediate and short reaction of “wow” and “yikes”, and I wasn’t the only one. Berk Ozler, at the Development Impact Blog, has a good review of the paper up with a great, punny title. Among other problems:

First, it turns out that the modern seeds are treated with a purple powder in the market in Morogoro (to prevent cheating and protect the seed from insect damage during storage), so the experimenters sprayed the traditional seeds with the same purple powder. As you can immediately tell, this is less than ideal. First, as this is a not a new product, farmers in the blind RCT are likely to infer that the seeds they were given are modern seeds. Given that beliefs are a major part of the story the authors seem to want to tell, this is not a minor detail. Second, if the purple powder really does protect the seeds from insect damage, the difference between the MS and TS is now reduced.

Berk’s analysis is well worth a read. Kim Yi Dionne also addresses placebo effects, though a different paper.

Update: the original post said that this paper was forthcoming in Social Science and Medicine. This is not the case. Sorry for the confusion and thanks to Marc Bellemare for catching it.

Update #2: The Economist has a nice review of this paper up as well on the Free Exchange blog. It doesn’t touch most of the analysis issues, but it does explain well why double-blind experiments might not be useful in Economics. h/t @cdsamii

Ploughs vs. sticks

There is small strain of the economics literature that deals with religion and culture and tries to take these things at face value. While much of economics (and economists) take culture out of the picture when creating models, there are whole conferences devoted to how culture influences our decision-making.

Much of the reason that culture is often excluded from economic models is that it is, or at least seems, endogenous. Culture determines our decisions which determines our culture, so we have a chicken-and-egg argument. You could say, then, that the point of the field of Economic History—which aims to bring economic reasoning to historical events and data–is to tease out which came first, the culture or the decision, the tradition or the allocation.

A recent paper by Alberto Alesina, Paola Giuliano and Nathan Nunn tackles this chicken-and-egg question by comparing places where the plough was readily adopted and places where more labor (digging with sticks, weeding by hand) than capital prevailed as the dominant agricultural tool. They argue that fertility, or how many children one decides to have, was influenced on a societal level by the adoption of the plough. The reasoning is rather straightforward. The plough, as a labor-saving device, reduced the need for women and children in the fields, thus creating a less egalitarian culture–where women stayed at home instead of working outside the home–and one where women had less children.

They note the fertility result as surprising; their original hypothesis had been that a plough would increase fertility as it increased the time mothers would have to bear children. I don’t find it particularly surprising, knowing it takes a lot of hands to run a farm, but I do think it’s an interesting attempt to identify the source of cultural norms.