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Substitution Bias and External Validity: Why an Innovative Anti-poverty Program Showed no Net Impact

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  • Morduch, Jonathan
  • Ravi, Shamika
  • Bauchet, Jonathan

Abstract

The net impact of development interventions can depend on the availability of close substitutes to the intervention. We analyze a randomized trial of an innovative anti-poverty program in South India which provides “ultra-poor” households with inputs to create a new, sustainable livelihood. We find no statistically significant evidence of lasting net impact on consumption, income or asset accumulation. Instead, income from the new livelihood substituted for earnings from wage labor. A very similar intervention made a large difference elsewhere in South Asia, however, where wage labor alternatives were less compelling. The analysis highlights the roles of substitution bias and dropout bias in shaping evaluation results and delimiting external validity.

Suggested Citation

  • Morduch, Jonathan & Ravi, Shamika & Bauchet, Jonathan, 2013. "Substitution Bias and External Validity: Why an Innovative Anti-poverty Program Showed no Net Impact," CEI Working Paper Series 2013-03, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:hitcei:2013-03
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    References listed on IDEAS

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    1. Angus Deaton, 2010. "Instruments, Randomization, and Learning about Development," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 424-455, June.
    2. Anirudh Krishna & Meri Poghosyan & Narayan Das, 2012. "How Much Can Asset Transfers Help the Poorest? Evaluating the Results of BRAC's Ultra-Poor Programme (2002--2008)," Journal of Development Studies, Taylor & Francis Journals, vol. 48(2), pages 254-267, May.
    3. Hunt Allcott, 2012. "Site Selection Bias in Program Evaluation," NBER Working Papers 18373, National Bureau of Economic Research, Inc.
    4. Mallick, Debdulal, 2009. "How effective is a Big Push to the Small? Evidence from a Quasi-random Experiment," MPRA Paper 22824, University Library of Munich, Germany.
    5. James Heckman & Neil Hohmann & Jeffrey Smith & Michael Khoo, 2000. "Substitution and Dropout Bias in Social Experiments: A Study of an Influential Social Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 651-694.
    6. repec:pri:rpdevs:deaton_instruments_randomization_learning_all_04april_2010 is not listed on IDEAS
    7. M. Shahe Emran & Stephen C. Smith & Virginia Robano, 2009. "Assessing the Frontiers of Ultra-Poverty Reduction: Evidence from CFPR/TUP, an Innovative Program in Bangladesh," Working Papers 2009-06, The George Washington University, Institute for International Economic Policy.
    8. Matin, Imran & Hulme, David, 2003. "Programs for the Poorest: Learning from the IGVGD Program in Bangladesh," World Development, Elsevier, vol. 31(3), pages 647-665, March.
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    Cited by:

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    2. Niels Hermes & Marek Hudon, 2018. "Determinants Of The Performance Of Microfinance Institutions: A Systematic Review," Journal of Economic Surveys, Wiley Blackwell, vol. 32(5), pages 1483-1513, December.
    3. Florian LEON, 2015. "What do we know about the role of bank competition in Africa?," Working Papers 201516, CERDI.
    4. Esther Gehrke & Michael Grimm, 2018. "Do Cows Have Negative Returns? The Evidence Revisited," Economic Development and Cultural Change, University of Chicago Press, vol. 66(4), pages 673-707.
    5. Tan Zhongming & Tinashe Mangudhla & Reginald Masimba Mbona, 2020. "Civil Servant Borrowing Practices: A Determinant of Poverty in Zimbabwe," Business and Economic Research, Macrothink Institute, vol. 10(2), pages 270-289, June.
    6. Hermes, Cornelis & Hudon, M., 2018. "Determinants of the Performance of Microfinance Institutions: A Systematic Review," Research Report 2018008, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    7. Joyeeta Deb, 2020. "Impact of Competition on Social Performance of MFIs: Comparative Analysis of India and Bangladesh," Vision, , vol. 24(2), pages 160-170, June.

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    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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