Low Endowment Research Articles

Community membership and reciprocity in lending: Evidence from informal markets

We study credit access in informal economies where market institutions, such as financial reporting systems, auditing, and courts, are nonexistent or function poorly. Using the setting of a large bazaar in India, we find that community membership plays a vital role in access to credit. Wholesalers are more likely to provide credit and offer greater amounts of credit to within-community retailers, and are more lenient when these retailers are delinquent. Furthermore, wholesalers who lent preferentially to their community retailers pre-COVID are more likely to receive help from their community following the COVID-19–related income shock, particularly from same-community landlords and suppliers. Also, wholesalers with low endowments, those with greater within-community information flow about them, and those facing income shocks are more likely to provide preferential credit to their community retailers. Our findings are consistent with an indirect reciprocity mechanism explaining within-community credit flows.

Group composition of income types and the absolute-relative framing of public good contributions

This paper examines the effect of absolute-relative framing on contributions to a public good. Group members have high and low endowments and the number of high-income members in each group varies between treatments. They make contributions without and with a minimum contribution level. We express the contribution metric either in absolute amount or as a relative proportion of a member's initial endowment. We propose that these institutional designs affect contribution behavior through shifting reference points in decisions. First, as the number of high-type members increases, the average contribution increases, especially among the low-type members in absolute framing. Second, relative framing makes the contribution proportions between high and low types move closer than in absolute framing. Third, the difference in contributions between absolute and relative conditions mostly disappears when the minimum contribution level is introduced. We show that the effects of group members’ endowments, relative framing, and the MCL policy represent the internal, external and the institutional reference point respectively with increasing strength.

Fossil fuel divestment in U.S. higher education: Endowment dependence and temporal dynamics

Since 2011, students and others have pushed U.S. higher education institutions (HEIs) to divest their endowments from fossil fuel producing industries. In the past decade, fossil fuel divestment (FFD) has become the fastest growing divestment movement in history, with over 140 U.S. HEIs announcing divestment commitments. We conduct a quantitative analysis of the phases of U.S. 4-year HEI divestment announcements (as well as rejections of divestment) to better understand the dynamics. Announcements began (2012–2017) with a number of schools divesting, followed by a second phase, where new divestment announcements slowed. The third phase, which began around 2019, showed a renewed increase in divestments. Formal rejections of divestment followed a similar pattern in the early years, where rejections were slightly more common and represented more endowment value but have declined as some schools reversed public positions. Schools that have divested from fossil fuels now represent roughly 3% of 4-year U.S. HEIs and 39% of HEI endowment value in our data. Roughly 133% more endowment value is now associated with U.S. schools that have publicly divested from fossil fuels than with those that have explicitly rejected it. Early divestments from all fossil fuels came nearly exclusively from schools with a relatively low endowment dependence (the share of operating expenses derived from the endowment) although qualitative factors were also likely important. We discuss the implications of these findings in the context of different theories of change for the divestment movement. In particular, we note that 99% of 4-year HEIs representing roughly 95% of endowment value in our dataset are less dependent upon their endowment than at least one recently divested HEI, suggesting that large endowment or high dependence on endowment are no longer strict barriers to FFD for most schools.

Partner choice and cooperation in social dilemmas can increase resource inequality

Cooperation is more likely when individuals can choose their interaction partner. However, partner choice may be detrimental in unequal societies, in which individuals differ in available resources and productivity, and thus in their attractiveness as interaction partners. Here we experimentally examine this conjecture in a repeated public goods game. Individuals (n = 336), participating in groups of eight participants, are assigned a high or low endowment and a high or low productivity factor (the value that their cooperation generates), creating four unique participant types. On each round, individuals are either assigned a partner (assigned partner condition) or paired based on their self-indicated preference for a partner type (partner choice condition). Results show that under partner choice, individuals who were assigned a high endowment and high productivity almost exclusively interact with each other, forcing other individuals into less valuable pairs. Consequently, pre-existing resource differences between individuals increase. These findings show how partner choice in social dilemmas can amplify resource inequality.

Asymmetric heterogeneities and the role of transfers in a public goods experiment

Previous experimental research has shown that cooperation is especially challenging in situations involving heterogeneous actors. Here, we investigate the effect of allowing unconditional transfers in a public goods game when actors differ asymmetrically in their endowments and productivity levels. Under this setup, full efficiency, in terms of highest maximum group payoff, can only be achieved with the full transfer of resources from the players with high endowment and low productivity to the players with high productivity but low endowment. We show that, in this setting, the availability of transfers enhances public good provision and cooperation. The voluntary transfer serves as a powerful cooperative signal, leading to high contribution rates among the recipients. However, if the transfer possibility is given but not used, cooperation erodes.

Wealth and risk heterogeneity effects in community‐based wildlife management: Experimental evidence

Community-based conservation is a widely adopted wildlife governance approach, but questions remain about the conditions under which this form of wildlife governance achieves success. Particularly, participating communities are often marked by considerable wealth and risk heterogeneities that are driven by differences in livestock or agricultural holdings and varying exposure to wildlife depredation of those holdings. The effect of these types of heterogeneity on successful conservation collective action is understudied, particularly in the case of risk heterogeneity. This lacuna limits policymakers' ability to effectively match the design of community-based programs to their particular settings. Using established behavioural experimental techniques, we model the incentive structures underlying community-based wildlife conservation where actors differ in wealth and exposure to human–wildlife conflict. We conduct a modified binary linear voluntary contribution mechanism game, in which we vary subject endowments and risk of incurring a loss when participating in collective action and we find that the type of heterogeneity matters to collective action success. On their own, the presence of either economic or risk heterogeneities (but not both) dampen cooperation compared with homogeneous groups, as do ‘balanced’ distributions of both heterogeneities (where individuals facing high risk levels receive high endowments and vice versa). However, groups with ‘unbalanced’ heterogeneities (where those facing high risk levels receive low endowments and vice versa) demonstrate cooperation at similar levels to that of homogeneous groups. At the individual level, risk drives cooperative behaviour, although its impact is influenced by relative wealth levels when both forms of heterogeneity are present. These findings suggest the need for a more in-depth look at the role and interaction of risk and wealth heterogeneities in conservation management. Read the free Plain Language Summary for this article on the Journal blog.

Inequality, Outreach, and Impact in Public Goods Contributions

Mobilizing domestic resources is vital in financing domestic investment and social programmes, which are essential for reducing poverty in developing countries. We consider citizens’ willingness to contribute to public goods as one mechanism for domestic resource mobilization. In particular, we are interested in how willingness to contribute varies on three dimensions: inequality in initial endowments, public good outreach (local vs. national), and the expected impact of giving. We conducted a preregistered (AEARCTR-0007746) online experiment with a sample of 900 respondents in South Africa. First, public goods game tasks with equal and unequal endowments were compared to estimate inequality impacts. Second, a dictator game decision with donations to a national charity was compared to the local public goods game to study the effect of project outreach. Finally, to estimate donation impact, charity decisions with quadrupled contributions were compared to those with doubled contributions. We find overall high levels of contribution, with much overlap across the different contexts considered. We note that the highest endowment proportion is contributed in the unequal context, with low endowment players giving the highest share of their endowments. Response time data shows that decisions take longer where donation impact is higher, and where endowments are unequal, particularly for those receiving lower endowments.

Comparison of machine learning predictions of subjective poverty in rural China

PurposeDespite rising incomes and reduction of extreme poverty, the feeling of being poor remains widespread. Support programs can improve well-being, but they first require identifying who are the households that judge their income is insufficient to meet their basic needs, and what factors are associated with subjective poverty.Design/methodology/approachHouseholds report the income level they judge is sufficient to make ends meet. Then, they are classified as being subjectively poor if their own monetary income is inferior to the level they indicated. Second, the study compares the performance of three machine learning algorithms, the random forest, support vector machines and least absolute shrinkage and selection operator (LASSO) regression, applied to a set of socioeconomic variables to predict subjective poverty status.FindingsThe random forest generates 85.29% of correct predictions using a range of income and non-income predictors, closely followed by the other two techniques. For the middle-income group, the LASSO regression outperforms random forest. Subjective poverty is mostly associated with monetary income for low-income households. However, a combination of low income, low endowment (land, consumption assets) and unusual large expenditure (medical, gifts) constitutes the key predictors of feeling poor for the middle-income households.Practical implicationsTo reduce the feeling of poverty, policy intervention should continue to focus on increasing incomes. However, improvements in nonincome domains such as health expenditure, education and family demographics can also relieve the feeling of income inadequacy. Methodologically, better performance of either algorithm depends on the data at hand.Originality/valueFor the first time, the authors show that prediction techniques are reliable to identify subjective poverty prevalence, with example from rural China. The analysis offers specific attention to the modest-income households, who may feel poor but not be identified as such by objective poverty lines, and is relevant when policy-makers seek to address the “next step” after ending extreme poverty. Prediction performance and mechanisms for three machine learning algorithms are compared.

How Dictators Use Information about Recipients

This paper explores the extent to which altruism is influenced by the salient features of the beneficiaries. We investigate how information presented to senders affects their perception of the recipient in a dictator game. In this environment, the starting endowment of a recipient can be inferred from choices the recipient made. Dictators give the same amount to all recipients regardless of the choices they made, despite the revealed preference to send more money to recipients who started with lower endowments. Dictators give very little when they are explicitly told that a recipient started with a high endowment. However, when dictators are only told that the recipient made a choice that indicates they started with a high endowment, dictators do not incorporate that information. Dictators are not more generous to others who made a similar financial choice to themselves, through in-group bias. An implication from our results is that charitable donors are influenced by salient information about recipients and do not try to infer deservingness beyond what is explicitly presented.

Roles of rural non-farm employment (RNFE) in India: Why RNFE, the conveyor of a shock like COVID 19 is also the key to recovery?

We assess the role of Rural Non-Farm Employment (RNFE) in livelihoods and in likely impacts of shocks like COVID 19. In India’s agri-food system, the preponderance of small farmers with low endowments of human and financial capital implies that, RNFE has been the principal source of poverty reduction. Yet, RNFE is also the most adversely affected by shocks like COVID 19 and the measures adopted to prevent disease spread. To assess the roles of RNFE and possible effects of shocks, we uniquely utilize the recent rounds of nationally representative Periodic Labor Force Surveys (PLFS). To assess the “potential impact” of COVID 19 on workers, by using the large dataset, we match similar workers in different states of employment (SOE) where SOE may partly reflect the situation post shock. Job loss, reduction in work hours, movement across types of employment, casualization within RNFE is possible due to shocks to RNFE. We estimate that SOE in RNFE have significant association with poverty and income. With the data on COVID lockdown periods, we then validate the results to pair with the prospectively assessed impacts. Notwithstanding the effect of shocks, RNFE has the unique potential in recovery, being the prime rural income generator and risk mitigator apart from being characterized by comparatively high growth in female employment and in socially disadvantaged groups in India.

Disempowerment of Women: The Experience of Indian States

The present study uses National Family Health Survey, 2015–2016 (NFHS-4) data to compute a multidimensional disempowerment index for women from India. A state-level analysis shows that disempowerment levels of women from the states of Haryana, Uttar Pradesh, Odisha, Madhya Pradesh, Karnataka and Bihar are found to be higher, with that of Bihar being the highest. Next, using a multilevel logistic model, the study explores the determinants of the level of women disempowerment. The probability of disempowerment is high among rural unemployed young Muslim women from joint families with low asset and education endowment and who witnessed parental violence as a child. Further, we found that the level of disempowerment of women from the state of Haryana is much higher as compared to its neighbouring state Punjab, where Haryana was an integral part of Punjab till 1966. A non-linear decomposition analysis reveals a significant contribution of Sikh religion on women’s autonomy in Punjab vis-à-vis Haryana.

Implementing the livelihood resilience framework: An indicator-based model for assessing mountain pastoral farming systems

CONTEXTOngoing decreases in family farms and livestock numbers in European mountain areas are linked to multiple interconnected challenges. The continuity of such farms concerns society at large since they also act as landscape stewards, and their management influences the provision of ecosystem services.The livelihood resilience lens provides a means of examining how farm households respond and build their capacity to persist, to adapt to changes and shocks, and eventually transform what is understood as farming. While an increasing number of studies address livelihood resilience in different parts of the world, its link with livelihood strategies and how these enhance or erode livelihood resilience dimensions is still missing. OBJECTIVEWe built and applied an indicator-based framework to characterize the livelihood strategies of mountain livestock farming households in the Catalan Pyrenees (Spain) considering local historical trends, to assess how these strategies contribute to their adaptive capacity. METHODSWe combined sustainable rural livelihoods and livelihood resilience frameworks and operationalized them to: group farm households with similar livelihood strategies based on their income-generating activities; asses the influence of capital assets and context on the adoption of strategies; and relate these strategies with their performance in three dimensions of adaptive capacity, namely capacity for learning and adaptation, self-organization, and diversity. Information was gathered surveying a sample of 103 farm households. RESULTS AND CONCLUSIONSWe identified five livelihood strategies showing different degrees of adaptive capacity. Farm households either intensified production (21.3% of the sample) or pursued various diversification pathways based on additional off-farm work (28.6%), rural-tourism activities (22.7%), or added-value production (13.3%). Pensioners (11.8%) had a low endowment of assets and presented the lowest estimates in several dimensions of adaptive capacity. In contrast, diversification into rural tourism scored higher in adaptive capacity, showing greater proactive capacity, farmer organization, and multiple income sources. SIGNIFICANCEWe explored the multidimensional issues that influence and are influenced by the livelihood strategies and their adaptive capacity at the farm household level. Our work highlights the relevance of including income-generating activities in addition to structural, technical, and socioeconomic variables in characterizing farming systems. It demonstrates the role of farmer involvement in formal and informal social cooperation networks in the sustainability and adaptive capacity of their households. To be successful, diversification strategies may require certain prerequisites in the farms, while strategies based on off-farm activities, although they support improved financial performance of the farm household, could also contribute to the displacement of agriculture from mountain areas.

A bit of salt, a trace of life: Gender norms and the impact of a salt iodization program on human capital formation of school aged children

This paper evaluates the effect of a national salt iodization program on the cognition of school-aged children in China. We focus on the role of gender preferences. Linking pre-eradication iodine deficiency rates with household survey data, we find a strong positive impact of prenatal exposure to the program on cognition and schooling for girls. For boys, we find no effect. Child preferences play an important role in parental investment decisions and impact program effects. We find that parents invest more in girls with a high initial endowment. For boys, this is different. Parents invest in boys, irrespective of their initial endowment. The nationally implemented program may therefore primarily benefit low endowment girls. We then exploit village-level variation in gender attitudes and find that gender attitudes are related to parental investment behavior and that the program’s impact is stronger for girls born to parents with strong preferences for boys.

The ability of European regions to diversify in renewable energies: The role of technological relatedness

Despite the global consensus about the growing significance of renewables, the regional drivers of innovation in these unique and novel technologies have been widely neglected in the literature. In this paper, we show that renewable energy (RE) inventions differ from other green inventions in the knowledge recombination processes leading to their generation as well as in their impact on subsequent inventions. The evidence on these specificities of RE technologies allows us hypothesizing that regional branching in renewables may rely on relatedness differently than other non-RE green technologies. In checking this hypothesis, we use a data set spanning the period 1981-2015 covering 277 European NUTS2 regions in the EU28 countries plus Norway. We obtain that relatedness is highly relevant in explaining regional specialization in RE, and more relevant than for other green technologies, which we associate to the lower generality in their impact and the narrower scope of the knowledge from which they nurture. This conclusion is maintained when considering separately regions with high and low development levels. However, the impact of relatedness increases for RE as the regional economic development decreases, signalling that a low endowment of resources and capabilities does not allow the region to break from its past technological specialization, depending more on relatedness. This would not be the case for other green technologies, probably due to their higher level of generality and wider scope.

Energy poverty trends and determinants in Pakistan: Empirical evidence from eight waves of HIES 1998–2019

United Nations Sustainable Development Goals (SDGs) have incorporated clean and affordable fuel access as the 7th goal because energy is crucial for economic development and well-being. However, the increase in energy prices, volatility, removal of subsidies, fiscal burden and limited access to modern fuel, and financial burden on the households have led to an increase in energy poverty. Although energy poverty is widely prevalent worldwide, it is more pervasive in developing countries. Yet, there is limited research on energy poverty in developing countries, and the government policy and program do not focus on energy poverty. Therefore, this study examines the energy poverty trend and factors influencing energy poverty in Pakistan using eight rounds of nationally representative Household Income and Expenditure (HIES) survey data collected during 1998–2019. This research adopted two different measures of energy poverty, namely ten percent and double median. The result shows that despite significant economic progress, energy poverty has increased during the last two decades. The study further investigated the determinants of energy poverty in Pakistan using the Probit model, and the results revealed that households with a low endowment, less education, and female-headed families are more likely to be energy poor. Given Pakistan's current energy poverty situation, it is challenging to meet SDG 7 of providing clean and affordable energy access to all by 2030. Therefore, sizeable clean energy programs targeting the poor with low education, families living in rural areas, and female-headed households are needed.

Labour market inclusion of Afghan refugees in Pakistan through Bourdieu's theory of capital

PurposeThis article examines the labour market inclusion of documented and undocumented Afghan refugees in Pakistan using and extending Bourdieu's theory of capital.Design/methodology/approachThe authors draw on 22 semi-structured in-depth interviews with both documented and undocumented Afghan refugees in Pakistan.FindingsThe findings show the low capital endowments of refugees. Their economic capital is shaped by low levels of financial resources, and emotional capital is shaped by their psychological distress and traumata and identity capital takes the form of negative perceptions about them. Their low capital endowments are further reduced through different forms of symbolic violence, such as ambiguous and short-term government policies, bribery and abuse by the police as well as unfair treatment by employers. However, refugees do mobilise their capital endowments to enhance their labour market position. The authors identified resilience as emotional capital, their strategic development of who they are as identity capital as well as social and cultural capital in the form of ethnic and linguistic similarities with locals in finding ways to improve their inclusion in the labour market.Originality/valueThe authors provide insights in the dynamics that lead to and sustain the exclusion and inequalities faced by Afghan refugees in Pakistan.

Financial incentives to poor countries promote net emissions reductions in multilateral climate agreements

Financial incentives to poor countries promote net emissions reductions in multilateral climate agreements

Inequality, institutions and cooperation

We examine whether the relationship between economic inequality and voluntary cooperation is influenced by the quality of local institutions, as proxied by corruption. We use representative data from a large-scale lab-in-the-field public goods experiment with over 1,300 participants across rural Vietnam. Our results show that inequality adversely affects aggregate contributions due to high endowment individuals contributing a significantly smaller share than those with low endowments. This negative effect of inequality on cooperation is stronger in high corruption environments. We find that corruption is associated with pessimistic beliefs about others’ contributions in heterogeneous groups, highlighting the indirect costs of corruption that are understudied in the literature. These findings have implications for public policies aimed at resolving local collective action problems.

Norm enforcement with incomplete information

We study the emergence of norms and their enforcement in a public goods game with private information about endowments. Subjects were randomly assigned a Low or High endowment and, across treatments, endowments were either Observed or Unobserved. In both treatments subjects could enforce contributions with peer punishment. We use punishment decisions to estimate contribution norms and then estimate the expected costs of noncompliance. In Observed, both Low and High types enforce a “contribute-your-endowment” norm, adjusting the costs of noncompliance to account for each type’s endowment. In Unobserved we find that groups adapt to incomplete information by adopting a “contribute-the-Low-endowment” norm, and our expected cost calculations suggest that the enforcement of this norm balances the benefits of cooperation with the risk of misguided punishment. When at least one High type pools with Low types (by contributing less than or equal to the Low endowment), contributions of zero are punished as if they come from a High type, while contributions equal to the Low endowment are not punished in expectation (in case they come from a cooperative Low type). This enforcement strategy prevents cooperation from unraveling, but it also enables High types to hide behind the Low endowment. Our results dovetail with results from bargaining games and suggest that in settings with incomplete information, norms can attenuate but not eliminate non-cooperative behavior.

LOCKDOWN MEASURES IN INDIA AND ITS ECONOMIC IMPACT ON LOW INCOME GROUPS

The complete lockdown measures implemented in India to combat the spread of the COVID-19 pandemic had a profound impact on the economic conditions of the working class of the country. The initial jolt pushed the unemployment figures to 23.52% in April 2020, and to date, the recovery has been far from satisfactory. The quarterly GDP growth data have indicated a negative real GDP growth for India for the fiscal year 2020-21. As data on employment, income, consumption, saving, borrowing, and access to different public utilities are available after a time-lag; there was no other option but to depend on micro-level studies to get an idea of the real picture on the ground. In this paper, we have attempted to assess the impact of the lockdown on the workers of unorganized sectors especially the self-employed and the daily wage earners of different service sectors from urban and semi-urban areas located in and around South 24 Parganas district of West Bengal. The present study has found that the income of workers from the informal sectors has recorded a sharp decline during the lockdown period. As these workers primarily belong to the low-income group, their consumption expenditures have also declined concomitantly, reflecting their low economic endowments. Most of them didn’t have much savings to support the sudden decline in their income, thereby resulting in a decline in consumption expenditure. This decline is most severe for daily wage workers. This paper has argued in favour of direct cash transfer from the government to low-income people as the only way out to overcome the present crisis.