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Kenya

Bad incentives put the brakes on firm growth: Evidence from Kenya's matatus: Guest post by Erin Kelley

Development Impact Guest Blogger's picture

This is the third in this year's series of posts by PhD students on the job market.
A firm’s success rides heavily on the performance of its employees. It is therefore important that firms design employment contracts that properly incentivize hard work. This becomes more challenging when firms cannot observe the amount of effort employees invest, nor the amount of output they produce. In theory, firms can use monitoring technologies that reveal the performance of their workers more accurately to overcome this constraint (Holmstrom, 1979). In practice, however, the impact of such monitoring technologies on contracts and employee performance is unclear. Managers may not know how to leverage the additional information monitoring technologies reveal. Moreover, weak legal institutions, which prevent companies from credibly sanctioning bad behavior, may limit how useful the new information actually is. 
 
In my job market paper - co-authored with Gregory Lane and David Schönholzer – we study the impact of moral hazard on labor contracting, employee behavior, and the extent to which improved monitoring affects firm operations. We also establish whether any gains to companies come at the expense of their workers, or society at large. To this end, we implement a randomized control trial where we introduce a monitoring device to 255 firms (vehicle owners) operating in Kenya’s transit industry. We design a novel mobile application that provides information to 125 treatment firms regarding: the location of the vehicle, number of kilometers driven, number of hours the ignition was on, and the number of safety violations incurred (sharp-braking, sharp-turning, over-acceleration and speeding). We confirm that 70% of owners consult the app weekly. This information provides treatment owners with a more precise estimate of what revenue should be, and whether drivers are engaging in behavior that damages the vehicle. This has implications for the owners’ choice of contract and drivers’ behavior, which ultimately impact firm profits/growth. We use daily surveys from vehicle owners and drivers over six-months to track the impact of reducing asymmetric information on these outcomes.

How to attract and motivate passionate public service providers

David Evans's picture

In Gaile Parkin's novel Baking Cakes in Kigali, two women living in Kigali, Rwanda – Angel and Sophie – argue over the salary paid to a development worker: "Perhaps these big organisations needed to pay big salaries if they wanted to attract the right kind of people; but Sophie had said that they were the wrong kind of people if they would not do the work for less. Ultimately they had concluded that the desire to make the world a better place was not something that belonged in a person's pocket. No, it belonged in a person's heart."
 
It's not a leap to believe – like Angel and Sophie – that teachers should want to help students learn, health workers who want help people heal, and other workers in service delivery should want to deliver that service. But how do you attract and motivate those passionate public servants? Here is some recent research that sheds light on the topic.
 

Teacher Coaching: What We Know

David Evans's picture
“Teacher coaching has emerged as a promising alternative to traditional models of professional development.” In Kraft, Blazar, and Hogan’s newly updated review “The Effect of Teacher Coaching on Instruction and Achievement: A Meta-Analysis of the Causal Evidence,” they highlight that reviews of the literature on teacher professional development (i.e., training teachers who are already on the job) highlight a few promising characteristics of effect

Scaling Up Effective Programs – Kenya and Liberia Edition

David Evans's picture
This page in: français

Over the last decade, both Kenya and Liberia have sought to scale up successful pilot programs that help children to learn to read. Even as more and more impact evaluations are of programs at scale, pilots still constitute a significant portion of what we test. That’s with good reason: Governments wisely seek to pilot and test programs before expending valuable resources in implementing a program across the country. Last year, I wrote about how the Indian organization Pratham worked with J-PAL to test effective programs to improve reading iteratively, varying different parameters in terms of who was implementing (government teachers versus volunteers) and when (in-school versus during the holidays).

Can you help some firms without hurting others? Yes, in a new Kenyan business training evaluation

David McKenzie's picture

There are a multitude of government programs that directly try to help particular firms to grow. Business training is one of the most common forms of such support. A key concern when thinking about the impacts of such programs is whether any gains to participating firms come at the expense of their market competitors. E.g. perhaps you train some businesses to market their products slightly better, causing customers to abandon their competitors and simply reallocate which businesses sell the product. This reallocation can still be economically beneficial if it improves allocative efficiency, but failure to account for the losses to untrained firms would cause you to overestimate the overall program impact. This is a problem for most impact evaluations, which randomize at the individual level which firms get to participate in a program.

In a new working paper, I report on a business training experiment I ran with the ILO in Kenya, which was designed to measure these spillovers. We find over a three-year period that trained firms are able to sell more, without their competitors selling less – by diversifying the set of products they produce and building underdeveloped markets.

Give power to the managers and the teachers will come: Guest post by Jacobus Cilliers

Development Impact Guest Blogger's picture
This is the ninth in our series of job market posts this year. 

Teachers’ attendance can be improved if they are monitored by head-teachers using mobile technology, but only if the associated reports trigger bonus payments.

Policy question
Can high-stakes decentralized monitoring improve civil servant performance, or will it lead to collusion between the monitor and civil servant? And what happens to the quality of information when we raise the stakes of reports?

Does Financial Inclusion Exclude? Formal Savings Reduces Informal Risk-Sharing Among Women in Kenya: Guest post by Felipe Dizon

Development Impact Guest Blogger's picture

This is the second in our series of posts by students on the job market this year.
 
In 2013 alone, donors pledged $31 billion to support financial inclusion programs—an attempt to deliver financial services to the 2 billion adults that do not have access to such services. In the past, microcredit and insurance programs received all of the attention, but improving the savings capacity of the poor and unbanked has recently drawn increasing attention as well. Access to a savings account has been shown to improve account holders' overall financial situation and their ability to cope with shocks.  In addition, access to savings may also lead to greater educational aspirations and completion of additional years of schooling for the children of account holders.

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?

David McKenzie's picture
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.

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