Transcript Technology Adoption Decisions of Farmers Facing Seasonal

The Social
Economics of
Poverty
Christopher B. Barrett
Cornell University
February 1, 2006
IFPRI seminar
Washington
On the Relevance of Identities, Communities, Groups
and Networks to the Economics of Poverty Alleviation
“Most of the people in the world are poor, so if we
knew the economics of being poor we would know
much of the economics that really matters.”
- T.W. Schultz (1980 Nobel Prize lecture)
Persistent poverty remains an analytical challenge.
Most current explanations turn on exclusionary
mechanisms.
But why are some excluded and others not?
Why do only some enjoy the fruits of cooperation?
Social Economics
The central claim of this book is that individuals’
social and moral identities affect their membership in
communities, groups, and networks, and that those
identities and social affiliations affect microeconomic
behavior, which feeds back into identities, with
poverty status a key outcome.
Builds on a nascent “social economics paradigm” that
draws heavily on insights from cognate social
sciences to explore social and economic dynamics
through study of the interactions between individual
behaviors and group outcomes (e.g., Durlauf and
Young 2001).
Social Economics
Builds on previous literatures:
- Behavioral/experimental economics: psychology
matters, social norms condition indiv. behavior
- Noncooperative and evolutionary game theory:
strategic interactions matter and can yield a variety
of equilibria, some of which prove unstable
- Models of power in multi-agent games
- Social capital – relations may be valuable or
obstacles.
Social Economics
Identities – observable, multidimensional attributes
of individuals, especially payoff irrelevant attributes.
Collective, shared identities create communities.
Shared identity often leads to salience… popular
awareness/use of the attribute to sort individuals.
This sorting leads to affinity for/alienation from
others, and thus to associational choice, whether
informally, in networks, or formally, in groups.
Identities and relationships (groups and networks)
affect preferences (e.g., for the nonmaterial),
constraints, expectations and incentives. Moreover,
because people are aware of these effects, they
actively manage their identity and their relationships.
Social Economics
Difficult to separate individual and social-level
phenomena
Closely associated with polarization of communities
Poverty necessarily reflects relatively low productivity per capita,
so work on improving productivity, especially in agriculture.
The empirical puzzle that motivates this paper:
Many recent studies find salutary effects of various
measures of social embeddedness at micro level. But at
macro level there seems a significant negative relation.
Can we reconcile these two observations?
This paper (i) offers a more general analytical framework that
nests within it issues of identity and social networks, then (ii)
illustrates the usefulness of the framework with a few, brief,
qualitative examples.
A General Analytical Approach
Build on Akerlof and Kranton (2000), acknowledging the
intrinsic value of identity, and making individual identity and
resulting social networks endogenous, with frictions created by
identity-dependent behavioral expectations. Nests the
instrumental effects found in the literature on social capital.
What is identity?
Collective identity and social networks
A Behavioral Model
Max V(Aj0,Ij0,Kj0,Nj0) ≡ U(ej0,c-j0,rj0,sj0) + δV(Aj1,Ij1,Kj1,Nj1)
cj0,ej0
(1)
Objective function captures intrinsic valuation of one’s
psychological and social status as well as interpersonal externalities
due to altruism, positional externalities, or both.
sj0 = s(Ij0,cj0)
rj0 = r(Nj0,cj0)
ej0 ≤ P(Ij0,Nj0)[L(cj0,Kj0) + Aj0] + B(Ij0,Nj0) - F(cj0)
where
F(cj0) = 0 for L(Ij0) ≤ cj0 ≤ H(Ij0)
= Φ(cj0,Ij0,Nj0) > 0 otherwise
(2)
(3)
(4)
(5)
Laws of motion:
Aj1 = a(Aj0,ej0,cj0,c-j0)
(6)
Nj1 = f(Nj0, Ij1, cj0, c-j0)
(7)
Ij1 = f(Ij0, rj0, cj0, c-j0)
(8)
Kj1 = k(Kj0,Ij0,I-j0,rj0, cj0, c-j0)
(9)
Some Implications of the Model
(i) Productivity and expenditures are increasing in
one’s density of social networks and for those
possessing particular identities due to
- Higher net payoffs
- Faster learning
- Better access to informal finance
(ii) Social networks and identity confer intrinsic
benefits as well as instrumental value. People
routinely make tradeoffs between the two.
(iii) Identity-dependent behavioral expectations
constrain choice. Separating equilibria based on
identity. Finance problematic.
Some Implications of the Model (continued)
(iv) Movement to a higher productivity equilibrium
often depends on coordinated action among a
critical mass of members within a community.
- homophily and strong link networks: power to
coordinate, but also power to subjugate/exploit
(v) Egalitarian pressures that can impede investment by
creating very high de facto marginal tax rates
Four Sample Puzzles
Foregoing significant productivity gains
(a) Conformity, tradition and rice intensification in Madagascar
- Ceremonial expenses: famadihana, zebu sacrifice
- Green revolution methods: Taboos and work restrictions
- SRI: Ancestral tradition and social conformity
* identity and strong social networks impediments
(b) Striga control in Kenyan maize systems
- non-host trap crops (A. histrix)
* lack of strong social networks
an impediment
Four Sample Puzzles (continued)
Strategies to facilitate gains
(c) Boarding schools for poor children
- not just school quality differences: remaking identity
(d) Farmer field schools
- aim to stimulate farmer
experimentation and to build their
confidence: identity transformation
and creation of common knowledge.
Conclusions: Research Implications
(i) Intrinsic value of identities and social networks?
(ii) Importance of coordination failures or conformity
effects as adoption barriers/
(iii) do behavioral expectations constrain individual
activity and investment choice?
(iv) dynamic effects of current behaviors on endogenous
identity/networks
Serious identification problems: significant role for
qualitative research
Conclusions: Policy Implications
Opportunity for policy due to
(i) Coordination failures and multiple equilibria
(ii) Externalities
Tipping points may be influenced/overcome by
- traditional instruments (subsidies, finance, etc.)
- targeting: indicator/community in spite of leakage?
Question enthusiasm for creating groups if one does not
shape identity (FFS model)
Beware overemphasis on material well-being
Thank you for your
time, patience and comments!