PSD Blog - The World Bank Group

Crowdsourcing creativity

A few weeks ago, I had the good fortune of attending a conference on prediction markets hosted by Inkling, a prediction market platform provider. The first presentation of the day actually had little to do with prediction markets, but still had everything to do with tapping into the wisdom of the crowds. (Or, better yet, the wisdom *in* the crowds.)

Mike Samson, one of the founders of a very cool site called Crowdspring, discussed his efforts to create a marketplace for creativity. Any small business (or large corporation for that matter) can go on the site and post specifications for a project, e.g. designing a logo or building a website, and anyone around the world with internet access can submit entries. Hidden talent seems to crop up in unanticipated places (there was one tale of a janitor winning projects who had no formal training in visual design).

Sachs vs. Easterly: From saga to mud-wrestling

Back in 2007, we were calling the Jeffrey Sachs and William Easterly debates a saga. Now we've been reduced to "two middle-aged white men mud-wrestling." Seriously, guys? I recommend leaving the mud-wrestling to the experts - you're liable to pull a muscle.

Evaluating the evaluators

My recent post discussing the unflattering findings from a randomized control trial of microfinance prompted some heated discussion of just what evaluation can tell us in this context. It turns out that a new Policy Research Working Paper takes up exactly this issue (Impact Assessments in Finance and Private Sector Development: What Have We Learned and What Should We Learn?).

If you got worked up about the microfinance findings, then this paper is definitely worth a read. For those who are more time-strapped, here is the CliffsNotes version:

• Randomized control trials can't tell us everything, but that's OK because there are other useful ways to measure impact.
• Evaluations should focus as much on the question of why there was an impact as on whether there was an impact.

Update: David McKenzie, the author of the working paper, has a question for those of you involved in finance and private sector development projects: If you haven't incorporated an impact assessment into your project, why not? And (this one is my own) what would it take to make it possible for you to include this kind of assessment?

Serving the poor through markets

I just ran across a useful compendium of market-based solutions to poverty. Not too long ago an organization called the Monitor Group put out a publication called Emerging Markets, Emerging Models. It's filled with instructive examples - here is one of them:

The Byrraju Foundation provides a good example of a promising pay-per-use operation in water purification. In India, one typical low-cost business model is to provide individual activated carbon water filter units to low-income families at costs ranging from Rs. 900 to 1,500 ($18-$30), with replacement filter cartridges needed every three to six months at the cost of Rs. 400 ($8). With a monthly cost of Rs. 60-90 at normal usage rates, this is often too much for families living on Rs. 3,000 or less.

Portfolios of the poor

Daryl Collins, one of the authors of an important new book (Portfolios of the Poor: How the World's Poor Live on $2 a Day), discusses how the world's poorest manage their cash flows in an interview in The Boston Globe. Collins explains just how sophisticated some of the poor are at managing their often irregular cash flows:

Here is an interesting mechanism...They call it money guarding. If you get a fairly decent chunk of money, you give it to a money guard, a neighbor or relative or friend that you trust and say, "Hold this, and don't let me touch it." Sometimes the same money guard asks you to hold their money, and so when someone comes to borrow money, you say, "It's not my money." It works.

The difficulty of saving money - as evidenced by the need to resort to a money guard - just might explain the popularity of microcredit. If it's that difficult to save up for a big purchase or investment, it's probably simpler to borrow for it and repay over time. Considering the recent unflattering findings about microcredit, however, perhaps it's time for the microfinance community to focus more on access to savings rather than access to loans.

(Thanks to Giulio Quaggiotto for the pointer.)

The verdict is in on microfinance

And it's not pretty. The results from the first large-scale randomized trial of access to microfinance indicate that it comes up short in many areas of human development. 52 of 104 slums in Hyderabad were randomly selected to receive new branches of a microfinance outfit called Spandana. Abhijit Banerjee and the other randomistas from the Poverty Action Lab describe the results in The Miracle of Microfinance? Evidence from a Randomized Evaluation:

...microcredit does have important effects on business outcomes and the composition of household expenditure. Moreover, these effects differ for different households, in a way consistent with the fact that a household wishing to start a new business must pay a fixed cost to do so. Existing business owners appear to use microcredit to expand their businesses: durables spending (i.e. investment) and business profits increase...

The World Bank disclosure policy review

Editor's Note: Larisa Smirnova is a consultant at the World Bank and is currently working with the Transparency Indicator team.

Earlier this week I attended the Workshop on Proposed Revisions to the World Bank’s Disclosure Policy. The World Bank revises its disclosure policy every two years. The concept of the current comprehensive review is outlined in the paper Toward Greater Transparency: Rethinking the World Bank's Disclosure Policy. Most importantly, the paper suggests a shift from only disclosing information on the "positive list" to disclosing any information in the Bank’s possession unless it is on the "list of exceptions".

The paper is available at the World Bank’s external website in seven languages and is open to comments by everyone. Have your voice heard!

Formal firms with informal workers

In my last post, I claimed that “it is common for formal firms to have many informal workers.” How do I know that?

Joyce Sadka and I have been doing some work using data from a labor court in Cuautitlán, which is located just outside of Mexico City. Each data point represents an individual who claimed to have been fired from a formal-sector firm without cause.

As of now we have data on about 2,000 such cases filed in 2002. Most cases settle or are dropped, but 245 cases went all the way to a judge’s ruling. A judge’s ruling hopefully gives us an unbiased look at the facts of the case.

What's the opposite of a boycott?

The answer is a "carrotmob".

Imagine going around to the shopkeepers in your neighbourhood and asking them what percentage of their sales they would be willing to invest in improving their energy efficiency. Identify the highest bidder and, using social media, you mobilise the local community to "mob" their shop on a mutually agreed date. Document everything on YouTube and get others to repeat the experiment around the world.

Corporate social responsibility and activism, the development 2.0 way. (Via the Guardian)

P.S. As well as being the opposite of a boycott, carrotmobs might also be an antidote to "slacktivism".

Nano is beautiful

Where are the growth opportunities in a down market? Tata, the company behind the $2,000 Nano car, seems to be betting on the bottom of the pyramid (or at least somewhere far from the top of the pyramid). According to Business Week, Tata will be building 1,000 Nano apartments outside Mumbai for $7,800 each. The smallest of the apartments measures a mere 283 square feet (check out the floor plans here).

(Hat tip: Richard Florida)