mind the gap - university of california, davis · mind the gap workshop christopher udry, yale...
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MindtheGapWorkshopChristopherUdry,YaleUniversity
October2016
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Isthegapreal?
• We’veallseenthis:
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• Inputintensityislow
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• Productivityislowrelativetotherestoftheeconomy
• Butwe’lldiscussthismorethoroughlylaterthismorning
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Whataretheprimarybarrierstoadoptionofnewtechnologiesandtointensification?
Financialdimensions• Opportunitycostofcapital• Liquidityconstraints• Risk
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• Opportunitycostofcapital
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• Liquidityconstraints• Inflexibility,inabilitytoraisefundstotakeadvantageofopportunities,thetimingofaccesstoresources
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• Risk
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ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns
Liquidity
Risk
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ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns Credit
Liquidity
Risk
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ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns Credit
Liquidity Savings
Risk
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ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns Credit
Liquidity Savings
Risk Insurance
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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
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ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns Credit Mali: onaveragebinding,butvarieslocally
Liquidity Savings
Risk Insurance
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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
Drou
ght
VSLA*D
rought
Baseline
VSLA
Drou
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VSLA*D
rought
FoodSecurity Income
Changefrom
BaselineinStand
ardDe
vun
its
Baselinevalue=0
VSLAinUgandaandMalawiinDroughtandnon-DroughtConditions
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ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns Credit Mali: onaveragebinding,butvarieslocally
Liquidity Savings UgandaandMali:resilienceindrought
Risk Insurance
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RainfallIndexInsurance
• 2008-2012,84Communities,1,406Households• Insurance:grants+subsidizedsales(Actuarialvalue8-9.5cedis/acre,averageof$40)• Cashgrants($85/acre)• Insuranceagainstdroughtandflood
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ConstraintsandFinancialInnovation
Constraints Instruments Evidence
Returns Credit Mali: onaveragebinding,butvarieslocally
Liquidity Savings UgandaandMali:resilienceindrought
Risk Insurance Ghana:strongimpactoninvestment,butvariesovertime
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Financialconstraintsandmissedopportunities
• Imperfectcreditmarkets• Wide-rangingevidence;fewcounter-examples• Successfulagriculturalcreditmarketinterventionsrare
• Constraintsonsaving• Growingevidence,butvaryingresults• Tiesintobehavioralliterature
• Incompleteinsurance• Evidenceverystrongagainstfullinsurance• Centralityforinvestmentchoicelessclear• Indexinsuranceproductsremainproblematic
• Investmentreturns?