CID Micro-Development Initiative :: Research :: Center for International Development at Harvard University (CID)

CID Micro-Development Initiative

Overview | Faculty Participants | Activities

Overview

This Micro-Development Initiative concerns itself with causes and consequences of public policy design. The Initiative seeks to create a center of excellence in micro-development research and to provide immediately exciting and relevant conclusions for policy-making around the world. Further, it aims to support teaching by demonstrating ways in which policy can be developed through rigorous and scientific assessment and evaluation, and to contribute to actual policy making on the ground.

Overview | Faculty Participants | Activities

Faculty Participants

Amitabh Chandra
Asim Ijaz Khwaja
Rohini Pande
Monica Singhal

Overview | Faculty Participants | Activities

Current Activities

Research within the Micro-Development Initiative is animated by applied microeconomic questions that affect public policy design in developing countries. Current projects include:

Informal Taxation: The Financing of Local Public Goods in Developing Countries (Monica Singhal)
A striking fact when comparing developed and developing countries is that household taxation forms a much smaller share of the tax base in many developing countries than it does in developed countries, and it is practically non-existent in most rural agricultural areas. Given this, one might conclude that local public goods, such as roads, schools, irrigation systems and other infrastructure, must be financed through intergovernmental grants or by outside agencies. However, these conclusions miss an important aspect of how local projects are actually financed. Anecdotal evidence from a large number of developing countries around the world suggests that when a local public project is undertaken, it is common for local residents to contribute to the project in money, materials, and often in labor. We refer to these mechanisms as “informal taxation.” This is an important area of study, since informal taxation may be a primary or in some cases the only mechanism for the finance of local public goods in developing countries. This study uses household surveys from developing countries which contain information about these types of contributions to local projects. Informal taxation is prevalent in all surveyed countries, with between 10 and 52 percent of households reporting having made a cash or labor donation in the year previous to the survey. Our current work focuses on estimating the magnitude of contributions relative to household income, formal taxes paid, and government budgets.

Credit Provision and Business Outcomes (Rohini Pande)
The focus of recent credit programs in many countries has been on designing contractual forms which increase outreach among populations that undertake entrepreneurial activities but haven’t been reached by traditional credit providers, especially the urban poor. Some of these programs, notably micro-credit programs, have enjoyed great policy success. However, an important, but largely missing element, in discussions of these programs is careful evaluations of existing interventions and alternative program designs. Such evaluations are critical for an understanding of whether microfinance is an effective way of reducing poverty and increasing entrepreneurial activity.

In ongoing work in India, we are undertaking two randomized impact evaluations of microfinance programs. The first, which is based in Kolkata in India, evaluates how different repayment schedules affect the default and delinquency rates for micro-credit clients and their economic well-being. Both from the micro-finance provider and client’s perspective, there is a critical need to understand how different repayment schedules affect delinquency and default rates. For a MFI frequent repayment implies high administrative costs while from a client’s perspective, economic wellbeing may also be adversely affected by the high frequency of loan repayments. The second, which is based in Ahmedabad, evaluates business training for women who are microfinance clients. The training combines elements of both financial literacy and entrepreneurial practices into a short two-day session that is designed to maximize efficacy of information presented to women by emphasizing the creation of personal goals and strategies that each woman devises during the training and pledges to maintain. Despite the popularity of business training and financial literacy programs (the 2006 Freedom From Hunger’s 2006 with Education Status report states that at least 24,010 credit associations worldwide implement financial education programs) there is limited evidence on whether it improves outcomes for clients. The randomized nature of our evaluation will allow us to provide causal evidence on this issue.

Drug Resistance in Developing Countries (Amitabh Chandra)
In many countries where government clinics are overcrowded or physician absenteeism is rampant, the poor rely on private physicians for the treatment of many chronic conditions. For several reasons (outlined below) this practice can lead to drug resistance. If sufficiently pervasive, such resistance could undermine the efficacy of public health interventions that rely on increasing access to medications for chronic ailments. For example, extensively drug-resistant TB, or XDR-TB, has now been detected in 40 countries. This bacteria does not respond to the “first-line” drugs like rifampicin and isoniazid, and arises when inadequately trained physicians mis-prescribe TB medications, or patients stop taking the medicine as soon as they overcome the chronic manifestations of tuberculosis.

There are three principal channels that contribute to the development of drug-resistance bacteria: (1) failure to take the entire prescribed course of the antibiotic, (2) using contaminated drugs of uncertain purity (3) overuse of broad-spectrum antibiotics (such as third-generation cephalosporins). These potential effects are largest in areas where patients are poor, where intellectual property rights aren’t sufficiently enforced, and where providers have an incentive to compete with each other by prescribing rapidly acting drugs which ameliorate chronic ailments that impede productivity.

In this project we are interested in measuring the magnitude of the first two channels. In the first phase of our study, we would oversample populations living in urban slums in India. In compliance with appropriate human-subjects protocol, would obtain blood draws from these patients and assess exposure to drug-resistance bacteria using standard lab-tests. We will also purchase antibiotics at pharmacies close to the slum populations and measure the purity of the purchased drugs through independent laboratory testing. These efforts will allow us to construct a map of the socio-economic and geographic gradients in antibiotic resistance, and would represent a crucial step towards developing policies that might mitigate the development of further drug-resistance in the population.

Overview | Faculty Participants | Activities