My research applies behavioural models to topics in development economics, such as microfinance, education, and health. I am particularly interested in the impact of time preferences, self-control, and commitment on individuals' lives. My methodology of choice are randomized field experiments that are firmly grounded in economic theory.
Commitment products can remedy self-control problems. However, imperfect knowledge about their preferences may (discontinuously) lead individuals to select into incentive-incompatible commitments, which reduce their welfare. I conduct a field experiment in the Philippines (N=913), where low-income individuals were randomly offered a regular-instalment commitment savings product. Individuals chose a personalised savings plan and a default penalty themselves. A majority appears to choose a harmful contract: While the average effect on bank savings is large, 55 percent of clients default, and incur monetary losses. A possible explanation is that the chosen penalties were too low (the commitment was too weak) to overcome clients' self-control problems. Both take-up and default are negatively predicted by measures of sophisticated hyperbolic discounting - suggesting that partial sophisticates adopt weak commitments and then default, while full sophisticates are more cautious about committing, but better able to choose incentive-compatible contracts.
We test the effect of light-touch psychological interventions on health-related behaviors and psychological outcomes using a randomized controlled trial among 3750 young women in rural Kenya. A two-session executive function intervention (“EF”) aimed to relax cognitive constraints; a two-session time preference intervention (“TP”) aimed to reduce present bias and impatience; and an information treatment (“INF”) aimed to correct incorrect beliefs about the benefits of health behaviors. Three months after the interventions, the EF and TP interventions lead to significant 18 percent and 27 percent increases, respectively, relative to a pure control (“PC”) group in the share of households who have chlorinated their drinking water. This increase was accompanied by significant 27 percent (EF) and 32 percent (TP) reductions in the number of diarrhea episodes in children relative to the information treatment. The TP intervention also significantly increased the share of individuals who save regularly by 38 percent. The information treatment, which delivered the same information about the benefits of chlorination as the active interventions, did not significantly affect these outomes, and in some cases, affected them significantly less. The EF intervention improved performance on a planning lab task (Tower of London) relative to the information group. The TP intervention did not affect time preferences. Both interventions increased self-efficacy, i.e. beliefs about one's own ability to achieve desirable outcomes. Together, these results suggest that psychological interventions can affect health behaviors, possibly through mechanisms including self-efficacy.
Joint-liability groups and rigid repayment schedules have long been considered essential for guaranteeing high repayment rates in microcredit lending, since they offer social insurance and keep repayment discipline high. Yet both features have been criticized lately: rigid repayment schedules interfere with fluctuating incomes, and joint liability induces excessive peer pressure. We study whether the interaction of both flexible repayment features and joint-liability allows reaping the benefits of joint liability and flexibility - high repayment and shock coping capacity - while keeping their downsides - low repayment morale and excessive peer pressure - at bay. Using data from lab-in-the-field experiments with microcredit borrowers in the Philippines, we find that interacting joint liability with repayment flexibility increases repayment discipline, enhances the responsible use of flexibility, and reduces anti-social punishment.
Youth participation in programs designed to enhance their employability is usually low. This paper reports the results from a large randomized experiment in which young, unskilled jobseekers in France receive a monthly cash transfer for a two-year period totaling up to €4,800, conditional on their participation in the French national career guidance program. Cash transfers lead to a significant increase in program participation (which mainly entails meetings with counselors), and sharply reduced drop-out rates. As a result, there is a large increase in the job offers, vocational training and career building workshops proposed to the young jobseekers. However, the jobseekers' response to these increased opportunities for employability investment is a precisely estimated zero. Moreover, we observe a significant reduction in employment over the first six months and only a minor increase in income. The results point to a strong impact of financial incentives, but also to the need to design more sophisticated incentive schemes if the goal is to improve employability investments.
Empirical evidence from developing countries suggests that there is a high demand for informal savings mechanisms even though these often feature negative returns - such as deposit collectors, ROSCAs, microloans, and informal borrowing. Why do people not just save at home, instead of relying on such costly devices? In a savings model with hyperbolic discounting and uncertainty, I show why a commitment to fixed regular savings deposits can help individuals to achieve the welfare-maximising level of savings, when they would not be able to do so on their own. Such regular-instalment commitment products further increase welfare by smoothing savings contributions. The setting is enriched by endogenising take-up, and giving individuals the ability to choose their own commitment stakes. The results point to the possibility that the observed demand for costly informal savings devices may simply represent a demand for commitment savings products with fixed periodic contributions, as they are commonly offered by banks in rich countries.
with Gautam Rao and Nishith Prakash
with Frédéric Schneider
with Justin Sydnor and
with Eric Mengus, Tomasz Michalski, and Frédéric Schneider
with Stefan Dercon and Karlijn Morsink
In light of the United Nations' latest urbanization projections, particularly with respect to China and India, a good understanding is needed of what drives aggregate urbanization trends. Yet, previous literature has largely neglected the issue in favor of studying urban concentration. Taking advantage of the latest UN World Urbanization Prospects, we use an instrumental variables approach to identify and analyze key urbanization determinants. We estimate the impact of GDP growth on urbanization to be large and positive. In answer to Henderson's (2003) finding that urbanization does not seem to cause growth, we argue that the direction of causality runs from growth to urbanization. We also find positive and significant effects of industrialization and education on urbanization, consistent with the existence of localization economies and labor market pooling.
The paper argues that the incidence of moral hazard played a significant role in the 2007/2008 credit crunch. In particular, bank traders subjected to asymmetric compensation structures have an incentive to take excessive risks even when the bank's shareholders would prefer prudent investment. Traders' incentives are shown to be unaffected by capital regulations, with the associated financial burden falling upon the taxpayer through deposit insurance or government bail-outs. Selected case studies further indicate that the phenomenon of “gambling traders” was widespread during the credit crunch, when high bonuses tempted bank employees to invest in risky subprime-backed securities. The intransparency of structured products and the inaccuracy of credit ratings contributed to the employees' ability to conceal the underlying risk from the banks' shareholders. The analysis points to an urgent need to reform compensation practices in the financial sector.
Current Teaching (2017/18)
All teaching materials can be found on Pamplemousse.
Econometric Evaluation of Public Policies (ENSAE, Paris-Saclay)
Joint with Bruno Crépon
Development Economics (ENSAE, Paris-Saclay)
Joint with Jean-Noël Senne
Experimental and Behavioural Economics (ENSAE, Paris-Saclay)
Joint with Guillaume Hollard
Term time: By appointment (ENSAE, Office 4043).