| The two essays in my thesis demonstrate that accounting for area level heterogeneity is critical to making an accurate assessment of program effects, and thus to quantifying the benefits from program placement. In the first essay, I estimate the long run benefits of participation in the three main micro credit programs of Bangladesh, taking into account various sources of endogeneity such as individual and household self-selection, and nonrandom program placement. The fundamental idea in this chapter is that more experienced members face lower costs of borrowing. Thus for them, inter-seasonal consumption differentials in response to seasonal shocks are of a smaller magnitude than for those who have recently joined. By using the first order Euler conditions, I derive a structural equation that relates changes in consumption to changes in prices, preferences, and the length of membership variable. Estimation of this equation demonstrates that duration of membership has a mitigating effect on anticipatable seasonal shocks, once nonrandom program placement and self selection are treated appropriately. I also model non-linearities in consumption smoothing benefits, in order to demonstrate that returns change with length of participation.;The second essay of the thesis is joint work with Professor Mark Pitt, and deals with the nonrandom placement of government programs in Indonesia. In this chapter, we propose a set of exclusion restrictions that allow us to measure program effects from a single cross-section of data, when program placement is endogenous. These exclusion restrictions are derived by optimizing models of household and government behavior, subject to resource constraints. An application of this technique to data from Indonesia highlights the fact that these programs have sizeable impacts on behavior once they are treated endogenously. The technique is valuable since it also allows us to test which programs are endogenous in each of the five behaviors studied. Results indicate that in most cases, the null hypothesis that government programs are exogenous is rejected. |
