Financial development

Jason Kerwin on getting the financial cart ahead of the economic horse.

At the least they could figure out a way to stagger the payments so people don't have to waste time in line.

Addendum (7/8): Be sure to read the corrective comment by Jessica Goldberg.

Returns to human capital

UM graduate student Jason Kerwin on the returns to human capital investment in Malawi.

Perhaps the most stunning figure in Jason's post is the fraction of the population in Malawi with education beyond high school, which is less than one percent. And we are now more than three decades after the end of the colonial period.

What's up with Bob Townsend?

A nice summary of some of Robert Townsend's recent research in development economics.

His departure to MIT was a big loss for Chicago.

Via: MR

Three on Detroit

The financial times has an optimistic [sic] piece on real estate in Detroit.

A lawyer suggests Detroit as the new Amsterdam with legalized pot and prostitution. This has always seemed like a natural strategy to me, particularly given that Detroit already is heavy (by the standards of places outside of Vegas and Atlantic City) with casinos. It could be a real Vegas for adults, instead of one that just pretends.

Conservatives bashed Mayor Bloomberg's idea for urban homesteading - here's your house and land, fix it up and live in it for a while and it's yours - but it seems like an excellent idea to me as well. Homesteading helped to populate the American West, why not empty blocks in Detroit?

Blog of the development data sets ...

I've added the new blog on development economics data sets to the blogroll.

Hat tip to Jason Kerwin.

Gates Foundation project

Some of the papers from the Gates Foundation project on evaluating innovative health interventions in developing countries I was involved with have now been published in the journal Health Economics. These are the stronger papers from the project.

Among the people I did not know prior to starting the project but got to know as a result of it, the Iranian group ("Family planning ...") and Jean-Louis Arcand ("Teacher training ...") were particularly impressive. Indeed, being the methods "mentor" for the Iranian group, who did not really need my help, changed my views on Iran quite a lot, as the policy being evaluated highlights aspects of internal politics within Iran with which I was quite unfamiliar. The papers by the people I did already know - Rodrigo Soares was a junior colleague of mine at Maryland and Rebecca Thornton is a junior colleague at Michigan - also impressed me.

One lesson that I learned from this project is that researchers who participate in things like this should get promises about publication outlets in writing before they commit to participating. Some of the papers in the Health Economics special issue could have been published in more prestigious journals but were not because the project organizers wanted to put all the best papers in a single special issue of a journal. The tradeoff here is between the promotion of the project as a whole, which is easier with a special issue, and the interests of the individual researchers, many of whom are untenured assistant professors, who want to get their own work in the best possible journals. I have no problem with making the tradeoff in favor of the project as a whole if the decision to do so is all spelled out in advance, but in this case it was not. This in turn led to some conflict and ill will during the course of the project, along with a bad taste afterwards, all of which could easily have been avoided.

Parasites and development

This strikes me as interesting, plausible and important.

Bonus points to the Economist for including a p-value in the article, and for waiting to write about it until it was published in a peer reviewed journal. Double bonus for understanding the difference between correlation and causation and for explaining the multivariate analysis simply and correctly.

Economist and minimum wages

From an article on Brazil:

How much of the credit does Lula [the current president] deserve for all this [growth]? ... He also raised the minimum wage by two-and-a-half times since 2003, taking its purchasing power to its highest level since 1979. This has not destroyed jobs: some 13m new jobs in the formal (ie, legally registered) economy have been created since 2003."

Oh dear! The implicit estimator here is the before-after estimator or, if you are a more expensive consultant, the "interrupted time series design." It requires, to produce a consistent estimate of a causal effect, that absent the change in the minimum wage, the change in the number of jobs would have been zero.

Given that Brazil increased its minimum wage in the midst of a boom, this assumption seems highly unlikely. Thus, the correct comparison would be between the number of jobs created in a boom with minimum wage increases and the number created in a boom without minimum wage increases. Both will be large positive numbers. The fact that the first is a large positive number is uninformative about the sign of the difference.

How big the difference would be depends on many factors, including how binding it was to begin with, something the Economist piece is silent about.

One expects this sort of basic error in counterfactual reasoning from the NYT or the WaPo, not the Economist.

On field work in Africa

My student Jessica recommends this moving post on being an outsider doing research in Africa.

You really are a visitor from another world - a rich and peaceful world.

The cutting edge of AIDS prevention in Africa

From the Nyasa Times and from my colleague Rebecca Thornton.

Note the role of simple, and in this case as in so many others misleading, bivariate correlations in confusing the Malawian policy discussion.

Global Development Network

Some readers will remember my traveling around to places like Beijing, Delhi, Brisbane and York to consult on some projects managed by the Global Development Network (GDN) and funded by the Gates Foundation. The GDN's web page for the projects is here. The working papers from the projects I was most directly involved with are here, here and here.

The projects aimed to test innovative health interventions in developing country contexts. They also aimed to "build capacity" by training developing country researchers in modern econometric program evaluation. These two goals, of course, conflict. Most of the projects that turned out the best in terms of providing high quality evidence involved researchers who were trained at top North American economics departments and who did not really need much of the assistance provided by the methodological experts (me and some old and new friends) and substantive experts assembled by the GDN. In contrast, the projects that resulted in the most capacity building were more mixed in terms of the quality of the resulting evidence. At the end, I was left wondering if it really made sense to combine evidence production and capacity building in this way.

That is not to say I did not enjoy the work; I did, tremendously. The travel was great fun - though I wish I had been able to spend more time outside the hotel compound in Delhi - and so was getting to know the developing country researchers. Especially useful in that regard was getting to know the researchers in the Iranian group I worked with, both in the sense that it always humanizes international relations to know people in the countries we are presently unhappy with, but also because they helped me to understand better the domestic political equilibrium within Iran.

John Bates Clark Medal

Esther Duflo wins the Clark Medal.

A fine decision and a well-deserved award.

Also excellent timing, as we just read a paper by Esther (and co-authors) on micro-finance for the final meeting of my undergraduate program evaluation course last Monday.

Linkings literatures in development economics

We are in the midst of reading papers on microcredit programs in my undergraduate program evaluation class. These programs provide small loans to individuals in developing countries while using alternative institutional arrangements, such as group liability, to keep costs down relative to traditional approaches. They often focus particularly on women and have the twin goals of encouraging modernization (i.e. making them more like us) and economic development. The Grameen Bank is the most famous example but there are many other such programs.

The literature is interesting in several ways. Perhaps the most interesting feature is that, despite all the media hype, a veritable supernova of warm glow and the Nobel prize, there is not particularly strong evidence that micro-credit programs pass cost-benefit tests.

Also interesting,though, is that the literature on micro-credit does not seem to be very well-integrated with other parts of the development literature. When I was in graduate school at Chicago, Robert Townsend published his famous paper "Risk and Insurance in Village India" (gated via JStor) that described the ways in which small scale farmers in rural India informally insure one another against common risks. That work spawned a large subsequent literature looking at risk and informal insurance, which has both its positive side and its negative side, as the demands of informal insurance (share your shocks!) can be thought of as a very high marginal tax rate, as in this paper by my student Jessica Goldberg.

It seems to me that the literature on informal insurance has important implications for the literature on micro-credit, in the sense that villagers who use micro-credit to establish successful enterprises likely face high implicit tax rates. Furthermore, informal insurance often works through extended family networks. This has implications for the nature of spillovers in evaluations that try to look at differences within villages between either eligible participants and non-participants or between eligibles and ineligibles. What I have in mind is the sort of analysis done for conditional cash transfer programs by my friend Manuela Angelucci but in the context of micro-credit.

Why Haiti is poor

There are surely many reasons why Haiti is so poor, even relative to other Caribbean nations. But US sugar import quotas are surely one of them.

It would be great if US politicians (and others) who purported to care about poor people would focus more of their attention and efforts on where the world's poor actually live, which is almost entirely in other countries. There are lots of things we can do, like getting rid of sugar price supports that would help people who are really, really badly off without having to spend more on problematic forms of foreign aid.

Bad behavior from 3ie

This is from my holiday email from 3ie, an organization (that I am usually quite happy with) that promotes rigorous evaluation and evidence-based policy in the developing world. The figure in the graph embodies one of the tricks that Huff complains about in his classic book How to Lie with Statistics, which is shaving the vertical access so as to visually overstate the amount of change in the dependent variable.

Oops.

Wild Bank humor

This is not new in an absolute sense but it was new to me and coincided some of my experiences with both the WB and the IDB.

Via: probably Chris Blattman

Bureaucrats in business class

A bit of moral indignation from Chris Blattman on the theme of UN and development bank bureaucrats flying in business class.

Key bits:

As I entered the plane, though, I passed the same sight I see on every flight to and fro a developing country: a business class full of World Bank and (senior) UN peeps.

I seldom fly business myself, even on Bank and UN consultancies, mostly to conserve my project funds for research assistants and survey expenses. My incentives are just right: money I spend on me comes out of money I'd spend making my research projects just a little better. Not so the rest of the agency?

I also hold back from business for another reason: $6000 for a single ticket? When the purpose of your trip is to contribute (however little) to ending poverty, something about that price tag just doesn't seem right.

It is nice to sit in front but is it a good buy for those who pay for the UN and the banks? I sense a principal-agent problem here.

Surfing and development

Truth is stranger than fiction at Waves for Development.

Hat tip: Chris Blattman

New foreign aid blog

William Easterly started a new blog about foreign aid a few days ago. You can find it here.

So far it is lively and right on target on important issues.

Deaton paper

The Angus Deaton paper that critiques field experiments in development economics that I mentioned in an earlier post is now up on his web page.

I am looking forward to reading it.