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.

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