Published on Development Impact

What makes a paper “development economics” and making this clear for a general journal audience: a nice recent example

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Development economics is a broad field, and sometimes the only thing that seems to make a paper a “development” paper rather than an education paper, a labor paper, or a firms paper, is the country in which data were collected. But typically there is a(n often implicit) viewpoint that a series of institutional features and market imperfections that are common in many low income countries help to shape economic behavior (see e.g. my paper on how development economics is typically taught). But then the question researchers often face when trying to publish such work in a general interest journal is whether the results generalize, or are specific to the specific features of the particular country being studied.

I got to thinking about this again when reading a paper by Banerjee, Finkelstein, Hanna, Olken, Ornaghi and Sumarto on increasing enrolment in universal health insurance in Indonesia, recently published in the American Economic Review. The introduction is a masterclass on making clear what makes this a development economics paper and where the similarities and differences lie with studying similar issues in the developed world. It is therefore really worth reading for seeing how to effectively pitch such a paper to a general audience, and for the general lessons that it draws out that apply to many other aspects of policy in developing countries. I highly recommend you read it, but will note three examples.

1.       The challenge of a large informal sector when it comes to funding government programs: the authors note that many low and middle income countries have aimed to create universal health insurance programs, but the large informal sector makes getting everyone to contribute towards paying for it very difficult. The authors note Indonesia has an individual mandate, with everyone but the poorest required to pay a premium – but the mandate becomes difficult to enforce, making it essentially toothless. They relate this to issues with Obamacare mandates, but then note enforcement is so much harder in developing countries, leading to low enrolment and adverse selection.

2.       Low administrative state capacity and bureaucratic hurdles: the authors test various interventions to try to boost enrolment, including time limited subsidies and assistance with online registration systems. The authors find that many more people attempted to enroll than were actually able to do so. One reason was technical and administrative issues with the online enrolment system (again the authors can make the case that the U.S. is not so different, given the roll-out issues). But the authors point to a more common underlying issue in many developing countries – errors in the civil registry which meant that data on who is in each family was inaccurate in many cases, requiring a time-consuming process to fix. This reminded me of our experience trying to formalize firms in Sri Lanka, where bureaucratic hurdles such as issues with land registration prevented some firm owners from formalizing even when we offered large incentives to do so; and issues we had in trying to help Filipinos get passports, where some had trouble with misspellings on birth certificates or other documents.

3.       The interplay of risk, fluctuating income flows, and imperfect credit markets: the authors find evidence of strategic enrolments, where some individuals wait until they are sick to enroll, and then some also drop it again when healthy. They note how the solution to this adverse solution in developed countries like the U.S. is our familiar open enrolment period, where there is a pre-determined window each year during which you must enroll. They explain how this idea may not be a great solution in developing countries, because the lumpiness of many income flows (e.g. with agricultural crop cycles) and credit constraints may mean the willingness to purchase insurance will be a lot lower if the timing for paying to enroll differs from when the household receives most of its income.

A fourth point that also caught my interest as an example of a more general phenomenon is that they find that insurance stays higher in the subsidy group even after the subsidies have ended, with people making active choices to go each month to pay premiums. They attribute this to health insurance being an experience good, in which people don’t understand the benefits until they have tried it out. In my recent paper on getting firms to try the market for professional business services in Nigeria, we likewise argue that hiring business service providers is an experience good. One potential feature of developing country economies is that many fewer people have direct experience with many of the policy solutions that we are trying to introduce than may be the case in more developed economies. So while the argument is not made in the paper, it might also be that inexperience is more of a barrier to take-up of policies in developing countries as well.

Finally, I note that the introduction provides multiple examples throughout to make clear that these are not just challenges faced by Indonesia, but apply to many other developing countries – for example, they note that Ghana, Kenya, the Philippines, and Vietnam have also tried to set up contributory health insurance systems like Indonesia; that imperfect civil registries are common throughout the developing world, and that other developing countries also allow rolling enrolment. The result is that the case is made from the start that this is a problem of general interest for developing countries.

Of course, there are many ways to motivate a paper, and I don’t think that a paper is only of general interest if you can somehow relate it to the U.S. and somehow explain the similarities and differences. But this introduction is worth reading to see an effective example of how to frame a development paper.


Further reading: the October 8 AEA research highlights has a nice summary of the paper.


David McKenzie

Lead Economist, Development Research Group, World Bank

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