Use of randomised control trials in Economics
Abhijit Banerjee along with Esther Duflo and Michael Kremer received the Sveriges Riksbank Prize funded by the Swedish Central Bank (popularly known as the Economics Nobel Prize) in 2019. Their contribution lies in their innovative research techniques to decide on policy-making to alleviate poverty. Abhijit Banerjee founded the Abdul Latif Jameel Poverty Action Lab at Massachusetts Institute of Technology, USA, for studying best public policy against poverty.
In natural sciences, experiments are quite common to decide the relative utility of different inputs towards a particular output. For example, for a particular crop, the effects of soil and fertilizer can be measured by growing that cop in different plots with different combinations of soil and fertilizer in a randomized manner. Abhijit Banerjee and others introduced this technique in Economics for assessing the comparative analysis of different policies.
What is the best policy to improve the educational outcome when resources are limited? One suggestion is to award students free books so as to facilitate their self-study; the second is to introduce free meals in the schools to attract the students to school; and the third suggestion is about hiring private tutors for weaker students. Banerjee and his co-researchers assigned one of the three policies in some randomly selected schools from a large pool. On evaluation, they found that the third policy is more effective than the other two when the same amount of resource is deployed.
Their prescription of remedial tutoring as the best educational support eventually provided arguments for large-scale support programmes that have now reached more than five million Indian children. Similarly, they performed another study where it was found that poor people avoid giving their wards deworming medicine even it costs a very small amount. In accordance with these results, the World Health Organization recommends that medicine is distributed for free to the over 800 million schoolchildren living in areas where more than 20 per cent of them have a specific type of parasitic worm infection.
(The author is associate professor at IIM, Kozhikode)