Michael Kremer

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(From left) 2019 Nobel laureates in Economic Sciences Michael Kremer, Esther Duflo, and Abhijit Banerjee at a press conference at the Royal Swedish Academy of Sciences, Stockholm, December 7, 2019

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Michael Kremer is an American economist who, with Abhijit Banerjee and Esther Duflo, was awarded the 2019 Nobel Prize for Economics (the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) for helping to develop an innovative experimental approach to alleviating global poverty. Kremer, Banerjee, and Duflo, often working with each other, focused on relatively small and specific problems that contributed to poverty and identified the best solutions through carefully designed field experiments, which they conducted in several low- and middle-income countries over the course of more than two decades. They also explored methods for generalizing the results of particular experiments to larger populations, different geographic regions, and different implementing authorities (e.g., nongovernmental organizations [NGOs] and local or national governments), among other variables. Their fieldwork led to successful public policy recommendations and transformed the field of development economics (see economic development), where their approach and methods became standard.

Kremer attended Harvard University, where he earned an A.B. degree in social studies (1985) and a Ph.D. in economics (1992). From 1993 he taught at the University of Chicago, the Massachusetts Institute of Technology (MIT), and Harvard University and served as a research associate or research fellow at several institutions, including the National Bureau of Economic Research, the Harvard Institute for International Development, the Brookings Institution, and the Center for Economic Research in Pakistan. At Harvard he was appointed professor of economics in 1999 and Gates Professor of Developing Societies in 2003.

Kremer, Banerjee, and Duflo applied their experimental approach in many areas, including education, health and medicine, access to credit, and the adoption of new technologies. In the mid-1990s Kremer and his colleagues conducted field experiments in western Kenya that showed that poor learning (as measured by average test scores) among schoolchildren was not caused by scarcity of textbooks or even by hunger (many students went to school without breakfast). Building on that work, Duflo and Banerjee tested the hypothesis that learning could be improved by implementing remedial tutoring and computer-assisted learning programs to address the needs of weaker students. Working with large student populations in two Indian cities over a two-year period, they found that such programs had substantial positive effects in the short and medium term, leading them to conclude that a major cause of poor learning in low-income countries was that teaching methods were not properly adapted to students’ needs. In later experimental research in Kenya, Kremer and Duflo determined that decreasing the size of classes taught by permanently employed teachers did not significantly improve learning but that putting teachers on short-term contracts, which were renewed only if the teacher achieved good results, did have beneficial effects. They also showed that tracking (dividing students into groups based on prior achievement) and incentives to combat teacher absenteeism, a significant problem in low-income countries, also positively affected learning. The latter finding was further supported in studies by Duflo and Banerjee in India.

In the area of health and medicine, Kremer and the American economist Edward Miguel conducted an experiment in 1998–2001 that showed that demand for deworming pills among poor families in Kenya was (understandably) extremely sensitive to price: 75 percent of parents obtained deworming pills for their children when the medicine was made available (in primary schools) for free, whereas only 18 percent of parents did so when they were required to pay a (heavily subsidized) fee of 40 cents (U.S.). Their research led the World Health Organization (WHO) to recommend that deworming medication be distributed for free in areas where more than 20 percent of children were infected with parasitic worms.

In a series of studies beginning in 2000, Kremer, Duflo, and the American economist Jonathan Robinson used field experiments to investigate the question of why smallholder farmers in sub-Saharan Africa often failed to adopt modern technologies, such as fertilizer, that were relatively simple to use and potentially greatly beneficial. Focusing on farmers in western Kenya, they demonstrated experimentally that the low adoption rates could not be attributed to difficulties that farmers encountered in applying the fertilizer correctly or to any lack of information among them. Kremer, Duflo, and Robinson instead proposed that some of the farmers were affected by present bias, a tendency to view the present or the short term as more important than the future or the long term, and specifically by hyperbolic discounting, a tendency to prefer smaller rewards that arrive sooner to larger rewards that arrive later. Accordingly, present-biased farmers would put off the decision to purchase fertilizer at a discount until just before a deadline, and even then some of them would choose not to buy, preferring a smaller amount of savings (in both money and effort) in the present to a larger amount of income in the future.

As a test of this hypothesis, Kremer, Duflo, and Robinson designed field experiments that showed that farmers as a whole purchased more fertilizer if it was offered to them at a small limited-time discount early in the growing season (when they had money) than if it was offered to them at a much larger discount (enough to offset their out-of-pocket costs) without a time limit later in the season. The researchers thus established the extremely valuable practical result that temporary fertilizer subsidies do more than permanent subsidies to increase the incomes of smallholder farmers.

Work by Kremer, Banerjee, and Duflo directly and indirectly influenced national and international policy making in beneficial ways. As a researcher associated with the Abdul Latif Jameel Poverty Action Lab (J-PAL), cofounded in 2003 by Banerjee, Duflo, and Sendhil Mullainathan, an economist then at MIT, Kremer helped to create scientific bases for anti-poverty programs that have affected more than 400 million people across the world. The laureates’ experimental approach also inspired both public and private organizations to systematically evaluate their anti-poverty programs, sometimes on the basis of their own fieldwork, and to drop those that proved to be ineffective.