Person:

Khwaja, Asim

Learning persistence plays a central role in models of skill formation, estimates of education production functions, and evaluations of educational programs. In non-experimental settings, estimated impacts of educational inputs can be highly sensitive to correctly specifying persistence when inputs are correlated with baseline achievement. While less of a concern in experimental settings, persistence still links short-run treatment effects to long-run impacts. We study learning persistence using dynamic panel methods that account for two key empirical challenges: unobserved student-level heterogeneity in learning and measurement error in test scores. Our estimates, based on detailed primary panel data from Pakistan, suggest that only a fifth to a half of achievement persists between grades. Using private schools as an example, we show that incorrectly assuming high persistence significantly understates and occasionally yields the wrong sign for private schools’ impact on achievement. Towards an economic interpretation of low persistence, we use question-level exam responses as well as household expenditure and time-use data to explore whether psychometric testing issues, behavioral responses, or forgetting contribute to low persistence—causes that have different welfare implications.

The current banking crisis highlights the challenges faced in the traditional lending model, particularly in terms of screening smaller borrowers. The recent growth in online peer-to-peer lending marketplaces offers opportunities to examine different lending models that rely on screening by multiple peers. This paper evaluates the screening ability of lenders in such peer-to-peer markets. Our methodology takes advantage of the fact that lenders do not observe a borrower’s true credit score but only see an aggregate credit category. We find that lenders are able to use available information to infer a third of the variation in creditworthiness that is captured by a borrower’s credit score. This inference is economically significant and allows lenders to lend at a 140-basis-points lower rate for borrowers with (unobserved to lenders) better credit scores within a credit category. While lenders infer the most from standard banking “hard” information, they also use non-standard (subjective) information. Our methodology shows, without needing to code subjective information that lenders learn even from such “softer” information, particularly when it is likely to provide credible signals regarding borrower creditworthiness. Our findings highlight the screening ability of peer-to-peer markets and suggest that these emerging markets may provide a viable complement to traditional lending markets, especially for smaller borrowers.

Evaluations of educational programs commonly assume that what children learn persists over time. The authors compare learning in Pakistani public and private schools using dynamic panel methods that account for three key empirical challenges to widely used value-added models: imperfect persistence, unobserved student heterogeneity, and measurement error. Their estimates suggest that only a fifth to a half of learning persists between grades and that private schools increase average achievement by 0.25 standard deviations each year. In contrast, estimates from commonly used value-added models significantly understate the impact of private schools' on student achievement and/or overstate persistence. These results have implications for program evaluation and value-added accountability system design.

We estimate the impact on pilgrims of performing the Hajj pilgrimage to Mecca. Our method compares successful and unsuccessful applicants in a lottery used by Pakistan to allocate Hajj visas. Pilgrim accounts stress that the Hajj leads to a feeling of unity with fellow Muslims, but outsiders have sometimes feared that this could be accompanied by antipathy toward non-Muslims. We find that participation in the Hajj increases observance of global Islamic practices, such as prayer and fasting, while decreasing participation in localized practices and beliefs, such as the use of amulets and dowry. It increases belief in equality and harmony among ethnic groups and Islamic sects and leads to more favorable attitudes toward women, including greater acceptance of female education and employment. Increased unity within the Islamic world is not accompanied by antipathy toward non-Muslims. Instead, Hajjis show increased belief in peace, and in equality and harmony among adherents of different religions. The evidence suggests that these changes are likely due to exposure to and interaction with Hajjis from around the world, rather than to a changed social role of pilgrims upon return.

We present a model with pre-marital schooling investment, endogenous marital matching and spousal specialization in homework and market production. Investment in schooling raises wages and generates two kinds of returns in our framework: a labor-market return and a marriage-market return because education can affect the intra-marital share of the surplus one can extract from marriage. We consider a household production function in which the schooling of spouses are complements, yielding positive assortative matching. If men and women have different market returns or household roles, they may have different incentives to acquire schooling, yielding a mixed equilibrium where some educated individuals marry uneducated spouses and those who educate less extract a relatively larger share of the marital surplus. The existence of large and frictionless marriage markets creates competition among potential spouses, precludes bargaining and generates premarital investments that are efficient. By combining the observations that the gender earning gap declines with schooling and that women’s household time obligations have declined over time, our model provides an explanation for why women now attain higher schooling levels than men.