Economic policy analysis tools for sustainable intensification

David J. Spielman and Patrick Ward

Africa RISING–CSISA Joint Monitoring and Evaluation Meeting, Addis Ababa, Ethiopia, 11-13 November 2013

CSISA’s policy research agendaImproved policies & institutions for inclusive growth

Aims and objectives– Address the policy environment needed to remove constraints

to the adoption of new technologies– Enhance the productivity and income benefits of improved

agricultural sector growth– Explore strategies and solutions to catalyse durable change at

scale

Expected outcomes• Improved policies and incentives that…

– encourage private investment and public-private partnerships in pro-poor technology development and delivery

– address changing labor, gender, assets, and migration dynamics related to pro-poor technology development and delivery

CSISA’s interesting questions

• What are farmers willing to pay for new technologies?– Custom-hired resource-conserving machinery services– Abiotic stress-resistant traits in inbred vs. hybrid backgrounds

• How heterogeneous in this demand for technology?– Does demand differ across geography, wealth, income, social status, etc.– Does heterogeneity create market opportunities for private investment?

• How might public and private investment leverage demand heterogeneity to increase adoption? – What types of encouragements (subsidy vouchers, discount coupons)

encourage adoption?– How do social network effects encourage adoption?– What are the tradeoffs inherent in different encouragement schemes?

CSISA’s policy analysis toolkit

• Tools to elicit willingness to pay and risk preferences– Choice experiments– Experimental games

• Tools to evaluate impact of a new technology– Natural experiments (difference-in-difference)– Propensity score matching (PSM), Regression discontinuity designs

(RDD), Instrumental variables (IV)– Controlled experiments (RCTs)

• Tools to evaluate market opportunity– Industry analysis, new empirical industrial organization– Structure, conduct, performance analysis

Ex: Preferences for drought tolerance in rice

• What are farmers willing to pay for drought-tolerant rice in inbred v hybrid background? – Inbreds: low-cost “renewable” public sector technology– Hybrids: high cost “non-renewable” private sector technology

• Participants presented with a series of “choice tasks” meant to reflect real-world seed purchasing decisions

• Three varying alternatives (A, B, or C): comprised of different combinations of relevant attributes

• Status quo (D): option to use seed cultivated in previous kharif season

Source: Ward, Ortega, Spielman and Singh (2013)

Illustrated choice tasks

Source: Ward, Ortega, Spielman and Singh (2013)

Estimated willingness to pay

Source: Ward, Ortega, Spielman and Singh (2013)

Yield: 1.3/0.9/0.4

Yield: 1.3/0.8/0.4

Yield 1/3/0.7/0.4

Yield: 1/3/0.6/0.4

Duration: <120 days

Duration: 120-135 days

Low seeding rate (4-6 kg/acre)

Seed must be purchased every year

-100 -50 0 50 100 150 200

Indian Rupees (INR)

Attrib

ute

t/acre under normal, severe, extreme drought

Demand for DT inbred vs DT hybrid rice

Source: Ward, Ortega, Spielman and Singh (2013)

Ex: Willingness to pay for LLL

• What are farmers willing to pay for custom-hired LLL services? – Binding auction for LLL service at for up to 3 plots of land– If participant bid ≥ a randomly drawn price, he may receive the service– Auction repeated in 2011 and 2012

Source: Lybbert, Magnan, Spielman, Bhargava, and Gulati (2013)

Heterogeneous willingness to pay across multiple dimensions

200

400

600

800

Rs.

/hour

0 10 20 30 40 50 60 70 80

Percent of area

Deoria

Gorakhpur

Maharajganj

District

200

400

600

800

Rs.

/hour

0 10 20 30 40 50 60 70 80

Percent of area

BPL

Non-BPL

BPL

200

400

600

800

Rs.

/hour

0 10 20 30 40 50 60 70 80

Percent of area

<1 acres

1-2.5 acres

>2.5 acres

Landholdings

200

400

600

800

Rs.

/hour

0 10 20 30 40 50 60 70 80

Percent of area

First (<= .3 acres)

Second (.3-1 acre)

Third (1 or more acres)

Plot size

Source: Lybbert, Magnan, Spielman, Bhargava, and Gulati (2013)

Change in willingness to pay, 2011-2012

Source: Lybbert, Magnan, Spielman, Bhargava, and Gulati (2013)

Cost-effectiveness of targeting strategies(Subsidy cost per acre and farmer)

100 120 140 160 180 200 220 240 260 280 300100

150

200

250

300

350

Uniform

Perfect

District

Landholdings

BPL

First-hour discount

Subsidy cost per farmer leveling (Rs./farmer)

Subs

idy

cost

per

acr

e le

vele

d

(Rs.

/acr

e)

Net gain for provider

Net loss for provider

Source: Lybbert, Magnan, Spielman, Bhargava, and Gulati (2013)

Random sample from village v Auction

(self-selection)

Auction winners

Auction losers

Lottery(random selection)

Lottery losersLottery winners

From auction to lottery: social network effects

Outcome: Water savings ≈ 21%

Source: Magnan, Spielman, Lybbert, and Gulati (2013)

New evidence, actionable information

• We can design novel targeting strategies to promote new technologies– A private sector strategy: Firms promote technologies to

profitable market segments only– A public sector strategy: State promotes technologies to all

market segments– A synthesis strategy: Firms and state collaborate to target

beyond profitable segments only

• Each targeting strategy involves tradeoffs– Equity vs. efficiency– Productivity vs. sustainability

Thank you