Behavioral development economics

By Michael Kremer, Gautam Rao, Frank Schilbach. Handbook of Behavioral Economics - Foundations and Applications 2, 2019

156 citations recorded by the source corpus.

Abstract Behavioral development economics applies theories and ideas from psychology and behavioral economics to the study of questions in development economics. We begin by examining a central puzzle in development economics: the existence of high rates of return without correspondingly rapid growth (the “Euler equation puzzle”). We discuss the extent to which present bias and loss aversion can help resolve this puzzle. We next consider various topics in development, including preventive health, savings, insurance, technology adoption, labor markets, and firms. We discuss particular behavioral theories that can help explain some key facts in each literature and describe the existing empirical evidence. Behavioral topics covered include non-standard preferences (present bias, loss aversion, and social preferences), nonstandard beliefs (naivete and non-Bayesian learning) and non-standard decision-making (limited attention and memory, mental accounting, and default effects). We argue that firms in developing countries are more likely to deviate from profit maximization and that studying “behavioral firms” in developing countries is a promising new agenda for research. We also discuss a recent literature arguing that variation in social preferences is an important driver of development, may have deep historical roots, yet may also be responsive to policies. Finally, we describe the emerging literature on the psychology of poverty, which argues that living in poverty itself may causally affect cognitive function, decision-making, and productivity.

Subfields: Demography

View Paper: https://www.semanticscholar.org/paper/dc80920604c0fdd2d79e92064e137df97c3e2baf

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In Demography

1. Ingar K. Haaland
2. Johannes Wohlfart
3. Christopher Roth
4. Michael Kremer
5. Frank Schilbach

Citations in the corpus

• Designing Information Provision Experiments (2020, background): “In developing country settings, Kremer and Miguel (2007) document muted effects of information on how to avoid worm infections.2 Fitzsimons et al. (2016) find that information provision to mothers in Malawi increases children’s food consumption.”
• Realizing the potential of digital development: The case of agricultural advice (2019, background): “Mobile technologies can also provide reminders and other nudges to address behavioral biases ( 27 ).”