When every argument begins with “is it better than cash?”

"Where the hell is the Jaeger?" "Oh the government couldn't figure out how to evaluate the anti-Kaiju programme, so they just do cash transfers now."

“Where the hell is the Jaeger?” “Oh the government couldn’t really figure out how to evaluate the giant robots-fight off giant aliens programme, so they basically just do cash transfers now.”

Kevin Grier grumbles about the IDA, arguing that its investments couldn’t possibly stack up to cash transfers:

The last 3 year replenishment of IDA was for 49.3 billion dollars. So for a decade of IDA, we can use 150 billion dollars as a cost number. People, for $150 billion dollars, you could give 75 million people each $2000 in cold hard cash. From my point of view, that sounds a lot better than giving them “access” to services. Now sure, there are aid agencies worse than the IDA (phone call for USAID), but there is nothing in Mombrial’s post that backs up his claim that the IDA is a good investment, and in my opinion, it’s actually a bad investment relative to unconditional cash transfers.

Even without the growing body of empirical evidence indicating that just giving cash is an incredibly cost-effective way to increase welfare, there is an extremely compelling theoretical case to be made for cash transfers. Poor households have preferences (replace these with `needs’ if you are so inclined, although there are important distinctions between the two), and no one will ever have better information on these preferences than these households. Transferring households cash allows them to best allocate these new resources to meet these preferences – otherwise, we run the risk of wasting resources on stuff that households just don’t want.* Combine this with the fact that cash transfers are getting quite easy to make, especially in the era of mobile money, and they appear to be a reasonable standard by which to compare all other interventions.

Yet, the most ardent supporters of cash transfer programmes often forget that many societies (read: all societies) are still struggling with pretty severe collective action problems which inhibit the provision of public goods. It’s far from clear that distributing cash will solve these problems: if a village of people haven’t banded together and produced a well-functioning school by now, although giving them cash certainly increases their purchasing power to do so, it’s unlikely to solve the basic collective action problem resulting in the failure to produce the school.

This is important, as there are a range of public goods (or semi-private goods which have substantial externalities) which we can imagine might increase welfare a great deal more than a cash transfer of equivalent cost: schools, health facilities, roads, a functioning police force. Basically, any semblance of a local or national state. How many of you would vote for your own government to transfer its entire budget evenly across the population and then shut down all its operation for good? It certainly would make it easier to pay the rent next month, if your apartment complex hadn’t been burned down by the marauding hordes yet.

Now, if the collective actions problems we care about have already been solved by the market, we should be less worried. Despite a steady flow of misinformed rhetoric from NGOs suggesting that private schools in developing countries are a distraction, there is a great deal of evidence suggesting that in settings where the state is failing to provide quality schooling, private schools present a reasonable (and probably strictly superior) alternative for poor families. In these settings, unconditional cash transfers should be enough. However, there are going to be a lot of contexts where markets are not filling these gaps. For example, rural health clinics tend to be the preserve of government or NGO work, rather than the private health sector, so the effect of income on health outcomes in these contexts is going to be more complex.

The hypothesis “is intervention X better than cash?” is relatively easy to test for a whole slew of interventions: run an RCT and see if this is the case. Yet, while development economists are getting quite good at making and replicating these comparisons for private or small-scale interventions, many of the large public-good investments that have the potential for a large payoff remain difficult to convincingly empirically evaluate (I am somewhat optimistic that we will get there, but we’re certainly not there yet). The current bias towards cash represents not only a positive assessment of the returns to these types of interventions, but also a preference for interventions that can easily be shown to work.

Yet we know that public goods matter and that cash-transfers, to the extent that they cannot be taxed by the state, are unlikely to help in this regard. Multilateral lending/aid organisations like the IDA tend to focus more on projects which have some public good element, such as infrastructure. Whether or not these organisations are any good at producing successful, cost-effective projects is certainly a question we should be asking. But the choice that Grier presents us with is a false one: that we must choose between wasteful public good spending and cash, as if the cash-only equilibrium is the only one that could ever make any sense.

I am frequently guilty of wheeling out the “but is it better than cash?” argument whenever I see an intervention which looks wasteful or too paternalistic** for my taste, but we should be cautious not to use cash transfers as the appropriate gold standard for every intervention. There are plenty of public-good-type interventions which are (currently) hard-to-measure but important. Whether or not aid donors and governments are any good at funding these interventions should be the starting point for the discussion.

*I’m ignoring a lot of potential problems here by using households instead of people, as well as ignoring issues with time-inconsistency, etc, because I want to focus on one particular argument in this post.

**There are those that doubt the efficacy of unconditional cash transfers due to concerns over the ability of households to discern what they should be spending the money on. These concerns are not entirely unfounded – we are all subject to a variety of cognitive biases which can lead to suboptimal decisions. I choose to ignore these concerns here, not because I don’t think that they apply, but because I’m pretty skeptical that aid agencies and charities would be better at determining optimal private expenditure patterns than households.

Of tribes and titles

deadwood-03-1024

“Sol, we’re new here and don’t really know anybody, so get over to Swearengen and secure us a title deed to some property.”

Things have been a bit quiet recently – part of this is due to a lengthy field-based ethnographic research trip focused on the interaction between late 80s and early 90s UK dance music and Croatian culture. I also was tied up by the always-impressive `Growth Week‘ held by the International Growth Centre Growth at LSE. I’ll let you guess which was more fun.

So let’s start with some blatant self promotion – I’ve got a new working paper out. Here’s the short, short version: most unplanned settlements or `slums’  in most of SSA are dominated by informal tenure, where your right over land is more likely to be determined by customary law, social connections, or ad hoc semi-formal methods of establishing occupancy, than it is by a formal land title. Some households are going to have an easier time of securing their tenure through informal means, others who face higher costs to doing so might be more likely to accept property rights provided by the state. I examine this by looking to see whether or not households in Dar es Salaam which are ethnically-isolated (surrounded by neighbours from other tribes) are more likely to buy property rights offered by the Tanzanian government.

For more detail, head over to the CSAE blog, where I talk about the paper in a little more detail.

I’ll leave you with an image which sums up all the fears and uncertainties of tenure in slums: a landowner on Oxford Street, Accra, who desperately wants to avoid the sale of his/her property (thanks to Elwyn Davies for this photo):

1266753_10151622795136570_102329590_o

Immigration smimmigration

"If you choose the red pill, then I'll show you just how deep the rabbit hole goes. But then we're going to stop releasing people from the Matrix. We're worried about wage effects in Zion."

“If you choose the red pill, then I’ll show you just how deep the rabbit hole goes. But then we’re going to stop releasing people from the Matrix. We’re worried about wage effects in Zion.”

Paul Collier writes about immigration for Bloomberg. I’m sure we’re only a matter of minutes away from some very serious commentary from the folks at CGD or from Roving Bandit, but here are a few of my own thoughts.

Firstly, Collier argues that new immigration inevitably will hurt the status of the recently-migrated, even if it does not hurt the native population:

The answer is that those who have already migrated lose, at least in economic terms, through the subsequent migration of others. Migrants lose because they compete with one another.

Migrants aren’t in close competition with indigenous workers. The advantage the indigenous have may be that they have better command of the language or that their greater tacit knowledge of social conventions makes them more productive.

The effects of immigration on the wages of indigenous workers vary between very small losses and modest gains. If immigration policy were to be set by its effects upon wages, the only interest group to campaign for tighter restrictions should be immigrants.

The individual behavior of immigrants evidently belies this interest: Immigrants typically devote considerable effort to trying to get visas for their relatives. But these two interests aren’t inconsistent.

An immigrant who enables a relative to join her receives benefits such as companionship. The increased competition in the job market generated by the extra migrant is suffered by other immigrants. In effect, a tightening of immigration restrictions would be a public good for the existing immigrant community as a whole.

So immigration doesn’t hurt the`indigenous’ population, but will hurt new migrants? Solution: every country in the world allows just one immigrant in its borders, then closes them forever. Seriously, it is unclear here what Collier’s assumed social welfare function is.* It’s perfectly understandable why immigration restrictions might be endogenous to levels of migration, but I’m struggling to recall any high-profile cases of recent-migrants calling for a curb on future migration.**

If we cared about general welfare and not just that of recent migrants, loosening restrictions are a bit of a no-brainer. Yes, it might depress wages in the short run for other migrants (evidence?) but compared against the enormous welfare benefits from the migration itself, this is really a second-order concern (a bit like arguing that we shouldn’t let anyone else into the life-boat because, damn it, it will be less comfortable).

Next, Collier argues that new immigration creates another set of externalities on existing migrants: more hate

There may be further social reasons that the existing stock of immigrants has an interest in tighter restrictions. The size of the immigrant stock also affects attitudes of the indigenous population. Contrary to the hope that exposure increases tolerance, the opposite appears to happen.

Heightened intolerance is a public bad suffered by immigrants as a whole, and is thus inadvertently generated by the individually maximizing migration decisions of each successive migrant. Hence, the paradox of migration. Individual migrants succeed in capturing the huge productivity gains from migration. But migrants collectively have an interest in precisely what individually is most detrimental: entry barriers.

Haters gonna hate – and haters gonna hate even more when there are more immigrants around, apparently. Again, no evidence is given to support this case. While I do think there is a worthwhile conversation to be had about how immigrants integrate into societies and how best to maintain social cohesion, falling back on the “We, the indigenous, are inherently racist, and are just going to get more racist as more foreigners show up and there’s nothing to be done about it” argument seems a bit silly.

Finally, Collier argues that migrants might not actually be that much happier and that, combined with the psychological cost of being in a new culture, immigration might be a bad deal. He turns to evidence from several studies showing happiness doesn’t increase when people are allowed to migrate.

This seems to me to be a better argument against using happiness as a welfare indicator, rather than against migration itself. It also leaves us with an entirely unsatisfactory explanation for current migration: that people are deluded about the benefits and would have preferred never to have traveled in the first place. This is particularly hard to swallow in an era where information is particularly cheap – it is relatively easy to send information back to one’s friends and family to clarify that, actually, it isn’t as cool here as I thought it was going to be.

In general, these feel like highly theoretical, armchair rationales for limiting migration. Surely we’ve moved past this by now?

 

*Update #1: To clarify, I mean the SWF Collier is using to make his case, not necessarily his personal preferences over migration!

**Update #2: a friend noted (via e-mail) that this is historically quite common – waves of immigrants turn around and try to stop the next group from landing. While I’d conceded that former-immigrants tend to resist those coming from a different national/ethnic origin, are there any cases where immigrants tried to close the door on immigration from their own country of origin?

NIMBY! Wait, where is my back yard?

uphouse

 

Most governments enjoy the ability to rely on eminent domain whenever land needs to be acquired for large scale development projects. China, a country where one would expect this sort of power to be exerted all the time, appears to be home to a surprising number of `nail houses‘ – property where owners refused compensation from private investors and refused to move out. If the government doesn’t exercise eminent domain and compensation cannot be agreed on, investors often go ahead anyway and build around the remaining property. There result is striking and more than a little funny - I stumbled across this collection of photos of Chinese nail houses (and a few from the US and Europe) on io9 – a few examples:

test

nailhouse

 

It’s hard to know how to feel about these situations. For the past few years I’ve been working on a project that has been trying to extent formal property rights to slum residents in Dar es Salaam. I’ve often sold the benefits as being primarily expropriation-related, but several seminar attendees have (rightly) pointed out that sometimes it’s better off for society if people can’t, on the margin, hold out for enormous compensation amounts. This opens up the enormous can of worms which is the rights-versus-efficiency debate, something I’m not going to get into at the moment. Yet, it’s still worth pointing out that this issue is far from straightforward: we want large investment projects to be successful, and to do so they need land. We also don’t want to trample on the rights of owners, especially the poor, especially when compensation is often neither fair nor transparently handled.

Sexist reasons for gender equity

I’m doing some reading on joint-titling in low income countries. In an article in Feminist Economics, I came across a description of the city of Chandigarh in northern India, where the local government decided to implement a joint titling policy for slums, not because they particularly cared about getting women access to land, but because they felt that nagging wives would stop their husbands from selling it!

One last, important reason why Chandigarh is an interesting place for studying informal settlements is that it recently introduced an innovative way to prevent property sales in regularized settlements – ‘‘joint titling.’’ The government has decided to allot houses in the name of both husband and wife, replacing the earlier policy of recognizing only the head of household, usually the male, as the homeowner. Joint titling was implemented because government policy-makers believed that women are inherently more attached to their homes than men and would therefore resist any attempt by their husbands to sell the house for profit. These gender differences in attitudes towards the home, officials assumed, would reduce property sales and enhance the effectiveness of housing policies.

We have a pope, now eat your vegetables

"Did you finish your plate?" "I did, I swear to God" "SWEAR TO ME"

“Did you finish your plate?” “I did, I swear to God” “SWEAR TO ME”

When I was young and fickle, my grandmother would sometimes admonish me for not finishing my plate. “Think of all the starving children in Africa!” she would say, in an attempt to use guilt to motivate me. My reply, which usually ended the conversation, was: “Why don’t you pack it up and send it to them then?”

I was about eight years old then, so I had since considered the argument to be settled. Not so fast! Pope Francis tags in and slides into the ring to set things right:

Pope Francis on Wednesday denounced what he called a “culture of waste” in an increasingly consumerist world and said throwing away goodfood was like stealing from poor people.

“Our grandparents used to make a point of not throwing away leftover food. Consumerism has made us accustomed to wasting food daily and we are unable to see its real value,” Francis said at his weekly audience in St Peter’s Square.

“Throwing away food is like stealing from the table of those who are poor and hungry,” he said.

I must admit, I have a hard time dealing with the concept of a new pope. I was born in the early 80s, so John Paul II is very much the `canonical’ pope in my mind, the same way that, well, the Tim Burton/Michael Keaton Batman is the original Batman. The brief, tempestuous tenure of Pope “Ratzinger” Benedict can be likened to the strange turn that the Batman films took in the late 90s, when Joel Schumacher took the reigns of the franchise, Robin showed up and the Batsuit acquired nipples. Given his focus on poverty, I really want to like this new pope – he has a leanness and focus which isn’t a million miles off from Christopher Nolan’s interpretation of Batman, but unfortunately he carries all the same self-serious baggage that sometimes weighed down the last few films.

But I digress. There are two potential reasons why we might consider wasting food to be odious. The first is that there is something morally unacceptable about waste when there are those that are suffering, regardless of whether or not the excess food could be transferred. The second is that somehow food wastage has a direct impact on those that are hungry (more or less what Christian Bale, I mean Pope Francis, is suggesting in the last quote).

The first criticism might hold some water if it was more commonly applied to other contexts than food, but it almost never is. How often have you used money less efficiently that you might have? For example, by booking a train later than you should have, or having that extra pint that you probably didn’t need? Aren’t you wasting money? Think of all the poor people who, by definition don’t have it. Or what about the time you sat in a class in university, and you failed to pay attention for five minutes – think of all the poor children of the world who don’t have university.

In reality, we human beings are fairly inefficient creatures, but often we’re inefficient in one domain so we can be efficient in other domains. I don’t spend a lot of time worrying about food wastage, so I might save money by avoiding waste. Then again, instead of spending time working to avoid waste, I might spend it working more, the returns to which (including those to charitable causes) might actually be higher.  Given that the reasons for food wastage are quite varied, and there is no easy redistribution mechanism (I can’t ship my leftover pasta to Ethiopia in time for consumption there), the first criticism doesn’t get us very far.

What about the second? Let’s assume that whatever cognitive biases or strategies that lead to food wastage could be eliminated, tomorrow. What would happen? Assuming this is a purely demand-side effect, we should see a decrease in the price of food. Whether or not this will lead to a net reduction in hunger is an extremely complex and difficult question, as the world is full of poor people who are net producers AND net consumers of food. Whoever works on a banana plantation might be happy that occasionally I over-estimate how many bananas I can eat in a week.

The second criticism is even sillier given that there is plenty of more general wastage which, if re-directed, could easily help the poor. Spend too much of your time sitting around, not sure what you want to do? Volunteer at a charity! Have money that you’ve been blowing on clothes you don’t really like and won’t wear too often? Give it to a charity with a good track-record of helping the poor. Unless you are chowing down on a turkducken in the middle of a drought-stricken village, worry less about your food wastage and worry more about other ways you could be helping the poor.

Now, if you’ll excuse me, I’m going to print this blog out and mail it to my grandmother.

You can never win

paula

“I am Paul Atreides, the Muad’Dib, leader of the Fremen of Arrakis, the *only* source of Spice Melange, which gives me rights as Galactic Emperor! ……. oh I see, you can create it synthetically now. This is awkward.”

It appears that it is now possible to synthetically create artemisinin, used primarily (solely?) as a treatment against malaria. This is the stuff of first-pumping and cheering, especially if the synthetic version turns out to be significantly easy and cheaper to obtain than the natural version. This is a real win for global health.

Not so fast, says Jim Thomas in the Guardian, a newspaper which somehow manages to make us feel guilty about any good development-related news by identifying some poor sod who has lost out (a wonderful example is their silly, excessive worrying over Western consumption of quinoa). According to Thomas, the new synthetic version of the drug will put farmers of sweet wormwood (the plant from which artemisinin is usually derived) out of business:

Now it turns out that artemesia farmers are dismissed as entirely expendable. The rejoinder of “let them plant potatoes” seems dismissive of farmer knowledge: farmers understand markets well and those now growing artemisia annua do so because it helps them bring in income. As for the argument that synbio is necessary to eradicate malaria, the botanical approach was already producing more than enough artemisinin to address malaria.

“There is simply no rationale to have a synthetic product on the market when farmers could produce enough raw material to produce the tablets from pulverised high quality plants,” said Professor Hans Herren, World Food Prize winner, who has worked extensively with east African artemesia farmers.

Now, it remains to be seen how much cheaper the synthetic version will be, but let’s assume that it’s significantly cheaper than the natural one (although it turns out the price of the latter is insanely volatile). How much hand-wringing should we actually do if welfare gains for fighting malaria outweigh the welfare losses of having farmers switch to another type of crop?

If you still feel outraged by all this, would you feel differently if we switched out the words “sweet wormwood” with “biofuel crops”? Would you feel differently if someone had discovered a working vaccine for malaria?

On MPIs and MDGs

Conan, what is best in life? "It is 1/3 crushing your enemies, 1/3 seeing them driven before you, and 1/3 hearing the lamentation of their women."

Conan, what is best in life? “It is 1/3 crushing your enemies, 1/3 seeing them driven before you, and 1/3 hearing the lamentation of their women.”

Sabine Alkire and Andy Sumner have released a short paper suggesting that the Multidimensional Poverty Index (MPI) be used as a `headline indicator’ for the post-2015 Millennium Development Goals (MDGs). If you’re unfamiliar with the MPI, you can read up on it here. Alkire and Sumner are suggesting that whatever indicators emerge out of the inevitable post-2015 intellectual bloodbath be aggregated into a single index using the same method that is used for the current MPI. This has excited some people, including Duncan Green, who thinks it will be useful in inducing governments to take the post-2015 goals seriously:

That in turn would allow the post2015 process to generate more traction on national governments (the lack of which is the subject of my paper) through league tables. Imagine if every year, all countries (including the rich ones) are ranked on a comprehensive human development table that (unlike the Human Development Index and other similar efforts) has buy in and recognition from across the international community. Each annual report would pick out the countries that have risen/fallen relative to the others. Regional tables could compare India and Bangladesh, or Peru and Bolivia, to generate extra public interest and pressure on decision makers.

I’ll go out and say it: I think this is a really bad idea. It combines the two things that make  two things that make me uncomfortable about both the MPI and the MDGs – arbitrary weights on different indicators/goals and an inflexibility to local preferences.

I’ll use a very basic example: let’s say that the next set of MDGs focuses on two things: hunger and access to clean water. After what will bound to be a seriously convoluted process, someone will agree on internationally-agreed weights on these two things. Let’s say the weights are fifty-fifty, that the final index puts just as much weight on a person who is hungry as one who does not have access to clean water.

Now consider a fictional country, Bigmacistan, which has a culture that sees hunger as being the ultimate state of poverty, much more than clean water. If Bigmacistan were allowed to assign its own weights, it would prefer 3/4 of the total weight to go to hunger and 1/4 to clean water. In fact, given limited resources, Bigmacistan will choose to combat poverty in a way that is not only seen as sub-optimal by the post-MDG framework, but would result in a fall in its global rankings, even if every single person in Bigmacistan is in agreement with its national emphasis on hunger. So differences in MPI 2.0 rankings not only reflect aggregate differences in each country’s success in fighting poverty, but differences in the structure of national social welfare functions.

What one could do is let countries set their own weights (I’ve argued that this is the only way the MPI could even be useful for governments in the long run), but this would never appease the technocrats, because once weights start varying across countries, country rankings start making even less sense.

One could argue that, if there are some indicators that we can reach a reasonably broad consensus on, then imposing these preferences on other countries might be defensible. Unfortunately, this still doesn’t adequately justify the use of the MPI, especially if they are used for annual rankings. Imagine the Bigmacistan actually cares as much about clean water as it does about hunger, but realises that, given its own complex context, it needs to deal with its hunger problem before it will have the capacity to deal with its water access problem. It draws up a national plan which ends hunger by 2020 and then improves access to water by 2025. Yet, from 2015 onwards, Bigmacistan is hounded by donors, NGOs and the media for its poor performance on the MPI 2.0 due to its lack of concern for those living without water.

Finally, any time we want to say anything interesting about the MPI 2.0, we’ll still have to unpack it into its composite indicators, a point Claire Melamed makes on Duncan’s blog:

Say the MPI 2.0, or whatever you called it, went up, or down, in a given country. You’d need an extra layer of data analysis – always fatal as that’s the point you lose people’s attention – to know why. It could be that health outcomes got a lot better, but education outcomes got a bit worse, and so the overall MPI score went up a bit. This would neither be helpful for policy makers, nor tell you much about what people think is important, and it would all be much too complicated to generate any campaigning or political energy anyway.

I do think MPI has its uses, but could we please avoid creating another worldwide indicator that doesn’t tell us very much and imposes what will ultimately be imposing fairly arbitrary weights on individual countries?

Some more thoughts on land grabs and tricky statistics

I suppose you could label this post as my response to Ricardo and Marloes’s response to my post on their recent media brief on the correlation between governance and land grabs. First, I should say that this is all very exciting – it’s nice to have an actual debate about this. NGOs frequently ignore substantive criticism of their analytical work (to be fair, so do a lot of academics), so I must commend Ricardo and Marloes for their enthusiasm and willingness to get in touch and have a reasonable argument about all this.

I think we’ll likely to continue to disagree about when results should be presented (or at least how they should be presented), so I’ll turn my attention to their three main technical points:

 

1) It’s not realistic to assume that investors target poor countries

True, but poor countries themselves might be more likely to put land up for sale. Discerning the difference between targeting and supply-side effects will always be difficult because we only observe actual land deals (in essence, the quantity `consumed’). But this is beside the point – spend fifteen minutes in an economics seminar and you’ll learn that a common way of challenging identifying assumptions is to come up with an equally-credible alternate story. I’ve shown that, at least in this very basic setup, income is a better predictor of a country having a land deal than governance. While my alternate story might be considered implausible (even if it does fit the data better), I really only put it up to point out how equally-flimsy the assumption of investor targeting is.

 

2) My last table is badly specified and then I forget to estimate a hurdle model.

Before delving into the technicalities of this argument, let’s briefly talk about burden of proof. It is Oxfam’s job here to convince us all that investors are targeting countries with poor governance, or at least that there is some consistent correlation between the two. By this very basic metric, I assert that the current analysis falls short, as it doesn’t provide enough evidence to reject the null of no relationship. One doesn’t always need to present and prove an alternate hypothesis, complete with fancy, well-specified econometrics, in order to disprove the one being asserted.

As far as the specification of the first two columns in Table 4 – sure, this is pretty much atheoretic wandering. I’m not going to assert that I’m cleanly identifying any individual channels, but seeing if Oxfam’s relationship stands up (I’m actually trying to help you here guys) once we start controlling for all these things. Multicollinearity doesn’t seem to be preventing some results from shining through. But yes, this is playtime with Stata, although I admit as much up front. See my point about burden of proof here.

Their final point is a technical one – I’m interested in whether, conditional on a country selling any land, governance is correlated with the number of land deals. Technically, this specification is subject to a form of bias due to selection on unobservables: for example, if hotter countries are more likely to sell land, and there is a correlation between temperature and the governance indicators, then estimates in columns (3) and (4) of Table 4 will be biased.  [OK this is not what their point was - see Paul's comment below.] Ricardo and Marloes would be happier if I estimated a model which took this selection into account.

But the problem is: as I point out at the end of my piece, I don’t really buy the selection equation in the first place, and this factors into their third point:

 

3). They take issue with my worry about “bias” in how land deals are reported. 

I’m worried the Land Matrix is a better measure of “number of reports on land deals” than “number of land deals” and that the measure of “have there been any substantial land deals” in the past ten years is really just a measure of “has anyone bothered to submit a news report to the land matrix on your country in the past ten years.” Ricardo and Marloes make a purely theoretical argument that reporting in the UK should be better than reporting in developing countries. If we were talking about general media reporting, I would be inclined to agree, but I’d be surprised if anyone is scanning British newspapers for land deals and submitting the data to the Land matrix.

Furthermore, consider the  final hurdle a land deal must clear to get into the Land Matrix: “entail the conversion of land from local community use or important ecosystem service provision to commercial production.” This seems like it should only be possible in societies where a significant percentage of the population is involved in agriculture and where large scale commercialisation is yet to happen. Sure, the quality of the British government is one of the reasons there aren’t many dodgy deals going on, but we have to remember that Great Britain has already gone through the long process of moving from smallholder farming to relatively large-scale commercial production. Yet Ricardo and Marloes want to code Great Britain  a zero and include it in the selection equation – I’m just not convinced.

How do we move forward? I’m happy that both Marloes and Ricardo want to continue working on this. This is definitely the best outcome – I can think of several ways that one could try and take it a little bit further

  • Let’s start exploiting the time dimension: we have a panel – let’s use it – although I do have a fear that, as several have pointed out, there won’t be enough meaningful variation in the WDI indicators across time to actually identify anything.
  • Number of deals and size - these are, save for my kitchen sink regressions, currently unexploited. As is information on whether or not deals are international or national.
  • Let’s get more data! I’m hesitant to throw a stake into the ground and say it’s time to make a call, especially when the data is as limited as it is. If we could get our hands on district level data (or, in my wildest dreams, GIS data) on land deals, we could start to say so much  more about what’s going on.

Finally, a word to idle academics out there – I implore you to pay more attention to this stuff. We have a hard enough time encouraging replication of our own studies, but I think the world would be a much better place if we sat down from time to time and just tried to recreate “killer facts” that otherwise dominate the discourse. I didn’t start my analysis with any intention to go after Oxfam’s results, but it only took a little while with the data before I realised that the story was much more complex, and worth a second look.

Again, thanks to Ricardo and Marloes for a fun debate (I’ve offered them a second reply if they’d like).

 

Response from Oxfam: Governance, land grabs and tricky statistics

by Ricardo Fuentes-Nieva and Marloes Nicholls

It is encouraging to read the post from Aid Thoughts. We appreciate the time he put into Oxfam’s analysis on large scale land deals. Indeed, we were hoping that our blog would spark debate and bring more attention to this topic.

As a quick summary, we took two databases, the Land Matrix and the World Governance Indicators and found that land deals are more likely to occur in countries with lower levels across different governance indicators.  We specified that “This analysis is only the first step towards a more in depth research project. Next steps include a more in depth analysis on the determinants of the number and location of deals

Aid Thoughts seems to take issue with the use of this kind of analysis when they are so preliminary. There are two things to say to this:  Firstly, and as Aid Thoughts acknowledges, there is other evidence in the development literature that points to the fact that land deals are concentrated in poorly governed countries. Our conclusions were not based only on our analysis and we used the best evidence at hand (both internal and external) to generate a better understanding of the problem (which Aid Thoughts actually helped with his critical review). So, we stand by our decision to publish the preliminary results.

Now, there are a couple of things to discuss on the technical front of his critique. Here are some:

 

1) Investors or governments?

AidThoughts replaces governance indicators with income per capita because they better explain the existence of land deals. This leads him to suggest that “Maybe investors aim for countries who are more willing to sell off land, not because they are poorly governed, but just because they are poor.” This is an interesting idea but if we put aside the regression tables and reflect for a moment, is it sensible to think that land investors are attracted to countries for being poor? Why would investors be attracted to the characteristics of poverty, such as poor infrastructure, limited public services and low levels of education and health? A more interesting hypothesis that AidThoughts raises, and which we think is worth exploring too, is that it might not  be investors who target countries, but bad governments who sell the land of their citizens.

 

2) Truncated sample bias.

AidThoughts recognizes that running OLS with two control variables, as reported in Table 3, is not serious analysis (and yet he managed to muddle the significance of the estimators in his table). But what’s really puzzling is that, in order to prove his point, he then goes on to throw the entire kitchen sink of governance indicators into the next table (Table 4). These indicators are highly correlated amongst them, and it is difficult to find a sensible explanation to specify the model that way.

He then goes on to say of this table:

“In column (1), prior controlling for income, only one of the relationships we expected to see has returned: countries rated low on the rule of law index are more likely to have land deals. Political stability/violence is also associated with land deals, but unfortunately that wasn’t part of Oxfam’s theoretical model. Now, voice and accountability is positively correlated with land deals! Of course, most of these relationships vanish when we toss in income, although it is worth noting that the rule of law measure keeps its significance and sign. So the relationship between governance and land sales seems to be a lot more complex than the Oxfam brief is suggesting.”

That’s a lot of explanation for a badly specified model that includes highly correlated regressors. But that’s not even the most puzzling part of that table. AidThoughts then tries to explain the number of land deals with the same variables but he does not correct for the truncated sample (look how his sample drops from 212 and 183 in the first two columns to just over 50 in the last two). Ignoring the bias in the observed sample is a mistake and something we had identified as a problem, and that’s why we suggested exploring  a double hurdle estimation to understand the issue better.

 

3) Reported land deals bias.

Aid Thoughts briefly mentions the potential problem of bias in the Land Matrix, but we don’t agree that he identified the right direction of bias. He argues that land deals are more likely to be reported in developing countries by diligent activists than in developed countries like the UK. On the contrary, we argue that land deals are much less likely to be ignored in richer countries with freer press, more access to information and better organized civil societies. Does Aid Thoughts seriously believe that a land deal can be more easily concealed in the UK than in the DRC?

Overall, we are very encouraged by Aid Thoughts’ response. He mentions that he can be convinced of the problem with more data and more, better data is on its way according to conversations we’ve had with the people managing the Land Matrix. So here’s our proposal for Matt: let’s work together – rigorously and objectively – on this issue in the next few months to try to better understand what’s driving the land rush. The problem deserves as much attention as we can give to it.