Person: McKenzie, David J.
Development Research Group
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Microenterprises, Private Sector Development, Migration
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Last updated: December 20, 2023
Biography
David McKenzie is a Lead Economist in the Development Research Group, Finance and Private Sector Development Unit. He received his B.Com.(Hons)/B.A. from the University of Auckland, New Zealand and his Ph.D. in Economics from Yale University. Prior to joining the World Bank, he spent four years as an assistant professor of Economics at Stanford University. His main research is on migration, enterprise development, and methodology for use with developing country data. He has published more than 150 articles in journals such as the Quarterly Journal of Economics, American Economic Review, Review of Economic Studies, Journal of Political Economy, Science, Review of Economics and Statistics, Journal of the European Economic Association, Economic Journal, American Economic Journal: Applied Micro, Journal of Econometrics, and all leading development journals. He is currently on the editorial boards of the Journal of Development Economics, the World Bank Economic Review, and Migration Studies. He is also a co-founder and regular contributor to the Development Impact blog.
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Now showing 1 - 10 of 198
Publication Is There Still A Role for Direct Government Support to Firms in Developing Countries?(World Bank, Washington, DC, 2023-12-12) McKenzie, DavidShould governments in developing countries directly support firms with policies such as grants, subsidized loans, and training and consulting programs, or should they instead just aim to enact sensible regulatory and macroeconomic policies and not attempt to engage in industrial policy While industrial policy has gained renewed attention in developed economies, it faces considerable skepticism in developing countries scarred by previous experiences and facing limited fiscal space. This paper discusses the rationale for government involvement, and then lessons from a recent research agenda in development economics on how to target these programs, on whether they induce firms to undertake additional activities, on avoiding political capture, and on how these interact with competition. This work shows that these policies can deliver some of their promised benefits, but that there is still much to learn and the need for systematic and serious attempts at prospective impact evaluation as new policies are launched.Publication Migration, families, and counterfactual families(Washington, DC: World Bank, 2023-12-07) Bertoli, Simone; McKenzie, David; Murard, Elie; McKenzie, David J.Migration changes how families form and dissolve, and how one should conceptualize the family. This has implications for thinking about how the migration decision is modelled when individuals are unable to picture the counterfactual families they may have. Differences in marital status can induce two otherwise identical individuals to make different migration decisions. It also has implications for attempts to causally estimate impacts of migration, when the family composition changes with the migration decision itself. This paper shows empirically that changing marital status after migration is widespread, and that the traditional model of a fixed family sending off a migrant who remains part of that same family only describes a minority of migrants moving from developing countries to the U.S. The authors draw out lessons from thinking about counterfactual families for empirical research and for migration policy.Publication Bayesian Impact Evaluation with Informative Priors: An Application to a Colombian Management and Export Improvement Program(World Bank, Washington, DC, 2023-01) Iacovone, Leonardo; McKenzie, DavidPolicymakers often test expensive new programs on relatively small samples. Formally incorporating informative Bayesian priors into impact evaluation offers the promise to learn more from these experiments. A Colombian government program which aimed to increase exporting was trialed experimentally on 200 firms with this goal in mind. Priors were elicited from academics, policymakers, and firms. Contrary to these priors, frequentist estimation can not reject 0 effects in 2019, and finds some negative impacts in 2020. For binary outcomes like whether firms export, frequentist estimates are relatively precise, and Bayesian credible posterior intervals update to overlap almost completely with standard confidence intervals. For outcomes like increasing export variety, where the priors align with the data, the value of these priors is seen in posterior intervals that are considerably narrower than frequentist confidence intervals. Finally, for noisy outcomes like export value, posterior intervals show almost no updating from the priors, highlighting how uninformative the data are about such outcomes.Publication Capacity Building as a Route to Export Market Expansion: A Six-Country Experiment in the Western Balkans(World Bank, Washington, DC, 2022-12) Cusolito, Ana P.; McKenzie, DavidThe limited market size of many small emerging economies is a key constraint to the growth of innovative small and medium enterprises. Exporting offers a potential solution, but firms may struggle to locate and appeal to foreign buyers. A six-country randomized experiment was conducted with 225 firms in the Western Balkans to test the effectiveness of 30 hours of live group-based training and 5 hours of one-on-one remote consulting in overcoming these constraints. Treated firms used techniques such as search engine optimization and improved Facebook content to increase their digital presence and better reach foreign customers. A year later, positive and significant impacts are found on the number of customers, and a significant intensive margin increase in export sales. Qualitative interviews suggest this improvement came from a combination of sector-specific advice on market expansion, and through an encouragement effect which gave entrepreneurs the confidence to try new sales strategies.Publication Field and Natural Experiments in Migration(World Bank, Washington, DC, 2022-12) McKenzie, DavidMany research and policy questions surrounding migration are causal questions. What causes people to migrate What are the consequences of migration for the migrants, their families, and their communities Answering these questions requires dealing with the self-selection inherent in migration choices. Field and natural experiments offer methodological approaches that enable answering these causal questions. This paper discusses the key conceptual and logistical issues that face applied researchers when applying these methods to the study of migration, as well as providing guidance for practitioners and policymakers in assessing the credibility of causal claims. For randomized experiments, this includes providing a framework for thinking through what can be randomized; discussing key measurement and design issues that arise from issues such as migration being a rare event, and in measuring welfare changes when people change locations; as well as discussing ethical issues that can arise. The paper then outlines what makes for a good natural experiment in the context of migration, and discusses the implications of recent econometric work for the use of difference-indifferences, instrumental variables (and especially shift-share instruments), and regression discontinuity methods in migration research. A key lesson from this recent work is that it is not meaningful to talk about “the” impact of migration, but rather impacts are likely to be heterogeneous, affecting both the validity and interpretation of causal estimates.Publication Three Interventions to Reduce Irregular Migration and Promote Alternatives: An Experiment in The Gambia(World Bank, Washington, DC, 2022-09) Bah, Tijan; Batista, Catia; Gubert, Flore; McKenzie, DavidIrregular migration from Africa to Europe attracts substantial policy attention. Although international migration can enable people from developing countries to dramatically increase their incomes, the absence of legal channels and the chance of higher incomes can induce people to take part in risky journeys that can involve a low chance of success, and the potential for human rights abuses and loss of life. The most common policy responses have been efforts to deter this form of migration through increased enforcement, and through information campaigns that emphasize the dangers associated with irregular migration. However, evidence on the effectiveness of such campaigns is limited, and such policies may not be enough if they do not offer alternative possibilities for improving livelihoods. We designed an experiment in The Gambia to test different approaches.Publication Fears and Tears: Should More People Be Moving within and from Developing Countries, and What Stops This Movement?(World Bank, Washington, DC, 2022-07) McKenzie, DavidOnly one in seven of the world’s population has ever migrated, despite the enormous gains in income possible through international and internal movement. This paper examines the evidence for different explanations given in the economics literature for this lack of movement and their implications for policy. Incorrect information about the gains to migrating, liquidity constraints that prevent poor people paying the costs of moving, and high costs of movement arising from both physical transportation costs and policy barriers all inhibit movement and offer scope for policy efforts to inform, provide credit, and lower moving costs. However, the economics literature has paid less attention to the fears people have when faced with the uncertainty of moving to a new place, and to the reasons behind the tears they shed when moving. While these tears reveal the attachment people have to particular places, this attachment is not fixed, but itself changes with migration experiences. Psychological factors such as a bias toward the status quo and the inability to picture what one is giving up by not migrating can result in people not moving, even when they would benefit from movement and are not constrained by finances or policy barriers from doing so. This suggests new avenues for policy interventions that can help individuals better visualize the opportunity costs of not moving, alleviate their uncertainties, and help shift their default behavior from not migrating.Publication Testing Classic Theories of Migration in the Lab(World Bank, Washington, DC, 2021-08) Batista, Catia; McKenzie, DavidThe predictions of different classic migration theories are tested by using incentivized laboratory experiments to investigate how potential migrants decide between working in different destinations. First, the authors test theories of income maximization, migrant skill-selection, and multi-destination choice as they vary migration costs, liquidity constraints, risk, social benefits, and incomplete information. The standard income maximization model of migration with selection on observed and unobserved skills leads to a much higher migration rate and more negative skill-selection than is obtained when migration decisions take place under more realistic assumptions. Second, these lab experiments are used to investigate whether the independence of irrelevant alternatives assumption holds. The results show that it holds for most people when decisions just involve wages, costs, and liquidity constraints. However, once the risk of unemployment and incomplete information is added, independence of irrelevant alternatives no longer holds for about 20 percent of the sample.Publication How Has COVID-19 Affected the Intention to Migrate via the Backway to Europe and to a Neighboring African Country? Survey Evidence and a Salience Experiment in The Gambia(World Bank, Washington, DC, 2021-05) Bah, Tijan L; Batista, Catia; Gubert, Flore; McKenzie, DavidThe COVID-19 pandemic has resulted in border closures in many countries and a sharp reduction in overall international mobility. However, this disruption of legal pathways to migration has raised concerns that potential migrants may turn to irregular migration routes as a substitute. This paper examines how the pandemic has changed intentions to migrate from The Gambia, the country with the highest pre-pandemic per-capita irregular migration rates in Africa. A large-scale panel survey conducted in 2019 and 2020 is used to compare changes in intentions to migrate to Europe and to neighboring Senegal. The data show that the pandemic has reduced the intention to migrate to both destinations, with approximately one-third of young males expressing less intention to migrate. The largest reductions in migration intentions are for individuals who were unsure of their intent pre-pandemic, and for poorer individuals who are no longer able to afford the costs of migrating at a time when these costs have increased and their remittance income has fallen. This paper also introduces the methodology of priming experiments to the study of migration intentions, by randomly varying the salience of the COVID-19 pandemic before eliciting intentions to migrate. There is no impact of this added salience, which appears to be because knowledge of the virus, while imperfect, was already enough to inform migration decisions. Nevertheless, despite these decreases in intentions, the overall desire to migrate the backway to Europe remains high, highlighting the need for legal migration pathways to support migrants and divert them from the risks of backway migration.Publication What Prevents More Small Firms from Using Professional Business Services? An Information and Quality-Rating Experiment in Nigeria(World Bank, Washington, DC, 2021-04) Anderson, Stephen J.; McKenzie, DavidWhy do more small firms in developing countries not use the market for professional business services like accounting, marketing, and human resource specialists? Two key reasons may be that firms lack information about the availability of these services, and that they struggle to distinguish the quality of good versus bad providers. A brand recognition exercise finds that most small firms are unaware of most providers in this market, and a survey of service providers reveals that they largely rely on word-of-mouth and informal reputation mechanisms for acquiring customers. This study set up a business services marketplace that contains information about the different providers present in the market and used mystery shopper visits to develop a quality ratings system. A randomized experiment with more than 1,000 firms provided access to this marketplace to the treatment group and randomized whether firms received just information or also quality ratings. The provision of quality ratings information shifts small firms’ preferences over which provider they would like to use, increasing the average quality rating of their preferred providers by 0.2 to 0.4 ratings points out of 5. However, neither the provision of information nor these quality ratings had any significant impact on the likelihood that small firms go on to hire a business service provider over the subsequent six months. The results suggest that alleviating information frictions alone is insufficient to increase usage of professional business services.