Issue 91, March 2016
Reducing teacher absence 10 times more cost-effective than hiring more teachers in India
Some people argue that increasing education system performance in low-income countries
requires a vast increase in inputs (hiring more teachers). Others believe that similar gains can
accrue by increasing efficiency (getting teachers to show up for work). A new nationally
representative data set of schools across 1,297 villages in India shows large investments over
the past decade in the education sector have led to significant increases in inputs but little
change in teacher absence. According to these data, the fiscal cost of 23.6 percent of teachers
absent during unannounced visits is roughly $1.5 billion/year. School monitoring is strongly
correlated with lower teacher absence, but hiring more teachers is correlated with increases in
absence. Simulations based on these results implies that investing in better governance by
increasing the frequency of monitoring could be over ten times more cost effective at
increasing teacher-student contact time (net of teacher absence) than hiring more teachers.
Thus, policies that decrease the inefficiency of public spending in India and other low-income
countries where absence rates are high, are likely to yield substantially higher returns than
those that increasing inputs.1
The ‘white-man’ effect on behavior in experiments
Development economists increasingly use behavioral games to understand how people make
decisions that mirror real-life choices. In this study, during a series of dictator games played
across 60 villages in Sierra Leone, the researchers varied the presence or absence of a foreign
researcher who differed starkly and visibly from that of the players. In dictator games, the first
player (“the dictator”) chooses how to split an endowment with a second player. How much
the first player chooses to give away is interpreted as a true measure of his/her underlying
generosity, since there is no need to give away anything at all. However, the study shows that
simply having a white foreigner in the room (who was silent and not otherwise involved in
managing the study) increased player contributions by 19 percent. It looks like the white
foreigner’s presence prompted players to be more generous than they would be in real life,
making their behavior in the game less indicative of true generosity. Second, local participants
more exposed to development aid gave less, possibly believing the games were testing them
for aid suitability. These results—which show that the race and nationality of evaluators across
treatment and control areas can influence what people do in these games—calls into question
what we think we know about how people make decisions.2
1
The Fiscal Cost of Weak Governance: Evidence from Teacher Absence in India, Karthik
Muralidharan, Jishnu Das, Alaka Holla, and Aakash Mohpal, World Bank Policy Research Paper 7579,
February 2016.
Cilliers, Jacobus, Oeindrila Dube, and Bilal Siddiqi. 2015. “The white-man effect: How foreigner presence
affects behavior in experiments.” Journal of Economic Behavior & Organization 118: 397-414, October | A
2
http://econ.worldbank.org/research
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New model estimates the size of illicit activity and laundered assets in Colombia
The estimates are guided by a long-run growth model, which can also be applied to other
countries. The model considers illicit workers and activities alongside a licit private sector and
a functioning government. The licit sector operates in a perfectly competitive environment and
produces a good through a standard neoclassical production function. The illicit sector operates
under imperfect competition (through cartels) and is composed of the production of illicit
goods with value in the market (for example illicit drugs) and activities that only redistribute
wealth (for example robbery, kidnapping, and fraud). The model provides a framework to
assess the effects of changes in productivity, government efficiency, and drug prices on labor
and output markets. It also derives a set of estimable equations to measure the size of illicit
activities and laundered assets from 1985 to 2013. Illicit incomes in Colombia increased
drastically until 2001, peaking at 12 percent of gross domestic product (GDP), and then
decreased to less than 2 percent of GDP by 2013. The decline occurred during a period of high
economic growth and the implementation of Plan Colombia. The estimated volume of
laundered assets increased from about 8 percent of gross domestic product in the mid-1980s to
a peak of 14 percent by 2002, and declined to 8 percent in 2013.3
Private banks lend to politically connected firms in Mexico in exchange for favors
Political rent seeking (surplus value after all costs and normal returns have been accounted for)
can distort banks’ lending decisions and hinder efficient resource allocation in financial
markets. This relationship is explored using loan-level data from commercial loans in Mexico
from 2003 to 2012 by linking loans to the state of origin of a senate committee chairman, as a
proxy for a firms’ political relationship. Not only do banks offer favorable loan terms to
politically connected firms with larger loan quantities, lower loan spreads, longer maturities,
and lower collateral requirements, but political loans also exhibit higher default rates. The
favorable lending increases with the strength of a firm’s political connection, varies gradually
along the political cycle, and is mainly offered by large and domestic private banks. Consistent
with the quid pro quo hypothesis, private banks that extend political loans receive significantly
more government borrowings with better credit quality. Also the greater credit supply due to
political connection leads to a large and significant increase in firm-level employment and
assets. The study estimates the total social cost of political lending and net revenue for banks
that are engaged in rent provision activity. 4
How restrictions in land markets hinder movement of labor out of agriculture in Sri Lanka
Policy restrictions in land markets can constrain the process of structural change from
agriculture to non-farm employment. Such restrictions increase the costs of migration,
adversely affecting non-farm entrepreneurship and expansion of non-farm business. A model is
used to show that sales and mortgage restrictions can result in reverse structural change.
Strange Study Involving the ‘White-Man Effect’ in Sierra Leone (New York Magazine, September 21, 2015) |
Researchers can change the outcome of studies just by being white (Quartz, October 2, 2015).
3
Illicit Activity and Money Laundering from an Economic Growth Perspective: A Model and an Application
to Colombia, Edgar Villa, Martha A. Misas, and Norman V. Loayza, World Bank Policy Research Working
Paper 7578, February 2016.
4
The Political Economy of Bank Lending: Evidence from an Emerging Market, Sumit Agarwal, Bernardo
Morais, Claudia Ruiz, and Jian Zhang, World Bank Policy Research Working Paper 7577, February 2016.
http://econ.worldbank.org/research
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Reverse structural change can occur if demand for the non-agricultural good is incomeinelastic (assuming the non-farm good is non-tradable), or is less labor intensive relative to
agriculture (assuming the non-farm good is tradable). Empirical evidence from a natural
experiment in Sri Lanka shows adverse effects of land restrictions on manufacturing and
services employment, rural wages, and per capita household consumption. The evidence on
occupational choices suggests that land restrictions increase wage employment in agriculture,
but reduce it in manufacturing and services, with no perceptible effects on self-employment in
non-agriculture. The results are consistent with the migration costs model, but contradict two
widely discussed alternative mechanisms: collateral effect and property rights insecurity. 5
Abolishing access to land based on family size reduces fertility in Ethiopia
In 1997 the historic practice of redistributing land based on family size was abolished in the
southern part of the Amhara region of Ethiopia. This research looks at the arrangement and
rearrangement of property rights in influencing fertility rates. In particular, it evaluates fertility
outcomes in the area where pronatal property rights were abolished by matching census data
before and after the reform with administrative data on the roll-out of the reform. The reform
reduced the life-time fertility of women in rural areas by 1.2 children.6
Income disparities for marginalized groups fell during the post-apartheid period
When apartheid ended in South Africa in 1994 the dismantling of coercive institutions affected
the distribution of rents (surplus value after all costs and normal returns have been
accounted for) from natural resource exports. This research examines spatial income
disparities in the post-apartheid period, when marginalized racial groups and labor unions
became empowered. The 1996 census shows large income gaps between communities located
just-inside and just-outside the former self-governing territories set aside for black inhabitants.
Between 1996 and 2011, spatial income convergence increased among marginalized
communities with higher initial exposure to resource rents. These results support standard
bargaining theory in which the dismantling of coercive institutions improves the negotiating
position of unionized workers in the mining industry.7
5
Do Land Market Restrictions Hinder Structural Change in a Rural Economy? Evidence from Sri Lanka, M.
Shahe Emran and Forhad Shilpi, Policy Research Working Paper 7525, December 2015.
6
Pronatal Property Rights over Land and Fertility Outcomes: Evidence from a Natural Experiment in
Ethiopia, Daniel Ayalew Ali, Klaus Deininger, and Niels Kemper, World Bank Policy Research Working
Paper 7419, September 2015.
7
Resource Rents, Coercion, and Local Development: Evidence from Post-Apartheid South Africa, Paulo
Bastos and Nicolas Bottan, World Bank Policy Research Working Paper 7572, February 2016.
http://econ.worldbank.org/research
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