How the economy could be used to fight poverty – two economists share their thoughts on Esther Duflo and the importance of development economics
On 10 December 2019, it will be 50 years since Professor Jan Tinbergen was awarded the Nobel Prize for Economics in Stockholm. While his focus area was economic growth in developing countries, he also worked on combating poverty in the Netherlands. He pursued this goal in a number of roles, including his time as Director of the Bureau for Economic Policy Analysis (CPB) from 1945-1955. From 1933 on, Tinbergen was employed at the Nederlandse Economische Hogeschool, the predecessor of Erasmus University Rotterdam, and starting in 1956, he was professor of Development Planning.
Erasmus University’s 106th Dies Natalis was a celebration of Tinbergen’s legacy, with an honorary doctorate presented to Prof. Esther Duflo (MIT) on this special day. Duflo is a development economist who was awarded the Nobel Prize in Economics in 2019. A similarity featured in the work of both scholars is their research into alleviating inequality and poverty.
‘Duflo conducted research into certain subsidies meant to alleviate poverty and whether it made a difference if the money was given to the mothers or the fathers in a family. She discovered that if money was given to the women, the outcomes were better than when funds were given to fathers’, says Dinand Webbink, a professor at the Erasmus School of Economics and one of Esther Duflo’s honorary promotors. He explains why her research is valuable and how it meshes with his own research.
Professor Webbink, what is your research area?
‘I’m a professor of policy evaluation at Erasmus School of Economics and an economist in the field of economics of education. Our research studies how funds can be most effectively spent to obtain the best learning results.
A paper was just accepted on research in Uruguay, where they’ve come up with the idea of giving teachers who work in poor neighbourhoods a higher salary. Just like in the Netherlands, more experienced teachers tend to work in the ‘better schools’. But with income disparities being much greater in Uruguay compared to the situation here, a poor neighbourhood is essentially a slum district. They wanted to remedy the issue by giving teachers in those districts a 25-percent higher salary. We evaluated the effects of that measure. We compared schools that either just met the criteria to be eligible for the scheme or just missed out on being eligible for the scheme. That was a kind of experiment on the threshold of the districts where this measure was applicable.’
"She uses field experiments to conduct research on policy aimed at combating poverty. This is the same approach used in the medical sciences: you have an experimental group and a control group."
What’s the link between your work and Esther Duflo’s work?
‘One thing we have in common is the fact that we search for a random or almost random sampling for our research. We look for random variation and then attempt to determine the causal effect of policy. I’m also doing a study on immigration. As a result of Surinam attaining its independence in 1975, almost half of the country’s citizens came to the Netherlands. Before independence, immigrants were mainly highly educated people, but after 1975 they came from all levels of society and from different regions as well. The Bureau for Economic Policy Analysis has a lot of data about this group of people: who became successful in the Netherlands and who didn’t, and how well the second generation fared. We can even answer the question of ‘what are the Cito-scores of their grandchildren?’. Due to the diversity of the post-1975 group, we were able to effectively measure many variables. This allows us to subsequently find an answer to the question of ‘how quickly can migrants adjust to a new society?’ What’s interesting is that because immigrants from Surinam came from all segments of society as well as from urban and rural areas, we essentially had a random sample group for our research.’
Why did you decide to award her an honorary doctorate two years ago?
‘Esther Duflo is a development economist who asks questions such as ‘why are some people poor?’. But she also asks the question of ‘why do some people remain impoverished and why do they find it difficult to escape poverty?’. Does it have something to do with limited access to loans, not enough resources to invest, or a lack of education? She uses field experiments to conduct research on policy aimed at combating poverty. This is the same approach used in the medical sciences: you have an experimental group and a control group. The groups are established using a draw that randomly assigns individuals to one of the groups. In other words, you have randomized controlled trials. In the environment she works in (poor countries), this system of using a draw is extremely complicated. She is the co-founder and scientific director of the ‘poverty action lab’ J-PAL. This is a large lab with 400 researchers where they collect funds to run hundreds of these field experiments with random groups in different countries.”
What is so special about her work?
‘She conducts large-scale and highly relevant experiments, and she has seriously contemplated the issue of poverty. She also links the experiments to economic theories, making them very relevant in a scientific and economics context. To quote Duflo: “experiments need to be ambitious and need to be informed by theory.”’
Prof. Olivier Marie (Erasmus School of Economics) is Prof. Esther Duflo’s other honorary promotor. This video of Marie explaining why Duflo’s research is so relevant was played during the Dies Natalis:
More about the 106th Dies Natalis
Professor of Economics Anne Gielen is one of the speakers during the 106th dies natalis. Her research focusses on to which extent people’s reliance on benefits is transferred to the next generation.
Prof. Dani Rodrik (Harvard University) will receive an honorary doctorate from Erasmus University Rotterdam during our 106th Dies Natalis on Friday 8th November.
Prominent speakers including Esther Duflo, laureate Nobel Prize in Economic Sciences 2019, and Minister of Finance Wopke Hoeksta, reflect on Tinbergens academic merits and progressive ideas.