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Week of November 28, 2016

1. The Case For Social Investment in Microcredit: Four years ago, at the suggestion of Alex Counts, I started working on a review of operationally relevant academic research specifically for practitioners. I finally finished it this month [sad trombone]. One of the reasons for the long delay was that the world kept shifting. Over the last 18 months it became clear that the need was not just to document the opportunities for innovation in microfinance but to specifically address whether additional social investment in microcredit was justified given the published impact evaluations.
So I ended up making the case for social investment in microcredit. I believe the case for additional social investment is strong—not despite, but because of, what we’ve learned from impact evaluations. Obviously there’s much more in the paper, but here’s the one sentence summary (there’s a one-page summary in the paper): Microcredit is a cheap intervention with modest but generally positive effects with a great deal of scope for evidence-based innovation that could materially improve impact. The kicker, though, is that the innovation required to boost microcredit’s impact is unlikely to happen without targeted social investment.

Please take a look and argue with me, publicly or privately, about it.


2. Digital Finance and Household Behavior: I lied, I admit it. A few weeks ago the faiV featured "the most interesting" papers from NEUDC. But the most interesting paper wasn't ready for circulation so I couldn't include it. It is now. Tomoko Harigaya studied what happened when savings groups in the Philippines were transitioned to digital finance tools--in other words, group leaders stopped taking cash deposits, instead directing members to make deposits themselves using mobile money. Members could now also make withdrawals without traveling to a bank branch. The result was a significant drop in savings deposits and savings balances and an increased reliance on informal loans. In other words, "convenience" went up and usage went down. The effects seem to be driven by those closest to bank branches ex ante, by the loss of positive peer effects and by increased salience of fees for transactions. Now there are some obvious ways to potentially counteract these effects but it is an important cautionary insight into how little we know about how digital stores of value and transactions affect household financial behaviors--and an especially important finding for the bank itself which would have seen it's funding costs rise from a program designed to reduce operational costs since it relied on deposits as a cheap source of capital.

3. Pro-Poor Digital Finance?One of my long-standing concerns about the move toward digital finance is that unlike the microfinance movement, the leading players in the mobile money world have never had any pretensions of being pro-poor. Don't get me wrong, there's value in poor households being treated as customers. But it's also concerning if the companies treating them as customers don't have reasons to care about the households' well-being. Wayan Vota cuts to the core of the question: Are You Guilty of Helping Safaricom Prey on Rural Women? At the European Microfinance Week recently Graham Wright exclaimed that fintech's primary current use is "rapacious consumer lending...and I'm tired of it, I'm fed up." That's the central dilemma of digital finance: pro-poor organizations can't afford to build out their own infrastructure (and that wouldn't work even if they could) but an open infrastructure is agnostic to the motives of the people using it.

Bonus Update: Some news on the Indian demonetization.

4. Reconsidering the Elephant Graph: Branko Milanovic's elephant chart showing rapid gains in income for the world's wealthiest and most of the rest, with stagnating incomes for the middle classes in developed economies has become one of the signal economic explanations for growing populism in wealthier countries. Caroline Freund of the Petersen Institute of International Economics dives into the data to show that the majority of the apparent stagnation is attributable to the aging of Japan and the slump after the collapse Soviet Union. Her charts suggest that things haven't been as bad for the middle classes in developed countries as the elephant chart implies. Of course, if you look at the national level data on incomes in say, the United States, it's clear that there's been 20+ years of wage stagnation. Here's Milanovic's and Lakner's formal response to an critique similar to Freund's.

On a related note, given what we're seeing in the political realm, I'm truly baffled that Benjamin Friedman's Moral Consequences of Economic Growth and Hirschman's Tunnel Effect are not the dominant frame for discussion.


5. Intergenerational Poverty and Safety Nets: Generational poverty is a problem even when average incomes are growing, but it's an even bigger problem in eras of wage stagnation. Philadelphia magazine profiles a grandmother who grew up in poverty, her poor grandparents and the grandchildren she is now raising in poverty through the lens of a program specifically focused on intergenerational poverty. And here's a new paper on the household response to SNAP benefit increase in 2009 finding that the additional funds increased spending on housing, transportation and education.  And here's an Evansian review of the spending on cash transfers on temptation goods finding that if anything, cash lowers spending on alcohol and tobacco.

Shameless Screen Shot of the Week: My book of interviews about RCTs in Development Economics is now available for pre-order. And because pre-orders for economics books is a thin market, a single purchase can radically change it's sales rank. So pre-order now. It makes a great holiday gift--even Guido Imbens thinks so.

Shameless Screen Shot of the Week: My book of interviews about RCTs in Development Economics is now available for pre-order. And because pre-orders for economics books is a thin market, a single purchase can radically change it's sales rank. So pre-order now. It makes a great holiday gift--even Guido Imbens thinks so.

Week of November 11, 2016

1. Demonetization in India: It doesn't seem like I'm the only one who's a bit confused by exactly what's happening in India and why this particular set of steps will yield the stated outcomes. Here's my current understanding: Last week, the government declared that 500 and 1000 Rupee notes would no longer be legal tender, effective immediately. Except that those notes could be exchanged for new notes until December 31 at banks and post offices. But only by people with official government ID. The purpose is to drive more of the economy into the formal sector and to clamp down on black market activity and corruption. Usually advocates of this sort of step talk about high denomination bills (which they say facilitates corruption by making it relatively easy--in terms of size and weight--to transport large sums) like $100 bills. But 1000 Rupees is roughly $15 and a new 500 Rupee note will be in use and other large denominations like 2000 Rupees will also continue to exist.

As you can imagine, when 86% of the currency in circulation by value has to be immediately exchanged, there are some problems. Of particular interest to faiV readers might be the effect on microfinance banks, which are not allowed (as of now) to accept or exchange the old notes. That apparently has caused repayment to plummet since people can't get their hands on legal notes to make their payments. There's also a surge in use of ATMs and people signing up digital finance systems. Of course, then there's the problem that roughly 30 percent of the population (a mere 300 million people) doesn't have official ID (not counting the additional millions who are short-term migrants and don't have their ID with them where they currently are). Lot's more to come on this story I'm sure.


2. Digital Payments and State Capacity: Dan Radcliffe of the Gates Foundation has a new paper (published by CGD) on the knock-on benefits of government-to-citizen digital payments infrastructure. Direct transfers have already shown significant benefits in terms of efficiency and effectiveness of social welfare programs. Radcliffe argues that other benefits also deserve attention, specifically "strengthening energy policy, food security, government transparency" and overall state capacity.    

3. Financial Inclusion for RefugeesCFI has been running a series on financial inclusion for refugees. The fourth and final installment is here, looking at the future of financial inclusion for refugees with specific advice for how donors, practitioners and governments can do better.

4. Goldman Sachs and Consumer Debt: I'm old enough to remember when Goldman Sachs was a "vampire squid" sucking the life out of the global economy. As of this week, GS is also your friendly (digital) neighborhood lender, here to help you manage life's demands and escape from credit card debt with low-interest loans. Beginning this week, GS is running ads for it's consumer lending business on Facebook and YouTube that "depict debt as an unavoidable nuisance of modern life." Given the amount of income and expense volatility documented in the US Financial Diaries, that sounds about right actually. The Goldman tagline is "Debt happens. It's how you get out that counts." I wonder if the Goldman loans will come with a "Don't Swipe the Small Stuff" sticker for credit cards?

In other consumer debt news, the former CEO of Lending Club, fired for potentially misleading investors, is already opening a new lending storefront. And here's an Urban report on how the overhang of bad credit scores from the Great Recession is continuing to hold back consumers and the US economy.


5. Obey the Evidence!: This week I happened across a review of the Milgram obedience experiments, which were conducted about 50 years ago. That led me to some more reading and research--there's a lot of recent material. Much of it is about what has been discovered by a close review of the Milgram archives and the difference between what actually happened in the experiments and what was reported--and what that means about how we should think about the results and the conclusions. It's interesting and thought-provoking reading, not only because it's about one of the foundational findings of behavioral science, but also because it should lead us to reflection on the conclusions we draw about the current generation of studies.

David Evans and Birte Snilstveit review what your paper should include so that it can be included in systematic reviews, including enough methodological details so that risks of bias can be assessed. Many papers don't. Source: Development Impact Blog

David Evans and Birte Snilstveit review what your paper should include so that it can be included in systematic reviews, including enough methodological details so that risks of bias can be assessed. Many papers don't. Source: Development Impact Blog

NEUDC 2016 Special Edition

Editor's Note: The Northeastern Universities Development Consortium (NEUDC) conference was hosted at MIT this weekend. Over two days you get to see an enormous amount of new development research by mostly younger researchers. I held back on faiV this past week, to bring you this special edition--featuring the five papers I found most interesting (of those that are shareable) and since there are far more papers presented than any one person can take in, I recruited Jessica Goldberg, a development economist at Maryland (responsible for interesting papers like this); she in turn recruited Emily Breza (responsible for interesting papers like this) of Columbia GSB and soon of Harvard to contribute; and Lee Crawfurd (also known as Roving Bandit in the glory days of the development blogosphere) of CGD and a PhD candidate at Sussex to weigh in with their own favorites.

Here's my list of the 5 most interesting papers from the weekend:

1. Mentors for Microenterprises in Kenya: Brooks, Donovan and Johnson assign high profit microentrepreneurs to mentor newer entrants. That's a particularly interesting way to potentially change the trajectories of microfirms. The mentored firms see a significant jump in profits driven by learning how to cut costs but don't maintain the gains once mentorship stops.


2. Grants and Plans for Senegalese Farmers: Ambler, de Brauw and Godlonton give $200 grants and develop a farm management plan for smallholders. The grants boost production (by more than $200), but the gains seem to fade out, though higher stock of assets remains. Farm management plans don't have a measurable impact. I find this interesting for many of the same reasons as #1: figuring out how to boost profits of small enterprises is near the top of my list of urgent program/policy questions.    

3. Seasonal Migration in India:  Imbert and Papp use NREGA and choices about short-term migration to better understand why the large gap in earnings between rural and urban migration doesn't lead to more seasonal migration. They estimate that more than half of the income gap is consumed with higher living costs in urban areas, with the rest due to non-economic costs--like being away from home and "hard-living", (e.g. sleeping on the street). There are some interesting policy applications for the design of rural public works/income programs and the development of migration finance and support programs. 

4. Crop insurance contracts in Kenya: There's a general consensus that insurance is one of the most promising margins to help poor households, but we're a long way from figuring out to efficiently and effectively deliver an insurance product that people will take up. Casaburi and Willis study an insurance program in Kenya where farmers can delay the premium payment--noting that premia are usually due at the point where farmers are most liquidity constrained (they can delay payments because the crop is sugarcane farmed under contract so premia can be collected from harvest proceeds). They find a 67 percentage point boost in take-up, with take-up highest among poorest farmers.


5. Saving and Smoothing: One of the ways that financial services should help poor households the most is by boosting their ability to smooth consumption and to absorb shocks. But access alone isn't enough if other constraints prevent households from using the tools like savings and insurance effectively. Aker et al. look at savings nudges to help Senegalese households save and budget. They find that lockboxes and reminders don't influence spending (particularly spending on festivals) but do seem to help households plan ahead and therefore be less susceptible to other shocks. There is a lot of heterogeneity in results though.
 

Jessica Goldberg's, with an assist from Emily Breza, list of 5 most interesting papers:

1. Gambling and Saving in Uganda: Betting on sports events is common among urban Ugandan men and, for those who partake, a substantial expenditure. This paper by Sylvan Herskovitz uses variation in bet outcomes and lab-in-the-field experiments to build a case that betting is a rational strategy for asset management in an environment with low perceived returns to savings.  It’s a novel topic — while we are learning a lot about savings, credit, and even mobile money, I haven’t read anything else about sports betting in developing countries.  But neither the topic nor the approach are trivial, and taking seriously the model that would rationalize the bets is commendable.

2. Workfare and Welfare: This paper from Bhanot, Han, and Jang uses a lab-in-the-field experiment in Kenya to test various attributes of common cash transfer or public works programs, and therefore contributes to the design of such programs. While many evaluations of cash transfer or public works programs focus on outcomes like employment, income, or consumption, this paper also measures subjective wellbeing, which is improved by requiring participants to exert effort in exchange for payment. This adds an additional justification for work requirements rather than cash transfer schemes, which is important since public works can be more expensive to administer and do not always achieve self-targeting.

3. Seasonal Migration in India: [Ed. Note: same paper as above] There’s a lot written about NREGA, but it’s a massive program that not only shares features with workfare programs in many other countries, but also operates at a scale that lets us understand what might happen programs that were rationed were instead made available to more people or for longer durations. Clement and John already have one really important paper about the equilibrium effects of NREGA on private sector wages.  Now, they show that NREGA reduces seasonal migration from rural areas to the cities

4. Crop insurance contracts in Kenya: [Ed Note: same paper as above]: This paper is a nice insight into understanding the demand for insurance, even though the specific pricing structure may be hard to implement outside of a closed marketing chain.  It’s also a contribution to the literature about how the timing of financial access affects outcomes.

5. Economics of Foot Binding: Fan and Wu look at the rise and fall of foot binding in China from an economic lens, particularly noting how the practice interacted with a gender-biased meritocracy and the physical demands of women's labor.



Lee Crawfurd's list of 5 most interesting papers:

1. Football and ethnicity in Africa: When their national football teams win, Chauvin and Durante find, Africans report weaker ethnic identity. [Ed. note: I'm sure Sepp Blatter is emailing this to the Nobel committee as I write]

2. Teaching at the right level in India: Second coolest paper--Muralidharan, Singh, and Ganimian find huge effect sizes from a computer system that gives kids tests, adapts to their level, and gives feedback.

3. Vote-buying in India: Green and Vasudevan are pretty modest about reducing vote-buying by 2 *million* votes with a radio campaign.

4. Aid, hospitals, schools and violence in Afghanistan: Child finds that US health projects reduced conflict, but education projects increased conflict.

5. Trader costs in Nigeria: Startz documents and explains trade costs for market traders in Lagos. We usually focus on how developing countries can export more, but there are also big welfare gains to be had from making importing easier so consumers get cheaper and better goods.

Andreyanov, Davidson and Korovkin find suspicious bidding patterns in Russian sealed-bid electronic procurement auctions, estimating that up to 10% are affected by corruption and up to 30% by collusion among bidders. According to Jessica Goldberg, their presentation has an even more striking chart showing winning bids occurring in the last minute. Source.

Andreyanov, Davidson and Korovkin find suspicious bidding patterns in Russian sealed-bid electronic procurement auctions, estimating that up to 10% are affected by corruption and up to 30% by collusion among bidders. According to Jessica Goldberg, their presentation has an even more striking chart showing winning bids occurring in the last minute. Source.

Week of October 24, 2016

Editor's Note: It seems like our topics this week are all perennial, the all-star topics you might say. You can always count on these topics for interesting stories.

1. The Future of Microfinance: The big news this week is the merger of two giants in the field--Grameen Foundation and Freedom from Hunger. The merger follows the relatively recent retirement of two giants of the field--the former leaders of Grameen and FFH, Alex Counts and Chris Dunford, respectively. As the announcement states there are clear ways that combining the two organizations may improve their impact, but it's also clear that consolidation is a result of the maturing of the microfinance industry, and I mean that in the Silicon Valley sense, not in the childhood development sense. Where is the industry headed? Reading between the lines of the announcement makes it clear that the combined organization sees the future as one where microfinance is just a utility, or perhaps one of a set of tools, not the center piece of anti-poverty interventions. That's probably right. 

One reason why: it's easy for microcredit to go off the rails when it is the centerpiece. Here's an update on overindebtedness in Cambodia.


2. Household Finance: How should households be managing their finances? I don't mean the basics, like choosing a lower-cost over a higher-cost loan, but managing their finances over their lifetime to achieve their goals. Almost all of the the ideas and advice we have for households in developed countries is built on the life cycle model--a household's earning power starts out low but steadily grows, peaks in late middle-age and then declines. Households then should use financial services and tools to shift their income and smooth their lifetime consumption. This piece from the WSJ about what mistakes households in the US make at each phase of their life is particularly explicit about using the life cycle model and it's implications as a standard for whether households are managing their finances correctly or not. The problem with that view, of course, is that it's increasingly clear from financial diaries and other work that the life cycle model isn't an accurate representation of the many households' situation. And we don't have good advice for households' where volatility is the norm, not a blip, and where slow and steady doesn't win the race, or even work at all.   

3. MigrationOne way households have always managed their finances and achieving their long-term goals is by migrating to better opportunities. Lant Pritchett has a new rant about the relative cost-effectiveness of development interventions versus migration: the NPV of gains from ultra-poor programs are significantly less than the gains from one year of labor in the United States for a low-skilled male migrant from any of the countries where the ultra-poor programs were evaluated. Here's Eduardo Porter reviewing a plan for reforming migration policy between the US and Mexico. Here's a piece that argues that Trump's Wall is not meaningfully different, morally, than current immigration restrictions (so why doesn't the latter produce the revulsion or incredulity that the former does?). And here's a piece from the Economist on Uganda as a model for policy toward refugees.

4. Basic Income, Cash Transfers (and not-so-cash transfers): Migration is one of the reasons that Tyler Cowen gives in this column on why he has rethought the benefits of universal basic income--he thinks adoption of UBI would lead to restrictions on immigration and naturalization, and the loss from those restrictions would more than offset the gains fro UBI. Here's an older interview of Robert Greenstein on why he thinks that universal basic income won't work in the US (for very different reasons). And here, just as a reminder, is Wydick et al's paper on the not-so-significant effects of the alternative to cash transfers--giving stuff. (Even though it looks like it, no, I'm not conflating UBI with cash transfers).


5. Behavioral Science: The UK government's Behavioral Insights Team has a new report on how behavioral science can be used to "improve opportunity" in the UK. As a reminder, here's the US government's Social and Behavioral Sciences Team's similar report from last month. Both the US and UK government have new reports on the use of behavioral science for policy. And Cass Sunstein has a new book (of course, he does; it's been at least six months since the last one) on The Ethics of Influence.

Bonus Update: A few weeks ago we featured some work on education interventions. Here's a new paper on Pratham's iterative attempts to scale up "teaching at the right level" and how they adjusted their approach through on-going testing and evaluation of impact. And here's David Evans with short descriptions of 30+ recent papers on education interventions. Remember when David Roodman's consistency in thoroughly evaluating some issue related to microfinance yielded the eponym Roodmanesque. I feel like we need a name for David's research summaries: Evansonian?

Pew's new report on the state of American jobs, as always, has lots of data to think about and puzzle over. Source: Pew.

Pew's new report on the state of American jobs, as always, has lots of data to think about and puzzle over. Source: Pew.

Week of October 17, 2016

Editor's Note: I'm writing this week's faiV from Kigali and the MasterCard Foundation Symposium on Financial Inclusion. Last week's edition was supposed to be called "The Doha Round" which would make the name of this week's edition make much more sense.

1. News from Rwanda: An evaluation of the use of small-scale household solar panels in Rwanda finds that there are benefits but those are small and diffuse enough that subsidies will be needed to scale adoption. At the conference itself I learned that while 89% of Rwandans are "financially included" only 6% are "adequately served" according to recent FinScope data--a healthy reminder that heavy caveats are required when setting inclusion goals. The next step is to recognize (with a nod to James Scott) that in markets with high "inlcusion," under-served is a strategy not a condition. And while this isn't news about Rwanda, I learned about it in Rwanda: MFO is conducting garment worker financial diaries in southeast Asia which should help us understand a bit more of the difference between Blattman and Dercon's results in Ethiopia and Heath and Mobarak's results in Bangladesh. 


2. The Cost of Volatility: One of the common findings from financial diaries work around the world is the prevalence of income volatility, perhaps most surprisingly among US households. In the US Diaries data we see a lot of the volatility coming from variations in amount earned per week in the same job. There are lots of reasons to suspect that volatile schedules and the income volatility that flows from it is bad for households, but how bad? A new field experiment hints that it's really bad. Mas and Pallais randomize wage offers to potential staff for a national call center and find that workers aren't willing to sacrifice pay for a flexible schedule, but are willing to give up 20% of their wage to avoid having a schedule set by the employer with a week's notice.  

3. Measuring Poverty (over time):  Measuring poverty is tough and it's even harder to generate global estimates or cross-country comparisons. Some countries have official poverty lines, but use different methodologies to set them. Should those lines just be accepted? Should they be adjusted for purchasing power parity? If so, what data should be used to set the PPP? The World Bank's new report (commonly called the Atkinson report) with recommendations on how to handle these questions is out. Justin Sandefur interprets the recommendations as moving away from a global poverty line.

One of the reasons the World Bank cares about global poverty measures is to track poverty over time. Here's a new paper on the long-term (10 years) effects of cash transfers for households with children in Ecuador finding no improvement in test scores and only a 2% increase in school completion rates, which the authors say suggests that the cash transfers are not likely to affect intergenerational poverty (which seems a shockingly narrow channel for impact).

4. Reforming (Indian) Banking: Also in the realm of reports that may have an impact on more than a billion people, IFMR Trust has recommendations on modernizing India's banking system, primarily focused on changing how banks manage risk. Among the recommendations are allowing regional banks to use credit default swaps to hedge agricultural/commodity price risk and pushing the banking sector to use formal insurance against catastrophic weather risks rather than counting on the government to step in when large scale defaults occur.


5. Reform through Labor: Well, not quite. A few weeks ago we highlighted the Muralidharan and Niehaus work on NREGA. Here's a new paper on the effects of a public works jobs program for youth in Sierra Leone, finding big boosts in household income (e.g. not crowding out other income strategies), little increase in temptation goods and that many households use the increased income to set-up businesses. Reminds me a bit of Blattman et al in Uganda. Here's a new paper evaluating the effect of unemployment insurance requirements to be actively looking for new work on labor supply. It finds the requirements don't push people into lower wage jobs but do have a positive effect on lower-income workers speed to re-employment. 

Single papers shouldn't move your priors much, though. Here's a new systematic review of youth employment programs. It finds that about a third of programs succeed at helping youth get into the labor market, and that programs in middle- and low-income countries have a better success rate.

Bonus Update: Last week we had a piece on how hard it is to get people to buy insurance. Here's a new paper on pricing agricultural microinsurance. My tongue-in-cheek summary: Economists find that insurance companies and governments will need to hire economists ever year to figure out optimal pricing and subsidy.

In the midst of travel, conferencing and slow internet connections this week, I didn't come across any compelling graphics. So here's a picture of a mountain gorilla I took this weekend in Volcanoes National Park. I can highly recommend gorilla trekking. Source: Me.

In the midst of travel, conferencing and slow internet connections this week, I didn't come across any compelling graphics. So here's a picture of a mountain gorilla I took this weekend in Volcanoes National Park. I can highly recommend gorilla trekking. Source: Me.

Week of October 10, 2016

1. Digital Identity: A few weeks ago we featured a paper on the general equilibrium effects of NREGA in India, which depends on a universal ID system. Next Billion takes a look at India's digital ID system and compares it with Pakistan's program.

2. Insurance (Is Hard All Over): When you read about attempts to launch microinsurance programs for developing countries, it can often seem like insurance markets work very well in developed countries. But insurance is hard no matter where you are, and may be getting harder due to climate risks and our human failings in thinking about large but rare risks. Here's a new brief from the Penn Wharton Public Policy Institute looking at how under-insured many American homeowners are and proposing some steps to get those people to buy insurance

3. Shocks and External ValidityTypically conversations about the external validity of an impact evaluation focus on whether a finding in one place applies to a finding in another place. Here's a new paper by Rosenzweig and Udry looking at external validity issues in the same place but in different times, specifically at how important aggregate shocks can be when impact is likely to vary over time (as with agriculture or schooling). I'm not sure how big a problem not considering time variance is, but it is a good reminder to examine assumptions when applying findings from impact evaluations.

4. Crops, Volatility, Saving and Malnutrition: There's been a lot of progress around the world in reducing childhood malnutrition and stunting, but rates are still shockingly high in India, given the economic development in the last few decades. Here's some new research that establishes that households "save" to deal with volatile prices of pulses by stockpiling wheat (which is less nutritious). In part, saving in wheat is driven by the cost of formal accounts to save in cash.


5. C-C-Ts in the USA: Doesn't quite roll off the tongue like R-O-C-K does it? MDRC, which ran the evaluation of the Family Rewards CCT program in New York, has a new cost-benefit analysis of the program (of note, taking Rozenzweig and Udry seriously, the program was run in 2007, and depending on the exact timing there was an aggregate shock during the program or shortly thereafter). They find that on average it cost $1.07 to deliver $1.00 of value to households, and the program "did not produce positive net present value for taxpayers."

A new way to represent funding needs and overhead costs for non-profits and social enterprises. Source: Nonprofit Assistance Fund

A new way to represent funding needs and overhead costs for non-profits and social enterprises. Source: Nonprofit Assistance Fund

Week of October 3, 2016

1. The End of Cash?: Ken Rogoff has a new(ish) book arguing for the end of paper currency. In the New Yorker, Nathan Heller explores Stockholm, one of the most cashless cities on the planet. The move away from cash in Sweden was strongly influenced by high profile robberies of cash depots, making the insecurity and anonymity (for criminals) of cash much more salient. In Heller's piece, there are a few references to issues of privacy, regulation and insecurity of digital tools, but surprisingly little reference to digital payments in less developed countries, or issues in countries where government is less trusted and less trustworthy than Sweden.

2. Cashless in the USA: The US is a very long way away from cashlessness, but one of the primary mechanisms for movement in that direction is prepaid cards. In the last decade they have become increasingly popular alternatives to bank accounts, and as a mechanism for delivering government benefits like food stamps and unemployment and pay to workers without accounts. The Consumer Financial Protection Bureau has released new regulations for prepaid cards to increase consumer protections and bring prepaid cards more in line with credit cards. The regulations include limited liability for lost or stolen cards and new requirements that cards that allow overdrafts have to evaluate customers' ability to repay.

3. Cashless Benefits and Financial InclusionWhile the federal and state governments use prepaid cards to deliver benefits in the US, even to people with bank accounts, there has been a lot of advocacy for making "government-to-person" or G2P payments digitally in other countries to drive financial inclusion. At Next Billiion, Beth Rhyne and Sonja Kelly of CFI, write that G2P as a mechanism for inclusion just isn't working, citing recent work by Guy Stuart in Colombia and Pakistan. The type of "inclusion" that G2P enables doesn't do much for poor households, in part because the banks still have little interest in serving low-income account holders.

Of course, this is a problem not just with G2P as a means to inclusion, but with inclusion itself as a goal. More than 90% of US households are "included" if you define that as having a bank account, but it's tough to argue that lower-income consumers in the US are getting what they need from financial services. I'm often surprised there isn't more attention paid to the US financial services market as a picture, and a warning, of what is to come in the near future for middle-income countries when it comes to financial access and quality services for lower-income households.

Meanwhile, in the world of G2P, Arvind Subramanian, the chief economic advisor to the Indian government, is making an argument for basic income in India.

4. The (Cashless?) Future of Microfinance: In a new paper, and a summary piece in Harvard Business Review, researchers and Karlan, Pande, Suri and Zinman, with Rebecca Mann from the Gates Foundation and Jake Kendall from Caribou Digital, lay out a vision for the future of microfinance, emphasizing the need to return to the underlying market failures--asymmetric information, high transaction costs, barriers to entry--to chart a course for more effective delivery of financial services to poor households. They highlight the potential for digital tools to overcome some of those market failures.

5. Profits Matter: Whether they are counted in paper or digital currency, profits (or the lack thereof) matter for businesses, be they banks serving low-income customers or small businesses in South Africa. That's the subject of a new paper from Anderson, Chandy and Zia based on a trial of marketing versus finance training. They find that both approaches can lead to higher profits through different channels. Marketing training is more useful to younger and narrower businesses by helping them grow, while finance training is more helpful to more established businesses by helping them trim costs. The fact that profits can be increased is perhaps the most surprising finding of all, given the mixed evidence on other efforts in business training.

A new MicroSave report looks at various models for cross-border remittances in Indonesia. Source: MicroSave

A new MicroSave report looks at various models for cross-border remittances in Indonesia. Source: MicroSave

Week of September 26, 2016

1. Jobs! Jobs! Jobs!: For quite a few years now, my mental model has been that most poor households are "frustrated employees, not frustrated entrepreneurs." In other words, most people aren't held back from their entrepreneurial dreams by lack of access to credit, but they are held back in their dreams of having a job by the lack of jobs. That view is tied heavily to the fact that most microenterprises don't grow at least in part because the owners don't appear to be trying to grow them. This week Chris Blattman and Stefan Dercon released a new working paper about an experiment in Ethiopia where they were able to compare factory jobs to grants for self-employment. They find, among many other details, that those who randomly receive factory employment leave the jobs quickly and those who receive grants for self-employment tended to stay in self-employment and out of the industrial sector. There is a lot going on in this paper so it requires careful reading and some thinking, but it will definitely alter at least my confidence level in my priors.

But the discussion of the new Blattman and Dercon paper revived my memory (hat tips to Rachel Glennerster and Asif Dowla) of this Heath and Mobarak paper on the positive impact of factory work in Bangladesh so there's multiple updating going on for me this week.

I discuss this experiment with Chris Blattman a good bit in my upcoming book--it will be available on January 2nd, 2017. Sign up here to get notified when it's available for order.


2. But Wait, There's More Jobs! Jobs! Jobs!: Karthik Muralidharan and Paul Niehaus have a new paper based off of one of the world's largest RCTs, the roll-out of the new and improved NREGA guaranteed work scheme in India. They find that the program raised incomes of poor households dramatically, but that most of the gains comes from pushing up private sector wage rates, not from income from the program itself. Jonathan Morduch notes that the jump in wages was a factor in the ultra-poor program he studied in Andhra Pradesh not having much impact (many participants left the program to take jobs).

The Muralidharan and Niehaus paper also brings to mind this earlier paper from Breza and Kinnan looking at something similar--how the availability or unavailability of microcredit in India to fund self-employment had generalized effects by altering wage rates. That paper is one of the reasons I believe in the "frustrated employees, not frustrated entrepreneurs" thesis, so now my brain hurts.

3. Even more on Jobs and Wage RatesThe New York Times has a new "Room for Debate" with several perspectives on whether the rising minimum wage in the US is raising incomes and how much of a role minimum wage hikes had in the reduction in poverty reported in the latest census report.

4. FinTech and Intrahousehold Bargaining: Simple, a US FinTech company announced this week a new product that tackles the age-old problem of intrahousehold bargaining head on: a hybrid shared account. In the new Simple account, two people have separate accounts, but each can see the other's activity and they can mutually contribute to and track shared goals (like savings). It's an interesting product for a variety of situations beyond traditional romantic partnerships like parent/child or child/parent in situations of aging parents, or in situations where disability requires something less than complete guardianship. I really hope someone is doing something randomized on this to test effects.
In other US FinTech news, D2D Fund has changed it's name to Commonwealth and EARN has a new version of its Starter Savings Program.


5. And Now For Something Completely Different: Some non-financial but definitely interesting and thought-provoking things from this week: Maria Konnikova has a lengthy article pushing back on the "practice makes perfect" conventional wisdom, and particularly the 10,000 hours hypothesis. Tyler Cowen "doesn't believe in progress, and he wishes you didn't either."  Duncan Green on "Why is it so hard for academics and NGOs to work together?" NYU Law has launched what it says is the first center on law and social entrepreneurship at a law school. Cass Sunstein on "the real reasons so many Americans oppose immigration reform." Having five things in the fifth point of the faiV just seemed right.

Masquerading as a video, here's Paul Niehaus talking about the logistics of GiveDirectly and delivering cash transfers.

Masquerading as a video, here's Paul Niehaus talking about the logistics of GiveDirectly and delivering cash transfers.

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 genie...it 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.