Seminar

Can Market Design Help theWorld’s Poor? Evidence from a Lab Experiment on Land Trade

Jonathan De Quidt (Stockholm University)

December 17, 2020, 11:00–12:30

Room Zoom

Behavior, Institutions, and Development Seminar

Abstract

Market design has increased efficiency in complex reallocation problems in the developed world. Because reallocation may be necessary for development, there is potential for market design to contribute to reducing poverty. A key constraint is that low levels of literacy and numeracy may preclude the poor from benefiting from complex market designs. To understand the importance of this constraint, we conducted a lab-in-the-field experiment with Kenyan small-holder farmers. Farmers traded land in a hypothetical environment where theory suggests a package auction would thicken markets and reduce exposure risk. Comparing performance in a more complex package auction to a simpler continuous double auction we show that the added complexity increased efficiency, reducing the gap to the first best by around 26%. We find no evidence that the added complexity increased inequality. (Join with Gharad Bryan, Mariajose Silva Vargas, Tom Wilkening, Nitin Yadav