Knowledge that Transforms

We assess whether financing can help private schools, which now account for one-third of primary school enrollment in low- and middle-income countries. Our experiment allocated unconditional cash grants to either one (L) or all (H) private schools in a village. In both arms, enrollment and revenues increased, leading to above-market returns. However, test scores increased only in H schools, accompanied by higher fees, and a greater focus on teachers. We provide a model demonstrating that market forces can provide endogenous incentives to increase quality and increased financial saturation can be used to leverage competition, generating socially desirable outcomes.

The experimental method not only helps identify causal relationships, but also provides economists with a rich sense of context, focuses research on specific practical questions, stimulates collaboration with practitioners and specialists from other fields, and allows for rapid iteration. In this lecture, I present a series of examples illustrating how together these features make the experimental approach a powerful tool for advancing scientific understanding, informing policy, and promoting innovation. I then discuss how institutions can be designed to accelerate innovation and direct it toward the world’s most pressing needs.

Natural resources can have a negative impact on the economy through corruption and civil conflict. This paper tests whether information can counteract this political resource curse. We implement a large-scale field experiment following the dissemination of information about a substantial natural gas discovery in Mozambique. We measure outcomes related to the behavior of citizens and local leaders through georeferenced conflict data, behavioral activities, lab-in-the-field experiments, and surveys. We find that information targeting citizens and their involvement in public deliberations increases local mobilization and decreases violence. By contrast, when information reaches only local leaders, it increases elite capture and rent-seeking.

Nearly one billion people worldwide live in rural areas without access to national paved road networks. We estimate the impacts of India’s $40 billion national rural road construction program using a fuzzy regression discontinuity design and comprehensive household and firm census microdata. Four years after road construction, the main effect of new feeder roads is to facilitate the movement of workers out of agriculture. However, there are no major changes in agricultural outcomes, income, or assets. Employment in village firms expands only slightly. Even with better market connections, remote areas may continue to lack economic opportunities.

Social norms, usually persistent, can change quickly when new public information arrives, such as a surprising election outcome. People may become more inclined to express views or take actions previously perceived as stigmatized and may judge others less negatively for doing so. We examine this possibility using two experiments. We first show via revealed preference experiments that Donald Trump’s rise in popularity and eventual victory increased individuals’ willingness to publicly express xenophobic views. We then show that individuals are sanctioned less negatively if they publicly expressed a xenophobic view in an environment where that view is more popular.

The homes of firm owners are an important source of finance for ongoing businesses. We use UK microdata to show that a £1 increase in the value of the homes of a firm’s directors increases the firm’s investment by £0.03. This effect is concentrated among firms whose directors’ homes are valuable relative to the firm’s assets, that are financially constrained, and that have directors who are personally highly levered. An aggregation exercise shows that directors’ homes are as important as corporate property for collateral driven fluctuations in aggregate investment demand.

We study multi-district legislative elections between two office-seeking parties when one party has an initial valence advantage that may shift and even reverse during the campaign; and, each party cares not only about winning a majority, but also about its share of seats. When the initial imbalance favoring one party is small, each party targets the median voter. For moderate imbalances, the advantaged party maintains the centre-ground, but the disadvantaged party retreats to target its core supporters; and for large imbalances, the advantaged party advances toward its opponent, raiding its moderate supporters in pursuit of an outsized majority.