Substitution Bias and External Validity: Why an Innovative Anti-Poverty Program Showed No Net Impact
New York University (NYU) - Robert F. Wagner Graduate School of Public Service; New York University (NYU) - Department of Economics
New York University (NYU) - Robert F. Wagner Graduate School of Public Service
August 11, 2011
NYU Wagner Research Paper No. 2134779
The net impact of development interventions can depend on the availability of close substitutes to the intervention. We analyze a randomized trial of an innovative anti-poverty program in South India which provides “ultra-poor” households with inputs to create a new, sustainable livelihood. We find no statistically significant evidence of lasting net impact on consumption, income or asset accumulation. Instead, income from the new livelihood substituted for earnings from wage labor. A very similar intervention made a large difference elsewhere in South Asia, however, where wage labor alternatives were less compelling. The analysis highlights the roles of substitution bias and dropout bias in shaping evaluation results and delimiting external validity.
Date posted: August 23, 2012 ; Last revised: August 29, 2014