Labor Markets and Poverty in Village Economies

The PIs conducted a randomized evaluation of BRAC’s Targeting the Ultra-Poor program (TUP), a one-off transfer of skills and assets to ultra-poor women in Bangladesh intended to facilitate occupational change. The evaluation was conducted from 2007 to 2014 and covered 1,309 villages from the thirteen poorest districts of Bangladesh.

First, a census was held of all households in the sample villages. BRAC officials then held a participatory rural assessment (PRA), in which village members classified every household into one of four wealth rankings: the ultra-poor, near-poor, middle class, and upper class. Only ultra-poor households with an able adult woman were eligible to receive the TUP program. The baseline survey was conducted in 2007. All ultra-poor and near-poor households were surveyed, while 10% of middle and upper class households were surveyed. Women from eligible ultra-poor households were given a choice of income-generating ass bundles consisting of livestock, tree nurseries, and vegetable gardening supplies. Each asset bundle was valued at $560 in 2007 purchasing power parity adjusted dollars. Eligible women also received a training package valued at $560 in 2007 dollars, consisting of classroom instruction one month before transfer of the asset bundle and follow-up monthly or bimonthly visits at home by an instructor. In addition, eligible women received a subsistence allowance for forty weeks after the asset transfer to help smooth short-run earnings fluctuation during work activity adjustment. Lastly, the participants were encouraged to increase savings of new income.

The results of the study indicate that the intervention was successful in allowing ultra-poor women to substitute into higher paying labor activities, which led to a large increase in income and assets. This increase was sustained four and seven years post-intervention, suggesting that assets and skill transfer programs can set recipients on a sustainable path out of poverty. In addition, the program was highly cost effective, with an average internal rate of return of 22%.

2007-12-01

2011-12-31

Hours devoted to rearing livestock, hours devoted to agricultural labor, hours devoted to maid labor; hours/days worked; earnings; per capita household consumption, value of household durables, savings, value of business assets

The experiment was conducted in the thirteenth poorest districts in Bangladesh; two sub-districts were randomly selected from these larger districts. Together, these sub-districts contained 40 BRAC offices serving 1,309 villages. Treatment and control was randomly assigned at the BRAC office level; i.e. one BRAC office in a sub-district was selected as the treatment office and the other as the control office. Every village within 8km of a treatment office received the program. The sample frame was made up of every household in the 1,309 villages. The participatory rural assessment (PRA) was conducted in both control and treatment villages and sorted households into one of four wealth classifications: ultra-poor, near-poor, middle class, and upper class. Only ultra-poor households with an eligible adult woman and that met several inclusion requirements were eligible to receive the TUP program. All ultra-poor and near-poor households were surveyed, while 10% of the middle and upper class households were surveyed. This partial population experimental design let the PIs estimate the treatment effects of the program on the gap between wealth classes and examine the distributional consequences of the intervention.

The PIs estimated a difference-in-differences specification, exploiting the experimental variation caused by random assignment to treatment and control. Quantile treatment effects for every centile were estimated to examine treatment effect heterogeneity. In addition, the PIs were also able to estimate indirect treatment effects on ineligible households and general equilibrium effects for village-level economies. Lastly, the PIs conducted a cost-benefit analysis for the TUP program.

Two sub-districts from the thirteen poorest districts were randomly selected; then, the 40 BRAC offices in these sub-districts were randomly assigned to treatment or control. Every village within 8km of a treatment BRAC office received treatment.

individual BRAC office

Yes

40 BRAC offices

21,839 total households; 6732 ultra-poor, 6743 near-poor, 6328 middle class; 2036 upper class

20 BRAC offices in treatment; 20 BRAC offices in control

We study how women's choices over labor activities in village economies correlate with poverty and whether enabling the poorest women to take on the activities of their richer counterparts can set them on a sustainable trajectory out of poverty. To do this we conduct a large-scale randomized control trial, covering over 21,000 households in 1,309 villages surveyed four times over a seven-year period, to evaluate a nationwide program in Bangladesh that transfers livestock assets and skills to the poorest women. At baseline, the poorest women mostly engage in low return and seasonal casual wage labor while wealthier women solely engage in livestock rearing. The program enables poor women to start engaging in livestock rearing, increasing their aggregate labor supply and earnings. This leads to asset accumulation (livestock, land, and business assets) and poverty reduction, both sustained after four and seven years. These gains do not crowd out the livestock businesses of noneligible households while the wages these receive for casual jobs increase as the poor reduce their labor supply. Our results show that (i) the poor are able to take on the work activities of the nonpoor but face barriers to doing so, and, (ii) one-off interventions that remove these barriers lead to sustainable poverty reduction.

Oriana Bandiera, Robin Burgess, Narayan Das, Selim Gulesci, Imran Rasul, Munshi Sulaiman; Labor Markets and Poverty in Village Economies, The Quarterly Journal of Economics, Volume 132, Issue 2, 1 May 2017, Pages 811–870, https://doi.org/10.1093/qje/qjx003

https://doi.org/10.1093/qje/qjx003