Instruments of development: Randomization in the tropics, and the search for the elusive keys to economic development
AbstractThere is currently much debate about the effectiveness of foreign aid and about what kind of projects can engender economic development. There is skepticism about the ability of econometric analysis to resolve these issues, or of development agencies to learn from their own experience. In response, there is movement in development economics towards the use of randomized controlled trials (RCTs) to accumulate credible knowledge of what works, without over-reliance on questionable theory or statistical methods. When RCTs are not possible, this movement advocates quasi-randomization through instrumental variable (IV) techniques or natural experiments. I argue that many of these applications are unlikely to recover quantities that are useful for policy or understanding: two key issues are the misunderstanding of exogeneity, and the handling of heterogeneity. I illustrate from the literature on aid and growth. Actual randomization faces similar problems as quasi-randomization, notwithstanding rhetoric to the contrary. I argue that experiments have no special ability to produce more credible knowledge than other methods, and that actual experiments are frequently subject to practical problems that undermine any claims to statistical or epistemic superiority. I illustrate using prominent experiments in development. As with IV methods, RCT-based evaluation of projects is unlikely to lead to scientific progress in the understanding of economic development. I welcome recent trends in development experimentation away from the evaluation of projects and towards the evaluation of theoretical mechanisms.
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Bibliographic InfoPaper provided by Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies. in its series Working Papers with number 1122.
Date of creation: Jan 2009
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Randomized controlled trials; instrumental variables; development; foreign aid; growth; poverty reduction;
Other versions of this item:
- Angus Deaton, 2009. "Instruments of development: Randomization in the tropics, and the search for the elusive keys to economic development," Working Papers 1128, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
- Angus S. Deaton, 2009. "Instruments of development: Randomization in the tropics, and the search for the elusive keys to economic development," NBER Working Papers 14690, National Bureau of Economic Research, Inc.
- I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- D10 - Microeconomics - - Household Behavior - - - General
- F35 - International Economics - - International Finance - - - Foreign Aid
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Rise and Fall of a Method
by Agent Continuum in Agent Continuum on 2010-04-21 13:53:35
- Deaton - Limits of Experiments
by Liam Delaney in Geary Behaviour Centre on 2009-04-13 16:47:00
- Development economics needs to refocus on theory
by Economic Logician in Economic Logic on 2009-04-10 13:35:00
- Articles for Journal Clubs
by Liam Delaney in Geary Behaviour Centre on 2010-06-22 17:50:00
- Causality and Econometrics
by Liam Delaney in Geary Behaviour Centre on 2009-04-28 19:19:00
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