Keys to Human Development

1. Keys to Human Development Bertil Tungodden, Norwegian School of Economics 3th National Conference «Unleashing growth potential in Tanzania: Economic Transformation for Human Development» Dar es Salaam, September 11, 2014

2. Behavioral economics and experimental methods

3. Key messages from my talk! • Keys to human development: • A trustingsociety • An entreprenurialsociety • Keys to learningabouttheway forward: • Lab experiments • Randomizedcontrol trial fieldexperiments

4. Why is Norway doing so well in human development?

5. How is Norway different?

6. Trust is much more important than oil! Fornavn Etternavn, navn@nhh.no

7. Why is trust so important? • Let us do a small lab experiment (to illustrate the mechanism)! • A trust game: • Suppose that you and someone else in the audience are paired together anonymously in an experiment. • Suppose you are given 1 million Tsh and are to decide how much of this to send anonymously to the other participant. • Whatever you send will triple in value! • But it is all up to the other participant to decide how much to return to you! • What do you do? • Reflects many real life situations where we can’t write a contract, but have to put our faith in others to create value.

8. But even if we can write a contract, it would be much more efficient if we could rather trust our partner

9. Key message 1: Trust is crucial for Human Development • However: Trust levelsare not necessarily stable in a society! – Norway was not a trusting country onehundredyearsago. • Million dollar question: How do wecreate a trustingsociety? – Public schoolsmay be important – establishsocial norms oftrustworthness and oftrustingothers. – More research is needed to understand themechanismsof trust – and theimportanceof trust should be given more focus in thepublicdebate.

10. Key message 2: How to build an entrepreneurial society? • Young people in developing countries typically have to create their own jobs. • 65% of Tanzanias are below 25 years old, very few get a formal job. • Self-employment promoted in the development plans of many poor countries (including Tanzania). • Opportunities for all! Entrepreneurship can play a role in ensuring development with a human face! • Three research projects in Tanzania: • What does it take to succed as an entrepreneur: Financial vs Human capital? • How can we reach out with entrepreneurship training: Ruka Juu! • Can enterpreneurship be a way to female empowerment? Girl Power

11. Key message 3: How to learn about development? • Randomizedcontrolfieldexperiments: The road to understandingtheimpactof a policy intervention! • Social scientists arebasicallycopyingtheapproach used in medicine and thenaturalsciences for a long time!

12. Human and financial capital for microenterprise development: Evidence from a field and lab experiment • ”…most simply duplicate what their neighbours are doing and do not appreciate the importance of innovation, quality, credibility and customer care.” • Donath Olomi, University of Dar es Salaam

14. Main findings • A combination of financial capital and human capital is needed for small scale entrepreneurs to grow. • Find very strong evidence of increased sales and profits among male entrepreneurs. • More comprehensive measures needed for the female entrepreneurs. • They learn as much as the male entrepreneurs from the training, but no signficant effects on business performance. • Our findings suggest that this is largely due to external constraints (like family obligations).

15. Teaching entrepreneurship through television: Ruka Juu!

16. Short term findings • The edutainment show had a strongeffectontheirambitions – madethemmuch more interested in business and entrepreneurship (particularlyfemales). • The edutainment show alsomadethem more risk willing and patient. • Whatabout long-term effects?

18. Girl power • Decisive time: Adulthood • Why? • Lackofknowledge/empowerment? • Lackofeconomicopportunities?

19. Time line • Baseline survey: April-May 2013 80 schools in Dodoma, Singida, Morogoro and Tabora 3485 girls • Randomization: Right after baseline 4 groups, 20 schools in each: Health, Entrepreneurship, Both, Control “Build your life”, “Protect your life” • Training of teachers: May 2013 Based on newly developed booklets from Femina • Training of the girls: July – September 2013 • Follow-up survey I: September-October 2013 Training camp for surveyors started on September 16 Separate in-depth qualitative follow-up • Follow-up survey II: Second half of 2014 Initial pilot in April 2014 Training camp for surveyors starts on September 8 Separate in-depth qualitative follow-up later in the fall

20. METHOD • Pre-analysis plan: Pre-specify what we would like to study and how we would like to test it (to avoid data mining) • Follow-up surveys: to study the impact of the training on: • Follow-up I: Knowledge, Behavior (plans), Gender-equality, and Empowerment. • Follow-up II: Behavior, Welfare, Persistence of Gender-equality and Empowerment.

23. Follow-up II: The important next step • Promising short-term treatment effects • They knowmore • They feelempowered • They dohave plans • We would like to study whether these initial positive findings have translated into changes in actual behavior and increased welfare (and also the persistence of gender-equality attitudes and empowerment feelings). • Basic idea: Girls need both to be empowered and to be given economic opportunities!!

24. Key messages from my talk! • Keys to human development: • A trustingsociety • An entreprenurialsociety • Keys to learningabouttheway forward: • Lab experiments • Randomizedcontrol trial fieldexperiments ASSANTE SANA!