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October 26, 2011

Global Poverty

by marcobuchbinder
Global poverty will be a reoccurring topic within my blog, given that it is one of my greatest interests and hopefully, will be one of my greatest contributions within my lifetime. If someone told you that the money you are about to invest towards an ad campaign will not provide you the necessary ROI metrics, would you still invest? You would likely conduct further market research to fully understand your customer’s requirements/needs and then tailor your investment in such a manner that it will achieve your goals.The same parallel applies to anti-poverty efforts, in which today, aid organizations often don’t apply enough of a data-driven, scientific approach to fully understand the cause and effect of their aid.

Enter the Abdul Latif Jameel Poverty Action Lab (J-PAL), a network of 64 affiliated professors around the world who are united by their use of Randomized Evaluations (REs) to answer questions critical to poverty alleviation. Started as a center in the department of economics at the Massachusetts Institute of Technology (MIT), J-PAL has now regional offices in Asia, Africa, Europe and South America and more than 300 projects in 45 countries. J-PAL’s mission is to reduce poverty by ensuring that policy is based on scientific evidence. They do so by conducting rigorous impact evaluations to test and improve the effectiveness of programs  and policies aimed at reducing poverty; by building capacity of local development organizations to become better producers and consumers of such evidence; and by informing policymakers of the results of the research so that the most effective, and cost-effective programs can be scaled up.

Iqbal Dhaliwal, J-PAL’s Global Head of Policy, a very intelligent, passionate thought leader and a close friend of mine, has committed to help me better understand the challenges and effective programs in addressing poverty, so that I can play a role in combating it.

Iqbal often stresses the need to take a scientific approach to alleviate poverty rather than rely on instincts, ideology or ignorance. When thinking of the poor, we often make assumptions based on our own situation, for example that the poor should understand the importance of preventive health care or that they will use extra money to buy food and improve their nutrition. But often this is not the case and there are a number of complex, yet understandable, reasons. Understanding these are critical to avoid wasting millions of dollars and countless manpower hours on programs that either don’t have the desired impact or that displace far more effective or cost-effective programs.

For instance, just legislating free vaccination for all children in developing countries does not automatically result in 100% full immunization rates. Though immunization rates have increased almost 20% over the last two decades, 23 million infants worldwide are still not vaccinated. This is due to a number of reasons including poor infrastructure to supply these vaccines and lack of demand by parents for these services.

While a huge emphasis has been placed in developing countries on improving the supply of vaccines, not enough is done to stimulate the demand beyond broad information campaigns to help parents understand the importance of full immunization. Moreover, even though many parents in developing countries like India bring their children for the first shot, the full immunization rate (which requires about five visits to the doctor) is often very low, reflecting a lack of demand rather than supply only. This is mostly because of “procrastination” – the costs of immunization are immediate (lost wages, discomfort and even mild fever to the child, walking to a distant clinic, waiting in the hot sun) while the benefits (illness prevented in the future) is not only distant and sometimes uncertain (some children fall sick despite immunization), but also very hard to measure (how do you appreciate the pain from a sickness that never occurred).

J-PAL professors Abhijit Banerjee, Esther Duflo and Rachel Glennerster setup a novel field experiment to test the impact of improved supply and more importantly the use of incentives to stimulate demand.

In a rural Indian district where full immunization rates were a paltry six percent, the researchers setup two treatment groups and one control group, all randomly selected so that any differences in the final outcomes could be attributed to the new programs (treatments). In the first group of treatment villages, they only focused on the supply side – ensuring a regular monthly visit by the nurse to the village to provide free immunization. In the second group of treatment villages, they supplemented the supply side by offering the parents a kilogram of lentils for each of the first four vaccination visits, and a set of steel utensils at the completion of full immunization.

The results were striking – in villages where the supply was improved, the full immunization rate jumped from six percent to eighteen percent, a remarkable achievement. But even more striking, adding the demand incentives resulted in a jump in full immunization rate to thirty nine percent – a more than six fold increase in just 18 months.  The incentive encouraged families to return multiple times for the full vaccination package and was effective at overcoming small inconveniences and a tendency to procrastinate.

More insight from Iqbal and others will follow. Please feel free to share your thoughts on global poverty below.

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