mind the gap - university of california, davis · mind the gap workshop christopher udry, yale...
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MindtheGapWorkshopChristopherUdry,YaleUniversity
October2016
Isthegapreal?
• We’veallseenthis:
• Inputintensityislow
• Productivityislowrelativetotherestoftheeconomy
• Butwe’lldiscussthismorethoroughlylaterthismorning
Whataretheprimarybarrierstoadoptionofnewtechnologiesandtointensification?
Financialdimensions• Opportunitycostofcapital• Liquidityconstraints• Risk
• Opportunitycostofcapital
• Liquidityconstraints• Inflexibility,inabilitytoraisefundstotakeadvantageofopportunities,thetimingofaccesstoresources
• Risk
ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns
Liquidity
Risk
ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns Credit
Liquidity
Risk
ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns Credit
Liquidity Savings
Risk
ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns Credit
Liquidity Savings
Risk Insurance
SuccessfulAgriculturalLending
• ….israre• Mali:Soro Yiriwaso• Agriculturalloanstowomenfarmers• Individualloanswithgroupliability• 25%annualinterest+3%fees+10%requiredsaving• $110-120/woman• Avg inputexpenses$200• Householdgrossoutput$520• Nodefaultover2years
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ImpactofAccesstoBorrowingonOutput
ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns Credit Mali: onaveragebinding,butvarieslocally
Liquidity Savings
Risk Insurance
VillageSavingsandLoanAssociation(VSLA)
• Basic Design:o Around15-30memberswhomeetweekly(mostlywomen)
o Ateachmeetingmembersmakesavingscontributions(commitment)
o Memberscantakeloansandrepaywithinteresto Atendof10-12monthcycle,fundissharedouto Emergencyfund
• FocushereisonGhana,Malawi,andUganda• Sampleof15,000householdsin950villages• Implementationperiod:22-30months
• Developed in the early 1990s in Mali by CARE• Aims to improve on the ROSCA model
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Baseline
VSLA
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VSLA*D
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Baseline
VSLA
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VSLA*D
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FoodSecurity Income
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VSLAinUgandaandMalawiinDroughtandnon-DroughtConditions
ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns Credit Mali: onaveragebinding,butvarieslocally
Liquidity Savings UgandaandMali:resilienceindrought
Risk Insurance
RainfallIndexInsurance
• 2008-2012,84Communities,1,406Households• Insurance:grants+subsidizedsales(Actuarialvalue8-9.5cedis/acre,averageof$40)• Cashgrants($85/acre)• Insuranceagainstdroughtandflood
ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns Credit Mali: onaveragebinding,butvarieslocally
Liquidity Savings UgandaandMali:resilienceindrought
Risk Insurance Ghana:strongimpactoninvestment,butvariesovertime
Financialconstraintsandmissedopportunities
• Imperfectcreditmarkets• Wide-rangingevidence;fewcounter-examples• Successfulagriculturalcreditmarketinterventionsrare
• Constraintsonsaving• Growingevidence,butvaryingresults• Tiesintobehavioralliterature
• Incompleteinsurance• Evidenceverystrongagainstfullinsurance• Centralityforinvestmentchoicelessclear• Indexinsuranceproductsremainproblematic
• Investmentreturns?