www.nhh.no

Keys to Human DevelopmentBertil Tungodden, Norwegian School of Economics

3th National Conference

«Unleashing growth potential in Tanzania: Economic Transformation for Human Development»

Dar es Salaam, September 11, 2014

Behavioral economics and experimental methods

Key messages from my talk!

• Keys to human development:

• A trusting society

• An entreprenurial society

• Keys to learning about the way forward:

• Lab experiments

• Randomized control trial field experiments

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Why is Norway doing so well in human development?

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How is Norway different?

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Trust is much more important than oil!

21.04.23 Fornavn Etternavn, navn@nhh.no 6

Why is trust so important?

• Let us do a small lab experiment (to illustrate the mechanism)!

• A trust game:– Suppose that you and someone else in the audience are paired together

anonymously in an experiment.

– Suppose you are given 1 million Tsh and are to decide how much of this to send anonymously to the other participant.

– Whatever you send will triple in value!

– But it is all up to the other participant to decide how much to return to you!

– What do you do?

• Reflects many real life situations where we can’t write a contract, but have to put our faith in others to create value.

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But even if we can write a contract, it would be much more efficient if we could rather trust our partner

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Key message 1: Trust is crucial for Human Development

• However: Trust levels are not necessarily stable in a society!

– Norway was not a trusting country one hundred years ago.

• Million dollar question: How do we create a trusting society?

– Public schools may be important – establish social norms of trustworthness and of trusting others.

– More research is needed to understand the mechanisms of trust – and the importance of trust should be given more focus in the public debate.

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Key message 2: How to build an entrepreneurial society?

• Young people in developing countries typically have to create their own jobs.

– 65% of Tanzanias are below 25 years old, very few get a formal job.

– Self-employment promoted in the development plans of many poor countries (including Tanzania).

– Opportunities for all! Entrepreneurship can play a role in ensuring development with a human face!

• Three research projects in Tanzania:– What does it take to succed as an entrepreneur: Financial vs Human

capital?

– How can we reach out with entrepreneurship training: Ruka Juu!

– Can enterpreneurship be a way to female empowerment? Girl Power

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Key message 3: How to learn about development?

• Randomized control field experiments: The road to understanding the impact of a policy intervention!

• Social scientists are basically copying the approach used in medicine and the natural sciences for a long time!

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Human and financial capital for microenterprise development: Evidence from a field and lab experiment

– ”…most simply duplicate what their neighbours are doing and do not appreciate the importance of innovation, quality, credibility and customer care.”

• Donath Olomi, University of Dar es Salaam

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Main findings

• A combination of financial capital and human capital is needed for small scale entrepreneurs to grow.

• Find very strong evidence of increased sales and profits among male entrepreneurs.

• More comprehensive measures needed for the female entrepreneurs.

• They learn as much as the male entrepreneurs from the training, but no signficant effects on business performance.

• Our findings suggest that this is largely due to external constraints (like family obligations).

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Teaching entrepreneurship through television: Ruka Juu!

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Short term findings

•The edutainment show had a strong effect on their ambitions – made them much more interested in business and entrepreneurship (particularly females).

• The edutainment show also made them more risk willing and patient.

• What about long-term effects?

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Girl power

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•Decisive time: Adulthood

•Why? • Lack of knowledge/empowerment?

• Lack of economic opportunities?

Time line

• Baseline survey: April-May 2013 80 schools in Dodoma, Singida, Morogoro and Tabora 3485 girls

• Randomization: Right after baseline 4 groups, 20 schools in each: Health, Entrepreneurship, Both, Control “Build your life”, “Protect your life”

• Training of teachers: May 2013 Based on newly developed booklets from Femina

• Training of the girls: July – September 2013

• Follow-up survey I: September-October 2013 Training camp for surveyors started on September 16 Separate in-depth qualitative follow-up • Follow-up survey II: Second half of 2014 Initial pilot in April 2014 Training camp for surveyors starts on September 8 Separate in-depth qualitative follow-up later in the fall

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METHOD

•Pre-analysis plan: Pre-specify what we would like to study and how we would like to test it (to avoid data mining)

•Follow-up surveys: to study the impact of the training on:

– Follow-up I: Knowledge, Behavior (plans), Gender-equality, and Empowerment.

– Follow-up II: Behavior, Welfare, Persistence of Gender-equality and Empowerment.

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Follow-up II: The important next step

• Promising short-term treatment effects

–They know more

–They feel empowered

–They do have plans

• We would like to study whether these initial positive findings have translated into changes in actual behavior and increased welfare (and also the persistence of gender-equality attitudes and empowerment feelings).

• Basic idea: Girls need both to be empowered and to be given economic opportunities!!

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Key messages from my talk!

• Keys to human development:

• A trusting society

• An entreprenurial society

• Keys to learning about the way forward:

• Lab experiments

• Randomized control trial field experiments

ASSANTE SANA!24