Poverty Alleviation: Learning What Works and Why

Dean Karlan Yale University

The Goal
Goal: Maximize aid effectiveness. Biggest impact for each dollar donated. Basic formula: A = they choose ideas proven to work, and the theory of why it should work supports the prediction that the idea should work in that particular context B = the organization does what they say they will do Goal: Maximize A x B = Aid effectiveness
*One can evaluate a monitoring system.

Why evaluate?
Know how to allocate scarce resources
Focus the convinced Convince the unconvinced

Guide management Key: Think forward, not backwards.

The Impact Question How have the lives of people in a program changed, compared to how they would have been in the programs absence?

Impact Evaluation: Evaluating the Evaluation

Internal validity
Counterfactual
Confounding factors
Outside influences, eg macroeconomic conditions Internal influences, eg selection bias

Quality data

External validity
Theory Replication

How to Evaluate?
Three theoretical questions should be tackled: 1. Is there a market failure, and if so how/why/what?
Microentrepreneurs can grow with $, but banks dont lend

2. Does a specific policy solve the market failure?

Microcredit: eg, through group lending, and high frequency repayment, learns to lend profitably to the poor

3. Is it worth solving, relative to the costs?

Microcredit: will come back to this. Idiot in the shower problem.

Key points for RCT viability

Not all situations work for an RCT Some creativity can go a long way though Examples:
Corruption in Indonesia CDD in Indonesia, Philippines, Ghana, Sierre Leone, Liberia, etc

Key points:
Plan ahead, not after the fact or during the fact Separable units
or study spillovers too they are part of the benefits, or costs

Embrace the scarce resource constraint

Thank you!

dean.karlan@yale.edu http://karlan.yale.edu http://www.poverty-action.org