Kami Richmond Economics of Development April 28, 2017 Nudging Cambodia: Behavioral Insights Applicability in Rural Development Kami Richmond Economics of Development April 28, 2017

Rural Development in Southeast Asia “Year Zero” (1974)

“Year Zero” 24.57% growth in rural population Nearly 2 million deaths Genocide- hundreds of thousands of educated middle class

Is Rural Development a Government Priority?

Government’s Neglectfulness of Rural Development Implications: Depend on donor financing for most new investment projects with more than 30% of the government budget comes from donor assistance. Negatively impacts the service delivery to the rural poor

Trends in Rural Development Predominately rural subsistence economy Main crop: rice 70% of real GDP is derived from the rural economy 81% of labor supply is in rural employment

Employment Breakdown

Labor Supply and Labor Requirement Labor shortage is partly a ramification of “Year Zero”

Implications of Labor Shortage Need for agricultural mechanization Economies of scale Market for economies Development of agro-industry

Why Don’t Rural Communities Demand More Opportunities? Behavioral Insight: “Land is not only their safety net, but also the centre of their social, cultural, and political life.” ~Karl Polanyi

Behavioral Insights: The Great Transformation Peasant Societies Western Societies Economic behavior: Social relationships, cultural values, moral concerns, politics, religion, or fear instilled by authoritarian leadership Influencer of behavior: Reciprocity Economic behavior: Individual choice, based on the logic of rational action and opportunity costs Influencer of behavior: Profits

Applicability to Rural Cambodia Seek paid employment Find replacement labor during harvest? Afford to pay laborer in place of family member? Can family member return to assist with harvest?

Applicability to Rural Cambodia Land Heritage Political Cultural Community and neighbors

Behavioral Insights Sending a household member into paid employment, especially non-agricultural work away from home, is heavily dependent on the potential effect it could have on the household’s subsistence activities. Farmers will adapt their livelihood strategies and find non-agricultural work to keep safe their only source of security, not to transition to the capitalist sector. Only when there is a strong and proven public social security system in place will the strong bond between rural households and land gradually loosen.

Converting Behavioral Insights into Behavioral Design Source: Center for Global Development

7 Behavioral Design Principles Facilitate Self-Control by Employing Commitment Devices Reduce the Need for Self-Control Remove Snags to Choosing Use Micro-Incentives Reduce Inattention: Reminders and Implementation Intentions Maximize the Impact of Messaging: Framing Effects, Social Comparisons, Norms Frame Message to Match Mental Model Source: Center for Global Development

Recommendations: Using Behavioral Design to Address Labor Shortage Campaign boasting percent of rural farmers using fertilizer and other agricultural innovations Emphasizing loss from not using (more effective than listing gain) Either a government or NGO-sponsored partnership that builds on reciprocity principle to form a pooled labor system between families to cover the missing labor of a “rotating migrant worker” similar to a ROSCA Government offer micro-incentive for using new agricultural products

Recommendations: Using Behavioral Design to Address Labor Shortage Establish commitment savings accounts Send bi-weekly text messages with goal specific savings reminder Source: Center for Global Development