Is Development Economics a Good Investment? Evidence on scaling rate and social returns from USAID’s innovation fund

with Nobel Laureate Michael Kremer (Chicago)

Date: Wednesday, May 26, 2021

Time: 9:30 AM - 10:45 AM EDT

Abstract:

We develop a method to establish a lower bound on the benefit-cost ratio of development innovation funds by comparing the benefits of a subset of innovations which scaled to the cost of the entire portfolio. Applying the method to the early USAID Development Innovation Ventures portfolio suggests each dollar spent generated at least $17 in social benefits. Predictors of innovation scaling include low unit costs, distribution through existing large business or government, and rigorous A/B tests or Randomized Control Trials (RCTs) in collaboration with development economics researchers. A model accounting for these results suggests that funders seeking social returns can exploit arbitrage opportunities by investing in innovations for which expected social returns likely exceed private returns.

Speaker:

Michael Kremer directs the Development Innovation Lab at the University of Chicago, where he is a University Professor. He is the joint winner of Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (Economics Nobel Prize) 2019, for an “experimental approach to alleviating global poverty.” He is also a recipient of a MacArthur Fellowship, a Member of the National Academy of Sciences, a Fellow of the American Academy of Arts and Sciences, a recipient of a Presidential Faculty Fellowship, and was a World Economic Forum Young Global Leader. He is a co-founder of BREAD, the association of development economists. He received his Ph.D. in Economics from Harvard University, and was the Gates Professor of Developing Societies in the Department of Economics at Harvard University from 2003 to 2020.

Other Speakers:

Arlie Petters, Provost, NYUAD (Introductory Remarks and Welcome)

Yaw Nyarko, Professor of Economics and Director, DevLab, NYUAD (Moderator)

Torsten Figueiredo Walter, Assistant Professor of Economics, NYUAD (Introductory Remarks)

Host:

The Development Laboratory for Research Methods in Economic Development (DevLab) is an interdisciplinary laboratory supported by the Division of Social Science at NYU Abu Dhabi (NYUAD) to assist faculty and students from a variety of fields in their research work in Development. The DevLab serves as a focal point at NYUAD to create knowledge and training for faculty and students to pursue field work in Development. Researchers seeking guidance, information, or funding can tap into the resources of the lab for planning and executing projects. Students seeking best practices and training on implementing research based on field experiments, randomized control trials (RCTs), and non- experimental methods will find resources in the lab.

The DevLab is led by NYUAD faculty in economics, politics, social sciences, and more broadly computer science and the sciences. DevLab members share a deep experience conducting field work and research in Africa, Asia, the Gulf, and Latin America. The research topics explored by members of the lab include Agricultural and Commodities Markets, Artificial Intelligence and Machine Learning, Communications and Web Access, Development Economics, Economic Growth, Experimental Economics, Food Security, Human Capital, Labor Markets, Political Economy of Development, Public Health, Research Methods, and Social Networks. The DevLab draws on cross-campus resources and collaborations with its partners NYU Africa House, the Center for Technology and Economic Development (CTED), and the Development Research Institute (DRI).

This program is co-hosted with the NYU Abu Dhabi Institute.