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Randomized Experiments in Development Economics

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Causal Inference and the Identification ProblemIntroduction to Econometrics+3 moreConditional Cash Transfers and Social PolicyDevelopment Policy Evaluation and Impact Assessment
RCT experimental-design

Core Idea

Randomized Controlled Trials randomly assign treatment (a development program) to some communities and not others, generating credible causal impact estimates. Banerjee and Duflo pioneered this approach in development economics, studying microfinance, education, and health programs. RCTs address selection bias and reverse causality but raise questions about generalizability and policy scalability.

Explainer

From causal inference, you know the fundamental problem: we want to know what would have happened to treated individuals had they not been treated, but we can never observe both states for the same person. From probability theory and sampling distributions, you understand that random assignment across a large enough sample ensures that treatment and control groups are statistically equivalent in expectation — any difference in outcomes can be attributed to the treatment itself. Randomized Controlled Trials (RCTs) in development economics apply this experimental logic to real-world programs, bringing the rigor of clinical trials to questions like whether deworming pills improve school attendance or whether microloans reduce poverty.

The core mechanics are straightforward. Researchers identify a population — say, 200 villages eligible for a new school-feeding program. They randomly assign half the villages to receive the program (treatment group) and half to continue without it (control group). After a specified period, they measure outcomes in both groups: test scores, attendance rates, nutritional status. Because assignment was random, any systematic difference between the groups at the end is the average treatment effect of the program. This eliminates selection bias, the problem that plagues observational studies. Without randomization, villages that receive feeding programs might be wealthier, better-governed, or more motivated — and any improvement in outcomes could reflect those pre-existing advantages rather than the program itself.

Abhijit Banerjee and Esther Duflo, along with collaborators at the Abdul Latif Jameel Poverty Action Lab (J-PAL), pioneered the systematic use of RCTs in development economics, winning the 2019 Nobel Prize for this work. Their studies produced surprising and policy-relevant findings. Providing free bed nets for malaria prevention was more effective than charging even small amounts, overturning the intuition that cost-sharing increases usage. Adding a second teacher to a classroom had little effect on learning, but hiring a contract teacher accountable to parents did. These results challenged development orthodoxies and shifted billions of dollars in aid allocation toward evidence-backed programs.

RCTs are not without limitations, and understanding them is essential for interpreting results responsibly. External validity — whether findings from one context generalize to another — is a persistent concern. A deworming program that raised attendance in Kenya may not work the same way in a Bolivian highland community with different health burdens and school systems. Scalability is related: a small, carefully managed pilot may succeed because of intensive researcher oversight that a national rollout cannot replicate. There are also ethical questions — is it acceptable to withhold a potentially beneficial program from the control group? — and practical constraints, since randomization requires the cooperation of governments and NGOs willing to let a coin flip determine who receives services. Despite these limitations, RCTs have fundamentally raised the evidentiary standard in development economics, shifting the field from ideological debates about what should work toward empirical evidence about what actually does.

Practice Questions 5 questions

Prerequisite Chain

Understanding ZeroThe Number ZeroCounting to FiveCounting to 10Counting to 20Counting a Set of Objects Up to 20Cardinality: The Last Number CountedMatching Numerals to QuantitiesSubitizing Small QuantitiesAddition Within 10Number Bonds to 10Addition Within 20Doubles and Near DoublesDoubles Facts Within 10Near Doubles Facts Within 20Mental Math Strategies for AdditionMental Math: Adding and Subtracting TensAddition Within 100Repeated Addition as MultiplicationMultiplication as Equal GroupsMultiplication: ArraysBasic Multiplication Facts (0s, 1s, 2s, 5s, 10s)Multiplication Facts Within 100Division as Equal SharingDivision as Grouping (Measurement Division)Division: Grouping (Repeated Subtraction) ModelDivision: Fair Sharing ModelDivision as Equal SharingDivision as GroupingBasic Division FactsDivision Facts Within 100Multiplication and Division Fact FamiliesRelationship Between Multiplication and DivisionDivision Facts as Inverse of MultiplicationRemainders and Quotients in DivisionDivision Word ProblemsMulti-Step Word ProblemsSolving Multi-Step Word ProblemsMultiplication Word ProblemsDivision Word ProblemsIntroduction to Long DivisionFactors and MultiplesPrime and Composite NumbersEquivalent FractionsRelating Fractions and DecimalsDecimal Place ValueIntegers and the Number LineComparing and Ordering IntegersAbsolute ValueAdding IntegersSubtracting IntegersMultiplying IntegersDividing IntegersUnit RatesProportionsPercent ConceptConverting Between Fractions, Decimals, and PercentsOperations with Rational NumbersTwo-Step EquationsSolving Multi-Step EquationsEquations with Variables on Both SidesAngle Pairs: Complementary, Supplementary, and VerticalParallel Lines and TransversalsCorresponding AnglesAlternate Interior AnglesTriangle Angle Sum TheoremExterior Angle TheoremTriangle Inequality TheoremSimilar Triangles: AA SimilaritySimilar Triangles: SSS and SAS SimilarityProportions in Similar TrianglesRight Triangle Trigonometry IntroductionSine, Cosine, and Tangent RatiosTrigonometric Ratios ReviewRadian MeasureConverting Between Degrees and RadiansThe Unit CircleGraphing Sine and CosineGraphing Tangent and Reciprocal Trigonometric FunctionsDerivatives of Trigonometric FunctionsAntiderivativesIndefinite IntegralsBasic Integration RulesRiemann SumsDefinite Integral DefinitionProbability Density Functions and Continuous DistributionsCumulative Distribution FunctionsContinuous Random VariablesProbability Density FunctionsExpected ValueWeak Law of Large NumbersProbability Axioms and RulesConditional ProbabilityIndependence of EventsSampling DistributionsStandard Error of EstimatorsHypothesis Testing: Framework and LogicP-values and Statistical SignificanceEffect Size and Practical SignificanceHypothesis Testing: Framework and LogicZ-Tests and T-Tests for MeansOne-Sample Z-Test for MeansOne-Sample and Two-Sample T-TestsInference in Linear RegressionPrediction Intervals in RegressionLinear Regression BasicsResiduals and Goodness of Fit (R²)Simple (Bivariate) OLS RegressionClassical OLS Assumptions (Gauss-Markov)Multiple RegressionInterpreting Regression CoefficientsHypothesis Testing in RegressionF-Test and Joint SignificanceR-Squared and Model FitOmitted Variable BiasCausal Inference and the Identification ProblemRandomized Experiments in Development Economics

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