UC Berkeley

This dissertation comprises three essays examining how the distinctive features of developing economies shape the decisions of firms and households. The unifying argument is that economic findings from high-income settings often fail to transfer cleanly to low- and middle-income countries (LMICs), where incomplete markets, weaker infrastructure, limited social protection, and severe budget constraints fundamentally alter the problems that agents face. Ignoring these differences may harm both academic understanding of low-income economies and the effectiveness of economic development policies. The first chapter asks whether risk aversion prevents firms in developing countries from pursuing profitable but uncertain investments. Standard economic theory assumes firms are risk neutral. This assumption may be correct in wealthy economies where owners hold diversified portfolios. In LMICs, however, most firms are owner-operated, and losses threaten household consumption directly. Using two field experiments with over 1,200 retailers in Kenya, I find that risk aversion significantly impedes the diffusion of new motorcycle helmets, harming retailers, upstream manufacturers, and consumers. These results challenge the assumption of firm risk neutrality and have broad implications for understanding innovation and growth in developing economies. The second chapter introduces a new method for estimating the value of a statistical life (VSL) -- a measure of consumers' willingness to pay for mortality risk reduction that is central to cost-benefit analyses of public policy. By experimentally updating beliefs about risk exposure without altering actual risk, I obtain a precise VSL estimate that is orders of magnitude below values from high-income settings. I argue this is theoretically consistent: as wealth declines, money's marginal value rises nonlinearly, sharply increasing the opportunity cost of investing in safety. This finding suggests that VSL estimates commonly applied in LMIC policy contexts -- typically rescaled from high-income benchmarks -- may systematically misallocate resources. The third chapter, co-authored with Michael Walker, Nick Shankar, Edward Miguel, and Dennis Egger, examines the effects of large, one-time unconditional cash transfers on infant and child mortality in Kenya. While a substantial literature documents the consumption effects of such programs, their inter-generational and health impacts remain understudied. We estimate that the transfers reduced mortality among children under five by 45\%. Increases in hospital deliveries and reductions in physically demanding labor among pregnant women emerge as key mechanisms. Mortality reductions are concentrated among the poorest households, underscoring how binding budget constraints shape health outcomes at the earliest stages of life.