Dangers of a Double-Bottom Line: A Poverty Targeting Experiment Misses Both Targets

26 Pages Posted: 12 Mar 2018 Last revised: 11 Feb 2023

See all articles by Dean Karlan

Dean Karlan

Northwestern University

Adam Osman

University of Illinois at Urbana-Champaign; Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL); Economic Research Forum (ERF)

Jonathan Zinman

Dartmouth College; Innovations for Poverty Action; Jameel Poverty Action Lab; National Bureau of Economic Research (NBER)

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Date Written: March 2018

Abstract

Two for-profit Philippine banks, aiming to increasing microlending to the poor, incorporated a widely used poverty measurement tool into their loan applications and tested the tool using randomized training content. Treated loan officers were provided an explanation of the tool’s purpose; exhortation tying the tool to the organizations’ social missions; and reassurance that these data, conditional on other characteristics, do not predict default and thus should not jeopardize incentive pay based on portfolio performance. The control group training merely labeled the tool “additional household information.” The strategy backfired, leading to no additional poor applicants and potentially lower-performing loans. Descriptive evidence suggests the training exacerbated loan officer misperceptions about compensation incentives and multitasking problems. This cautionary tale is an example of why management may want include social outcomes directly into employee performance evaluations, or silo corporate social responsibility efforts from core operations.

Suggested Citation

Karlan, Dean and Osman, Adam and Zinman, Jonathan, Dangers of a Double-Bottom Line: A Poverty Targeting Experiment Misses Both Targets (March 2018). NBER Working Paper No. w24379, Available at SSRN: https://ssrn.com/abstract=3138313

Dean Karlan (Contact Author)

Northwestern University ( email )

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Adam Osman

University of Illinois at Urbana-Champaign ( email )

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Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL) ( email )

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Jonathan Zinman

Dartmouth College ( email )

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Innovations for Poverty Action

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Jameel Poverty Action Lab

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National Bureau of Economic Research (NBER)

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