mateusz filipski international food policy research institute may 2014
TRANSCRIPT
Evaluating Development Impacts with Local Economy-
wide Models
Mateusz FilipskiInternational Food Policy Research InstituteMay 2014
1 - General Equilibrium Large and Small 2 - LEWIE: Local Economy-wide Impact
Evaluation 3 - Application 1: Kenya’s CT-OVC 4 - Other recent applications 5 - Preview of Current work in China Conclusions
Outline
Part 1:General Equilibrium, Large and Small
A local spillover story
“Once upon a time in Mexico …
…“I don’t get Progresa, but tomorrow buyers will be lining up here”
Spillovers Local GE effects
Shock
Rest of Zimbabwe
Rest of World
Treatment household
Control household?
Market
Rest of the country
Villages can have their own markets (& prices)◦ Factor markets (land, labor)◦ Commodities (non-tradables, specific varieties, etc.)
Interventions can have spillovers in the village◦ From target households to non-target households◦ From target sector to other sectors
What’s a great way to research such spillovers? ◦ Computable General Equilibrium methods◦ Can be applied to economy of any scale
Local spillovers
Local Economy-wide Impact Evaluation Central idea = local economies also
experience general equilibrium effects. CGE analysis is applicable to an economy
of any size (household, hamlet, village, region, country, multiple countries)
In comes LEWIE
Book (Forthcoming): Taylor and Filipski (2014): Beyond Experiments in Development Economics: Local Economy-Wide Impact Evaluation. Oxford University Press.
Most of this talk is based on material in the book
What are they? ◦ Systems of equations representing economies
What are they not? ◦ Not econometrics = no statistical significance◦ Not a forecasting tool
How we build them? ◦ Computer code such a GAMS
LEWIE models
What do we do with them?◦ “Laboratory for economic experiments”, “Flight
Simulator”◦ All about markets and linkages. “General
Equilibrium effects”, “Higher-order effects”, “Spillover effects”, etc...
Are they a CGE? ◦ “Computable”, “General”, “Equilibrium” => in
essence yes
LEWIE models
LEWIE vs. CGE differences (?)
CGE– Usually:
LEWIE– Usually:
Scale National Subnational
Data National Accounts Household surveys
Uses Policy AnalysisMacro Shocks
Local ProjectsPilot projects Rural focus
More similarities than differences. Models akin in spirit, very similar equations
When you arrive ex-post When you need results ex-ante When you cannot randomize your treatment When outcomes are multifaceted, with
winners and losers When you need to know why there is an
effect, not just whether (i.e. structure) When you expect spillovers
When do we want to use LEWIE?
Part 2:LEWIE basics
Start from the household model Nest up to a village/region/island/[…] model Calibrate the model, usually from household
data Perform simulations
LEWIE Basics
Household-farm economy
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Treated Economy
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Manufactured goods, purchased inputs
Crops, livestock, retail, services, labor
• Market Closures (for village)
LEWIE system of equations (simplified)
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Indexing allows us to greatly increase number of variables and equations without complicating the model.
Part 3:Cash Transfer in Zambia
“Standard” cash transfer intervention Targets the most vulnerable
CGP – Cash Grants Program
Transfer
Rest of Zimbabwe
Rest of World
Treatment household
Control household?
Market
From Protection to Production
• Most evaluations look at the beneficiary households
• They are a conduit through which cash enters local economies
• Does the whole local economy, then, become a beneficiary of the CGP
• …including those who do not get transfers?
Beneficiaries: The Point of Entry into the Local Economy
The CGP Has an Income Multiplier of 1.79
Every Kwacha transferred to a poor household generates an additional 0.79 Kwacha in spillovers
Most Spillovers Go To Non-beneficiaries
Real Income Multipliers Are Smaller But Significant*
*Real-income multipliers (Kwacha) if land, capital, and liquidity constraints limit the local supply response
Spillovers Result from Productive Impacts
Good News
The economic impacts of social cash transfers are likely to significantly exceed the amount transferred
There may be less of a tradeoff between protection and production than we once thought
Non-beneficiaries should be interested in seeing the transfer programs continue—and expand
A Caveat
Positive spillovers depend on having a good supply response
Interventions may be needed to make sure this happens◦Micro-credit, extension, etc.
FAO Report:Impact of the CGP program on productive activities and labour activities. Benjamin Davis, Silvio Daidone, Josh Dewbre and Mario Gonzalez
References - FAOFrom Protection to Production Projecthttp://www.fao.org/economic/PtoP/en/
The Transfer Projecthttp://www.cpc.unc.edu/projects/transfer
Part 4:Other applications
Mostly from “Beyond Experiments” book (Taylor and Filipski, forthcoming 2014)
Irrigation project in Tanzania
Irrigation project in Tanzania
Irrigation project in Tanzania
Rice Processed Rice
Local crops Export crops Livestock Ressources Food Proc. Trade Services-2
-1
0
1
2
3
4
5
Production Effects by district
Kilombero Mvomero Other Districts
Irrigation increases yields in the target zone… but creates spillovers through the region.
Ultimately affects all consumers (+), affects non-irrigated producers (-), affects food processors (+), livestock producers (+)
Milling capacity outside of the irrigated region => regional spillovers
Urban households may be the biggest winners
Irrigation project in Tanzania
Reference: Filipski, M., Manning, D., Taylor, J. E., Diao, X., & Pradesha, A. (2013). Evaluating the Local Economywide Impacts of Irrigation Projects: Feed the future in Tanzania. IFPRI publications.
The true cost of Corruption
Mexico’s leaky Pro-Campo program◦ Payments are proportional to land ownership◦ Two databases: payments due / payments
received => there exist discrepancies
Reverse of a Cash Transfer Creates negative spillovers: each $1 not
received by a supposed beneficiary means $1.2 dollars of real income foregone in the economy
The true cost of Corruption
The true cost of Corruption
Galapagos: the Myth of Eco-tourism
Tourism on the Galapagos islands Construction ban supposed to control
tourism and environmental degradation Small share of tourist expenditures
Can we assume a small impact? => No, because of local migration
Galapagos: the Myth of Eco-tourism
LEWIE model with migration ◦ Labor comes from the mainland of Ecuador
Increased demand for tourism services triggered increases: ◦ 58% increase in labor migration to the islands◦ 77% increase in income from fishing activities◦ 67% in income from agriculture on the islands
Full economic impact much larger than tourist expenditures alone suggest
Galapagos: the Myth of Eco-tourism
What’s a corral reef worth?
Roatan Corral Reef (Honduras, Caribbean) Many aspects to value: use value (fishing),
non-use value (“existence”), potential value (future scientific knowledge?) etc…
We value is only by tourist expenditures = conservative lower bound
What’s a corral reef worth?
We value is only by tourist expenditures…◦ Accounting for spillovers
Yearly tourist expenditures = $80 million Net Present Value over 30 years =
between$1.3 billion and $4.5 billion (more than the country’s national debt)
What’s a corral reef worth?
Part 5:Preview of work in China
With Dr. Yumei Zhang from CAAS-AIRI (张玉梅博士，中国农业科学院农业信息研究所 )
Model for Puding (普定，贵州 )
Background – Income sources
Figure 1:Rural household income source (%)
0
10
20
30
40
5043
30
9 6 4
33 35
11
3
15
2004 2011 Local off farm income share increased from 30% to 35% during 2004-2011
Background - Subsidies
2002 Grain for green subsidies
2011 Subsidy for dilapidated housing
2009 Pension insurance
2007 Rural subsistence allowance
2006 Agricultural subsidies
2003 Abolish agricultural tax
2003 Rural health insurance
The transfer income share in rural HH increased from 3.7% to 8.7% during 2003-2012.Low income HH: the transfer income share reached 14%.
Background: Local odd job market
About 20% of laborers worked local odd jobs in 2011.The wage rate increased from 10~15 yuan to 80~100 yuan per day between 2004 and 2011.The per capita local odd job income increased from 258 yuan to 926 yuan between 2004 and 2011 with annual real growth rate of 20%.
2004 2006 2009 20110
200
400
600
800
1000
259 338
520
926
Fig. Per capita local odd job income (yuan at 2004 constant price
Objectives:
Reveal the hidden impacts of rural China’s
safety-nets, and understand how they have
participated to the dramatic evolution of the
country-side.
How have the different safety-nets
influenced the growth of rural activities?
How did they impact the supply of labor and
the shift towards urban employment?
Look forward to those results!
Model for Puding (普定，贵州 )
Part 6:Conclusions
LEWIE modeling: ◦ Applies GE methodology at the local scale◦ Uncovers spillover impacts of programs and
policies◦ Provides a flexible framework for a variety of
situations Why not Econometrics?
◦ Modeling and Econometrics are complements, not substitutes
◦ Ideally, both… if data is available! This methodology is not difficult – maybe
can be applied in your research
Conclusions
