Hey everyone! This is Navya and welcome back to Eco decode, your go to podcast for economics concepts simplified in just 5 minutes. Today we will continue our series: Nobel Prize Economics explained. Welcome to episode 4: where we will be discussing the 2019 Nobel prize in economics: and today’s subject is extremely important and relevant, because the 2019 laureates did some groundbreaking research that is helping alleviate poverty. The 2019 Nobel prize in economics was awarded to Abhijit Banerjee, Esther Duflo and Michael Kremer. According to the prize committee, More than 700 million people continue to live on very meager incomes. Additionally, half of the world's children finish school without acquiring basic literacy and numeracy skills.
To fight global poverty effectively, we need to find the most impactful solutions. The Laureates of this year have demonstrated how tackling global poverty involves breaking it down into smaller, more precise questions at the individual or group levels. They use carefully crafted field experiments to answer each of these questions. In just two decades, this approach has revolutionised development economics research, producing tangible and meaningful results that contribute to alleviating global poverty.
First of all, let’s discuss their experiments in one of my favorite sectors: education. During the mid-1990s, Michael Kremer and his colleagues decided to shift their research from universities in the northeastern US to rural western Kenya to find answers to important questions. They conducted a series of field experiments in collaboration with a local non-governmental organization. To study the impact of additional resources on schools, they selected several schools in need of substantial support and divided them randomly into different groups. Each group received extra resources, but in varying forms and at different times. For instance, one group received more textbooks, while another group had free school meals. Surprisingly, the experiments revealed that neither more textbooks nor free school meals had any significant effect on improving learning outcomes. If there was any positive impact from the textbooks, it was only observed among the highest-performing students.
Subsequent field experiments confirmed that in many low-income countries, the main issue isn't the lack of resources but rather the inadequacy of teaching methods that fail to meet the specific needs of the students.
A crucial concern in experimental research is whether the results can be applied to different situations, known as external validity. For instance, can the findings from experiments conducted in Kenyan schools be generalized to Indian schools? The Laureates have been pioneers in studying external validity and have devised innovative methods that take into account crowding-out effects and other spillover effects.
By closely connecting experiments to economic theory, the chances of generalizing results are enhanced, as fundamental patterns of behavior often have implications beyond specific contexts. This approach broadens the opportunities to apply research findings to a wider range of situations.
Something imperative to know is that the researchers got some very concrete results from their studies: A study conducted by Banerjee, Duflo, and others demonstrated that providing focused assistance to struggling students had remarkably positive effects, even over a significant period. This study marked the beginning of an ongoing process, where new research findings were integrated with progressively larger programs to aid students. As a result, these programs have now been implemented in over 100,000 schools across India.
Similarly, such studies were conducted in the sphere of healthcare as well: An important question arises about whether medicine and healthcare should be charged for and how much they should cost. In one study, Kremer and his co-author examined how the demand for deworming pills, used to treat parasitic infections, was influenced by the price. They discovered that when the medicine was provided for free, 75% of parents gave it to their children, but when it cost less than a dollar (still heavily subsidized), only 18% did so.
To address this issue, Banerjee, Duflo, and their team explored the impact of mobile vaccination clinics where healthcare staff were always available on-site. In the villages randomly selected to have access to these clinics, vaccination rates tripled, rising from 6% to 18%. And if families received a bag of lentils as a bonus for vaccinating their children, the rates increased even further, reaching 39%.
Surprisingly, despite the additional cost of the lentils, the total cost per vaccination actually halved because the mobile clinic had high fixed costs. This research shows that making healthcare more accessible and providing incentives can significantly improve vaccination rates and reduce overall costs. And with that, we come to end of episode 4 of the EcoDecode podcast, you can visit our website at ecodecode.org or follow us on instagram to learn more economics concepts in detail but with ease.
Works Cited
“Popular science background:The Prize in Economic Sciences 2019.” Nobel Prize, https://www.nobelprize.org/uploads/2019/10/popular-economicsciencesprize2019-2.pdf. Accessed 23 July 2023.
“The Prize in Economic Sciences 2019 - Press release - NobelPrize.org.” Nobel Prize, 14 October 2019, https://www.nobelprize.org/prizes/economic-sciences/2019/press-release/. Accessed 23 July 2023.
“UNDERSTANDING DEVELOPMENT AND POVERTY ALLEVIATION.” Nobel Prize, 14 October 2019, https://www.nobelprize.org/uploads/2019/10/advanced-economicsciencesprize2019.pdf. Accessed 23 July 2023.