Referee Report: Selling Crops Early to Pay For School Brian Dillon

Refereed by Haseeb Ali, 3rd Year PhD student in Applied Economics, University of Minnesota

Study Summary

This paper examines the effects of a change in the primary school academic calendar, which moved up
the start of the school year, on household financial behavior, in Malawi. Specifically, the study analyzes
how the change effected those households with potential credit constraints. Such households would
need to finance the educational expenses of their primary school children at a time when agricultural
prices are low. If an agricultural household in credit constrained, it will need to sell some of its harvested
produce to pay for these expenses. The study finds that the strategy of selling early is limited to poor
households with school children, and increases in the number of children. The author finds little
evidence of improved schooling outcomes.

Empirical Summary

The change of the primary school year calendar provides a nice natural experiment to test for changes in
financial activity. The change is effectively randomized over multiple dimensions, which allows for a
clean identification strategy. The first, most obvious dimension is the time dimension. Those asked
about the previous years harvest cycle (due to the timing of the survey) were not affected by the
change, while those asked about the current harvest cycle were affected by the change. Another
dimension concerns the composition of the composition of the family, the change only effected those
with primary school children. These two dimensions allow for a difference-in-difference estimation
strategy which meets all the necessary exogeneity assumptions

Here are some suggestions:

1) In the section on Primary school expenses, there should be some discussion/data on how
much a proportion of total household expenditure and total monthly income these expenses
are. Breaking this down for poor and non-poor households would also be informative. The raw
MWK value does not tell me how substantial these costs in the context of the average Malawian
household.
2) It should break down the Childrenh variable in the estimating equation. This will allow you to
differentiate effects that exist because of the presence of primary school children, and whether
this effect is increasing in the number of children. Currently, your estimation strategy does not
do this. Why? Suppose that any household that has primary school children (whether 1 or 5
primary school children) spends X Malawian kwacha more this year than last compared to a
non-primary school household. Suppose also that this effect is independent of the number of
primary school children. Assuming randomization such that the exogeneity assumptions are
met, your estimation strategy will find a statistically significant coefficient on the interaction
variable (between the year variable and the number of primary school children), given that
there is a high enough statistical power in your data. This coefficient will be somewhere
 between 0-X, even though the effect is not increasing in the number of primary school children.
Instead, your estimation should be:
Salesmh = + 1.Primary_Childrenh + 2.2010h + 3.Number_Childrenh +
4.{Primary_Childrenh 2010h} + 5.{Primary_Childrenh 2010h} + .Xh + h

I have included R code to show how your specification may lead to faulty interpretation of the
coefficients. All data is generated hypothetically within the file.

3) The results that you get only use the IHS3 data set. Do the other rounds of the cross-section part
of the Malawian IHS surveys also spread out interview dates so that some households are
reporting for the previous years harvest, while others are reporting for the current years
harvest. If so, then you can exploit another dimension to validate your results. Such analysis
would in a sense be testing for other trends that may be driving your results. You can run the
same regressions and check whether the all-important interaction term is significant. Given that
there was no change in the school calendar in the other years (both before and after IHS3), you
would not expect to see a significant coefficient. If you do, then this casts some doubt about
whether what you are picking up in IHS3 is a result of school calendar change. I do not expect
them to be significant because I trust the natural experiment is what drives the results, but it
would be a nice robustness check.