More Evidence of The Effects of Unconditional Direct Cash Transfers

Haushofer and Shapiro have a really cool paper evaluating the impact of unconditional direct cash transfers to households in rural southwestern Kenya (Rarieda in Siaya County). The paper contains several great insights relevant for policy-makers on the promise of direct cash transfers. Here are some highlights:

[i] …… we find increases in holdings of home durables (notably metal roofs, ownership of which increased by 23 percentage points over a control group mean of 16 percent), and productive assets such as livestock, whose value increases by USD 85 over a control group mean of USD 167. These investments translate into higher revenues from agriculture, animal husbandry, and non-agricultural enterprises; monthly revenue from these sources increases by USD 17 relative to a control group mean of USD 49. Note, however, that this revenue increase is partially offset by an increase in flow expenses for agriculture, animal husbandry, and business (USD 13 relative to a control group mean of USD 24).

[ii] We find that indeed monthly transfer recipients are significantly less likely to invest in durables such as metal roofs than lump-sum transfer recipients, suggesting that households may be both credit- and savings-constrained. The fact that program participation required signing up for mobile money accounts, which are a low-cost savings technology (people could have chosen to accumulate their transfer – and even add other money – on their M-Pesa account), suggests that the savings constraint at work is more social or behavioral than purely due to lack of access to a savings technology.

[iii] …. contrary to previous literature and our expectation, we find no significant differences between transfers to men and transfers to women in expenditure decisions or any other outcomes.

Oh, and there is more…

… we find significant reductions in cortisol levels in several treatment arms: specifically, large transfers, transfers to women, and lump-sum transfers lead to significantly lower cortisol levels than small transfers, transfers to men, and monthly transfers. Some of these effects occur in the absence of differences in traditional outcome variables. Together, these results support a causal effect of poverty (alleviation) on (reductions in) stress levels. More broadly, they suggest that psychological well-being and cortisol can complement traditional welfare measures, and in some cases may in fact respond to interventions with greater sensitivity than these traditional measures.

Amazing stuff.

So what are some of the policy implications?

Direct cash transfers are not the panacea to underdevelopment. But these findings and others out there (see summary here) are evidence that we should seriously consider Martin Ravallion’s idea of raising the consumption floor of the poorest of the poor in developing countries through direct policy intervention (e.g. through cash transfers).

Making direct cash transfers work for development will be predicated on taking the interventions out of the humanitarian/aid sphere, and integrating them into the national political economies of developing countries.

In my view, the need for a higher consumption floor will soon become politically salient due to rapid urbanization rates in many developing countries. Obviously, aid money alone will not be able to fully finance such a policy. More efficient public finance management in developing countries will be one way to fill the gap. Putting aside the overhyped storied budgetary leakages due to corruption, many developing countries still do not meet their annual budgeted expenditure goals due to lack of absorptive capacity, i.e. money simply never gets spent at the end of the fiscal year and is returned to the treasury.

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For instance, according to an internal Ugandan government report, between 2004-2010 an average of 3.4% of budgetary allocations to central government ministries, departments, and agencies returned to the treasury (this was net of corruption and other leakages). Note that the figure is most likely higher if you factor in local government expenditures. And as Figure 2 above shows, late disbursement is the norm, which makes budgeting within government agencies a nightmare. In addition, over the same period (2004-10), the proportion of the budget that was simply not released (as opposed to released and not absorbed) was a staggering 9.92%!

This is money that can go directly to citizens’ pockets. And we have the technology, thanks to M-Pesa, to effect the policy. Governments shouldn’t be allowed to handle more money than they have capacity to spend. Plus making legislative appropriation conditional on agency capacity could be a way to incentivize capacity building more than a million workshops and study tours could ever do.

Lastly, the idea of a consumption floor for the urban poor might not appeal to some higher income tax payers. But smart politicians should be able to remind these voters that there is only so much physical security that one can get from high fences topped with electrified razor wire.

Most read posts in 2014

Here are the top posts in 2014

1. Corruption under apartheid South Africa: This post was top partly because of the 2014 South African elections. More on the legacies of apartheid era corruption and rent-seeking in South Africa here.

2. Kenya Security Laws (Amendment) Bill 2014: This bill (now an Act of Parliament) is further evidence of Uhuru Kenyatta’s autocratic tendencies. I personally don’t think that he is an incarnation of Moi or other dictators of years gone. Rather, Mr. Kenyatta is a poor administrator who likes taking shortcuts to get quick results. As I argued in a related post, the Security Laws (Amendment) Act 2014 could potentially severely limit civil liberties in Kenya.

3. Did European Colonialism Benefit Africans? The popularity of this post is perhaps a reminder that more research is needed on the long-run effects of colonialism not just in Africa but in other formerly colonized places as well. So far all the literature tells us is that colonialism was bad, but that the Western institutions that Europeans spread around the globe are good. More recently we’ve seen evidence that pre-colonial institutions in the colonies were pretty resilient in the face of colonial intrusion; and have had lasting effects (also remember that the duration and intensity of colonialism varied widely across the globe). One avenue of research that I have been exploring is how pre-colonial institutions interacted with colonial administrations, and how this shaped the institutions that emerged out of the independence wave of the early 1960s. More on this in the new year.

4. Why Raila Odinga Lost: A sizable proportion of Kenyans still believe that Odinga was robbed in the March 2013 election in Kenya. I disagree. In my own projections on this blog – merging disaggregated opinion polls with historical district turnout rates (perks of having a case with tight ethnic voting) – I found Mr. Kenyatta to be ahead of Mr. Odinga by about 740,000 votes, or 7.2 percentage points (which was close to the final official figure of 6.7% difference between the two).

I don’t think that Kenyatta won in the first round, but do believe that we would have trounced Odinga in a runoff anyway. Which is why I have never come to terms with the unanimous Supreme Court decision granting Kenyatta victory on the basis of less than 9000 votes out of 12.3 million cast.

5. Understanding Uganda’s Military Adventurism Under Museveni: General President Museveni has managed to create an image of himself as the anti-terror hatchet man in the wider horn of Africa region. Ugandan troops are the backbone of the AU mission in Somalia (AMISOM). Since his triumphant entry into Kampala in 1986 Museveni has also been involved in conflicts in Rwanda, the DRC, Sudan, C.A.R, and more recently South Sudan. Because of the degree of militarization of the Ugandan state and recent public displays of intra-elite friction, I think Uganda will continue to inch up in the coup sweepstakes ahead of the 2016 election.

Working With the Grain in Development

I finally got to reading Brian Levy’s Working With the Grain. It is easily the most underestimated development book of 2014, and should be read alongside William Easterly’s Tyranny of Experts (which it both complements and pushes back against). Like Easterly, Levy worked at the Bank and has insightful case studies and anecdotes from South Korea, to Ethiopia, to Bangladesh, among other countries. The book’s main thrust is that approaches to interventionist development policy ought to internalize the fact that:

… Successful reforms need to be aligned with a country’s political and institutional realities. For any specific reform, an incentive compatible approach begins by asking, who might be the critical mass of actors who both have standing and a stake in the proposed arrangements – and so are in a position to support and protect them in the face of opposition? [p. 142-3]

From a policy perspective, Levy tackles the relationship between governance, regime types, and development head on. How do you deal with the Biyas, Kagames or Zenawis of this world if you deeply care about [both] the material aspects of human welfare – roads, hospitals, schools, electricity, etc., [and] political freedoms and inclusive institutions?

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Levy’s answer is that development experts should work with the grain, focusing on incrementally solidifying past gains in specific agencies and issue areas, instead of engaging in epic battles against ill-defined and equally poorly understood “bad institutions” and evils like “corruption.” He aptly points out that you do not need the full set of the “good governance” bundle in order to continue chugging along on the path to economic prosperity.

In other words, we don’t have to put everything else on pause until we get the institutions right (or topple the bad guys). It is not an all or nothing game. His argument is persuasive (“good governance” has failed as a prescriptive remedy for underdevelopment), albeit at the cost of casting the immense toll of living under autocratic regimes as somewhat ineluctable on the road to economic prosperity. But at least he dares to challenge conventional approaches to governance reform that have at best failed, and at worst distracted governing elites from initiatives that could have worked to improve human welfare in developing countries.

As I read the book I wondered what Levy might think of the current state of development research. We are lucky to live in an age of increasing appreciation for evidence-based policy development, implementation, and evaluation. However, the resulting aura of “objectivity” in development research often leaves little room for politics, and its inefficiencies and contextual nuances. Sometimes the quest for generalizability makes us get too much into the weeds and forget that what is good for journal reviewers seldom passes the politicians’ (or other influential actors’) incentive compatibility test, rendering our findings useless from their perspective.

It is obvious, but worth reiterating, that the outcomes we can quantify, and therefore study, do not always overlap with the most pressing issues in development or policies that are politically feasible.

Perhaps this is a call for greater investment in public policy schools (not two-day capacity building workshops) in the developing world that will train experts to bridge the gap between academic development research and actual policy formulation and implementation (talking to policymakers makes your realize that this gap is wider than you think). Linking research findings to actual policy may sound easy, but you only need to see a “policy recommendations” section of a report written by those of us in the academy to know that it is not.

Development Experts and Their Biases

It is perhaps uncontroversial to suggest that World Bank staff have a different worldview from others. World Bank staff are highly educated and relatively wealthier than a large proportion of the world. However, it is interesting to note that while the goal of development is to end poverty, development professionals are not always good at predicting how poverty shapes mindsets. For example, although 42 percent of Bank staff predicted that most poor people in Nairobi, Kenya, would agree with the statement that “vaccines are risky because they can cause sterilization,” only 11 percent of the poor people sampled in Nairobi actually agreed with that statement. Overall, immunization coverage rates in Kenya are over 80 percent. There were also no significant differences in the responses of Bank staff in country offices and those in headquarters or in responses of staff working directly on poverty relative to staff working on other issues. This finding suggests the presence of a shared mental model, not tempered by direct exposure to poverty [emphasis added].

That is an excerpt from the World Development Report 2015, the section on the biases of development professionals.

One hopes that the problem highlighted by the last line is not crowded out of President Kim’s agenda at the Bank by the ongoing cost-cutting. And in case you were wondering, I don’t think flying coach and no breakfast will cut it since airports and the Mamba Points of this world are beyond the reach of most poor people. Speaking from experience, the development “expert” bubble is real, and enduring. We definitely need to do more to burst the bubble.

If field country offices are mere extensions of DC, then many development projects will continue to be variants of the proverbial solar cookers decried by Jim Ferguson in the Anti-Politics Machine. And everyone will continue to run around in circles.

Kenya Security Laws (Amendment) Bill 2014

Here is a pdf copy of the Kenya Security Laws (Amendment) Bill 2014.

The proposed amendments will, broadly speaking, curtail the freedom of speech and association, and limit media coverage of security related stories. They will also cut into the independence of the Kenya Police Service by granting the president the powers to appoint and fire the Inspector General of Police. Presently an independent commission picks a list of candidates from which the president chooses the IG. Lastly, the law promises to resurrect the position of the all powerful internal security minister with broad discretionary powers.

All in the name of keeping Kenyans safe from foreign terrorists, and themselves.

There are a few good things in the proposed law, including the sections that clarify the roles of the office of the Attorney General and the Director of Public Prosecutions (DPP); and those that limit judges’ discretion in the handling of cases involving terror suspects.

Despite the dubious constitutionality of some clauses in the bill, I bet a majority of Kenyans would support it in a poll. For that we have to thank the recent uptick in terror attacks and fatal communal conflicts. This year alone hundreds of Kenyans have died from such attacks.

That said, if you ask me the problem of insecurity in Kenya is not simply a result of restrictive laws that limit the government’s ability to pursue and prosecute criminals. It is a problem of a corrupt police force that takes bribes from petty criminals, poachers, drug dealers, and terrorists, alike. It is a problem of an increasingly unaccountable intelligence and military securocracy that is both fighting jihadists in Somalia and trafficking in charcoal and other goods, the proceeds of which benefit the same jihadists. It is a problem of an ineffectual intelligence service that instead of diligently doing its homework prefers to carry water for foreign agencies, regardless of the domestic consequences.

And finally, it is a problem of an elite political class that wants to have its cake and eat it. They want a criminal justice system that protects those who steal from public coffers but punishes chicken thieves. A system that protects poachers and drug dealers but nabs terrorists and armed robbers. At some point something will have to give.

Iko shida.

Two Important Lessons Americans Should Learn From the Senate Torture Report

As Americans digest the contents of the just released Senate Report on CIA’s use of torture, here are two important lessons that they ought to internalize.

  1. The release of the report neither absolves America of the deeds highlighted therein, nor does it mean that such gross violations of the rights of non-Americans have ended. As Mother Jones reported back in 2012, President Obama may have ended officially sanctioned torture, but as it continued to wage the global war on terror America merely “outsourced human rights abuse to Afghanistan, Somalia, and elsewhere” through rendition programs. In addition, CFR has calculated that over the course of 500 drone strikes under both the Bush and Obama administrations 41 men were targeted, but 1147 people were killed. Dangerous terrorists should be taken out, by all means. But at some point we must begin to ask questions about what ought to constitute an upper limit of tolerable collateral damage. Especially in relation to the lives of innocent non-combatants.
  2. By outsourcing illegal practices to governments in the developing world America is contributing to the weakening of institutions of accountability in those countries and the radicalization of potential jihadists. Six months ago I argued for caution in the ongoing militarization of US-Africa relations. My worry is that many American security arrangements with African governments are designed to bypass normal democratic channels (like direct military to military cooperation) and risk creating unaccountable militaries and governments. In Kenya, for instance, it is increasingly unclear whether the military or the elected civilian administration is in charge of national security policy (especially with regard to the mission in Somalia). Nairobi has also recently been on the spotlight accused of engaging in extra-judicial killings of suspected terrorists with foreign assistance. In addition, many governments in the region that cooperate with the US have enacted sweeping anti-terror laws, many designed to also silence domestic political dissent. If it is not yet abundantly clear, it is high time American policymakers realized that unaccountable and highly securitized governments play into the hands of jihadist recruiters.

The release of the report is certainly commendable. It is a shining example of the virtues of separation of powers, something that America, more than any other nation in history, has perfected. But it is not an end in and of itself. It ought to be a first step in acknowledging that human rights do not end at the water’s edge, and putting pressure on elected officials to devise national security and foreign relations policies that respect this fact. Despite what some Americans may say, respecting the rights of non-Americans and their desire for accountable political and military institutions will not weaken America. On the contrary it will make it stronger by bolstering its soft power, and safer.

This is huge >> ICC drops case against Uhuru Kenyatta

The ICC prosecutor has dropped the charges against President Uhuru Kenyatta, citing the lack of evidence due to non-cooperation by the Kenyan government. Mr. Kenyatta stood accused of playing a significant role in the 2007-08 post-election violence in Kenya in which at least 1300 people died and over 300,000 were displaced.

Four quick observations.

  • The Kenyan case was always going to be a tough one for the ICC. Kenya is neither the DRC nor Sudan. As soon as Kenyatta got elected Brussels, London, and Washington made it clear that they would not sacrifice their economic and geopolitical interests in the wider eastern Africa region on the alter of justice. This gave Mr. Kenyatta latitude to attack the legitimacy and legality of the ICC case against him both through the African Union (AU) and Kenyan diplomatic channels. Back in Kenya witnesses disappeared or withdrew their testimonies. The Office of the Prosecutor repeatedly said that the Kenyan state refused to hand over evidence relevant to the Kenyatta case. All this while Western embassies remained quiet about the case (for fear of “losing” Kenya to China).
  • This leads me to conclude that in a perverse way, the collapse of the Kenyatta case might actually be good for the ICC. The court (and OTP) can save face by arguing that they had the authority to prosecute the case but lacked cooperation from the Kenyan state. Now, the biggest challenge for everyone involved is how to ensure that this does not get interpreted as blanket immunity for all sitting presidents who are suspected of committing atrocities against their citizens. The deterrent effect of the ICC should be preserved.
  • The collapse of the case has interesting implications for Kenya’s domestic politics. It is common knowledge that the political union between President Kenyatta and Deputy President Ruto ahead of the 2013 election was primarily driven by their ICC cases. Mr. Kenyatta’s case has collapsed. Mr. Ruto’s is ongoing. This will diminish Mr. Ruto’s bargaining power in the alliance. It will also demand for Kenyatta’s allies to walk a tight rope and ensure that they do not signal to Ruto’s supporters that they no longer need them now that Kenyatta is off the hook. Ruto’s bloc, URP, has the second largest number of MPs in the National Assembly. This will give him leverage of some sort, even as his case goes on. Simply stated, without the ICC bond, the union between Kenyatta and Ruto will become more transactional. This means that mistakes will be made, and each side will have to try hard to ensure that disagreements over specific issues do not get blown out of proportion. Knowing Kenyan MPs, this will be a tall order.
  • Lastly, now that the ICC is behind him President Kenyatta might actually seriously tackle the issue of insecurity in Kenya. It is widely known that since he took office his approach to security matters has been informed by the desire to rid his administration of anyone who might have been sympathetic to the ICC. The former chief of intelligence (who may have played a role in “fixing” both Kenyatta and Ruto) and other senior officials who may have testified against him were let go. It took the slaughter of more than 450 Kenyans at the hands of terrorists and armed bandits over the last 18 months for the president to fire the chief of Police and the Cabinet Secretary in charge of internal security. One can only hope that now Kenyans will get a more responsive security sector.

What does this mean for reconciliation in Kenya? Not much. 2007-08 shattered the myth of Kenya as a peaceful oasis in an otherwise volatile region. Kenyans are yet to comprehensively deal with the shock of seeing what neighbors could do to one another. The preferred MO has been to sweep things under the rug. That was the logic of the Kenyatta-Ruto alliance (the land issues that erupted in clashes between their respective constituencies have not been resolved). It is the same logic that drove the peace-at-all-costs campaign that stifled open discussion of contentious national issues ahead of the 2013 election.

For better or worse, Kenyans are desperate to move on past 2007-08. But the weight of historical injustices, inequalities, and the continued failure to address them are constant reminders that 2007-08 might happen again.

Do Tough Traffic Rules Reduce Road Accidents?

The Kenyan Cabinet Secretary in charge of Transport recently announced a 22% decline in accidents on Kenyan roads in the first quarter of 2014 compared to the same period last year (resulting in 201 fewer deaths). Following the end of year holiday season uptick in road deaths (more people travel then; presumably more drink and drive as well) the government instituted strict traffic regulations, some of which have been struck down by the courts. But do these top-down rule changes work in reducing road accidents?

Probably not as well as we think, according to a new paper by Habyarimana and Jack:

This paper compares the relative impact of two road safety interventions in the Kenyan minibus or matatu sector: a top down set of regulatory requirements known as the Michuki Rules and a consumer empowerment intervention. We use very detailed insurance claims data on three classes of vehicles to implement a difference-in-difference estimation strategy to measure the impact of the Michuki Rules. Despite strong political leadership and dedicated resources, we find no statistically significant effect of the Michuki Rules on accident rates. In contrast, the consumer empowerment intervention that didn’t rely on third party enforcement has very large and significant effects on accident rates. Our intent-to-treat estimates suggest reductions in accident rates of at least 50%. Our analysis suggests that in institutionally weak environments, innovative consumer-driven solutions might provide an alternative solution to low quality service provision.

The Michuki Rules, which required retrofitting of vehicles with certain safety devices and other reforms as outlined in the net section, were widely believed to have led to an immediate and sustained improvement in the safety of Kenya’s roads. However despite this view, we find that most of the perceived effects were driven by short-run compliance costs imposed on vehicle owners and drivers, as opposed to their behavior, and that a month after the rules were introduced there was no discernible effect on insurance claims. In contrast, the consumer empowerment campaign we examine, which encouraged passengers to actively complain directly to their drivers when they felt unsafe, led to a remarkably large reduction in insurance claims of between a half and two-thirds.

Eng. Kamau and his team should take a look at this paper.

Also, the lesson here is not that we should not legislate against insanity on Kenya’s roads, just that those efforts should be complemented by a fire-alarm enforcement mechanism as opposed to using the Chai-Culture-crippled police patrol system.

Africa’s top economies

Yesterday Nigeria unveiled new GDP figures following the rebasing that catapulted the country of 170 million to become Africa’s biggest economy (GDP US$509b). Below is the ranking of the top sixteen economies in SSA. Mineral economies (10/16) still predominate (Source: The Economist).