Nobel Prize Insights for Global Development

November 26, 2019 By Zach Cohen

As Team USGLC travels across the country highlighting the return on investment from U.S. development and diplomacy, we’ve hosted a number of impressive guests, from Members of Congress to retired Generals and Admirals. However, it’s not often that we have the opportunity to host a Nobel Prize winner.

Last month, in Wilmington, Delaware, we were joined by Dr. Michael Kremer, who was awarded the 2019 Nobel Prize in Economics alongside fellow economists Abhijit Banerjee and Esther Duflo for their groundbreaking and experimental work to tackle global poverty.  Kremer sat down for a discussion alongside Senator Chris Coons (D-DE) to share his insights into how rigorous evaluation can ensure that investments in global development have a catalytic effect.

Nobel Prize Winning Work

Kremer’s Nobel Prize winning body of work draws inspiration from the medical world by applying the method of randomized controlled trials (RCTs) to evaluate the impact of foreign assistance. By designing development programs in a way that gathers data to compare experimental and control groups, his studies demonstrate better measurements of what works and can in turn inform policy and funding decisions. According to the Nobel Prize Committee, Kremer’s research helped revolutionize his field, as the randomized trials he introduced “now entirely dominate development economics.”

Kremer’s research highlights several key insights for global development:

  • Small Interventions Can Have Far Reaching Effects: In developing countries such as Kenya, for example, many are affected by infestation from parasitic worms and face serious health issues. Since school-age children are the most impacted by worms, Kremer worked with a Kenyan non-profit to analyze the potential impact of bringing deworming medication directly into classrooms, rather than clinics alone. The results of his trial extended beyond improved health – and thanks to this small investment, school absenteeism rates were decreased by 25%, which translated to higher chances of secondary school attendance, higher wages, and ultimately higher standards of living.
  • Scale Up Projects for Greater Impact: Kremer’s focus on rigorous evaluation not only ensures that aid is cost-effective, but also sets the stage for deciding which interventions should be scaled up. After the success of the deworming intervention in Kenya, USAID supported Kenyan scientists to travel to India and provide technical assistance to expand the program. Within just a few years, 150 million children were being treated with deworming medication in India each year.
  • Technology Opens up New Possibilities: Kremer also highlighted the importance of new technologies, particularly for farmers in developing countries. We know that many farmers face challenges from climate change such as intensified droughts but finding ways to improve yields is often expensive and inefficient. Cell phones however have opened up “huge new possibilities” for farmers, according to Kremer – as a government or an NGO can send tailored messages to farmers based on weather, time of year, and other factors to better inform their farming decisions.  Kremer’s research has suggested that these low-cost messages can change farmer behavior and increase their yields.

Challenges for Policymakers

While Kremer’s work has inspired many development economists to view RCTs as the ‘gold standard’ for evaluating impact, there remain challenges to their use by policymakers. Impact evaluations are expensive and time consuming for policymakers with constrained budgets. As a result, policymakers have tended to rely on less rigorous performance evaluations, which measure a program’s outputs without demonstrating causality.

In 2016 only 20% of large-scale health programs at the World Bank and USAID conducted rigorous impact evaluations, according to a study by the Center for Global Development.  Despite the cost, however, a World Bank paper found that impact evaluations can improve the long-term performance of development projects.

Additionally, evidence-based projects can lead to greater country ownership and self-reliance so that U.S. taxpayers need not bear the cost.  For example, Kremer’s deworming initiative in Kenya yielded a benefit-cost ratio of 100 to 1, allowing the Kenyan government to scale up and fund the program itself through the extra tax revenue it takes in each year.

A Growing Trend at USAID

Impact evaluations have begun to make their mark on U.S. development policy. According to experts at AidData, USAID is undergoing a shift from prioritizing performance evaluations to conducting impact evaluations. This trend can be seen in full force at USAID’s Development Innovation Ventures (DIV) program, an initiative Kremer helped design. DIV provides grants to innovative development projects that build evidence through impact evaluations, and works to grow successful projects from proof of concept to operating at scale. Since 2010, DIV has helped foster 190 innovations that have impacted millions.

Kremer and his colleagues have helped make the case that impact evaluations can be a critical complement to policymaking. And as Senator Coons shared in Wilmington, Dr. Kremer’s peer-reviewed research not only strengthens the effectiveness of foreign assistance but can also “build domestic support for the idea that what money we are spending on development is being spent well.”