Research

Working papers and papers under submission

Comments welcome!

"Selection and Impact: Automated Credit Scoring for Agricultural Micro-credit," April, 2024, with Thein Zaw Oo, Khin Pwint Oo, and Tin Tin Wai.

We test how a traditional borrower selection process performs compared to an automated credit scoring algorithm in predicting loan performance and impacts in the context of agricultural microfinance. The automated credit scoring approach leverages metadata from mobile phone activity of potential loan recipients. We use both randomized treatment assignment and human-led borrower selection in the context of smallholder agriculture in rural Myanmar. We pick up significant correlations between credit scores and some financial behavior and social network measures. There is evidence that loan recipients spend more on agricultural inputs, particularly fertilizer, and choose to save at much higher rates. They also have higher casual earnings, suggestive that a significant aspect of the loan impact may be off-farm. Credit scores are not predictive of loan delinquency, and there is little evidence of heterogeneity in impacts by credit score, suggesting low relevance of off-the-shelf automated credit scoring models in such settings. This study contributes evidence to the policy discourse about using technology to expand financial inclusion in rural settings in developing countries.

"How does Information about Inequality Shape Voting Intentions and Preferences for Redistribution? Evidence from a Randomized Survey Experiment in Indonesia," April, 2024, with Chris Hoy and Nurina Meredikawati. Revise and resubmit

We test the elasticity of people‘s voting intentions and preferences for re-distribution to information about inequality through a large-scale, randomized survey experiment in Indonesia. Respondents received information about either the level of national inequality, their position in the national income distribution or no information.The first treatment raised people‘s concern about inequality and increased the likelihood they would vote against the President. The second treatment lowered richer respondents‘support for redistribution. These findings provide new insights about the challenges of increasing public support for government-led redistribution, such as tax increases and greater spending on social protection, in middle-income country settings.

"The Impact of Fast Payment Systems on Financial Inclusion in Emerging Markets: Evidence from India," June, 2023, with William Greenland.

We evaluate whether emerging fast payment systems (FPSs) can accelerate uptake of formal financial services. We exploit variation in early exposure to India’s Unified Payments Interface (UPI) amongst already-banked individuals. We find that users of UPI nearly triple their likelihood of saving in formal accounts, while informal saving is unaffected. UPI users are also more likely to substitute cash for digital in receiving wages and paying bills, and to purchase insurance and make investments through digital channels. We provide new evidence that FPSs in emerging markets can deepen financial inclusion by encouraging the uptake of digital financial services.

"Banking on Persistence: The Impacts of a Credit Guarantee on Bank Lending in Indonesia," July, 2019, with Sascha Kerbert.

Credit guarantees are a common policy instrument to increase access to credit for targeted firms, such as small and medium enterprises (MSMEs). There are at least two premises to justify a guarantee. First, by lowering the risk on lending, a guarantee can induce banks to lend more to the targeted firms. However, banks may use the guarantee on loans they would have issued without it, so the amount of guaranteed credit may be significantly less than the additional lending caused by the guarantee. Second, the guarantee can induce persistent improvements in banks’ capacity to overcome lending frictions, causing additional lending even in non-guaranteed credit. We present new evidence on these channels by estimating the impacts of one of the largest credit guarantee schemes in history, on commercial banks: the Indonesian Kredit Usaha Rakyat (KUR), launched in late 2007. We argue that non-KUR banks provide a valid counterfactual for trends in lending in KUR banks, with validation from a test for common pre-trends. First, we show that the KUR generated additionality, resulting in KUR participant banks cumulatively expanding their MSME lending portfolios significantly more than non-participant banks. Furthermore, we demonstrate that the KUR generates minimal crowd out of counterfactual MSME lending. Second, we leverage a KUR program suspension in 2015 to demonstrate that the increased lending was persistent, suggesting that the KUR led banks to build up persistent MSME lending capacity. The results speak to our understanding of the process of credit market deepening in emerging credit markets.

"Behavioural Substitution of Formal Risk Mitigation: Index Insurance in East Africa," November 2017, with Chris Barrett, Richard Bernstein, Patrick Clark, Carla Gomes, Shibia Mohamed, Andrew Mude, and Birhanu Taddesse.

Risk-mitigating products such as insurance have the potential to improve welfare by enhancing wealth and consumption smoothing through reducing the impact of negative shocks. At the same time, the presence of insurance changes the distribution of payoffs over future states, which may induce behavioural responses distinct from the classical moral hazard channel. The welfare impact of these behavioural responses is ambiguous in general. We present novel evidence on these issues in the context of index-based livestock insurance (IBLI) in East Africa, where microinsurance has the potential to enhance the welfare of poor livestock herders by providing protection against localized shocks from weather. Conditioning the payout of such insurance on a regional weather index greatly reduces the cost of insurance provision, and in principle eliminates the classical moral hazard channel that plagues indemnity-based insurance. However the presence of index insurance still changes the distribution of expected wealth over future states, which might lead livestock herders to substitute away from prior self-insurance behaviours. Hence our setting allows us to focus on the latter channel, which we focus on in two dimensions, while eliminating the classical moral hazard channel. First, if precautionary savings motives for holding livestock assets dominate, then we would expect to see households that receive IBLI to reduce herd sizes. However if risk-adjusted investment motives dominate, then we would expect households to build larger herds. Second, the presence of insurance might induce livestock herders to reduce their efforts to protect their herds from loss, even if they are fully rational and cannot influence insurance payouts with their actions, essentially through a wealth effect. To test between these theoretical possibilities, we implement two complementary randomized control trials in southern Ethiopia, paired with novel, high frequency data collection that provides unique insight on livestock herder effort. The results suggest that in the presence of IBLI pastoralists tend to increase herd sizes, particularly as they gain greater knowledge of, and experience with, IBLI. Furthermore, they also appear to put in less herding effort. This suggests a potential unintended spillover of insurance: herds grazing more intensively on smaller pasture areas, which has the potential to intensify environmental degradation. The results have implications for the ecological impacts of scaling up index insurance programs, and for microinsurance design. More broadly, these results allow us to identify unintended behavioural consequences of insurance even in the absence of classical moral hazard incentives.

Publications

Hoy, Christopher, Nurina Merdikawati, and Russell Toth. Forthcoming. "A False Divide? Correcting Beliefs about Inequality Aligns Preferences for Redistribution Between Right- and Left-Wing Voters," Journal of Economic Inequality.

Published online 25 Jan 2024

https://doi.org/10.1007/s10888-023-09609-2

Are differences in preferences for redistribution between right- and left-wing voters ampliﬁed because of misperceptions of inequality? To address this question, we conduct three nationally representative, randomized survey experiments with 7020 Australians, in which respondents are informed about either the level of national inequality and economic mobility, their position in the national income distribution, or given no information. We show that correcting misperceptions of inequality reduces the gap in support for redistribution between right-wing and left-wing voters by between 21 to 37 percent. This is predominantly due to right-wing voters, who held more inaccurate priors, increasing their support for redistribution.

Hoy, Christopher, Nurina Merdikawati, and Russell Toth. 2022. "Can a Multipronged Strategy of "Soft" Interventions Surmount Structural Barriers for Financial Inclusion? Evidence from the unbanked in Papua New Guinea," Journal of Development Studies, 58(12): 2460-2482.

Working paper

We study the impacts of a comprehensive financial inclusion program in a particularly remote, insecure and low-trust setting, lacking bridging institutions to facilitate sustained interventions. We evaluate this program in Wewak district in northwest Papua New Guinea, by randomly assigning treatment to 41 of 79 villages. The program involves a two-day financial literacy training workshop, timely offers of no-fee bank accounts with reduced administrative hurdles, and savings ‘nudges’. We use both survey and bank account administrative data to measure its impact on financial literacy, budgeting and savings behavior, as well as on the ownership and use of bank accounts. Although 25% of adults in treatment villages attended the training and 70% of participants opened a bank account, we do not detect any significant downstream effects. Our results draw into question the benefit of initiatives aiming to ‘bank the unbanked’ in remote areas, revealing challenges in promoting financial inclusion among the next frontier of underserved and hard-to-reach populations.

Headey, Derek, Sophie Goudet, Isabel Lambrecht, Elisa Maria Maffioli, Than Zaw Oo, and Russell Toth. 2022. "Poverty and food insecurity during COVID-19: Phone-survey evidence from rural and urban Myanmar in 2020," Global Food Security, 33.

Myanmar first experienced the COVID-19 crisis as a relatively brief economic shock in early 2020, before the economy was later engulfed by a prolonged surge in COVID-19 cases from September 2020 onwards. To analyze poverty and food security in Myanmar during 2020 we surveyed over 2000 households per month from June–December in urban Yangon and the rural dry zone. By June, households had suffered dramatic increases in poverty, but even steeper increases accompanied the rise in COVID-19 cases from September onwards. Increases in poverty were much larger in urban areas, although poverty was always more prevalent in the rural sample. However, urban households were twice as likely to report food insecurity experiences, suggesting rural populations felt less food insecure throughout the crisis.

Mihm, Maximilian, and Russell Toth. 2020. “Cooperative Networks with Robust Private Monitoring,” Journal of Economic Theory. Issue 185.

Last pre-publication version | Online appendix | https://doi.org/10.1016/j.jet.2019.104974

Social networks support cooperative behavior in a variety of social and economic settings. We study cooperative networks that can be formed when payoff and information asymmetries imply that cooperation relies on unverifiable third-party punishments. Under private monitoring, equilibrium predictions can depend on players’ beliefs about unobservable behavior, and our results identify the range of equilibrium network outcomes. In particular, when strategies must be robust to beliefs, we show that network structures satisfy a triadic closure property, providing a strategic rationale for the short paths and high clustering observed in many social and economic networks. We illustrate some of the substantive restrictions identified in our results for risk- and information-sharing networks.

John, Felix, Russell Toth, Karin Frank, Jürgen Groeneveld, and Birgit Müller. March 2019. "Ecological vulnerability through insurance? Potential unintended consequences of livestock drought insurance," Ecological Economics, 157: 357-68.

Working paper (September, 2018)

Increasingly frequent and severe droughts pose one of the greatest challenges for dryland pastoralists in the Horn of Africa. Livestock drought insurance (LDI) has been proposed as a means to manage these risks. However, LDI may have unintended side effects, such as inducing unsustainable herd sizes leading to long-term pasture degradation. These issues are infeasible to study empirically given that none of the emerging LDI programs has existed at scale for any extended period of time. Thus, we study the potential long-term effects of LDI on pasture conditions at scale with the help of an agent-based model. We particularly consider the possibility that if insurance is taken up at scale, the quick herd size recovery that insurance enables after droughts can disrupt natural pasture recovery dynamics, with the potential to degrade the long-run carrying capacity of the vegetation. Our results show that, especially if pastures are very sensitive to grazing, insurance can indeed cause and/or intensify ecological instability. Furthermore, unfortunately, these unintended ecological consequences are most likely where insurance is needed the most. Designing the insurance product in the light of these insights may dampen these effects.

Gobin, Vilas, Paulo Santos, and Russell Toth. 2017. "No Longer Trapped? Promoting Entrepreneurship Through Cash Transfers to Ultra-poor Women in Northern Kenya," American Journal of Agricultural Economics, 99(5): 1362-83.

Working paper (March, 2017)

We examine the short-to-medium-run impacts of the Rural Entrepreneur Access Program (“REAP”), a poverty graduation program that promotes entrepreneurship among ultrapoor women in arid and semi-arid northern Kenya, a context prone to poverty traps. The program relies on cash transfers (rather than asset transfers) in addition to business skills training, business mentoring and savings. Participation in each of three rounds of the program was randomly determined through a public lottery. In the short-to-medium-run we find that the program has a positive and significant impact on income, savings, and asset accumulation similar to more traditional poverty graduation programs that rely on asset transfers.

Toth, Russell. 2015. “Traps and Thresholds in Pastoralist Mobility,” American Journal of Agricultural Economics, 97(1): 315-332. DOI: 10.1093/ajae/aau064.

Featured in AJAE virtual issue on agricultural economics (January, 2016).

Last working paper version: [pdf]

This article presents a new approach to identifying poverty traps in East African pastoralist communities. A flexible semiparametric estimation procedure is used to identify a bifurcation in the propensity to engage in the asset-based, mobile herding livelihood, in comparison to the sedentary alternative, as a function of herd size. The identifi ed threshold is consistent with previous evidence on poverty traps based on modeling herd stock dynamics. The approach contributes to an emerging literature that seeks to identify poverty traps through testing the implications of the posited behavioral mechanism behind the trap, as opposed to directly modeling asset dynamics. The approach is further employed to provide complementary evidence on the relationship between ability and assets in sustaining mobile pastoralism.

Ermon, Stefano, Yexiang Xue, Russell Toth, Bistra Dilkina, Richard Bernstein, Patrick Clark, Steve Degloria, Andrew Mude, Christopher Barrett and Carla Gomes. 2015. "Learning Large Scale Dynamic Discrete Choice Models of Spatio-Temporal Preferences with Application to Migratory Pastoralism in East Africa." Proceedings of the Twenty-Ninth Conference on Artificial Intelligence, Special Track on Computational Sustainability. (AAAI-15).

Oo, Alex, and Russell Toth. September 2014. “Do Community-Sanctioned Social Pressures Constrain Microenterprise Growth? Evidence from a Framed Field Experiment," Journal of the Japanese and International Economies, special issue on Experiments for Development: Achievements and New Directions, 33: 75-95.

Last working paper version (August, 2013)

We conduct a framed lab-in-field experiment to explore the hypothesis that a number of stylized facts about microenterprise behaviour in developing countries – including product market homogeneity and lack of growth and innovation – can be explained by a social institution in which microentrepreneurs share the market to “buy a job.” 280 present or prospective market trader women across four communities in rural Vietnam are anonymously randomized into pairs to play three “market game” treatments. The interactions are framed to simulate real-world retail market competition. The participants compete in an effort task, with performance determining market returns. A highly incentivized individual round allows us to extract a measure of individual “ability” in the effort task. The subjects then compete in successive treatments, where in the final treatment the losing participant in a round can elect to “burn” their competitor’s output, which is framed as the application of social pressure. The behavioural responses are significant and fitting with a theoretical model of the social institution we have in mind: even though subjects are from the same community they are willing to punish (“apply social pressure”), the probability of punishment is increasing in the gap in ability in the pair, and this leads to a decrease in performance from higher-ability individuals. The study provides an example of the use of framed lab experiments to shed light on market behaviour in developing countries, for which full-blown RCTs may face serious feasibility or ethical challenges.

Burtraw, Dallas, David Evans, Alan Krupnick, Karen Palmer, and Russell Toth. 2005. “The Economics of Pollution Trading for SO2 and NOx,” in Volume 30 of the Annual Review of Environment and Resources.

Papers in progress

“Identifying Subsistence and Aspirational Entrepreneurs: A Dynamic, Empirical Model of Occupational Choice and Entrepreneurial Human Capital,” with Dan Keniston.

Literature Review on Impacts Evaluations of Policies for Small and Medium Enterprises in Developing Countries, with Antoinette Schoar.

"Microenterprise Competition, Social Pressures, and Innovation," with Alex Oo.

"The Return of the Sea Turtles: Impacts of High Skill Overseas Returnees on Chinese Firms," with Sibo Liu and Yifan Zhang.

“Certification or Certainty? Impacts of 4C on Coffee Smallholder Livelihoods,” with Manann Donoghoe and Jeffrey Neilson.

Projects in the field (selected)

"Impacts of Sustainability Standards on Smallholder Coffee Farmers: A Randomized Evaluation," with Jeff Neilson.

Data collection complete.

[baseline report] [endline report]

"Don’t Follow the Crowd: Incentives for Directed Spatial Sampling," with Nathan Jensen, Yexiang Xue, Richard Bernstein, Eddy Chebelyon, Andrew Mude, and Carla Gomes.

Data collection complete.

“Can Reference-Dependent Preferences Explain Investment Decisions? Evidence from Rural-Urban Migration in Indonesia,” with Peter Bowers and Rami Tabri.

Data collection complete.

"The Impacts of Liquidity Loans to Mobile Money Agents," with Siobhan Herbert.

CEGA project description

IPA project summary

Dormant Working Papers

“Why Isn’t Financial Capital Enough? The Dynamics of Entrepreneurial Human Capital and Emergent Small Enterprises in Indonesia,” January 2011. Not for submission (some of the content of this paper has been re-structured into other papers).

“What Goes Around Comes Around: A theory of strategic indirect reciprocity in networks,” May 2009, with Maximilian Mihm and Corey Lang, Cornell Center for Analytical Economics working paper #09-07.Not for submission; contains material and alternative model setup cited in similarly-titled working paper (above).

"Where There’s Haze There’s Fire: Political Accountability and Indonesia’s Forest Fires," March, 2019, with James Macdonald.

Projects (selected)

Interoperable Payment Systems (IPS). Funded by the Bill and Melinda Gates Foundation, managed by Innovations for Poverty Action.

Razi, Hussam, Philip Roessler, Russell Toth, and Hsin-Tien Tsai. August 2022. "Instant Inclusive Payment Systems: An Evidence-Based Approach from Design to Impact." IPA Report.

Inclusive Agricultural Value Chain Financing (IFS4Ag) (funded by the Australian Centre for International Agricultural Research (ACIAR) and the International Food Policy Research Institute (IFPRI) through the Policies, Institutions, and Markets CGIAR Research Program. Project Facebook page: https://www.facebook.com/IFS4Ag/.

Evaluation of the Impacts of Sustainability Standards on Smallholder Coffee Farmers in Southern Sumatra, Indonesia. Funded by funded by the Australian Centre for International Agricultural Research (ACIAR), ISEAL Alliance (through funding from the Ford Foundation), and J-PAL SEA (through funding from DFAT).

[baseline report]

[final report]

The human and environmental impacts of migratory pastoralism in arid and semi-arid East Africa (funded by the Australian Department of Foreign Affairs and Trade (DFAT) Australian Development Research Awards Scheme (ADRAS) 2012 round, grant 66138).

The food security of migrant pastoralists on the arid and semi-arid rangelands of East Africa is critically affected by shocks like droughts and the state of vegetation resources for animal forage. This project aims to generate results on the feedbacks between migrant pastoralism and the environment, including addressing the impacts of new index insurance products.