The Illusion of Sustainability Michael Kremer Edward Miguel Atheendar Venkataramani – ECON 730a.

The Illusion of SustainabilityThe Illusion of Sustainability

Michael KremerMichael Kremer

Edward MiguelEdward Miguel

Atheendar Venkataramani – ECON 730a

BackgroundBackground

Recent interest in sustainable development projectsRecent interest in sustainable development projects

Creation/promotion of projects with one time/limited Creation/promotion of projects with one time/limited subsidies that can continue without external supportsubsidies that can continue without external support

Community “ownership” Community “ownership”

Does it work? Is this possible?Does it work? Is this possible? MicrofinanceMicrofinance Cost-sharing in public healthCost-sharing in public health Other examplesOther examples

Objectives of this paperObjectives of this paper

Study sustainability in the context of deworming projectStudy sustainability in the context of deworming project

Strategies to promote sustainabilityStrategies to promote sustainability User feesUser fees Health education – move beyond focus on drugs to changing Health education – move beyond focus on drugs to changing

behaviorsbehaviors Diffusion of worm prevention information and behaviors through Diffusion of worm prevention information and behaviors through

peer effects/social networks*peer effects/social networks* Verbal commitment interventionVerbal commitment intervention

Relevant Background – Primary School Relevant Background – Primary School Deworming ProjectDeworming Project

Project conducted in Busia district, Kenya.Project conducted in Busia district, Kenya. Recall from Miguel and Kremer [2004] – sizeable social benefits, ¾ of Recall from Miguel and Kremer [2004] – sizeable social benefits, ¾ of

which were due to externalitieswhich were due to externalities

Randomized phase in: Group 1 schools treated 1998-2001, Group 2 Randomized phase in: Group 1 schools treated 1998-2001, Group 2 schools - 1999-2001 and Group 3 – starting in 2001.schools - 1999-2001 and Group 3 – starting in 2001.

Aspects of program relevant for this study:Aspects of program relevant for this study: Health education efforts at treatment schools – preventative behaviorsHealth education efforts at treatment schools – preventative behaviors Of the 50 Group 1 and 2 schools, half were randomized to cost-sharing Of the 50 Group 1 and 2 schools, half were randomized to cost-sharing

program in 2001.program in 2001. Randomizing schools to treatment generates variation in knowledge of Randomizing schools to treatment generates variation in knowledge of

treatment withintreatment within an individual’s given social network; knowledge prior to an individual’s given social network; knowledge prior to inception of program in 1998 likely minimal.inception of program in 1998 likely minimal.

Peer Effects and Technology Peer Effects and Technology Adoption: TheoryAdoption: Theory

Model of information spread and take up of a new Model of information spread and take up of a new technology in a social networktechnology in a social networkBasic idea: people adopt deworming if expected private Basic idea: people adopt deworming if expected private benefits exceed expected cost. benefits exceed expected cost. People have differing priors over the effect of deworming People have differing priors over the effect of deworming drugs and are heterogeneous with respect to tastes and drugs and are heterogeneous with respect to tastes and preferences for the regimen. preferences for the regimen. Model includes four types of peer effects:Model includes four types of peer effects:

Pure imitationPure imitation Information on how to use technology effectivelyInformation on how to use technology effectively Provide information on benefits of technologyProvide information on benefits of technology Modification of disease environment (treatment externalities)Modification of disease environment (treatment externalities)

Peer Effects and Technology Adoption: Peer Effects and Technology Adoption: TheoryTheory

The first RHS term incorporates individual’s beliefs about drug The first RHS term incorporates individual’s beliefs about drug effectiveness, level of infection, and specific taste for deworming.effectiveness, level of infection, and specific taste for deworming.Second RHS term reflects financial, time, or utility costs of Second RHS term reflects financial, time, or utility costs of treatment.treatment.Final term is the desire to imitate social context*share of social Final term is the desire to imitate social context*share of social contacts who took up drug in previous period.contacts who took up drug in previous period.

Peer effects influence beliefs about effectiveness, infection burden, Peer effects influence beliefs about effectiveness, infection burden, costs, and utility from imitation.costs, and utility from imitation.


Before technology is introduced, individuals have priors Before technology is introduced, individuals have priors over effectiveness. over effectiveness. Heterogeneity – people can be optimistic or pessimistic Heterogeneity – people can be optimistic or pessimistic relative to actual effectiveness. This may vary with level relative to actual effectiveness. This may vary with level of schooling of individual, “traditional” thinkingof schooling of individual, “traditional” thinkingUpdating priors and learning:Updating priors and learning:

Own experience – individuals learn something through Own experience – individuals learn something through experience. Other shocks to health experience. Other shocks to health noisy signals noisy signals

Social networks - the network is infinite and single path connects Social networks - the network is infinite and single path connects any two nodes. individuals have any two nodes. individuals have mm direct links, and each of direct links, and each of those links have those links have nn direct links, etc. Probability of information direct links, etc. Probability of information transfer is transfer is pp each period. People send information at beginning each period. People send information at beginning of period and receive messages at end of period from their of period and receive messages at end of period from their contacts.contacts.


Steady State Steady State - - As long as some fraction of individuals adopt technology, As long as some fraction of individuals adopt technology,

information will eventually diffuse through the network. information will eventually diffuse through the network. Thus, in the steady state beliefs about effectiveness and costs Thus, in the steady state beliefs about effectiveness and costs

faced will converge to “true” values.faced will converge to “true” values. Two cases:Two cases:

No imitation effects: unique equilibrium existsNo imitation effects: unique equilibrium existsImitation effects: multiple steady states possible if imitation Imitation effects: multiple steady states possible if imitation contribution to utility sufficiently large.contribution to utility sufficiently large.

Implications for subsidiesImplications for subsidiesSubsidizing a small number of people Subsidizing a small number of people people will learn about people will learn about returns as well as how to best use technology returns as well as how to best use technology enough to ensure enough to ensure widespread long-run adoption of technologies with positive private widespread long-run adoption of technologies with positive private returns. returns.


Information transfer: probability that signal is transmitted from Information transfer: probability that signal is transmitted from j j th order link:th order link:

So, the direct impact of an additional signal acquired by a jth order link on take-up is:So, the direct impact of an additional signal acquired by a jth order link on take-up is:

The second piece above can be nonzero depending on how the signal impacts The second piece above can be nonzero depending on how the signal impacts beliefs, cost of take up, infection status, and so forth. beliefs, cost of take up, infection status, and so forth.

Peer Effects and Technology Adoption: Peer Effects and Technology Adoption: TheoryTheory

BeliefsBeliefs

Use of technologyUse of technology C(.) C(.) is a decreasing function of total signals ever received about technology (i.e. is a decreasing function of total signals ever received about technology (i.e.

C’(.) < 0, C’’(.) > 0, C(0) > 0C’(.) < 0, C’’(.) > 0, C(0) > 0))

Treatment externalities from social contactsTreatment externalities from social contacts

Impact of early treatment links on expected private benefits to adoption:Impact of early treatment links on expected private benefits to adoption:

Peer Effects: Empirical AnalysisPeer Effects: Empirical Analysis

Basic idea: are households with more social links to randomly Basic idea: are households with more social links to randomly chosen treatment schools more likely to take deworming drugs, chosen treatment schools more likely to take deworming drugs, conditional on total social contacts?conditional on total social contacts?Data: Data:

Surveyed representative subsample of parents with children in Group 2 Surveyed representative subsample of parents with children in Group 2 and 3 schools. and 3 schools.

Information on five friends, five relatives with whom they speak Information on five friends, five relatives with whom they speak frequently, as additional social contacts whose kids go to primary school frequently, as additional social contacts whose kids go to primary school and individuals with whom they talk about child health issues.and individuals with whom they talk about child health issues.

Information on deworming status of social links’ children as well as Information on deworming status of social links’ children as well as health effects, frequency of interaction with links, respondent knowledge health effects, frequency of interaction with links, respondent knowledge of public health practices.of public health practices.

Second order link measures from 40 parents in each Group 2 and Second order link measures from 40 parents in each Group 2 and Group 3 school. Construction of average number of links parents have Group 3 school. Construction of average number of links parents have to early (Group 1 and 2) and late (Group 3) treatment schools to early (Group 1 and 2) and late (Group 3) treatment schools measurement error?measurement error?


Probit ModelProbit Model

First term is vector of social links to early treatment schools. Includes both First term is vector of social links to early treatment schools. Includes both first order and higher order links.first order and higher order links.

Second term is total number of social links.Second term is total number of social links.

Third term is randomized cost-sharing project.Third term is randomized cost-sharing project.

Fourth term is a vector of household socioeconomic characteristics Fourth term is a vector of household socioeconomic characteristics (education, assets), demographic characteristics (fertility), group and (education, assets), demographic characteristics (fertility), group and community fixed effects.community fixed effects.

Additional specifications include interactions with main treatment variable.Additional specifications include interactions with main treatment variable.

Checking identification: direct contacts with treatment schools, cost sharing Checking identification: direct contacts with treatment schools, cost sharing variables, membership in group 2 generally uncorrelated with vector of variables, membership in group 2 generally uncorrelated with vector of observables. observables.


Main results:Main results: Each additional direct link is associated with 3.1 percentage Each additional direct link is associated with 3.1 percentage

point point decline decline in probability of receiving deworming regimen. in probability of receiving deworming regimen. Implies that majority of effect due to treatment externalities or Implies that majority of effect due to treatment externalities or

learning about effectiveness.learning about effectiveness. Social effects are stronger for respondents with more education Social effects are stronger for respondents with more education

more educated were more optimistic about benefits prior to more educated were more optimistic about benefits prior to program? program?

Social contacts of children also appear to be salient. Stronger for Social contacts of children also appear to be salient. Stronger for adolescents?adolescents?

Higher order contacts appear to have as strong an impact as Higher order contacts appear to have as strong an impact as direct contacts, though third order contacts do not.direct contacts, though third order contacts do not.

Peer Effects: Further IssuesPeer Effects: Further Issues

Are negative social network effects due to treatment externalities or Are negative social network effects due to treatment externalities or learning about drug? Latter seems to be dominant:learning about drug? Latter seems to be dominant:

Having direct social links to early treatment schools is associated with Having direct social links to early treatment schools is associated with lower rates of moderate-heavy infection, but the effect is not statistically lower rates of moderate-heavy infection, but the effect is not statistically significantsignificant

Prior infection status does not seem to be associated with take-up (not Prior infection status does not seem to be associated with take-up (not necessary causal, however)necessary causal, however)

At best, the externality pathway would account for 15% of reduction in At best, the externality pathway would account for 15% of reduction in take-up due to an additional social contact in early treatment school.take-up due to an additional social contact in early treatment school.

Endogeneity of social networks: Were networks measured in 2001 Endogeneity of social networks: Were networks measured in 2001 affected by program?affected by program?

Bias would likely be Bias would likely be positive positive (health conscious parents would find health (health conscious parents would find health conscious friends)conscious friends)

Direct evidence of learning about effectiveness:Direct evidence of learning about effectiveness:

Peer Effects: SimulationPeer Effects: Simulation

Use school to school connection matrix and estimated first order effects to Use school to school connection matrix and estimated first order effects to simulate take-up gains along transition path to steady state. simulate take-up gains along transition path to steady state.

Unlike deworming, the technology under consideration provides true private Unlike deworming, the technology under consideration provides true private benefits which are larger than most individual’s priors benefits which are larger than most individual’s priors diffusion of knowledge diffusion of knowledge speeds adoption.speeds adoption.

Assume: Assume: Health benefits * idiosyncratic utility uniformly distributed Health benefits * idiosyncratic utility uniformly distributed Everyone in a given school has same prior; priors differ Everyone in a given school has same prior; priors differ acrossacross schools schools All social effects from learning about benefits of technology.All social effects from learning about benefits of technology.

Find: Find: Beliefs about technology and take-up rates converge quickly, even when Beliefs about technology and take-up rates converge quickly, even when

signals have high variancesignals have high variance Optimal seeding does not yield additional benefitsOptimal seeding does not yield additional benefits Large additional subsidies provide little additional benefit to take-up; so in Large additional subsidies provide little additional benefit to take-up; so in

cases where difference in (expected) social benefits is negative, sustainability cases where difference in (expected) social benefits is negative, sustainability might not be possiblemight not be possible

Cost SharingCost Sharing

Impact of Health EducationImpact of Health Education

Verbal Commitment StrategyVerbal Commitment Strategy

FindingsFindings

User fees, even very small ones, lead to sizeable drops User fees, even very small ones, lead to sizeable drops in treatment rates.in treatment rates.Additional social links to individuals in treatment schools Additional social links to individuals in treatment schools (random assignment of treatment schools (random assignment of treatment schools source of source of identification here) associated with identification here) associated with decreased decreased rates of rates of take-up.take-up.

Peer effects of learning about the benefits of technology Peer effects of learning about the benefits of technology outweigh those of imitation and learning how to use it.outweigh those of imitation and learning how to use it.

Suggest that large ongoing subsidies might be required Suggest that large ongoing subsidies might be required to sustain high-take up for technologies with large to sustain high-take up for technologies with large positive externalities.positive externalities.Broader lesson: “It may be difficult for external Broader lesson: “It may be difficult for external interventions to promote sustainable voluntary local interventions to promote sustainable voluntary local public good provision.”public good provision.”

The Illusion of Sustainability Michael Kremer Edward Miguel Atheendar Venkataramani – ECON 730a.

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