Multi-year datasets from the King Center’s African Urbanization and Development Research Initiative continue to inform research and policy insights in Ethiopia and Côte d’Ivoire.
The "Meet Our Researchers" series showcases the incredible scholars at Stanford’s Center on Democracy, Development and the Rule of Law (CDDRL). Through engaging interviews conducted by our undergraduate research assistants, we explore the journeys, passions, and insights of CDDRL’s faculty and researchers.
Marcel Fafchamps is a Senior Fellow Emeritus at the Freeman Spogli Institute for International Studies (FSI) and a faculty member at the Center on Democracy, Development and the Rule of Law. Previously, he was the Satre Family Senior Fellow at FSI. He is also a Professor (by courtesy) in the Department of Economics, and his research focuses on economic development, market institutions, social networks, and behavioral economics, with a regional emphasis on Africa and South Asia. Before joining Stanford, Dr. Fafchamps served as a professor at Oxford University and spent several years in Ethiopia working with the International Labour Organization.
My choice of research field was actually somewhat serendipitous. I wasn’t initially interested in development; I was drawn to human behavior, but not development specifically. After finishing my undergraduate studies, I went to Ethiopia for what was meant to be just one year and ended up staying nearly five. Being there completely changed my direction. As a young graduate, I suddenly had a lot of freedom. I carried out individual research, traveled on missions to several African countries, observed institutions, asked questions, and produced studies. That experience made me much more interested in international issues.
I spent the first ten years of my career at Stanford before moving to Oxford University, which had a strong research community in this field. Eventually, I decided to return, and by the time I came back in 2013, Stanford had developed a vibrant and dynamic community in this area.
I haven’t pursued research with the aim of having a specific policy impact. I’ve always been more interested in understanding behavior — why people act the way they do — rather than focusing on whether a particular intervention changes outcomes. Without understanding the underlying mechanism, it’s hard to know whether a result will carry over to another context.
My citations, about 33,500, are spread across a wide range of papers rather than concentrated in one or two major hits. If I had to choose the work I’m proudest of, it would be the book I wrote on market institutions in the early 2000s. Many of my papers have also been influential.
Early on, one of the major challenges was finding a place with the right kind of support: interested colleagues, staff who could assist with fieldwork, and, especially, a community of graduate students interested in similar questions. That kind of environment takes time to build. Oxford had a very strong community with a lot of support, funding, and students working in this area. When I later returned to Stanford, we hired younger development economists and were able to build a similarly vibrant student community working on different aspects of behavior and development.
Mostly through understanding behavior and what lies behind different types of decisions. That’s what matters. In addition, the direct policy impact has largely come through my students. Many have gone into academia, but many others have joined organizations like the World Bank, the IMF, or private companies. One student, for example, helped set up a commodity exchange in Ethiopia, which certainly had policy impact. So my influence on policy has been felt primarily through the work that my students go on to do.
Research methodologies have evolved significantly over time. In the early days, researchers did not even use surveys. Later, surveys became more rigorous, and the field moved toward panel data to follow households over longer periods. With the introduction of GPS, it became possible to work with spatial data in new and more precise ways. The emergence of randomized controlled trials marked another major shift and shaped development economics for many years, although that influence is now starting to decline. Conceptually, the growing importance of behavioral economics has also been a major change and has become increasingly central to how we study issues in economic development.
There are always gaps. It never is a finished business. The challenges also change over time. Recently, in a very short period, many things built over our lifetimes have been undone. The question is whether to try to rebuild them or conclude that they did not work and try something else. I do not think many of the solutions being proposed now will last; they are not effective. The erosion of the rule of law is especially disturbing. Even democracies struggle with it, but in this country, it has essentially gone out the window. The neglect of international law is also profoundly shocking.
Closing down USAID is a massive change. Development institutions could certainly be improved, but shutting them down entirely is something very different. These shifts have also affected research funding. Funding has dwindled, and academic positions in development have declined. The job market in development economics overall seems to be shrinking. There is also less interest in people who study democracy, because their work would necessarily be critical of what is happening. It has been a significant backward step.
My students! Their enthusiasm has not disappeared, and the enthusiasm among researchers remains strong as well. Our international contacts remain solid, and parts of the world, especially in Europe, such as Germany and Switzerland, have not given up on these ideals. For example, Esther Duflo recently moved from MIT to Zurich, and we may see more moves like that.
Development economics now covers everything; it’s essentially all economics for 80 percent of the world, so there isn’t one book that summarizes it. If someone wants to start a research career focused on market institutions, I would recommend the book I wrote on that topic: Market Institutions in Sub-Saharan Africa: Theory and Evidence (MIT Press, 2003). But if I had to pick a book I personally enjoyed, it would be the historian Fernand Braudel's three-volume Civilization and Capitalism, which looks at market institutions across the world from 1400 to 1800. It was eye-opening and a lot more interesting than traditional, battle-focused history.
As he approaches retirement at the end of 2025, Dr. Fafchamps offers insights drawn from decades of research on behavior and institutions. His legacy endures through his students and the body of research that continues to shape scholarship worldwide.
On November 14, 2025, CDDRL and the King Center on Global Development hosted "Unfinished Business: A Tribute to Marcel Fafchamps" — a full-day academic symposium celebrating the career and contributions of economist Marcel Fafchamps on the occasion of his retirement. Featuring a keynote by Marcel himself, this tribute brought together colleagues, collaborators, and students to engage with the themes and ideas that have shaped his influential work in development economics, labor markets, and social networks.
Marcel's keynote on "Behavioral Markets" can be viewed below:
A conversation with Marcel Fafchamps as he reflects on the insights, challenges, and evolving institutions that have shaped his decades in development research.
Over the past six decades, equity stakes in emerging-market infrastructure ventures backed by the International Finance Corporation — which fosters economic development by investing in private enterprises — delivered higher returns, on average, than investments in portfolios of publicly-listed equities.
This brief is part of the Democracy Action Lab's "The Case for Democracy" series, which curates academic scholarship on democracy’s impacts across various domains of governance and development. Drawing from an exhaustive review of the literature, this analysis presents selected works that encompass significant findings and illustrate how the academic conversation has unfolded.
Democracies generally do not possess an intrinsic economic advantage over autocracies, but they tend to sustain less volatile economic growth. Scholarly debate concentrates on the causal link between democracy and economic development, seeing as this relationship can be context-dependent and heterogeneous across different forms of democracies and autocracies. However, stronger institutions of accountability and protections for economic rights in democracies have the potential to foster long-term GDP gains.
The Stanford Center on China's Economy and Institution's (SCCEI) annual China Conference brings together leading voices from policy, business, and academia to examine key economic trends in China and their implications for the world.
We are finalizing an outstanding lineup of speakers from academia, industry, and policy communities. This year's theme and selected speakers will be announced in the coming months. Updates will be posted here as confirmed.
Location:
Bechtel Conference Center
Encina Hall
616 Jane Stanford Way, Stanford University
*Topics, speakers, and timing will be confirmed in the coming months.
Parking meters are enforced Monday - Friday 8 AM to 4 PM, unless otherwise posted.
The event will take place in the Bechtel Conference Center located on the first floor of Encina Hall Central. The closest visitor parking to Encina Hall is:
Please visit the this website for more detailed parking options and directions to the venue.
Bechtel Conference Center
Encina Hall
616 Jane Stanford Way, Stanford University
This event is by invitation only.
The starkly different paths of economic development followed by China and the West leading to the Industrial Revolution is often being attributed to environmental factors. This column argues that institutions and culture played a key role in setting Europe and China on divergent paths well before the onset of the Industrial Revolution, but the role they played was mediated by a critical difference between the two civilizations: the nature of their prevalent social organizations. A key factor behind China’s remarkable economic resurgence has been its capacity to adapt traditional institutions and cultural practices to the needs of a modern economy.
Social, political, and religious polarization has steadily grown in many longstanding democracies. Some elected representatives and voters have come to view their opponents as illegitimate participants in politics who pose an existential threat to the nation-state; this justifies ignoring or violating democratic norms and procedures to prevent them from gaining power. As polarization increases, voters may prefer to support authoritarian parties that are viewed as better expressing their group identities, as opposed to democratic parties seen as hostile to those identities.
Trust lies at the root of these processes: polarized individuals tend to believe that those who differ from them will not act from a place of goodwill and will lack the incentive to promote their interests. Revitalizing democracy would thus seem to require revitalizing trust. Yet one’s sense of trust is often shaped by factors that are difficult to change, such as childhood socialization. How, then, can trust be increased?
In “Financial market exposure increases generalized trust,” Saumitra Jha, Moses Shayo, and Chagai M. Weiss provide evidence from an experiment conducted among Israelis in 2015. The authors find that individuals who participated in the stock market were more likely to agree with the statement that “most people can be trusted.”
Their argument builds on the intuition that stock markets are fundamentally about trust: investors take a risk by placing their assets in the hands of unfamiliar people who nonetheless have an incentive to promote their interests. As these assets grow, participants ought to become more trusting, not only of financial markets but also of people more generally. Surprisingly, the authors find that even those whose assets did not grow became more trusting. Another surprise is that the increases in trust were higher for Israelis on the political left and right. In other words, polarized voters — those who especially struggle to trust others — exhibited greater increases in trust than centrists.
Social scientists have analyzed trust as both a cause and a consequence. Much of this research concerns the economy, as transactions, contracts, and negotiations all require the belief that other parties will honor their commitments. Higher levels of trust may be a cause of higher economic growth. Conversely, consumers tend to distrust firms that are subject to scandals, leading the corresponding value of those stocks to decrease.
Apart from the economy, trust is also a central aspect of ‘social capital,’ which consists of the resources gained from one’s social networks. Trust can also promote good governance by enabling collective action and by providing legitimacy to political institutions. And as Americans and others learned during the COVID-19 pandemic, trust is central to public health compliance.
Survey research has identified a persistent trust deficit; less than a quarter of respondents to the World Values Survey agree with the statement that “most people can be trusted.” This deficit has many root causes. At the personal and psychological level, one’s sense of trust likely develops in childhood. Meanwhile, people who have experienced trauma or discrimination are less likely to trust others. Whether or not two people are from the same country or the same ethnic or religious group also affects their sense of trust. Those whose ancestors were victims of the African slave trade centuries ago exhibit lower levels of trust today. People in economically unequal societies are also less likely to trust each other. All of this suggests that improving trust is very difficult, especially in polarized societies.
Fig. 1. Generalized trust around the world. (a) Geographic Distribution of Generalized Trust. This figure reports cross-national patterns of generalized trust from the World Values Survey (Wave 7). For each country, we report the share of respondents who state that most people can be trusted. Since Israel is not included in the most recent wave of the World Value Survey, the figure shows generalized trust data from the 2004 World Value Survey.
Studying whether stock market participation affects trust is difficult because participation is itself correlated with pre-existing levels of trust, as well as with other relevant factors like gender or personality traits (such as excitability). The authors’ experimental methodology seeks to overcome this by randomly allocating a large number of participants (over 1300) into treatment and control groups. Prior to this allocation, the authors conducted a survey to establish participants’ baseline levels of trust.
Those in the treatment group participated in an additional survey that explained the study rules as well as how their asset values would be determined on the stock market, quizzing them on these topics afterwards. Participants were given either $50 or $100 (USD), which was between 64% and 128% of the average Israeli daily wage in 2015.
Stock market participants received weekly updates on the prices of their assigned assets, along with a description and valuation of their portfolio, when the markets closed at the end of each week. Individuals in the treatment group were given weekly opportunities to decide whether to buy up to 10% of their portfolio, sell up to 10% of it, or make no change. (If no decision was made, they lost the 10% that could have been traded.) Participants ultimately traded at high levels: around 70% did so at every opportunity, and 80% did so in six out of the seven weeks.
As stated above, participation increased the probability of expressing trust by around six percentage points. These effects were largest for polarized voters and for those whose stocks performed well; however, even those who suffered market losses exhibited increases in trust.
The authors carefully show how trust can be not only a cause but a consequence of stock market participation. Their approach is not paternalistic because it lets participants make independent financial decisions — as opposed to lecturing them — from which trusting attitudes then develop. In addition, the study can be replicated on a large scale because (a) it can be integrated within existing government cash aid programs and (b) participants would not need much special teaching or supervision. The authors’ approach should appeal to both those who seek solutions that promote equality and empowerment and to those who oppose top-down social programs but support market-driven solutions.
*Research-in-Brief prepared by Adam Fefer.
CDDRL Research-in-Brief [4-minute read]
This paper examines the “Korea discount,” the chronic undervaluation of South Korean stocks compared to other developed markets. Despite Korea ranking 13th globally in market capitalization, its stock market has grown only 25% over the past decade, while the S&P 500 grew 186%. The author attributes this poor performance to weak corporate governance, particularly the dominance of family-controlled conglomerates (chaebols) that prioritize the interests of founding families over those of minority shareholders. An analysis of successful reforms in Japan, Taiwan, and the United States shows that the Korea discount could be successfully resolved by strengthening corporate disclosure requirements, resolving conflicts of interest among institutional investors, and making South Korea’s voluntary stewardship code more enforceable to encourage active shareholder engagement and improve market valuations.
Institutional Investor–Driven Governance Reform and the Resolution of the Korea Discount
We conduct an interactive online experiment framed as an employment contract. Subjects from the US, India, and Africa are matched within and across countries. Employers make a one-period offer to a worker who can either decline or choose a high or low effort. The offer is restricted to be from a variable set of possible contracts. High effort is always efficient. Some observed choices are well predicted by self-interest, but others are better explained by conditional reciprocity or intrinsic motivation. Subjects from India and Africa follow intrinsic motivation and provide high effort more often. US subjects are more likely to follow self-interest and reach a less efficient outcome on average, but workers earn slightly more. We find no evidence of stereotypes across countries. Individual characteristics and stated attitudes toward worker incentives do not predict the behavioral differences observed between countries, consistent with cultural differences in the response to labor incentives.
While the Basel III framework has helped prevent a repeat of the 2008 global financial crisis, it has also made it harder for banks to finance critical infrastructure projects in developing economies. Addressing this requires updating regulatory models that treat such investments as riskier than they are.
