Market Design and Development Economics
Friday, Jan. 6, 2017 2:30 PM – 4:30 PM
Swissotel Chicago, Zurich B
- Chair: Edward L. Glaeser, Harvard University
Land Trade and Development: A Market Design Approach
AbstractSmall farms and fragmented plots are hallmarks of the agricultural sector in less-developed countries, and there is evidence of high potential returns to consolidation of farmland. Yet consolidating land via private bilateral trade is difficult and slow, due to complementarities, hold-up and asymmetric information. Market design therefore has the potential to improve the allocation of land and contribute to the development process. The design needs to address the specific market failures thought to be impeding land trade, as well as to be understandable to participants, many of whom may be poor and have limited education or experience in trading large assets. As a first step in this agenda we present the results of a series of framed field experiments with farmers in Kenya, comparing the performance of a range of two-sided land auction designs.
AbstractRoughly 100,000 refugees are permanently resettled from refugee camps to hosting countries every year. Nevertheless, refugee resettlement processes in these countries are typically ad hoc, accounting for neither the needs and capacities of hosting communities, nor the preferences of refugees themselves. In this paper, we propose three refugee resettlement systems based on two-sided matching theory that can be used by hosting countries in different circumstances. The mechanisms we propose can improve match efficiency and reduce internal movement of refugees across localities—and might thereby encourage localities to accept more refugees in total. Additionally, the combinatorially-constrained matching framework we develop for our model is of independent theoretical interest and has applications beyond the refugee resettlement context.
Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field
AbstractThe impacts of cash grants and access to credit are known to vary widely, but progress on targeting these services to high-ability, reliable entrepreneurs is so far limited. This paper reports on a field experiment in Maharashtra, India that assesses (1) whether community members have information about one another that can be used to identify high-ability microentrepreneurs, (2) whether organic incentives for community members to misreport their information obscure its value, and (3) whether simple techniques from mechanism design can be used to realign incentives for truthful reporting. We asked 1,380 respondents to rank their entrepreneur peers on various metrics of business profitability and growth and entrepreneur characteristics. We also randomly distributed cash grants of about $100 to measure their marginal return to capital.
We find that the information provided by community members is predictive of many key business and household characteristics including marginal return to capital. While on average the marginal return to capital is modest, preliminary estimates suggest that entrepreneurs given a community rank one standard deviation above the mean enjoy an 8.8% monthly marginal return to capital and those ranked two standard deviations above the mean enjoy a 13.9% monthly return. When respondents are told their reports influence the distribution of grants, we find a considerable degree of misreporting in favor of family members and close friends, which substantially diminishes the value of reports. Finally, we find that monetary incentives for accuracy, eliciting reports in public, and cross-reporting techniques motivated by implementation theory all significantly improve the accuracy of reports.
- D4 - Market Structure, Pricing, and Design
- O1 - Economic Development