Week of September 19, 2016

1. Microfinance Subsidy: Back before there were impact evaluations the heated discussions in microfinance were about costs and subsidies (and business model, which is really a conversation about cost and subsidy). Those conversations have died down as the focus shifted to impact evaluations--appropriately!--but cost and impact are equally important when it comes to policy choices. Cull, Demirguc-Kunt, and (our very own) Morduch have a new paper that does the painstaking work to accurately measure subsidy in microfinance. They find that subsidy is pervasive and long-lasting, but small: meaning the modest impact of microfinance has to be viewed in terms of even more modest cost. I could write the whole faiV this week just on findings from the paper which is another way of saying: read it! Bob Cull has a short overview of the findings here for those with short attention spans, or a day full of meetings.

2. But Wait, There's More Microfinance: While most eyes have been turned to tracking the growth of digital financial services, the microfinance industry in India is growing rapidly again. The industry association reports 60% year-over-year growth, with the majority coming from the large incumbents like SKS and Ujjivan. Apparently the banking correspondent model is playing a significant role in growth. Let me pause for a moment to roll my eyes at the finding that clients say that 94% of loans are for "income generating activities."
Meanwhile, Jonathan Morduch has a review of Lesley Sheratt's new book on achieving an ethical balance in microfinance, a balance that a 60 percent growth rate calls into question.  

3. Financial InclusionBack in August I noted a paper about low-take up of no-frills savings accounts in a number of countries. A new paper from Brune et al. using the Malawi commitment savings experiment data to look at what happens with account usage and spending composition when funds are direct deposited into accounts or delivered in cash, and the delay between when the household learns the deposit is coming and when it is delivered. Higher account balances for direct deposit persist for only a few weeks, and there is no meaningful effect on the composition of spending, which, they say, suggests "that households manage cash effectively without the use of formal financial products."
And in a connection that perhaps only my brain makes, here's a new paper about a job training program in Argentina that tracks effects on employment for 4 years. Gains are large in the short run but fade out over time. The effect seems to come from "persistence of employment." In case you're wondering here's the connection I make: financial inclusion matters most to those with income, and the benefits of financial inclusion are related to the volatility of income in the short- and long-term, which, of course, is affected by the persistence of employment.

4. Education: Like financial inclusion, education is about more than access. Liberia, where 60% of children aren't in school, and only 20% of women who reached fifth grade can read a sentence, is experimenting with turning over some schools to Bridge International Academies (not unlike charter schools in the US). Here's a story about an ActionAid visit to one of the schools and the aftermath. There is an external impact evaluation underway of Liberia's experiment. As Justin Sandefur notes in describing the situation and the evaluation, "when the status quo is unacceptable, experimentation is an obligation." But which educational experiments are obligated? 3ie is about to release a systematic review of education intervention evaluations. Here's a paper from David Evans from earlier this year where he notes there are a lot of "systematic reviews" that have little overlap in their systems and come to very different conclusions about which experiments to implement.

5. Evidence-Based PolicyIt always comes back to policy eventually, even among anarcho-capitalists. The Liberia situation makes me think of my interview with Angus Deaton where he talks about the issues of where, on whom and what types of experiments are conducted. Here's Deaton's and Cartwright's newest paper on RCTs. Here's the new second edition of Impact Evaluation in Practice (free!). And the Urban Institute is launching a new Evidence-Based Policymaking Collaborative (with Brookings, AEI and the Pew-MacArthur Results First-Initiative) "to create tools to inform evidence-based policymaking at all levels of government." I wonder if a primer on Deaton & Cartwright will be one of those tools? 

The JP Morgan Chase Institute has a new report tracking cash flows of small businesses in the US. This is a look at daily inflows and outflows of these businesses by industry.

The JP Morgan Chase Institute has a new report tracking cash flows of small businesses in the US. This is a look at daily inflows and outflows of these businesses by industry.

Week of September 12, 2016

Editor’s Note: I’ve been 'away' for a while finishing up two books: Experimental Conversations, a collection of interviews about RCTs in development economics and evidence-based policy (pub date January 2017) and The Financial Diaries, based on the US Financial Diaries project (pub date March 2017). I briefly entertained the idea of a “catch-up” faiV, but that might have become the faiVhundred so herewith we’re back to (sort of) five items from (mostly) this week.

1. Income, Poverty and Volatility: The big news of the week in the US was the release of the US Census Bureau’s report on income, showing strong gains across the board (but best for lower income groups) and the largest drop in the poverty rate since 1999. As always, the story is more complicated than the headline statistics. Annual income measures hide year-to-year and month-to-month volatility. And volatility seems to be rising. That means that even though the poverty rate is falling based on annual income, the number of households that spend part of a year in poverty or bounce in and out of poverty from year to year may be increasing.

Aspen EPIC has a wealth of new materials on the topic of volatility including videos, interviews and blog posts.

2. Measurement: Also prominent in US news was the announcement that Wells Fargo, one of the country’s largest banks, had fired 5300 employees and paid a $185 million fine for creating millions of accounts without customer consent (to hit management metrics). Matt Levine has the most useful reporting on the issues and the problem of measurement, calling it an “evil grants your wishes, but it takes them just a bit too literally." Case in point, Indian banks have apparently been doing essentially the same thing as Wells Fargo, depositing 1 rupee into dormant accounts, so they don't appear dormant. I won’t miss the opportunity to plug Dan Rozas’ work on the large gap between savings accounts and savings account usage in microfinance banks around the world, not just in India.

3. Digital Finance: Visa announced the roll-out of mVisa in Kenya with near-term expansion into Uganda, Tanzania and Rwanda and possibly Nigeria. I must admit I’m a bit confused as mVisa ran a pilot in Rwanda beginning back in 2013. Did that shut down? In any case, mVisa is a significant challenge to m-Pesa, perhaps the first significant challenge, because it works differently—it’s cross-bank and makes customer-to-merchant payment (as opposed to p2p transfers) easier, though it does require smart phones. In other digital finance news, while mVisa is attempting to expand in east Africa, mobile money has now disappeared from South Africa as MTN followed mPesa by shutting down the service in the country because of lack of use. I’ve also seen reports that mobile money use is falling in Nigeria but not sure about how reputable the source is. Anyone know more?   

4. Behavioral Finance (and more): The Urban Institute released a report on a test of a behavioral intervention to help consumers reduce credit card debt. Working with a credit union they tested "rules of thumb" messages to discourage use of credit cards and found the message “Don’t Swipe the Small Stuff”, encouraging people to use cash for small transactions rather than a card, reduced their balances by $104 in six months. To put the result in context, the gains to households (reduced debt/increased savings) were equivalent to 60% of the matched savings incentive in the SaveUSA program, for less than 1% of the cost. On the other hand, the finding that encouraging people to use cash reduces their spending in helpful ways presents something of a problem for boosting the use of mobile money.

In related news, here’s the White House’s Behavioral Sciences Team’s 2016 report.

5. Poverty Measurement: Sort of tying all our topics for the week together, the Grameen Foundation and Innovations for Poverty Action just announced that the Progress Out of Poverty Index will be moving to IPA with funding from several institutions, so that this particular measure of poverty, designed to be operationally useful for MFIs, will continue to be developed and, hopefully, improved.      

Since we're on the topic of poverty measures and volatility and net savings, here's an infographic from the US Financial Diaries, on exactly those issues. (Click on image to see entire infographic on US Financial Diaries website.)

Since we're on the topic of poverty measures and volatility and net savings, here's an infographic from the US Financial Diaries, on exactly those issues. (Click on image to see entire infographic on US Financial Diaries website.)

Week of August 8, 2016

Attack of the Zombies

1. Night of the Living FinLit: I'm increasingly using the persistence of financial literacy programs as a proxy for the "evidence-based" movement. Here's a story about a new $5 million investment in FinLit for low-income youth in Chicago, where apparently half the curricula is devoted to day-trading stocks. Most remarkable is that the story spends its time wringing its hands about the irony of financial services firms funding FinLit, rather than the fact that it doesn't work in any meaningful sense. If the evidence-based movement can't kill FinLit as we know it what hope is there for other policy domains?

2. Priming Zombies:
No the zombies aren't doing the priming, nor are they being primed. Here's a new review of studies of the effect of "eyes" on influencing social behavior--it's one of the "neato" findings in the priming literature that became so popular in the last decade. Like recent replications of other priming interventions, the widely reported effects don't stand up. How long will priming hold on as a zombie idea? 

3. Homelessness Interventions: People tend to have pretty strong priors about what to do about homelessness and panhandlers--it's a policy space that seems like its filled with zombie ideas and interventions. Here's a new study of a natural experiment in providing up to $1500 cash to people at risk of losing their housing in Chicago. It finds that the one-time cash payments significantly reduce homelessness up to 2 years later. Here's a (largely evidence-free) news story about a program in Albuquerque to provide public works jobs and expedited social services access to panhandlers. Here's Matthew Desmond's best-selling recent book, Evicted.   

4. Efficient Markets and Behavioral Finance: No, I'm not calling either a zombie idea. But here's a conversation between Gene Fama and Richard Thaler where they discuss their differences. Here's Justin Fox's book on the history and impact of some of these ideas. Both very good reads.

5. New Paper Round-Up: A number of interesting papers have crossed my desk this week. Here's a strained attempt to continue the theme: Is self-determination a zombie idea? Steven Levitt on making decisions by coin flip. In a way defaults are zombies: Blumentstock et. al. on savings defaults in Afghanistan. Zombie savings accounts: Dupas et. al. on low take-up and use of no-frills savings accounts in Uganda, Malawi and Chile (There's a lot more there, worth looking at, really). See also Rozas. And I've got nothing for this one: Brune and Kerwin on the effect of monthly vs. weekly and Friday vs. Saturday paydays in Malawi.     

Bonus Update: A few weeks ago we featured some musings on client protection in research. Here's a new piece on client protection in digital payments, another important topic that doesn't get much attention. Here's an old piece of mine on the importance of making digital payment systems pro-poor

Week of August 1, 2016

1. Cash Transfers, Conditions and Fathers: Akresh, de Walque and Kazianga compare the effects of conditional and unconditional cash transfers, and whether they are given to mothers or fathers in 75 villages in southern Burkina Faso. They find conditions matter and that, if anything, children and households benefit more when the father is the recipient. I'm trying really, really hard to fight confirmation bias, and losing.

2. Financial Inclusion and Digital Financial Services:
The Bookings Institute has published it's second annual review of progress on financial inclusion and access, with a particular focus on digital financial services. It covers 26 countries reviewing availability, use and the policy/regulatory environment. Kenya and Colombia top the list; Egypt and Ethiopia are bottom.

3. Medicine, Economics, Data and Evidence: The grass is not greener on either side of the fence. A few weeks ago we had Croke, et al's critique of meta-analysis in health research. On the other hand (see what I did there?): "In comparison to medical studies, most economics studies examined do not report important details on study design necessary to assess risk of bias." Meanwhile the medical community is arguing over how and when data from clinical trials should be shared. Larry Husten summarizes the arguments, but be sure to scroll to the end for a discussion of the difficulties of setting up a market for data and whether anyone "owns" the data. I feel like some economists might have something to say about that, perhaps starting with Coase and Ostrom. Though will the market for data end up being a Market for Lemons? And will economists put their data where their mouth is?  

4. Payday Regulation: In the New Yorker, Astra Taylor reviews why it's so hard to regulate short-term lenders, with particular emphasis on Georgia (the US state) which, I learned was founded as an alternative to debtors prison ("Would you prefer to go to prison or go to Georgia?" may not have been the most effective branding campaign in history). Perhaps it's time to focus more on why so many people need access to short-term credit. Could it be income volatility? And might that be disproportionately affecting certain communities?    

5. Whither INGOs: Michael Edwards pens an essay on the future of INGOs, neither one thing or the other in a rapidly evolving landscape, touching on organizational survival imperatives, theories of change, effective altruism, "new power" and principal-agent problems (maybe I read between the lines too much). Michael Clemens has some suggestions about an issue that INGOs are well-placed to take on. 

Weekof July 25, 2016

1. Financial Institution Behavior, Part I: Xavi Gine and Rafe Mazer pull together audit studies of banks conducted in Ghana, Mexico and Peru. You will be shocked, shocked to discover gambling--I mean, failure to disclose true product costs or best-fit and cheapest products--in these establishments.

2. Financial Institution Behavior, Part II:
The recovery in home prices in the United States since the housing bubble has left one part of the market untouched: homes with values below $100,000. Banks won't originate loans for mortgages of this size because the fees they can charge are capped below profitable levels, so owners can't refinance or sell. There is a non-profit turned hedge fund that's taking on this market though.

3. Financial Institution Behavior, Part III: OK, so they're not financial institutions, but debt collectors are part of the financial infrastructure. And they've behaved so badly--harassing debtors, pursuing people who don't actually owe the debt, etc.--that they generate more complaints to the CFPB than even payday lenders or frauds. So the CFPB is drafting new rules to govern debt collection

4. Hope, Aspirations and Poverty: Travis Lybbert and Bruce Wydick have a new paper providing a framework for empirical and experimental work on the role of hope and aspirations in development interventions. They have some preliminary tests of what happens when a microfinance institution tries to raise hope and aspirations of clients. Hey, this one's about financial institution behavior too!     

5. Research and Fear: Barbara Magnoni wonders about the ways researchers and product designers and testers convene focus groups and conduct research, and suggests the need for more guidelines on how to convene people respectfully, recognizing power dynamics and cultural context--and not scare them. Whaddaya know, turns out this is about financial institution behavior too.

Speaking of hope, here's a video of Esther Duflo's talk on hope and aspirations (from 2013) at the Stanford Center for Ethics in Society.

Week of July 18, 2016

Editor's Note: I barely resisted the temptation to title every item here "Why not What"

1. Why not What: Chris Blattman posts notes from a recent talk he gave at DfID arguing that focusing too much on "what works?" is a mistake. Via Ryan Briggs on Twitter, here's Angus Deaton's 2010 paper making much the same argument.     

2. Why not What, Part II: 
A new paper from Buera, Kaboski and Shin looks at a host of "well-identified evaluations of the impacts of micro-financial interventions" including the microcredit evaluations, the targeting the ultrapoor programs, and cash grants to try to understand why the results are what they are.

3. American Financial Security (or lack thereof): Americans confidence is their ability to afford retirement is creeping up again, but it's not clear why. A new HSBC study finds that 64% of respondents over age 70 are financially supporting others. Andrew Yarrow writes about "the 45%" who are paid less than $15/hour, are "asset poor" and do not have access to employer-sponsored retirement-savings (note that these are not all the same people).

4. Digital Finance "Expansion": Pablo Garcia Arabehety has a perspective on why digital finance a la M-Pesa has not expanded rapidly in Latin America: proximity and simplicity of bill payment and person-to-person transfers (which account for 96% of usage) was already sufficient. Meanwhile, the Kenyan government is proposing to expand its regulation of M-Pesa to enable tax collection.     

5. Measuring Outcomes: Bobbi Gray writes about the balance between "hard" and "soft" outcome measurement, particularly in terms of measuring domestic violence and fear. Those softer measures can play an important role in understanding "why" as well as "what."

Week of July 11, 2016

Editor's Note: What would you rather do in the midst of a heat wave than read about social science methodological debates?

1. Meta-Analysis of Worms: When the dust settled in last year's #wormwars it was clear that a core issue was methodological and interpretive differences between epidemiologists and economists (see Humphrey's section 5). A new meta-analysis of deworming impact studies from Croke, Hicks, Hsu, Kremer and Miguel takes that issue head-on: it's as much an argument about how to evaluate evidence as it is an argument about the evidence on deworming in particular, concluding with, "Under-powered meta-analyses are common in health research..."   

2. Police Shootings: Another raging methodological debate on an issue of even greater emotional resonance broke out this week: are African-Americans more likely to be shot by police than whites? Roland Fryer has a new working paper that answers, "No [in some cities, though they are more likely to be physically accosted during a stop]." The initial critical reactions focused primarily on the fact that this is a working paper and not enough emphasis in reporting on the paper was given to the limited context (e.g. only a limited number of cities) of the results. The larger methodological issue though is about how to treat the data in the first place. Michelle Phelps looks at how bias in who gets stopped by police can substantially bias outcomes and puts the findings in context of other research. Radley Balko looks at how the source of the data--police reports--makes it questionable whether the data can be trusted at all.

3. Charter Schools: Completing the trifecta of emotionally resonant issues, how about some controversy over how to evaluate schools? The New York Times had a front page story about "chaos" resulting from Detroit's expansion of charter schools harming students, with this curious sentence: "But half the charters perform only as well, or worse than, Detroit's traditional public schools." Jay P. Greene argues that the piece misuses the little data on charter performance that it has. Here's an old post from Alexander Berger on understanding charter performance evaluations and what they actually measure. Meanwhile, here's David Evans rounding up some recent global research on education, teachers and how to measure them.

4. Study Design: Speaking of what studies are measuring, Bruce Wydick has a new post, with specific emphasis on microcredit impact evaluations, about how infrequently development impact evaluations start with a diagnosis of a problem before prescribing a treatment--and how to design better studies based on diagnosis.   

5. Prediction Markets: Finally, everyone's (n=1) favorite prolific blogger on statistics and causal inference, Andrew Gelman, has a couple of posts about why prediction markets and polls are diverging, with prediction markets seemingly on the losing end of accuracy.

Not new, but relevant to many current conversations and largely, it seems to me, unknown. Source: Migration Policy Institute

Not new, but relevant to many current conversations and largely, it seems to me, unknown.
Source: Migration Policy Institute

Week of June 27, 2016

Editor's Note: There won't be a FAIV next week. We'll all be on vacation or traveling.

1. LOL Nothing Replicates: Jason Collins looks back over Kahneman's Thinking Fast and Slow post-repligate, finding some distinctly uncomfortable language ("You have no choice but to accept that the major conclusions of these [priming] studies are true"). Meanwhile a new paper in PNAS suggests that fMRI studies have 70% false positive rates.  

2. Migration: There's a lot of work to be done understanding intra-household bargaining in the context of migration. A new paper tries to estimate the returns to internal migration in South Africa by looking at the effects on the migrant as well as on the households from which the migrant departs and which the migrant joins. A southern New Zealand town is trying to recruit internal migrants because it has too many jobs. Perhaps they could expand the Tongan lottery. And the New York Times magazine has a long piece on Canada's refugee sponsorship program where you can find this unexpected but lovely statement: "I can't provide refugees fast enough for all the Canadians who want to sponsor them." 

3. The Future of Microfinance: Next Billion has a terrific collection of posts on last year's sale of six microfinance banks by Opportunity International to MyBucks, a for-profit fintech firm. Dan Rozas and Gabriela Garcia provide an overview, Chuck Waterfield expresses skepticism that the transaction is good for customers and Vicki Escarra, Opportunity International Global CEO, responds. Anybody else miss the old days when this type of back and forth was common?

4. Financial Inclusion: Michael King summarizes his new co-edited volume on the state of financial inclusion in Kenya. As ever, the story is more complicated than the headlines about M-PESA and M-Shwari suggest and there is still a great deal of work to be done.  

5. Agent Banking and Gender: Some new work from MicroSave looks at looks at how banking agents differentially interact with women in Uttar Pradesh, India. Agents report a preference for serving female customers, but that preference comes from women being more "manageable", less knowledgeable and asking fewer questions.

Turns out that if you ask economists a very narrow yet vague question about a basic income policy, most will reject it. Anyone want to join a faiV experts panel where we promise to ask better (at least better written) questions?   Source: IGM Economic Experts Panel

Turns out that if you ask economists a very narrow yet vague question about a basic income policy, most will reject it. Anyone want to join a faiV experts panel where we promise to ask better (at least better written) questions?   Source: IGM Economic Experts Panel

Week of June 20, 2016

Note: This week’s edition of the faiV was written by FAI’s Program Administrator, JoAnne Williams. After dedicating over three years toward FAI’s mission, JoAnne will be moving on to pursue her MBA at Columbia Business School, where she plans to study Finance and Social Enterprise.

1. Financial Health: How should a financial services company assess its customers' financial health? Three financial services organizations, HelloWallet, Wells Fargo, and Solutions for Progress, have developed tools and metrics to measure the financial health of their customers. NextBillion

2. Housing Segregation: Housing instability as a repercussion of income volatility has been well documented, but what about the cycle and segregation of poverty in specific neighborhoods? Matthew Desmond's Evicted: Poverty and Profit in the American City and Mitchell Dunier's Ghetto: The Invention of a Place, the History of an Idea take a look at the history and complexity of living in concentrated poverty. The Atlantic Magazine - June 2016 Edition

3. Grit in Developing Countries: Is grit a useful predictor of success in developing economies? Roving Bandit

4. Financial Inclusion: Kenya has been spotlighted regionally and globally for tremendous gains in financial inclusion, but has access to formal and informal financial services reached the ultra-poor? Heyer and King discuss this question in the book Kenya's Financial Transformation in the 21st CenturyThe World Bank - All About Finance

5. Aging Workforce: A new Pew Research Center study highlights a growing trend of Americans working well into their retirement years. When compared to previous generations, older Americans are expected to stay in the labor force longer and work longer hours. 
Pew Research Center

Migration patterns leading up to Brexit.

Migration patterns leading up to Brexit.

Week of June 13, 2016

1. State of Economics Laureates: Video from the World Bank's "State of Economics, State of the World" conference is now available. Here's Ken Arrow on equilibrium and welfare, Amartya Sen on social choice, and Joe Stiglitz on information economics. And here's Clark laureate Esther Duflo on the influence RCTs are having on the world. Bonus: blog post from David McKenzie based on his comments on Duflo's presentation examining whether RCTs have taken over development economics. Oh, and the rest of the talks are here.   

2. Mobile Money: An in-depth discussion of why little progress has been made on merchant acceptance of mobile money/digital payments and what to do about it. And here's a pretty thorough debunking of the long-lived "fishermen use mobile phones to get market prices" story that helped jumpstart enthusiasm for mobile phones as a poverty-fighting tool.  

3. The Way We Bank Now (in the US): Starbucks is a bank (or a prepaid card company) that happens to serve coffee.
Meanwhile, the actual banks are earning more from overdraft fees again. The preference for storing money with Starbucks is starting to make more sense.      

4. Client Protection: MFIN, the Indian microfinance industry association, in collaboration with the Smart Campaign, has created a standardized process for its members to address client grievances. It has "17 performance standards bucketed into 9 categories." Given how little microfinance clients typically know about how to complain, I'm not sure 17 standards are the best approach.  

5. A Syndicate of Laureates: Angus Deaton thinks that we're not paying enough attention to the negative effects of globalization on poor households in rich countries. Edmund Phelps suggests that one way to help those folks is job subsidies. In case that was too subtle those are both links from Project Syndicate.

A bonus video, better filmed, of Esther Duflo speaking at the RES Conference

A bonus video, better filmed, of Esther Duflo speaking at the RES Conference

Week of June 6, 2016

The Confusion Edition

1. Marshmallows: I'm very confused by marshmallows, or at least marshmallow tests. Did you know about the massive attrition in the original work? The fuzzy proposed mechanisms? It's executive control! Trainable mental tricks! Actually it's a measure of trust! No, poor children who choose immediate rewards are calmer and more rational! Did I mention that willpower depletion doesn't replicate (and that physiological measure of calm rationality is suspect)? If the marshmallow test doesn't tell us much, at least there's Grit to rely on. Sigh...    

2. The Housing Boom: I'm also newly confused about what was happening in the housing boom. A new working paper from Foote, Loewenstein and Willen shows that low-income borrower mortgage debt didn't increase relative to high-income borrower mortgage debt. Reading that paper I learned thatBhutta earlier found that new home buyers weren't much of a factor during the boom

3. Consumer Debt: A lot of people are confused about consumer debt, not just housing debt, in the United States. Here's a Slate piece about how to get out of debt which won't tell you anything new if you've ever heard of present bias. Here's a Slate piece from the week before blowing large holes in the "present biased overspending" theory of consumer debt. And remember that link from last week about how behavioral tricks to increase saving
still don't yield any increase in poor households ability to save for the long term? One sure fire way to reduce debt is to forgive it--but you might want to acknowledge the source of the idea.       

4. Field Experiments: Banerjee and Duflo have edited a new volume on field experiments for Elsevier packed with good stuff (several papers have been linked in the faiV in recent months) but their agreement was conditional on the working paper versions being available for free. My confusion: who is going to pay Elsevier and why?  

5. Jobs: Finally some clarity. As it ever was, workers prefer jobs to freelancing and as the job market improves, freelancers trade in "freedom" for regular paychecks. And workers in low-income and middle-income countries really are less productive than workers in high-income countries, putting in longer hours for less output and income. I've heard there's a way to fix that...

Bonus Update: The Swiss voted against basic income, but the Y-combinator experiment in Oakland is moving forward.

Source: VoxEu/Bick, Fuchs-Schundeln and Lagakos

Source: VoxEu/Bick, Fuchs-Schundeln and Lagakos

Week of May 30, 2016

1. Basic Income: Basic income's 15 minutes of fame seem to be stretching on. In the New York Times, Eduardo Porter rains on the parade, at least in the US context. Paul Niehaus is still marching anyway: he hosted a Reddit Ask Me Anything about GiveDirectly's basic income experiment in Kenya. Meanwhile, the MacArthur Foundation announced it's going to give $100 million to a single organization to "solve" a social problem. Poor choice of words aside, I can't think of a better use of that money than expanding basic income experiments into other countries.  

2. Nigerian Entrepreneurs: We all know about a certain kind of Nigerian grassroots entrepreneur. But there are others. PlanetMoney has a podcast about David McKenzie's experiment in giving large cash grants to winners of a business plan competition. David also has a new paper exploring how well participants in the competition (winners and losers) anticipate the effects of winning the cash grant. Most think the impact of the money will be larger than it is, and their estimates don't help predict who will benefit most from receiving the cash.

3. Payday Lending: The US Consumer Finance Protection Board published its long-anticipated proposed regulations for the payday lending industry. Reaction is mixed with some praising the step forward and others suggesting the regulations don't go far enough. It's a tough issue--there are a lot of bad products out there but making credit constraints more binding for the poor isn't great. Here's a reminder about how costly illiquidity is for poor households, even when they don't borrow. CFSI has a look at the demand for small-dollar, short-term credit. And here are the stories of two households from the US Financial Diaries, and how short-term credit can help and hurt.      

4. Work Gap: The theoretical concept of payday lending is that users are borrowing against their next paycheck. Fewer people in the lower-third of the income distribution are getting a paycheck though and those that do are working fewer hours, points out Isabel Sawhill. She and her team model the effects of various proposals and find that few have a material effect, other than full employment. Volatile hours and the lack of paid labor helps explain why behaviorally-informed adjustments to policies like Individual Development Accounts still don't yield any increase in these households ability to save

5. Cashless Societies: What percentage of global consumer transactions are in cash? It's still more than 80 percent. Here's a new framework for assessing which countries would benefit most (at least in economic terms) from moving away from cash and which countries are most ready to make a cashless transition. No word on which countries have the governance to make digital money safe from both criminal and government interference.

Week of May 23, 2016

In the US, we have a three-day weekend; what our English friends would call a bank holiday. There's a little extra time to read. So this week’s faiV is book recommendations—but not the new books that are getting all the attention. I’m also taking this opportunity to rebel against the tyranny of the new. Herewith are some books, all at least a year, if not decades, old that if you haven’t read, you should. Or at least you should read a review of them so you can mention it during your next conference call. These are almost all Kindle links since you don't have time to get the book before heading out on holiday. 

1. Entrepreneurship, Social Investment and Not-so-Social Investment: Scott Shane's The Illusion of Entrepreneurship is a great overview of entrepreneurship research in the US, a body of knowledge that is a lot more applicable to developing contexts than is generally acknowledged. For those wishing to spur social businesses, going to back to first principles of corporate finance and principal-agent problems is a good idea--check out Henry Hansmann's The Ownership of Enterprise. There's a lot of entrepreneurship in the secret spaces of the web, though its generally not what we think of when you use the word entrepreneur. Here's a guide to The Dark Net

2. Memorial Day: The reason for the holiday in the US is it's Memorial Day, to commemorate the sacrifice of those in the Armed Forces--what's usually invoked is fighting for or defending freedom. I always tend to think of The Gettysburg Address. It's not just soldier and sailors who fight for freedom and to defend rights; Letter from a Birmingham Jail is a good reminder of other fighters. Sometimes you fight for your rights by leaving--The Warmth of Other Suns is the story of the Great Migration in the United States when African-Americans pursued freedom by moving out of the South en masse (I can't quite put my finger on what present situation it makes me think of...). The use of power in pursuing virtuous ends is tricky, and something we should think about more on weekends like this, perhaps by reading Reinhold Niebuhr's The Irony of American History.

3. Global Narratives: Long weekends are designed for travel and "getting away." Some books to vividly take you to other places (and times): Behind the Beautiful Forevers (India), My Colombian War, Every Day is for the Thief (Nigeria), Notes from the Hyena's Belly (Ethiopia) or Chen Village (China)     

4. Economic Thought: Perhaps you prefer to use the vacation to bone up on some economic thought to really impress your friends, family and neighbors at the requisite Memorial Day barbecue. In that case how about Lives of the Laureates, Fifty Key Thinkers on Development or Economics Evolving.

5. Economics meets Anthropology (or at least the real world): Still not your style? Need something intellectually challenging but outside the ivory tower? Try Seeing Like a State, The Anti-Politics Machine, Give a Man a Fish or Development Projects Observed. Yes, you probably know most of these, but have you actually read them? If you read them this weekend, no one will ever have to know and one small piece of your impostor syndrome will be resolved.

Special Thanks to Joanne Williams, Jonathan Morduch, Lucy Bernholz, David Evans, Michael Clemens and Joanna Smith-Ramani for contributing recommendations. If you can match up the book to the recommender, I'll buy you all the books listed here.

Week of May 16, 2016

1. Microcredit Impact: One way to judge the impact of microcredit is randomizing access. Another way is to see what happens when microcredit is suddenly taken away. There are two new papers that use the latter approach based on the sharp reduction in lending that ensued from the Andhra Pradesh crisis in 2010 (has it really been that long ago?) by Emily Breza and Cynthia Kinnan, and Banerjee, Breza, Duflo and Kinnan. BK find decreases in wages, wage earnings and consumption concentrated among poorer borrowers when microcredit goes away. BBDK find sharp heterogeneity in effects on "gung-ho" entrepreneurs and "reluctant" entrepreneurs of access to and then loss of access to microcredit. Of course, that leaves the question of the underlying differences between gung-ho entrepreneurs and reluctant entrepreneurs. Could it be aspirations? You should ask Stefan Dercon or Bruce Wydick about that.

2. Income Volatility: This week, the Aspen Institute launched the website for the Emerging Prosperity Impact Collaborative, an ongoing effort to draw attention to emerging economic issues that affect household financial security in the United States. The first year is focused on income volatility, inspired in part by the US Financial Diaries. EPIC has an overview paper, some cool data viz, and videos (some better, some worse) of researchers and practitioners discussing income volatility and its effects.

3. On-Demand Debt Traps?: Income and expense volatility create challenges of illiquidity. An obvious approach to that problem is more frequent access to pay (though it has some concerning behavioral drawbacks). Uber is trying that. But more frequent access to pay may not provide the lump sums necessary--short-term credit is another approach. Now Uber is trying that too. But the terms and conditions, and the people the credit is being offered to, seem pretty likely to pull in the naive and trap them in debt. While there is good reason to be skeptical of Uber's approach to finance, it has been rightly praised for fighting racial discrimination by both drivers and customers. AirBnB not so much--it's being sued for not taking action even when racial discrimination is obvious.     

4. Suckers Games: Speaking of behavioral drawbacks, a key behavioral insight is limited attention. That's led to lots of experimental interventions in two orthogonal directions: using defaults so that people don't have to pay attention, and attempts to get people to pay attention to the "right" things at the "right" time. This past weekend I was at IPA's researcher gathering on Advancing Financial Inclusion, where new papers on work with digital finance, attention and defaults in Afghanistan, India, the Philippines and the UK strengthened my priors: trying to capture attention is a sucker's game. (yes, that's a lot of papers, but they are good papers and you should at least read the abstracts).

5. Microfinance Investment: While we in the research world tend to obsess over measures of microfinance impact, the "real world" chugs on. In recent weeks, two Indian MFIs have had successful IPOs, Ujjivan and Equitas, both attracting substantially more investor interest than they could accommodate (it really has been that long since the AP crisis). Meanwhile, Daniel Rozas looks at the inexorable growth of microfinance in Cambodia which increasingly looks like the next overheated market. I'm getting conflicting signals--I hear about a dramatic decrease in investors' interest in microfinance but I'm also seeing evidence of continued flows. What are you hearing or seeing?

Bonus Updates:
Our Algorithmic Overlords: (Are you noticing a theme?) Zeynep Tufecki writes in the NYTimes about the "real" bias in Facebook's algorithms, while Mullainathan et. al. find that using machine learning can improve hiring decisions for police and teachers.

A new approach to measuring financial inclusion via BBVA Research

A new approach to measuring financial inclusion via BBVA Research

Week of May 9, 2016

1. Online Lending: Lending is hard. And not just because of the difficulty of assessing creditworthiness. Lenders are intermediaries, matching borrowers and investors, which means there are lots of principal-agent problems and a thicket of rules, regulations and practices to manage them (in most places). When lending goes online it can dramatically increase access for both borrowers and investors, but principal-agent problems don't go away. (That's a report from the US Treasury Dept., but it's good! You should read it!) That's the sub-text of the downfall of Lending Club, perhaps the largest of the online lending "platforms" that have emerged in the US in recent years. This week the CEO was forced to resign after it emerged that he had approved misleading investors about how the company was managing some of those principal-agent problems in ways reminiscent of the sub-prime crisis.

2. Unexpected Regulators: Speaking of online lending and regulation, this week Google became a de facto financial services regulator by banning ads for online payday lenders. Perhaps that was in response to this unexpected regulator using Google to make terms and conditions of online payday lenders more transparent. Meanwhile, if you still need quick access to cash online, you may want to study more about the rules enforced by Reddit's volunteer lending regulators.

3. Savings: But perhaps you take a more conservative approach to building up lump sums: saving. If so, you won't have much company in the United States. But you'll also be pretty lonely in Korea (10,000 Won is less than $10USD). And in Japan. Time for me to update my priors about savings rates in Asia.   

4. Digital Finance: I'm not sure how many people would call the undermining of branches and groups an "unexpected" consequence of digital financial services, but what will become of them is still a good question. If you're curious about how to measure the impact of those consequences, expected or otherwise, IMTFI has a helpful new guide to conducting consumer finance research.

5. Feedback: IMTFI helpfully includes a link to offer feedback on the guide. Feedback was the theme of a conference I attended yesterday put on by Feedback Labs, to examine the value of feedback in development programs. They have a new paper on the topic, which, of course, they'd like feedback on (with a very cool web tool--why don't we have this for working papers?). The best thing I heard yesterday (but not the only good thing!) was from a panel about the role of feedback in medicine, where Erin Holve introduced the concept of "evidence-generating medicine" as a better construct than "evidence-based medicine" since even in the medical field we have shocking little good evidence, and even what we have is frequently ignored (ask your doctor to wash her hands!). Evidence-generating policy--that's something we all can get behind. Right?

Bonus Updates:
Insurance/FinTech: Oh those pesky regulators and their insistence that CEOs don't actively help their employees cheat on their licensing exams.
Our Algorithmic Overlords: Sometimes they're not so bad. Sometimes they're just a guy with access to open data on New York City parking tickets.

Week of May 2, 2016

1. Affordable Housing and Cities: The rising cost of housing is pushing lower income households out of US cities with the most job growth. Trulia, an online real estate information something or other, documents which US cities lower-income households are fleeing fastest. That's a perverse way to get the benefits that a higher proportion of economically stable households brings to cities.

2. Inequality: The new issue of the Journal of Economic Perspectives has a special section on inequality. Attanasio and Pistaferri consider consumption inequality vs. income inequality. Currie and Schwandt find that while mortality at age 40 and 50 has been falling more slowly in poorer counties in the US, mortality of children has been falling more quickly in poorer counties, reducing inequality. Mortality reductions have been especially large among African American men from 1990 to 2010. 

3. Evidence-Based Policy and Time Scales: Of course, the main focus of study on what's been happening to African American men from 1990 to 2010 is mass incarceration. Also in the JEP issue, Lofstrom and Raphael take a look at changing sentencing guidelines, incarceration rates and crime rates. They find that sentencing changes in the 1980s increased incarceration and likely reduced crime rates by 1/3, but further "tightening" in the 1990s increased incarceration without any effect on crime rates. I heard Raj Chetty at a conference this week where he noted that Moving to Opportunity didn't "work" for 20 years, until it did--when evidence emerged that while MtO didn't have an effect on adults and teenagers, younger children experienced large gains. Now there's a policy dilemma: Doing more of what worked in criminal justice yielded bad outcomes, while doing less of what didn't work in housing and opportunity forestalled good ones. (See also, the Gates Foundation Small Schools Initiative and the Mexican Soda Tax.)  

4. Financial Education: What happens when you add financial literacy to the Boot Camp curriculum of new soldiers? It changes behavior in the first year, but all of that disappears in the second year--except for rates of retirement savings, which once set don't get changed. There is no effect on labor outcomes. Which suggests yet again we're probably teaching the wrong things, the wrong ways. Speaking of, there is a Journal of Professionalizing Financial Counseling and Coaching, which focuses on quality, consistency and accountability. That sounds like a very good idea.

5. Regulation: The Center for Global Development looks at how financial regulation can better advance financial inclusion (yes, it's from March, but I didn't get a chance to look at it until this week). One area of regulation that desperately needs continuing attention: the high cost of remittances everywhere, but particularly transfers to and within Africa

Via Maria May of BRAC, a look at the work it takes to go from technology to use in digital financial services

Week of April 25, 2016

1. Children are the Future: The NY Times has a new data set and visualization on socioeconomic status and school achievement in the US. But it’s not just in poor neighborhoods in the US that children aren’t learning. The failure to measure learning in global education policy is a big problem. Of course, surviving to school age is the first step. Chen, et. al. look at why infant mortality is higher in the US than Europe (hint: mothers in poverty) and Amarante et. al. see cash transfers to such poor pregnant women leads to higher birth weight babies (which are less likely to die) in Uruguay. But perhaps the cash grants shouldn’t stop during pregnancy. Russ Whitehurst at Brookings argues that cash support to families has a bigger impact on learning outcomes than early childhood education programs. Hey, that’s 5 things in the first item. This may be getting out of hand.

2. Basic Income: Speaking of cash grants, basic income is apparently the story of the moment. FiveThirtyEight provides a pretty comprehensive overview, including upcoming experiments in Kenya, the Netherlands and Finland and a look back at the NIT experiments (which helped launch the modern era of RCTs). Meanwhile, Michael Strain at AEI thinks basic income is unworkable in practice and we’ll just end up back where we started.

3. Women and Risk: There's danger in the “risky rhetoric of female risk aversion”. Which seems like a good time to point to an oldie but goodie debate I had with Barbara Magnoni about microcredit targeting women (with bonus comments from David McKenzie and Dean Karlan) and this oldie but goodie literature review from Esther Duflo of women’s empowerment and economic development.

4. Agriculture: How do farmers allocate their time, money and investment? A new paper from Jing Cai examines how agricultural insurance affects financial behavior (though, "boo" to the overly broad title and an abstract that says nothing about context). But there’s also a long-term mystery about farming behavior: why are small plots more productive than larger plots (almost everywhere and everywhen)? Barrett and Bevis have a new paper that suggests it’s accessibility to the edges of the plot—in other words, attention—that that drives the difference in Uganda.

5. Debunking: It’s always exciting to see conventional wisdom overturned. But can we stay out of a debunking recursive cycle? It’s not clear how. (Here’s Jeff Mosenskis guide to debunking debunking). Ever wonder how the story of #wormwars or #repligate will be told in a few years? If the past is any guide, important details will be wrong.

Bonus Extra: There’s some new Q&A from the US Financial Diaries and basic income, daily pay and fintech all make appearances. That only makes it 15 links in a newsletter purportedly about 5 links.

What do we know about how much kids are learning? Not much. At least I don't think so. I'm color blind so I can't tell the difference between None of the Above and Non-Standardized. Source: Center for Global Development

What do we know about how much kids are learning? Not much. At least I don't think so. I'm color blind so I can't tell the difference between None of the Above and Non-Standardized. Source: Center for Global Development

Week of April 18, 2016

1. (American) Household Finance: The new issue of the Atlantic is all about Americans' finances. Some choice bits: Derek Thompson on why Americans (and many others) stopped saving; Bethany McLean on what comes after payday lending; and Neal Gabler on how he came to be one of the many American households who cannot come up with $400 for an emergency. And while we're at it, Esquire talks to 4 men with very different incomes about spending, saving and taxes.

2. (Healthcare) Household Finance: A new paper looks at how the Affordable Care Act has affected household finances and finds that access to insurance through Medicaid expansion reduced debt and collections for the poorest households. NBER

3. Theory: Theory plays an important role even in empirical economics. Annette Brown argues for getting theory back into theories of change at 3ie. Markus Goldstein summarizes a new paper from Banerjee, Chassang and Snowberg on the theory of when a policymaker should conduct randomized trials (it's not "always").

4. What Works: Surprise! It's Child Sponsorship. Glewwe, Rutledge and Wydick evaluate the international charity program that everyone loves to hate but more Americans give to than any other. They find that being sponsored increases years of schooling and adult income (and some other measures, but, of course, not for everyone or everywhere). The channel? Probably raising aspirations. Development Talk

5. Migration: You may have noticed that I care about migration. New this week: a piece I wrote for Alliance Magazine on migration as the mother of all anti-poverty strategies. Matt Colin defends a Branko Milanovic proposal to overcome objections to migration by limiting the rights of migrants. The Hamilton Project has 10 facts about immigration. Meanwhile, 500 migrants drowned this week trying to cross from Libya to Italy. 

Video of the Week: Absolutely nothing to do with finance, just cous cous, but very cool.  Hat Tip to Chris Blattman.

Week of April 11, 2016

1. Our Algorithmic Overlords: How will digital financial services, and the data that flows from them, affect our daily lives? It depends. Big data, combined with the low marginal cost of extending digital services can be used to dramatically expand access to quality financial services. But they can also be used to discriminate against the poor, empower dictators, punish political enemies and limit economic mobility. In other words, algorithms and the people that write them matter.

2. Digital Trust: Obviously a key factor in the reach of mobile money is trust. IMTFI has a new synthesis of studies examining how trust in mobile money systems is built or squandered, while the Helix Institute has thoughts on trends in mobile money fraud (the most prevalent and serious of which involve people with access to the algorithms) IMTFI and Helix Institute

3. Remittances: Rebecca Rouse and Caitlin Sanford have thoughts on what the recent Mexican financial diaries reveal on the role that remittances play in the finances of receiving households. Hints: the money isn't regular, isn't squandered and isn't invested. MIF

4. Regulation: New evidence on the effects of regulation in two very different contexts. First, regulation that reins in debt collection practices doesn't seem to have much effect on credit availability (in the US) and deregulation of the financial services industry contributed to growing income inequality in Japan and the UK (and other countries). CRL and VoxEu

5. Tax Time: It's tax day in the US (sort of) so I'm obligated to point to some work on tax refunds and household finance. Here's some detail on tax refunds in the US Financial Diaries. And here's some work from the JPMorgan Chase Institute showing that tax payments and refunds play a bigger role in household finances than gaining, losing, or switching jobs or getting a raise.

Bonus Updates: Senator Elizabeth Warren has a new report on how lobbying by tax preparation firms has stopped efforts to simplify the filing process. Berk Ozler writes about his discomfort with my cellphone/altruism experiment. NerdWallet weighs in on the debt vs. savings question.

The more things change...well, maybe they don't change that much. Hat Tip to Barbara Magnoni.

Week of April 4, 2016

1. Poorest of the Poor: There's new data from the Bangladesh "graduation model" evaluation that provided livestock and training to very poor women. After three years, results were strikingly positive. Now there's a 7 year follow-up that suggests those gains hold for the long-term and may even continue to increase--importantly with no evidence of negative spillovers and some evidence of positive spillovers to others in the village. Development Impact

2. Debt vs Savings: If you get an influx of cash, should you pay down debt or build up savings? It's a hard question to answer. Allison Schrager argues that paying down debt is conventional wisdom (is it?) but that saving is better than paying down low-interest, long-term debt for millennials. Of course, by rough calculation only 30% of millennials have such debt while the average American household carries $15,000+ of credit card debt. Quartz

3. Efficient Markets: Omar Al-Ubaydli and John List review the findings of field experiments on markets, finding that while there are behavioral quirks that limit market efficiency, many of those quirks disappear when participants have the chance to learn. A useful reminder when thinking about the use of nudges and the application of behavioral economics.

4. Efficient Markets in Philanthropy: Speaking of efficient markets, I've argued that despite much protestations, charitable giving is an efficient market after all. Here a documentarian discusses the role that story-telling ("propaganda") plays in reinforcing donors' perceptions and expectations, and "legitimi[zing] an entire crooked aid system." Two Dollar Challenge

5. Remittances: Donald Trump revealed his plan for coercing Mexico into paying for a border wall involves threatening remittance flows: a "ludicrous pipedream" that will help money launderers and hurt the poorest. Politico

The rising relative cost of being poor, as seen in housing costs. Source: Pew

The rising relative cost of being poor, as seen in housing costs. Source: Pew