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The Journal of Socia-Economics - Preference Variability Along the Policy Chain in Vietnam

The Journal of Socia-Economics - Preference Variability Along the Policy Chain in Vietnam

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The Journal of Socio-Economics 37 (2008) 1729–1745
Contents lists available atScienceDirect
The Journal of Socio-Economics
 journal homepage: www.elsevier.com/locate/soceco
Preference variability along the policy chain in Vietnam
C. Leigh Anderson
a
,
, Alison Cullen
a
,
1
, Kostas Stamoulis
b
a
University of Washington, Seattle, WA, USA
b
Food and Agriculture Organization of the United Nations, Viale delle Terme di Caracalla, 00100 Rome, Italy
a r t i c l e i n f o
 Article history:
Received 4 May 2007Received in revised form 22 February 2008Accepted 6 April 2008
 JEL classification:
O1O2
Keywords:
PolicyDecision-makingRiskVietnam
a b s t r a c t
This paper explores whether there are systematic differences in decision-making betweenthose who regularly allocate public resources and those who are the intended recipients.To test for differences we sample across farmers and policy makers in Vietnam. Our find-ings suggest that preference parameters such as fairness, risk orientation, discounting andcontrolsystematicallydifferbetweenthesetwogroups,andarepredictorsofthelikelihoodthat an individual is in a position of allocating public resources or receiving them. Regard-lessofwhetherthesedifferencesareinnateorsocialized,theymayhelptoexplaintheoftenunexpected outcomes of development policy interventions.© 2008 Elsevier Inc. All rights reserved.
1. Introduction
Individuals make decisions both about allocating their own resources, and to varying degrees, about allocating collectiveresources. Our interest is in whether there are systematic differences in decision-making between those who are regularlyinvolved in allocating public resources for development, and the poorer individuals who are more frequently the intendedrecipients.Totestfordifferenceswesampleacrosstwogroupsofindividualswhovarybythecontrolandresponsibilitytheyhave over public resource allocation decisions in Vietnam.The motivation for our study is that a better understanding of patterns in decision-making can help to explain the oftenunexpectedoutcomesofdevelopmentpolicyinterventionsaimedatpovertyreduction.Themixedperformanceof60yearsof development assistance has led to changes in the prevailingparadigms includingthe search for the proper balance between“state-led” and “market-led” solutions. We are suggesting that this distinction may be artificial or, in any case, not the mostimportantone.Rather,developmentpolicyframeworksmayhavemissedsalientpointsofpeoples’behaviorwhichdeterminethesuccess(orlackthereof)ofthepoliciesthemselves.First,institutionalandprogramincentivesmaybepremisedonastrictmodel of rationality that ignores experimental findings on risk and fairness perceptions, and second, policy and resourcedecisions may be premised on the preferences of the policy maker, which can differ from the preferences of the intendedrecipients.Traditional economic models of decision-making assume that individuals make fully reasoned and consistent choices.Yet arguments of bounded rationality dating back 50 years, regular observation, and repeated experiments fail to supportsuch models, particularly for complex decisions made under uncertainty (Simon, 1955).Individuals often employ decision
Corresponding author at: Evans School, Box 353055, University of Washington, Seattle, WA, USA. Tel.: +1 206 543 0365; fax: +1 206 543 1096.
E-mail addresses:
cla@u.washington.edu(C.L. Anderson),alison@u.washington.edu(A. Cullen),Kostas.stamoulis@fao.org(K. Stamoulis).
1
Evans School, Box 353055, University of Washington, Seattle, WA, USA.1053-5357/$ – see front matter © 2008 Elsevier Inc. All rights reserved.doi:10.1016/j.socec.2008.04.011
 
1730
C.L. Anderson et al. / The Journal of Socio-Economics 37 (2008) 1729–1745
heuristics; simple rules that allow them to make decisions in the absence of full information, or when they are unableor unwilling to incorporate all the information that is available in the relevant timeframe (Gigerenzer and Selten, 2001).Fairnessandsomequalitativedimensionsofriskyoutcomes,suchasfamiliarityandasenseofcontrol,canalsoaffectchoices(Fischhoff et al., 1978).While there is an impressive inventory of experimental findings, most come from experiments in the U.S. or Europeanlaboratory settings with relatively homogeneous and well-off populations (for example, seeThaler, 1991; Camerer et al.,2003).Subsequentlyweknowverylittleaboutthenatureandprevalenceofthesebehaviorsinthefield,andhowpatternsvaryacrosspopulationcharacteristics.Ourpapercontributestotheliteratureintwoways.First,wetestwhetherthesebehavioursarerobustacrossasampleinVietnamandhowpreferencesvarywithbasicdemographicandsocio-economiccharacteristics.Second, we explore specifically whether preferences vary across groups – policy makers and program recipients – that varyin their responsibility over allocating development resources.The next section outlines hypotheses related to why we might expect decision-making between these two groups todiffer. In Section4we describe our sample and present the results from a series of questions posed to farmers and policymakers in Vietnam. Our findings indicate several significant differences in preferred choices and measures of risk, controlandfairness.WeexplorepossiblereasonsforthesedifferencesinSection4bylookingatpreferenceparametersaspredictors of respondent job category. Section5concludes.
2. Preference differences
Wehavelongunderstoodthatindividualshavedifferentpreferences.Butgiventhosedifferentstartingpoints,theoriesof decision-makingnonethelessassumesomecommonandpredictableresponsestochangesinopportunitiesandconstraints.The exercise of searching for ways to better model behavior that seemingly deviates from these expectations has often beenempirically driven, based on 30 years of experiments, largely conducted in classrooms in the U.S. and Europe. Initially, mostexperiments focussed solely on recording “behavioural anomalies”. More recently, interest has grown in field research andother strategies to look at differences across individual characteristics, including whether certain characteristics are associ-ated with a greater likelihood of behaviour that contradicts standard axioms. That is, are there certain subpopulations forwhomstandardmodelsperformbetterorworse?Thusfarresearchhasprimarilyfocusedongenderdifferences,thoughthereis a small literature on stakeholder preferences in health care and “consumer versus citizen” preferences for environmentalgoods. We briefly review each of these literatures, and the support they provide for positing preference variability betweenpolicy makers and program recipients.
 Apriori
,whywouldweexpectpreferences,andhencechoices,tosystematicallyvarybetweenpolicymakersandprogramrecipients? Certainly in international development policy we typically believe that choices between these two groups willdiverge,butthatthisdifferencestemsprimarilyfromdifferencesinconstraintsandopportunities.Policymakersareexpectedto have more formal education, higher income and wealth, and access to a wider range of, though potentially less local andrelevant,information.Participatorymethods,stakeholderrepresentation,andsimilarconceptsareintendedtoaddressthesedifferent perspectives.Differences among stakeholders, where income is not the distinguishing feature among groups, have been examined inthe health care literature. For example,Shumway et al. (2003)nd differences in preferences over schizophrenia treatment outcomes between public policy makers and mental health care providers, and patients and their families. Similarly,Saigalet al. (1999)nd differences in preferences for neonatal care between health care professionals and adolescents. In thesecases, different decision frameworks and goals are hypothesized to drive the patterns of preferred outcomes. Hence, privateattitudes may be similar, but in their role allocating public resources, policy makers may favor broader public goods, andmore visible and measurable outcomes.A variation on this theme appears in the environmental literature on consumer versus citizen preferences, whereby thesame individual is assumed to have multiple preferences that are distinguished by the degree of altruism arising from theirdecision-makingrole(Sagoff,1988).Levitt(1996)andShumwayetal.(2003),however,suggestthatevenintheroleofpublic decisionmaker,individualsmayvoteaccordingtotheirprivatepreferences.Levittfindsempiricalsupportthatsenatorsgivemost weight to their own preferences, rather than those of the public they are representing, though he does not explore if,or why, there may be systematic differences.Allocating public resources according to personal preferences has implications when there is a preference divergencebetweenthoseallocatinganddesigningpolicy,andthosewhoaretheintendedrecipients.Leavingasidethedifficultquestionof whether the allocation is welfare enhancing, if policies reflect policy maker preferences and these differ from programrecipients, we can expect that programs will produce unanticipated results, including low take up rates and an inability totarget intended recipients.Hypotheses of biological or evolutionary preference differences appear almost exclusively in studies of gender. Labormarket economists have looked at preference differences to explain the “gender gap” and wage discrimination. This fairlylarge literature on gender differences, presumed both evolutionary and socialized, is summarized byCroson and Gneezy(2004).They suggest three areas where gender preferences may vary systematically: risk taking, social preferences, andreaction to competition. In one developing country example that supports this,Chattopadhyay and Duflo (2004)nd that investment in the local public good infrastructure that is of primary concern to women dominates in Indian villages wherelocal village council positions are reserved for female policy makers.
 
C.L. Anderson et al. / The Journal of Socio-Economics 37 (2008) 1729–1745
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The reproductive cost argument common to hypotheses of differences in innate gender preferences is difficult to carrythrough to policy makers and program recipients (Croson and Gneezy, 2004)There is, however, the possibility that for bio- logicalorotherreasons,policymakerswill,onaverage,havedifferentriskattitudesandsocialpreferences.Inanevolutionarysense, certain risk attitudes may have both predisposed individuals to seek public decision-making roles, and by exercisingtheir private preferences in those roles, they created policy and institutions that perpetuate the well being of like-mindedpeople. Alternatively, if socialized, policy makers may understand that they are expected to make decisions on behalf of abroader public good. Or the particular informational, political, and economic factors that make up the local environmentsmay lead policy makers and program recipients to view fairness and risk differently.Flynn et al. (1994)andFinucane et al. (2000)havefounda“whitemaleeffect.”Thelowerriskperceptionsofthisgrouparehypothesizedtoarisefromtheirgreaterinvolvement in creating, controlling and benefiting from technology and other activities seen as hazardous. Since decisionmakersinmanysocietiesarepredominantlymenofthedominantethnicity,itmaybethatitisthedecision-makingposition,rather than gender or race
per se
, that gives rise to the lower risk perceptions.To what extent these base attitudes are innate and largely immutable, or more endogenous to different environments, isan open debate. What is of interest to us, is whether systematic differences in these latent variables between policy makersand program recipients leads to different choices. Similar to the gender literature, we focus on two factors that may berelevant to differences in one’s position as a policy official allocating public resources, and a private farmer: risk attitudesand social preferences. We do not posit causality – it may be that low income program recipients are more risk averse andhave higher discount rates because of the environment they live in – that is, the preference variability is due to income andeducational differences (Lawrance, 1991).Or, it may be that risk aversion and impatience played a role in determining who is a policy maker and who is a program recipient—that is, the preference variability is due to latent variables that self-selectindividuals into different decision-making positions through migration and educational choices (Fisher, 1930).For social preferences, we concentrate on attitudes toward fairness and responsibility.We suggest that development policy and program failures may arise from using behavioural models that fail to accountfor relevant preference parameters, and that these preference parameters may systematically differ between individualsallocating public resources and the intended recipients due to either innate or socialized differences in risk and socialpreferences. In the following sections, we describe a series of questions to assess preference differences between these twogroups.
3. The Vietnam experiment
A stated preference survey instrument was administered in Vietnam during the spring of 2005 by enumerators fromthe Institute of Sociology in Hanoi. We surveyed 40 relatively poor rural workers (mean monthly income of VND 842,062,or approximately US$ 53) and 47 middle and high level professionals involved in policy making (mean monthly income of VND4,210,213,orapproximatelyUS$265).Werefertotheformergroupasfarmers,theoccupationidentifiedby90%ofthissub-sample.Werefertothelattergroupaspolicymakers,thoughtheirlevelofdirectinvolvementinpolicyvaries.Weaskedallindividualstorespondpersonally,ratherthanintheirpublicrole,toabstractfromthepoliticaleconomyquestionofwhatindividuals in the public sector are trying to maximize, if not their own self interest.ThefarmerswererandomlysampledinCaoKycommuneinBacCanprovince.Theselectionofpolicymakerswascarefullyconsideredtobefairlyrepresentativeofdecisionmakerswhoareinvolvedinallocatingpublicresourcestoruralcommunes.ThepolicymakersurveyfocusedonseniorofficersincentralagenciesincludingtheMinistryofFinance,theBankofAgricul-tureandRuralDevelopmentandBankofSocialPolicies(banksthatprovidecreditforruralareasandthepoor),theMinistryof Planning and Investment, the Ministry of Agriculture and Rural Development, the Banking Institute, and the Ministry of Health. Additionally, some provincial, district and communal officers and officers of major hospitals, were surveyed. Ninetypercent of policy makers were born in rural communes.Table 1presents the main descriptive statistics of the sample with further details provided inAppendices A and B.Thefinalsurveyinstrumentcontainedstandardquestionstoassessriskandtimepreference,viewsoffairness,andsourcesofinformation.Respondentswerealsoaskedaseriesofquestionsdesignedtoidentifythecognitiveefforttheyapply,andtheirassessment of the qualitative and quantitative dimensions of risky outcomes including their sense of control over, respon-sibility for, and experience with, various decision outcomes. This choice of questions was driven by three considerations:earlier experimental results, contextual relevance, and priors that preference differences, if they existed, would most likelyarisearoundriskattitudesandsocialpreferences.Eachquestionwasrepeatedfordecision-makinginhealth,food,andhiringdecisions, to assess different risk perceptions across more or less familiar decision domains, and to assess construct validity.Experimental studies using hypothetical questions have the advantage of allowing the researcher to abstract from thecomplexities of real decisions, but they introduce new concerns, particularly around validity and the complexities of hypo-thetical scenarios. Researchers have looked at how stated preferences correspond to revealed preferences, beginning withBinswanger’s(1980)workinruralIndiawherehefoundthatexperimentallymeasureddegreesofriskaversionwererelatedtoactualeconomicdecisions.
2
DaviesandLea(1995)examinedasimilarquestionfortimepreference,andfoundthatstudentattitudes toward debt were related to actual debt. In experiments with hypothetical rewards, there is also a concern that
2
This issue is particularly important when estimating willingness to pay, as discussed inCarson et al. (2000).

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