Evans School Professor C. Leigh Anderson researches the relationship that poor agricultural communities in developing countries have to markets in order to design programmatic interventions that improve their livelihoods. Anderson, along with Evans School researchers Alison Cullen, Diana Fletschner, and Andrew Gordon, worked for the International Fund for Agricultural Development (IFAD) to help them understand why a program in Vietnam didn’t get the rate of participation they were hoping for or reach the populations they wanted to target. The “Programme for Improving Market Participation of the Poor in Ha Tinh and Tra Vinh Prinvinces” was designed to build infrastructure, invest in skills training, and offer financial services to diversify livelihood strategies. To get at these questions, the research team created surveys to learn about decision-making in these communities and understand why the interventions were underperforming.
Anderson and colleagues based their survey on insights from behavioral economics that take into account that people lack perfect self-control and may make short-run choices—like skimping on education or training, or not making a loan repayment—they previously determined were not in their long-run interest, especially when these choices involve risk. The research team separately surveyed husbands and wives in 560 rural households in Ha Tinh province and asked questions about choices related to psychological attributes such as risk attitudes, social preferences, willingness to compete, cognitive effort, and intra-household dynamics, in conjunction with standard economic incentives. Their study provided insights into differences between male and female preferences in a single household and how these differences influence the (unintended) consequences of policy and program interventions. Their results suggest that adjusting to decision-making characteristics of certain sub-populations, such as willingness to compete, risk perceptions, and views of fairness, could increase the participation of target populations in IFAD training and credit programs, and make such programs and policies more effective. Read more
Evans School Assistant Professor Crystal C. Hall is applying psychology and behavioral economics to understand decisions to spend the Earned Income Tax Credit (EITC) and how the implementation of the EITC could be improved to provide a more robust benefit to low-income EITC recipients. Hall and her colleague, Jennifer Romich, Assistant Professor of Social Work at the University of Washington, asked individuals who had their taxes prepared at a free United Way-run tax site in Seattle what they anticipated their refunds to be and how they made this prediction. They were also interested in whether framing the EITC as a benefit for those with low incomes or as a way of lessening the tax burden on workers would influence their spending intentions. They expected that people would be more likely to spend the EITC than put it in a savings account if it was framed as a benefit for the poor—typically the EITC is spent very quickly. To test this, after participants were randomly assigned to the low-income or worker groups, they asked them to describe how they planned on spending their anticipated refund amount. They also asked if participants would be willing to invest part of their refund in a savings bond if it were offered by the United Way at the time they filed their taxes. Preliminary results suggest that individuals seem to be loss averse, even in their estimation of tax refunds. This research has the potential to enhance the social benefits of the EITC with simple changes in the description and marketing of EITC benefits. Specifically, this research demonstrates that simple, low-cost interventions could be effective at increasing the propensity to save or invest a portion of what is often a large windfall for low-income consumers. Hall and Romich have completed the preliminary stage of this research and are in the process of preparing a larger scale study for the upcoming tax season. Their findings will improve policies to address poverty and help nonprofits like the United Way implement such policies more effectively.
Published on February 25, 2010
