The science of fighting poverty: learnings

from the Jameel Poverty Action Lab

Abhijit Vinayak Banerjee

MIT and J-PAL
J-PAL was started in 2003 at MIT to reduce poverty by
ensuring that policy is informed by scientific evidence

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Evidence in the fight against poverty

• Surprisingly little is known about what works and lots of decisions

are taken based on “intuition” and/or “first principles”
• Or worse
• Empowerment and Poverty Reduction: a Source-book
(World Bank Source-book on “what works”)
• Reports: “the Gyandoot program that put computers in
villages in India was hard hit by lack of power. The computer
kiosks lost money and many had shut. “
• Then says, without any apparent irony, “Following the
success of the program..”

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The problem is two-fold

Our intuitions are faulty

• Often based on ideology
• “We should never pay people to do what they should on their own”

And the general principles, even when correct, are too general
• “Improving education is difficult without more resources”
• What resources: teachers, books, charts, computers, curricula, training?
• No theory will tell us the answer
• The devil, alas, in the details

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J-PAL conducts Randomized Control Trials to generate the
necessary evidence
Before a program starts, individuals are randomly assigned to two groups. With enough
people, both groups have statistically identical characteristics, on average.

Intervention
We measure outcomes
of both groups.

Any differences in
The only difference between the two outcomes can be
groups is the presence of the programme.
attributed entirely
to the programme.
Comparison

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J-PAL has over 1,027 randomized evaluations in
87 countries
More than a hundred each in Financial Access, Livelihoods, Education, Health,
and Governance
Agriculture
Crime, Violence,
& Conflict
Education
Environment, Energy
& Climate Change
Finance
Firms
Gender
Health
Labor Markets
Political Economy
& Governance

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Myths, Insights and Challenges: What have
we learnt from these experiments?
Myth 1
Access to small loans will eliminate poverty
Headlines

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Impact on investment
Durable PCE Business Durables

140 14
138
120 12
12.1
116
100 10

80 8

60 6

5.3
40 4

20 2

0 0

Banerjee, Abhijit, Esther Duflo, Rachel Glennerster, and Cynthia Kinnan. 2015. “The Miracle of Microfinance? Evidence from a
Randomized Evaluation.” American Economic Journal: Applied Economics 7, no.1: 22-53.

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Impact on poverty
PCE

1600

1400
1,457 1,419
1200

1000

800

600

400

200

Banerjee, Abhijit, Esther Duflo, Rachel Glennerster, and Cynthia Kinnan. 2015. “The Miracle of Microfinance? Evidence from a
Randomized Evaluation.” American Economic Journal: Applied Economics 7, no.1: 22-53.

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What is going on?

• People use microcredit primarily to finance “lumpy” consumption

• Refrigerators, televisions, marriages

• They pay for that by taking on extra work

• Some new businesses

• Or by cutting back on other forms of consumption

• Expanding their business was not what the borrowers were aiming for

Banerjee, Abhijit, Esther Duflo, Rachel Glennerster, and Cynthia Kinnan. 2015. “The Miracle of Microfinance? Evidence from a
Randomized Evaluation.” American Economic Journal: Applied Economics 7, no.1: 22-53.

Abdul Latif Jameel Poverty Action Lab (J-PAL). 2018. "Microcredit: impacts and limitations." J-PAL Policy Insights. Last modified
April 2018.

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Myth 2
”Free money” makes people lazy
The “Lazy” welfare recipient
Panel A: Worked last week

Panel B: Hours worked per week

Banerjee, Abhijit, Rema Hanna, Gabriel E. Kreindler, Benjamin Olken. 2017. “Debunking the Stereotype of the Lazy Welfare
Recipient: Evidence from Cash Transfer Programs.” World Bank Research Observer.

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Some ideas are hard to root out…

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The “yale economists” indeed show very little impact of
CARES on employment
Event study: effects of replacement rate ratio on probability of employment
a) Without controls for state business restrictions

Altonji, Joseph, Zara Contractor, Lucas Finamor, Ryan Haygood, Ilse Lindenlaub, Costas Meghir, Cormac O’Dea, Dana Scott,
Liana Wang, and Ebonya Washington. 2020. “Employment Effects of Unemployment Insurance Generosity During the Pandemic.”
Working Paper.

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But it did not matter

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Insight 1
Giving very poor people a one-time boost can have
durable effects
The Graduation Program

• Designed by BRAC
• Implemented by various NGOs
• Asset transfers + “training/handholding” +
encouragement to save
• RCTs in 7 countries: Bangladesh, India,
Pakistan, Ethiopia, Ghana, Honduras,
and Peru
• Find consistent positive impacts 18 months
and 3 years after asset transfer Graduation program beneficiaries in Ghana. Photo: BRAC

Banerjee, Abhijit, Esther Duflo, Nathanael Goldberg, Dean Karlan, Robert Osei, William Parienté, Jeremy Shapiro, Bram Thuysbaert, and
Christopher Udry. 2015. “A Multi-faceted Program Causes Lasting Progress for the Very Poor: Evidence from Six Countries.” Science 348, no. 6236

Abdul Latif Jameel Poverty Action Lab (J-PAL). 2015. "Building stable livelihoods for the ultra-poor." J-PAL Policy Insights.

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Cross-Site Analysis

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Per Capita Consumption

0.60 Per capita consumption, month

Pooled endline 1: $4.55 (control mean $78.80)
0.50 Pooled endline 2: $3.36 (control mean $68.80)

0.40
Standard deviation
treatment effects

0.30

0.20 Endline 1
Endline 2
0.10

0.00

-0.10

-0.20
Pooled Ethiopia Ghana Honduras India Pakistan Peru

Abdul Latif Jameel Poverty Action Lab (J-PAL). 2015. "Building stable livelihoods for the ultra-poor." J-PAL Policy Insights.

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Food Security

0.50 Everyone gets enough to eat each day

Pooled endline 1: treatment 47%, control 42%
Pooled endline 2: treatment 45%, control 40%
0.40

0.30
Standard deviation
treatment effects

0.20
Endline 1
0.10 Endline 2

0.00

-0.10

-0.20
Pooled Ethiopia Ghana Honduras India Pakistan Peru

Abdul Latif Jameel Poverty Action Lab (J-PAL). 2015. "Building stable livelihoods for the ultra-poor." J-PAL Policy Insights.

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Time Use
0.50 Minutes spent on productive activities
Pooled endline 1: 17.5 (control mean 169)
Pooled endline 2: 11.2 (control mean 185)
0.40

0.30
Standard deviation
treatment effects

0.20
Endline 1
0.10 Endline 2

0.00

-0.10

-0.20
Pooled Ethiopia Ghana Honduras India Pakistan Peru

Abdul Latif Jameel Poverty Action Lab (J-PAL). 2015. "Building stable livelihoods for the ultra-poor." J-PAL Policy Insights.

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Assets only does not work

105% ***
***
85%
***
65% Any GUP
***
% Change from

45%
Control Mean

Goat Drop
25% **
5%

-15%

-35%

-55%

-75%
Value of Livestock Value All Livestock Total Consumption
Goats Excluding Goats Value per Month

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The impact lasts

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Insight 2
The problem is less “welfare queens” than people not
claiming what they are entitled to
Take-up of SNAP

• 30,000 over-60 Medicaid participants

in Pennsylvania
• Not in SNAP, but probably eligible
• RCT:
• One group was given information
that they may be eligible
• One group was given information
and assistance in enrolling

Finkelstein, Amy and Matthew J. Notowidigdo. 2019. “Take-up and Targeting:

Experimental Evidence from SNAP.” Working Paper.
Sample information letter.

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Take-up of SNAP

20%
18%
18%
16%
14%
12%
10%
11%
8%
6%
4% 6%

2%
0%
Control group Information only Information and help

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Universal Basic Income

• Should we replace welfare as we know it

by UBI?
• Pilots all over the world
• Including one in Stockton, California
• Not clear that UBI is the answer
• But it is critical that welfare be more
generous and less demeaning

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A Challenge
How do we get political buy in for real
welfare reform?
Voters are overly cynical

• In part because they are so convinced by the

myth
• Especially about others
• There is clearly a connection with racism

Voters casting their ballots in Los Angeles, CA.

Photo: Joseph Sohm | Shutterstock.co m

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Lots of RCTs

• On what does and does not affect voter preferences

• Information can help, but it is often interpreted through
an ideological lens
• How do we get information through
• The media is obviously critical

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The fight against poverty

• Is like the fight against cancer.

• There are many problems. Not one.
• There are many snake oil salesmen. On all sides.
• The truth is often uncomfortable. For everyone.
• But there has been enormous progress and a lot
of that is as a result of good policies.
• We can win.

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