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David McKenzie's blog

Long-term effects of a short-term boost to savings – are mental accounts the key to why more small businesses don’t take advantage of high returns?

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Standard economic theory would suggest that a one-time infusion of cash should have at most a temporary effect on business profitability – over time, individuals facing high returns should be able to re-invest business profits and bit-by-bit bootstrap themselves up to the steady-state size. Yet in an experiment I did with Suresh de Mel and Chris Woodruff in Sri Lanka, we find a one-time grant has sustained impacts five years later on male microenterprise owners.

Doing Experiments with Socially Good but Privately Bad Treatments

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Most experiments in development economics involve giving the treatment group something they want (e.g. cash, health care, schooling for their kids) or at least offering something they might want and can choose whether or not to take up (e.g. business training, financial education). Indeed among the most common justifications for randomization is that there is not enough of the treatment for everyone who wants it, leading to oversubscription or randomized phase-in designs.

The Illusion of Information Campaigns: Just because people don’t know about your policy, it doesn’t mean that an information campaign is needed

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How many points do you need to qualify to migrate to Australia? What is the cost of applying? How much money do you need to set up a bank account in the Cayman Islands? What is the procedure for getting money out of these accounts when you want to spend it?

May 3 Links: Finding your “thing” as a researcher, programs for female self-employment that work, and more…

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  • From the indecision blog – as a young researcher, how do you find out what your “thing” is, that is, your research agenda -  interesting hypothesis that for many researchers research preferences “reveal themselves”.
  • From the 3ie blog – does economics need a more systematic approach to replication to be considered a hard science? – interesting link contained within to an AER editor’s report on the replication policy there.
  • New results published in the New England Journal of Medicine from the Oregon Health Experiment look at impacts of access to Medicaid on simple health measures like cholesterol and blood pressure (see our discussion of the original set of results here), and for summaries of the new results either the Washington Post Wonkblog or NPR). One of the big measurement issues is of course that even with a sample of approx 6,000 treated and 6,000 control, it is not clear there are enough cases over 2 years of the sort of health events that easier access to medical care can fix.
  • After Markus’s post this week showing how a package of grants and training helped women grow small businesses in Bangladesh, Chris Blattman has a post on new results from an evaluation he did in Uganda, which also finds positive impacts of training and grants on getting women to start businesses. We’ll wait for a working paper to render our thoughts on this – there are worrying issues (phased in randomization where the control group was guaranteed treatment at a known later date, potentially causing them to delay current business activities) and intriguing-sounding findings (general equilibrium effects on village economies) that pique my interest.

Enhanced Active Choice: Utilizing Behavioral Economics to Increase Program Take-up

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Shifting from opt-in to opt-out defaults is one of the clearest success stories for policy to emerge from behavioral economics, as evidenced by the large increases in organ donor rates and contributions to retirement savings plans obtained when opt-out defaults are used instead of opt-in. 
                However, there are several limits of opt-out policies:
 

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