The canonical model of expenditure choices assumes that people are able to smooth their consumption. However, extensive empirical and theoretical work suggests that consumption smoothing is imperfect, so the precise timing of individuals’ income may affect their behavior. We report results from a randomized field experiment in Malawi that varied the timing of workers’ income receipt in two ways. First, payments were made either in weekly installments or as a monthly lump sum, in order to vary the extent to which workers had to save up to make profitable investments. Second, payments at a local market were made either on the weekend market day (Saturday) or the day before the market day (Friday), in order to vary the degree of temptation workers faced when receiving payments. We provide novel evidence that the frequency of payments matters for workers’ ability to benefit from high-return investment opportunities. Workers in the monthly group have more cash left in the week after the last payday when the lump sum payment was made. Moreover, they are 9.5 percentage points more likely than the weekly payment group (mean of 6.3%) to invest in a risk-free short-term “bond” that required a large payment and that was offered by the project in the week after the last payday. We argue that this result is driven by the lump sum group’s decreased savings constraints relative to the weekly payment group. In contrast, despite anecdotal evidence and suggestive survey data that, in this study’s context, market days increase the temptation to overspend, being paid at the site of the local market on Saturday compared to Friday did not strongly matter for expenditure levels or temptation spending
Compared to the number of randomized evaluations that have been conducted on cash transfers in Latin America, evaluations on cash grant interventions in African settings are few. However, the recent studies that have been conducted in Africa help to answer several key questions about cash grants.
In Malawi, we have continued our global tradition of rigorous, applicable research by building foundational research capacity and conducting evaluations in areas of pressing national concern. Examples of our research below offer promising insights into everyday issues that affect the lives of the Malawian poor.
An observed positive relationship between compensation and productivity cannot distinguish between two channels: (1) an incentive effect and (2) worker selection. We use a simplified Becker-DeGroot-Marschak mechanism, which provides random variation in piece rates conditional on revealed reservation rates, to separately identify the two channels in the context of casual labor markets in rural Malawi. A higher piece rate increases output in our setting, but does not attract more productive workers. Among men, the average worker recruited at higher piece rates is actually less productive. Local labor market imperfections appear to undermine the worker sorting observed in well-functioning labor markets.
Can volunteer farmers effectively communicate information about conservation farming and nutrient management to other farmers? Does the social position and gender of these farmers affect their success in disseminating this knowledge?
This evaluation studies the effects of new ways to disseminate knowledge of conservation farming and nutrient management practices via the Ministry of Agriculture and Food Security (MoAFS) extension staff. We observe that volunteer farmers trained by MoAFS extension workers can effectively disseminate knowledge of conservation farming and nutrient management techniques to others in their villages. The largest gains in knowledge and usage took place when these communicators were similar to the average village member and where the communicators were offered moderate, in-kind rewards for good performance.
In 2013 IPA celebrated ten years of producing high-quality evidence about what works, and what does not work, to improve the lives of the poor. It was a year of celebration for our accomplishments. More so, it was a time to prepare our organization for the next phase as we continue to pursue our vision of a world with More Evidence and Less Poverty.
View an online version of the report at annualreport.poverty-action.org/2013annualreport/