Research

Working Papers


– Estimating the Production Function for Human Capital: Results from a Randomized Control Trial in Colombia

May 2017

with S. Cattan, E. Fitzsimons, C. Meghir and M. Rubio-Codina

NBER WP 20965

 

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– Work pays: different benefits of a workfare program in Colombia

March 2016

with Arthur Alik-Lagrange Costas Meghir, Sandra Polana-Reyes and Marcos Vera-Hernndez (available soon)

Abstract: Workfare programs provide a low paid employment guarantee to individuals in selected public works. They are designed to self-select the poor and provide insurance against job losses by informal sector workers at the possible cost of crowding out private labor effort. We analyze the impact of a Colombian workfare program called Job in Action [Empleo en Accin] to shed light on the following issues: (1) whether the program crowds out labor effort by members of the household different from the participant in the particular context of a middle-income economy, (2) whether there are gains in household labor income, but also in consumption, which is important to assess the role of the program as an insurance mechanism and (3) whether there are some gains from participating in the program six months after the program has finished. Our results show no evidence of the program crowding out private labor effort by other household members. In addition, we find that the program had large positive transfer benefits, as the program increased individuals labor income and labor supply in large as well as small municipalities. There is a positive significant impact in small municipalities on consumption which is doubled when focusing only on food consumption. Finally, we do find that the program had a significant positive effect on individuals outcomes as well as on households monthly labor income per capita in small rural municipalities six months after the program ended. We shed light on the potential channels explaining this novel result in the literature on public work schemes.
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Measuring and Changing Control: Womens Empowerment and Targeted Transfers

October 2015

with Ingvild Almas, Alex Armand and Pedro Carneiro

– Parental Beliefs and Investments in Human Capital

October 2015

with Flavio Cunha and Pamela Jervis (available soon)

– Human capital development and parental investment in India

June 2015

with Costas Meghir and Emily Nix

Abstract: We study human development from the early years to adolescence by embedding a structural model within a measurement system for factor models. Our theoretical framework extends in several dimensions the approach taken by Cunha et al (2010). We use flexible functional form assumptions for the distribution of factors and use an instrumental variable approach to take into account the endogeneity of investment. Using data from three waves of two cohorts of Indian Children from the Young Lives Survey, we estimate the production function for two dimensions of human capital: cognition and health. The richness of the data and the fact that they cover children from the age of 1 until the age of 15 allows us to cover a very long and important interval, which has previously not been investigated in this fashion. We uncover important complementarities, so that the non-linearity of the production function is important. We also show that it is important to take into account the endogeneity of investment.
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Non-Linear Pricing in Village Economies

November 2015

with Elena Pastorino

Abstract: We propose a model of price discrimination that accounts for the nonlinearity of unit prices of basic food items in developing countries. We model consumers subsistence constraints and allow consumers to differ in their marginal willingness and absolute ability to pay for a good. We also incorporate outside options from purchasing a good that depend on consumers preferences for the good, like self-production or access to other markets. We obtain a simple characterization of optimal nonlinear pricing and show that nonlinear pricing leads to higher levels of consumption, lower marginal prices, and higher consumer surplus than implied by the standard nonlinear pricing model. We prove that a multiplicative utility version our model is nonparametrically identified under common assumptions, derive nonparametric and semi- parametric estimators of the models primitives, and develop a test that formally allows to distinguish between our model and the standard model. These estimators, as well as the test we propose, can be easily implemented using individual-level data commonly available for beneficiaries of conditional cash transfer programs in developing countries. We find that the model well accounts for the data and that at the estimated primitives, nonlinear pricing especially benefits consumers who purchase intermediate to large quantities compared to linear pricing. We show that failure to account for the endogeneity of prices in the presence of heterogeneous constraints among consumers can lead to an incorrect assessment of the impact of common policies, like cash transfers, that affect households ability to pay. When sellers have market power, such policies effectively increase sellers ability to price discriminate and may thus give rise to asymmetric price changes for low and high quantities demanded, thereby exacerbating the consumption distortions typically associated with nonlinear pricing. These results confirm the importance of incorporating our proposed extensions of the standard nonlinear pricing model to evaluate the distributional effects of nonlinear pricing.
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Aggregating Elasticities: Intensive and Extensive Margins of Female Labour Supply

June 2015

with Peter Levell, Hamish Low and Virginia Sanchez-Marcos

Abstract: There is a renewed interest in the size of labour supply elasticities and the discrepancy between micro and macro estimates. Recent contributions have stressed the distinction between changes in labour supply at the extensive and the intensive margin. In this paper, we stress the importance of individual heterogeneity and aggregation problems. At the intensive margins, simple specifications that seem to fit the data give rise to non-linear expressions that do not aggregate in a simple fashion. At the extensive margin, aggregate changes in participation are likely to depend on the cross sectional distribution of state variables when a shock hits and, therefore, are likely to be history dependent. We tackle these aggregation issues directly by specifying a life cycle model to explain female labour supply in the US and estimate its various components. We estimate the parameters of different component of the model. Our results indicate that (i) at the intensive margin, Marshallian and Hicksian elasticities are very heterogeneous and, on average, relatively large; (ii) Frisch elasticities are, as implied by the theory, even larger; (iii) aggregate labour supply elasticities seem to vary over the business cycle, being larger during recessions.
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Long Term Impacts of Vocational Training: Experimental Evidence for Colombia

June 2015

with Arlen Guarn, Carlos Medina and Costas Meghir

Abstract: We use experimental data on a training program implemented in 2005 in Colombia. We match the experimental survey data collected for evaluation purposes with administrative data and find that, up to ten years later, the JeA program had a positive and significant effect on the probability to work in the formal sector. Applicants in the treatment group also contributed more months to social security and were more likely to work for a large firm. Earnings of treated applicants were 11.8% higher in the whole sample, and they made larger contributions to social security. Consistently with the findings of the short term evaluation, we find that most of the impact on formal earnings is obtained through higher participation in the formal sector. We compute non-parametric bounds for the impact of the program on various percentiles of the earnings distribution and we find some suggestive evidence that for women the program might have also increased productivity. The evidence however is not precise enough to obtain significant lower bounds for these effects. Throughout the analysis we compute p-values corrected for multiple hypotheses testing. We also find that for the whole sample of applicants, those in the treatment group have 0.315 more years of education, and have a probability of graduating from high school 10 percent higher than the control group. We find no significant effect on the probability of attending college or any school program, nor on fertility decisions, marital status or some dimensions of assortative mating. Among applicants matching to the census of the poorest population, we find that beneficiaries are more likely to participate in the labor market, to be employed, and to be enrolled in a private health insurance at the time of the survey. Finally, we find that the benefits of the JeA program are higher than it costs, leading to an internal rate of return of at least 22.1 percent. On the whole, the program was a cost-effective alternative, worth to consider to bridging the transit of youths from the informal to the formal sector in the future.
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– Microcredit Contracts and Risk Diversification

March 2016

with Britta Augsburg and Ralph de Haas (available soon)

Abstract: In this paper, we study theoretically and empirically the demand for microfinance loans under different contract arrangements and different environments. In particular, we compare loans with joint liability to loans with group liability. With a simple theoretical model, we show that the demand for group liability loans can be larger than that for individual liability loans in an environment in which risk averse customers value the long run relationship with the microfinance institution. Joint liability loans might constitute a way to diversify risk. We also show that the demand for loans depend negatively on the riskness of the projects. Empirically, using data from a randomized controlled trial from Mongolia, we show that the predictions of the model hold true in the data. We use innovative data on subjective expectations about the riskness of projects and show that the subjective riskness of projects does affect negatively the demand for loans but the effect is muted in villages where group loans are available, confirming the insurance role of joint liability loans.
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Insurance in Extended Family Networks

March 2015

with Costas Meghir and Corina Mommaerts, NBER WP No.21059

Abstract: This paper analyzes the extent to which members of an extended family network insure each another against income shocks. We develop a model of intertemporal consumption that decomposes income shocks and insurance parameters into within-family and between-family components and generates a test of within-family partial insurance. To identify the model, we derive covariance restrictions between income and consumption across family members and over time. We use recent income and consumption panel data from the PSID and exploit the intergenerational structure of the data to estimate the parameters of the model.
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Global demographic trends, capital mobility, saving and consumption in Latin America and Caribbean

March 2015

with Andrea Bonfatti, Sagiri Kitao and Guglielmo Weber

Abstract: In this paper we study the effect of demographic transitions on the econ- omy of Latin America and Caribbean (LAC). We build a model of multi- regions of the world and derive the path of macroeconomic variables includ- ing aggregate output, capital, labor and saving rate, as the economies face a rapid shift in the demographics. The timing and the extent of the demo- graphic transition differ across regions. We simulate the model in both closed economy and open economy assumptions to quantify the roles played by the factor mobility across regions in shaping capital accumulation and equilibrium factor prices.
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Estimating the Production Function for Human Capital: Results from a Randomized Control Trial in Colombia

March 2015

with S. Cattan, E. Fitzsimons, C. Meghir and M. Rubio-Codina) NBER WP. No. 20965

Abstract: We examine the channels through which an early childhood intervention in Colombia led to significant gains in cognitive and socio-emotional skills among a sample of disadvantaged children. The program, which was randomized, improved significantly cognition and socio-emotional skills. We estimate production functions for cognition and socio-emotional skills as a function of maternal and child cognition as well as material and time investments that are treated as endogenous. The effects of the program can be explained by increases in parental investments, which have strong effects on outcomes and are complementary to both child and maternal cognition.
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Mortality, Permanent Income and Inequality

May 2014

with Torben Nielen

Abstract: Using full-population register data from Denmark, this study shows that estimates of the economic gradient in mortality depends on the specific measure of economic resources used, where we investigate permanent income, annual income or financial and housing wealth. Our favorite measure is what we call ‘Permanent income’, that is the average level of income over a long interval. We find that when using annual income or current wealth, the gradient is overestimated, unless one controls for a number of additional variables, such as education, civil status and initial health. In the last part of the paper, we compare the results from Denmark to results from the UK. Although the countries are very different in terms of inequality, the estimates of the gradient we find are very similar, suggesting that differential levels of resources (including information), rather than inequality itself, determine the gradient in survival and mortality.
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– Education Choices and Returns on the Labour and Marriage Markets:
Evidence from Data on Subjective Expectations

October 2012

with Katja Kaufmann

Publications


2016


– Why is Multiple Micronutrient Powder ineffective at reducing childhood anaemia in Colombia?
Evidence from a Randomised Controlled Trial

December 2016

with Alison Andrew, Emla Fitzsimons and Marta Rubio-Codina
SSM- Population Health, Vol 2  pp95-104

– Mediating pathways in the socio-economic gradient of child development
Evidence from children 6–42 months in Bogota

2016

with M. Rubio-Codina and S. Grantham McGregor
International Journal of Behavioral Development, 2016

Challenges to promoting social inclusion of the extreme poor

May 2015

Evidence from a large scale experiment in Colombia

with Laura Abramosky, Kay Barron, Pedro Carneiro and George Stoye.
forthcoming in Economia, Journal of LACEA,

Abstract: We evaluate the large scale pilot of an innovative and major welfare intervention in Colom- bia, which combines homes visits by trained social workers to households in extreme poverty with preferential access to social programs. We use a randomized control trial and a very rich dataset collected as part of the evaluation to identify program impacts on the knowledge and take-up of social programs and the labor supply of targeted households. We find no consistent impact of the program on these outcomes, possibly because the way the pilot was implemented resulted in very light treatment in terms of home visits. Importantly, administrative data in- dicates that the program has been rolled out nationally in a very similar fashion, suggesting that this major national program is likely to fail in making a significant contribution to re- ducing extreme poverty. We suggest that the program should undergo substantial reforms, which in turn should be evaluated.

– Consumption Inequality

March 2016

with Luigi Pistaferri.
forthcoming in the Journal of Economic Perspective
Volume 30, Number 2—Spring 2016—Pages 1–27,

Subjective Expectations and Income processes in rural India

2016

with B. Augsburg
forthcoming in Economica, 2016

Abstract: This paper uses unique primary data to analyze and characterize the process that generates household income of poor households in rural India. We analyze and use data on individual subjective expectations elicited directly from the respondents of a household survey. We describe how the data was elicited and discuss its validity and to what degree we can trust that it reflects agents believes about the future. We then use the responses to the subjective answers to the expectations questions and a para- metric assumption to fit, for each household in the sample, a probability distribution for future income. We then use the moments we can compute from this distribution, together with data for actual current income, to specify and estimate a dynamic model of household income. We find that our households face a very persistent income pro- cess: we cannot reject the hypothesis of a random walk. Our paper is one of the first that uses subjective expectations data to model income processes.

– Holy Cows or Cash Cows?

April 2014

with Britta Augsburg, NBER WP 20304 .
Forthcomin in Economic Development and Cultural Change, 2016

Abstract: In a recent paper, Anagol, Etang and Karlan (2013) consider the income generated by these owning a cow or a buffalo in two districts of Uttar Pradesh, India. Given the value of the animals, the net profit generated ignoring completely labour costs, gives rise to a small positive rate of return. Once any reasonable estimate of labour costs is added to the calculation, the rate of return is a large negative number. The authors therefore conclude that the households holding this type of assets do not behave according to the tenets of capitalism. A variety of explanations, typically appealing to religious or cultural factors have been invoked for such a puzzling fact. In this note, we point to a much simpler explanation that is fully consistent with rational behaviour on the part of Indian farmers. In computing the return on cows and buffaloes, the authors used data from a single time year. Cows and buffaloes are assets whose return varies through time. In drought years, when fodder is scarce and more expensive, milk production is lower and profits are low. In non-drought years, when fodder is abundant and cheaper, milk production is higher and profits can be considerably higher. Therefore, the return on cows and buffaloes, like that of many stocks traded on Wall Street, is positive in some years and negative in others. The fact that in a given year the observed return on a risky asset is negative could certainly not be used as a contradiction of one of the basic tenets of capitalism. We report evidence from three years of data on the return on cows and buffaloes in the district of Anantapur and show that in one of the three years returns are very high, while in drought years they are similar to the figures obtained by Anagol, Etang and Karlan (2013).


2015


– The Determinants of Human Capital Formation During the Early Years of Life: Theory Measurement and Policies

2015

Journal of the European Economic Association, Vol 13 , No 6 (December) pp.949-997.

Abstract: This paper is based on my presidential address for the European Economic Association meetings held in Toulouse in August 2014. In it, I discuss a research agenda on the study of human capital accumulation in the early years, with a particular focus on developing countries. I discuss several methodological issues, from the use of structural models, to the importance of measurement and the development of new measurement tools. I present a conceptual framework that can be used to frame the study of human capital accumulation and view the current challenges and gaps in knowledge within such an organizing structure. I provide an example of the use of such a framework to interpret the evidence on the impacts of an early years intervention based on Randomized Controlled Trial.

– Frank Ramseys : A Mathematical Theory of Saving

2015

Economic Journal, Vol 125 (583) pp. 269-294

– Building social capital: conditional cash transfers and cooperation

May 2015

with L. Pellerano and S. Polania-Reyes
Journal of Economic Behavior and Organization DOI:10.1016/j.jebo.2015.04.004

– The Socio-Economic Gradient of Child Development:
Cross-Sectional Evidence from Children 6-42 months in Bogota

April 2015

with Marta Rubio-Codina, Costas Meghir, Natalia Varela, and Sally Grantham- McGregor
Journal of Human Resources Vol. 50(2), Pages 464-483, Spring 2015. (pdf)

– Should Cash Transfers Be Conditional? Conditionality, Preventive Care, and Health Outcomes

April 2015

with Veruska Oppedisano and Marcos Vera-Hernandez
American Economic Journal. Applied. American Economic Association, vol. 7(2), pages 35-52. (pdf)

– The Impacts of Microfinance: Evidence from Joint-Liability Lending in Mongolia

January 2015

with Britta Augsburg, Ralph De Haas, Emla Fitzsimons and HeikeHamgart),
American Economic Journal Applied. American Economic Association, vol. 7(1), pages 90-122. (pdf)


2014


– Modelling Movements in Individual Consumption: A Time Series Analysis of Grouped Data

November 2014

with M Borella
International Economic Review, vol. 55, pages 959-991,.

– Cognitive Deficit and poverty in the first five years of childhood in Bangladesh

October 2014

with J Hamadani; F. Tofail; S. Huda; D. Alam; D. Ridout and S. Grantham-McGregor
Pediatrics, Vol 134 (4), (), pp.e1001-8, doi:10.1542/peds.2014-0694 .

– Admixture in Latin America: Geographic Structure, Phenotypic Diversity and Self-Perception of Ancenstry
Based on 7,342 Individuals

September 2014

with A. Ruiz Linares et al
PLOS Genetics; 10(9):e1004572. doi: 10.1371/journal.pgen.1004572. eCollection 2014 Sep. PMID:25254375.

– Using the infrastructure of a conditional cash transfer programme to deliver a scalable integrated early child development programme in Colombia
A cluster randomised controlled trial

September 2014

with C. Fernndez, E. Fitzsimons, S. M Grantham-McGregor, C. Meghir and M. Rubio-Codina,
British Medical Journal, 349:g5785

– Consumption Inequality over the Last Half Century: Some Evidence Using the New PSID Consumption Measure

May 2014

with L Pistaferri
The American Economic Review, Papers and Proceedings, Volume 104, Number 5, , pp. 122-126

– Efficient responses to targeted transfers

February 2014

with V. Lechene
Journal of Political Economy, Vol. 122(1), pp.178-222, DOI: 10.1086/674968.

– Education Choices and Returns to Schooling: Intra-household Decision Making, Gender and Subjective Expectations

February 2014

with Katja Kaufmann
Journal of Development Economics , vol. 109(C), pp. 203-216.


2013


– Community Nurseries and the Nutritional Status of Poor Children. Evidence from Colombia

September 2013

with V di Maro and M Vera-Hernandez
Economic Journal, Vol 123 (9) pp 1025-1058.

– The effect of increases in food prices on consumption and welfare in rural Mexico

February 2013

with V. DiMaro, V. Lechene and D. Phillips
Journal of Development Economics, vol. 104(C), pages 136-151.

– The demand for food of poor urban Mexican households: Understanding policy impacts using structural models

February 2013

with M Angelucci
American Economic Journal: Economic Policy, Vol 5(1)) pp 146-78.


2012


– The Impact of Oportunidades on Consumption, Savings and Transfers

September 2012

with M. Angelucci and V. DiMaro
Fiscal Studies, Vol. 33(3), pp. 305-334.

– Risk Pooling, Risk Preferences, and Social Networks

April 2012

with A Barr, JC Cardenas, G Genicot and C Meghir
American Economic Journal: Applied Economics, Vol. 4(2): 134–67. DOI:10.1257/app.4.2.134

– Food and Cash Transfers: Evidence from Colombia

March 2012

with E. Battistin and A. Mesnard
Economic Journal , Vol 122, pp 92-124. DOI: 10.1111/j.1468-0297.2011.02473.x

– Housing choices over the life cycle

January 2012

with R. Bottazzi, H. Low, L. Neisham and M. Wakefield),
Review of Economic Dynamics , Vol.15(1),pp. 1-18, DOI: http://dx.doi.org/10.1016/j.red.2011.09.001.

– Education Choices in Mexico: Using a Structural Model and a Randomized Experiment to Evaluate PROGRESA

January 2012

with C. Meghir and A. Santiago,
The Review of Economic Studies, 79 (1): 37-66. DOI: 10.1093/restud/rdr015.


2011


– Behind the scenes: experience managing and conducting large impact evaluations in Colombia

December 2011

with Bertha Briceo and Laura Cuesta
Journal of Development Effectiveness, Dec. 2011 DOI: 10.1080/19439342.2011.636485.

– The impact of cash transfers to poor women in Colombia on BMI and obesity: prospective cohort study

December 2011

with I Forde, T. Chandola, S. Garcia and M. Marmot
International Journal of Obesity, DOI: 10.1038/IJO.2011.234.

– Changes in Consumption at Retirement

August 2011

with Emma Aguila and Costas Meghir
Review of Economics and Statistics, Vol. 93 (3, pages 1094-1099.

– Subsidizing Vocational Training for Disadvantaged Youth in Developing Countries
Evidence from a Randomized Trial

July 2011

with Adriana Kugler and Ccostas Meghir
American Economic Journal, Applied, Vol. 3 (3), , pages 188-220.

– Risk Sharing in Private Information Models with Asset Accumulation

July 2011

with Nicola Pavoni,
Econometrica, Vol.79 (4) , pages 1027-68.

– Do House Prices Drive Consumption Growth? The Coincident Cycles of House Prices and Consumption in the UK

July 2011

with Andrew Leicester and Matthew Wakefield
Journal of the European Economic Association, Vol. 9(3), pages 399-435 .

– Intertemporal consumption choices, transaction costs and limited participation into financial markets
Reconciling data and theory

March 2011

with Monica Paiella,
Journal of Applied Econometrics, Vol26 (2), pages 322-343.


2010


– Consumption and Saving: Models of Intertemporal Allocation and Their Implications for Public Policy

September 2010

with Guglielmo Weber
Journal of Economic Literature, 48(3):693–751. DOI: 10.1257/ jel.48.3.693 (pdf)

– Mandated Attendance at Parenting Workshops Improves Womens Healthcare Knowledge But

September 2010

with I Forde, T Chandola and M Marmot
Journal of Epidemiology and Community Health, Vol 64, A58. (pdf)

– Mexico in the 1990s: the Main Cross-Sectional Facts January 2010

with Chiara Binelli
Review of Economic Dynamics, Vol 13, Issue 1, Pages: 238-264. (pdf)

– Childrens education and Work in the Presence of a Conditional Cash Transfer Program in Rural Colombia

January 2010

with Emla Fitzsimons, An Gomez, Marta I. Rodriguez, Costas Meghir and Alice Mesnard
Economic Development and Cultural Change, Vol 58(2), 181-210. (pdf)


2009


– Building Trust? Conditional Cash Transfers Programs and Social Capital

June 2009

with Luca Pellerano and Sandra Polania
Fiscal Studies, Vol. 30, Issue 2, Pages: 139–177.

– Oportunidades: Program Effect on Consumption, Low Participation, and Methodological Issues

April 2009

with Manuela Angelucci
Economic Development and Cultural Change , Vol57(3) pp.479-506.

– Estimating Euler Equations with Noisy Data: Two Exact GMM Estimators

March 2009

with S. Alan and M. Browning
Journal of Applied Econometrics, Vol 24 (2), pp.309-324.

– Booms and Busts: Consumption, Expectations and House Prices in the UK

February 2009

with L. Blow, R. Hamilton and A. Leicester
Economica, Vol. 76(301), pp.20-50.