Low willingness to pay (WTP) for environmental quality in developing countries is a key research question in environmental economics. One explanation is that missing credit markets may suppress WTP for environmental improvements that require large up-front investments. We test the impact of microloans on WTP for hygienic latrines via a randomized controlled trial in 30 villages in rural Cambodia. We find that microcredit dramatically raises WTP for improved latrines, with 60% of households in the Financing arm willing to purchase at an unsubsidized price, relative to 25% in the Non-financing arm. Effects on latrine installation are positive but muted by several factors, including a negative peer effect: randomly induced purchases by neighbors reduce a household's probability of installing its own latrine. On methodological grounds, this paper shows that a “decision-focused evaluation” can be integrated into academic analysis to provide insight into questions of general interest.

No abstract

The International Initiative for Impact Evaluation (3ie) is an international grant-making NGO promoting evidence-informed development policies and programmes. We are the global leader in funding and in producing high-quality evidence of what works, how, why and at what cost. We believe that better and policy-relevant evidence will make development more effective and improve people's lives. 3ie working papersThese papers focus on current issues, debates and enduring challenges facing development policymakers and practitioners and the impact evaluation and systematic reviews communities. Policy-relevant papers draw on findings from impact evaluations and systematic reviews funded by 3ie, as well as findings from other credible and rigorous evaluations and reviews, to offer insights, new analyses, findings and recommendations. Papers focusing on methods also draw on similar sources to help advance understanding, design and use of rigorous and appropriate evaluations and reviews. About this working paperThis paper was commissioned by the William and Flora Hewlett Foundation to provide a perspective on the future of impact evaluation, based on IDinsight's work using rigorous impact evaluation as a practical decision-making tool for policymakers and non-governmental organisations in developing countries. The goal of this paper is to articulate how impact evaluations can achieve their full potential to improve social programmes in the developing world. All of the content is the sole responsibility of the authors and does not represent the opinions of 3ie, its donors or its Board of Commissioners. Any errors and omissions are also the sole responsibility of the authors. Any comments or queries should be directed to the corresponding author, Neil Buddy Shah, Neil.buddy.shah@idinsight.org. AcknowledgementsThe authors would like to thank the William and Flora Hewlett Foundation for funding this paper, and in particular, Kristen Stelljes and Sarah Lucas from the Hewlett Foundation for their useful comments throughout the process of writing the paper. We would like to thank Annette Brown, Emmanuel Jimenez, Jo Puri, and anonymous reviewers from the International Initiative for Impact Evaluation (3ie) for their comments. We would like to acknowledge all of our colleagues at IDinsight, especially Ronald Abraham, Heather Lanthorn, Jeffery McManus and Esther Wang, whose perspectives and experiences were integral in writing this paper. Finally, we are grateful for the insightful thoughts from the numerous policymakers, donors, and NGO leaders who were generous in giving us their time to be interviewed for this paper.ii Executive summaryImpact evaluations have enhanced international development discourse and thinking over the past 15 years, but the full promise of impact evaluations to improve lives has yet to be realised.Rigorous impact evaluations to date have largely focused on contributing to a global learning agenda. These 'knowledge-focused evaluations' (KFEs) -i.e. those primarily designed to build global knowledge about de...

No abstract