Q&A: Development Economics

A multitude of initiatives aimed at reducing poverty and suffering exist around the world. Programs focus on introducing fertilizer or drought-resistant seeds, adding roads and other infrastructure, delivering medicines and electrifying hospitals, and increasing access to information, banking services, or education.

Research in development economics is crucial to informing these efforts and measuring their outcomes. Breakthroughs sat down with two leading development economists in the Department of Agricultural and Resource Economics to learn about their work and commitment to improving human welfare and promoting sustainable development.

These conversations have been edited for length and clarity.

Assistant Professor, Agricultural and Resource Economics

What drew you to the field of development economics?

I’ve always been interested in understanding the stark differences between cities and villages in places like Ghana, where I grew up. Drive only 30 minutes and you will see a remarkable change in quality of life and economic outcomes. I wanted to understand what kind of research can improve welfare, and the developing world is a place of obvious need in that regard. Giving one dollar to someone who is poor is so much more impactful than to someone who is rich. I am interested in not just economic theory but in putting policy and practice at the core of my research to answer questions relevant to changing people’s lives.

How do you summarize your work?

I focus on how we can design new markets in low-income environments where people have historically lacked formal access to safe financial services, and on how to improve government efforts that are working to distribute funds to or scale up programs for poor people.

My work is based on fieldwork: getting to know people, seeing what we call frictions in the market, and then exploring economic approaches that could change those. I often collaborate with Ghana’s Ministry of Fisheries; Ministry of Energy; Ministry of Local Government, Decentralization and Rural Development; and other large, commercial providers of financial services for the poor. I also work with local research teams to collect survey responses and use data from the Ghana Statistical Service and other government and commercial data sources. Many of my research questions are influenced by personal experiences and conversations in the field—my research wouldn’t be the same without them.

Describe some current projects?

In one project, we’re trying to improve the design and effectiveness of the Unified Petroleum Price Fund (UPPF), which is working to redistribute transport costs. If oil companies are allowed to set their prices differentially across geographical regions, they will add transport costs to bring fuel to more isolated locations, which in turn creates higher prices for the people in rural, poor areas. To address this inequality, the government adds a markup to the price of fuel that funds the UPPF, which is then used to pay the oil companies for the cost of moving their product. Rich people buy fuel more often, so they contribute more to the UPPF. In economics we call it the law of one price: trying to ensure that the price is the same across space, with all distortions eliminated in the market. 

It’s a wonderful program that’s been running for about seventeen years, but the monitoring capacity of the state is poor. Seven years in, it was discovered that oil marketing companies were claiming to have moved fuel farther than they did, ripping off both the government and the isolated poor. Working with the Ministry for Energy through the National Petroleum Authority, I’m exploring the integration of digital monitoring technology to deploy GPS and volumetric trackers on all the tankers that deliver the fuel to prevent fraudulent claims and effectively redistribute transport costs. 

Another project focuses on premix fuel, a special blend of fuel intended for boats and canoes that the Ghanaian Government subsidizes for fishing communities. It’s fairly easy for economists to determine the optimal subsidy, but it’s much harder to ensure that it is delivered appropriately. When fuel arrives in a village, select committees are responsible for selling to the fisherfolk with the discount, but they often sell to others at a higher price and pocket the difference. This issue creates an artificial shortage in the premix market, forcing fisherfolk to the black market to acquire fuel. 

I have been working with Ghana’s vice president’s office through the National Premix Fuel Secretariat in their efforts to solve this issue through automation. Premix fuel stations are being built in villages, and fisherfolk will receive biometric cards to buy fuel at the subsidized price. We are automating around 200 villages and studying the equilibrium impacts, with the goal of increasing the capacity of fisherfolk and ultimately lowering the price of fish—making everyone better off. 

I was in one of the villages a few months ago and a fisherman told me that the program is the best thing that has happened to him during his 25-year fishing career. I thought, even if I don’t publish a paper from this, it won’t matter because I know we’ve changed lives in a material way.

Can you explain your work in digital financial services?

This stream of my research includes working with banks and commercial providers like Ghana’s largest mobile telecommunications company. Poor people have lacked access to financial services for numerous reasons, one being that banks don’t have branches in villages because the market there is so thin. We’re looking at programs for mobile money in which village corner stores become outlets for retail financial services. Cell phone numbers can become account numbers, and suddenly, it’s much easier for people to receive, deposit, and send money across space and time. 

Poor people are supposed to benefit from these services, but they are often victimized when retail vendors overcharge for transactions, resulting in people not trusting the financial vendors and less likely to use mobile money services. This phenomenon of vendor misconduct is seen in many places, including Ghana, Nigeria, Kenya, Uganda, Bangladesh, and elsewhere and highlights the need for robust interventions to improve market dynamics and trust in digital financial services. 

I worked on a program that implemented three distinct, scalable antimisconduct information programs across 130 local markets in Ghana. The interventions yielded a significant reduction in misconduct and improvements across several metrics: consumer trust, market activity, vendor revenue growth, and spillover effects. These findings from markets for mobile money in Ghana offer valuable insights for policymakers and stakeholders aiming to improve market integrity in developing economies, calling for transparent practices and effective monitoring to foster broader financial inclusion. 

What role can development economics play in climate change?

Many of today’s problems will be exacerbated by large, global, environmental changes. Rising temperatures will have pronounced impacts: farmers will be hit hard and both drought and flooding extremes will increase. Some of my work has looked at these types of problems. For example, I studied the US Federal Crop Insurance Program, a large public-private partnership program, which was designed using now-outdated models that didn’t account for climate change. Insured farmers aren’t exactly incentivized to adapt to climate change. Why irrigate when the drought is coming? They’ll still get a payout if the crops go bad. My work draws on insights from cash transfer programs in developing countries to evaluate alternative market and policy redesigns for climate resilience and adaptation under the US Federal Crop Insurance Program. A lot of research needs to go into rethinking the interaction between the public and the private sector when it comes to engagements to build a society that is resilient to climate change. 

Professor, Agricultural and Resource Economics

What drew you to this field?

There’s a general intuition in economics that the value of money declines as you get wealthier. People get a lot of happiness from those first few dollars and a lot less from the thousandth or hundred-thousandth dollar. That idea always seemed powerful to me, and I wanted to try to make an impact by focusing my research on communities for whom increasing the value of dollars they can earn is really meaningful. 

People under extreme financial constraints have immediate needs that take priority over all else, and these constraints can distort their ability to make the most profitable decisions. I research how they can make productive decisions.

How do you summarize your research?

Most of my work evaluates new governmental programs or other initiatives in sub-Saharan Africa. After informal focus group discussions to make sure that I’m finding the right problems and focusing on the most relevant topics, I create surveys that can get samples large enough for statistical analysis.

Recently, I’ve focused on the implementation of irrigation technologies in Rwanda in collaboration with a team at the World Bank. We have partnerships with the government and a research group called Innovations for Poverty Action. In Rwanda in particular, there’s a culture around collecting evidence and designing policies based on evidence, which doesn’t exist in a lot of other places. We found that the way the irrigation systems were originally designed makes them very labor intensive. Farmers can make a lot of money by growing vegetables using irrigation, but it requires an incredible amount of work, and a lot of people just don’t do it. Now, the government is finding ways to invest in labor-saving technologies like sprinklers and drip systems rather than the big hoses from the first system. It’s exciting to see a direct path between our work and how the government’s been pursuing agriculture.

I’ve also led many projects on how social networks fill the gaps where formal institutions don’t exist. In countries where there isn’t easy access to banks, for example, people borrow more often from their friends and relatives. I’ve conducted projects on how job opportunities percolate through social networks in Liberia and what advantages or disadvantages come from that, as well as on how social networks could be useful in determining which individuals would most benefit from direct cash payments.

Most notable career projects?

One project I’m proud of involved understanding how to best spread a new climate-smart agricultural technique in Malawi. We had extension agents training farmers on the benefits of digging pits for maize, which can increase plant yields during drought. We looked at how ideas diffuse through a network to see if we could better pick which partners the agents should work with in each village. We created a network map, which at the time was the largest social network map ever collected. 

In some villages, agents picked partners as they always do. In others, we asked them to work with people who knew a lot of different people and would try to spread the information, and in others still, we asked them to work with two people who knew the same people. In the “business as usual” villages, there was little evidence that anyone adopted the new technologies at all. The only approach that proved effective was concentrating the information on people right in the middle of the network. Many programs would just try to reach all the stakeholders, and this research showed that a different approach might result in better adoption of helpful technology. 

What challenges do you see for development?

A lot of the programs being tried in developing countries aren’t as effective as hoped.  Many programs make people’s lives a little bit better in different ways, but it is hard to find many cases where a new program suddenly creates meaningful wealth for people. Sometimes programs fail for simple logistical reasons, like the program was designed or implemented ineffectively, but a lot of it is just that people are under a lot of constraints. When you are in extreme poverty, you need to make careful decisions that avoid bad outcomes, so you are less likely to make changes or take risks. It’s not that programs are bad, it’s just that they are trying to solve really difficult problems. 

What’s next for your work?

We’re currently expanding on the previous work on irrigation in Rwanda. Some farmers who have access to a new irrigation system aren’t interested in using it, while others who are interested have plots with no access to the system. Our research shows that nearly all the land rentals and labor hiring that take place in the villages happens among people who know each other well. It may not sound surprising, but it’s not how economists usually think about markets working. If you only do business with people that you know well, a lot of productive transactions can’t happen. Our research looks at how best to facilitate land transactions, creating opportunities for interested farmers to rent land from those who don’t want to utilize the new irrigation systems.