1. The History of Banking: For a project I'm working on I've been thinking a lot about financial system development and have gotten a bit obsessed with the history of banking. You might think that with a topic so core to economic thinking there would be some consensus on things like what banks do and how they came to do them. But you would be wrong. I've had great fun reading conflicting accounts of the history of banking in the US and Germany over the last few weeks. At the AEA exhibit floor I stumbled on a new book about the history of banking in France, Dark Matter Credit. The short version is that informal banking was a massive part of the French economy, and worked better in many ways than French banks until World War I, and it took regulation to finally allow formal banks to displace the informal system. I also picked up Lending to the Borrower from Hell and just in the first few pages discovered that Italian "friars, widows and orphans" were buying syndicated loans to Charles the II of Spain in 1595. The bottom line is that informal finance was much more efficient and "thick" than I believed, and formal banking extended much further much earlier than I had known. There's also a new book on banking crises in the US before the Federal Reserve, Fighting Financial Crises, which is equally relevant to thinking about the much-more-grey-than-you-would-think borderland between formal and informal banking. To tie this all more specifically to the AEA meetings than just what was on display at the book vendors' booths, one of my favorite sessions was Economics with Ancient Data. Though I'll confess I'm not sure whether to be heartened that things we are doing now can have persistent effects for thousands of years, or depressed that our present was determined by choices thousands of years ago.
2. MicroDigitalHouseholdFinance: There was of course a number of new(ish) papers on our favorite topics, further condensed here. Here's the session on financial innovation in developing countries and one specifically focused on South Asia. Some of these papers have appeared in recent editions of the faiV already, but I want to call out a couple specifically. Microcredit, I've argued, is in dire need of innovation. So I'm always pleased when I see papers on innovation in the core product terms, like this paper from India on allowing flexible repayment, and while it wasn't at AEA,this one in Bangladesh. In both cases, allowing borrowers to skip payments results in higher repayment rates and better business outcomes. I see these as part of an evolving understanding that microcredit is a liquidity-management product, not an investment product. Credit can also be a risk-management product, as long as you know it's going to be there when you need it. That's the story of this paper on guaranteed loans for borrowers in the event of a flood (in Bangladesh). Another cool innovation in microcredit. Of course, the next question is who is going to insure the MFI so that it has the liquidity to make good on emergency loan promises? There was a session titled "Shaping Norms" that I almost missed out on because of the somewhat oblique title. There were some very interesting papers here on how household preferences get formed, and how they can be changed, including longer-term data on the experiment in Ethiopia that I think of as launching the "changing aspirations" theme that we see more and more of. I was amused that there were simultaneous sessions on "Finance and Development" and "Financial Development" but the poor Chinese student beside me was very confused as apparently the translations in the official app did a poor job of differentiating between the two. Both had interesting papers, but I found this on the sale of a credit card portfolio from a department store to a bank (which has access to more credit bureau data) in Chile, and this on bank specialization in export markets particularly interesting. But moving outside of the AEA realm, my confirmation bias prevents me from not including two other related items on Household Finance. First, Matthew Soursourian of CGAP has some pointed questions about the usefulness of "financial health" as a concept, questions I thoroughly endorse. Second, there is documentary evidence (for instance, here) that I've long been skeptical of the story about mothers in developing countries caring about their children while fathers don't. I find it more than vaguely racist as these stories typically only involve countries where the majority of fathers are black or brown. Anyway, at long last someone, specifically Kathryn Moeller, tried to track down one of the more common statistics on women spending more money on children and found that there is no source, and it was apparently made up as part of a marketing campaign. But that's just the start. Seth Gitter links to three studies that find no difference in investment in children (and I'll add the Spandana impact evaluation to his list) and Martin Ravallion points out that the "70% of world's poor are women" stat seems equally unsourced.
3. Entrepreneurship, Reluctant and Otherwise: Overall, the paper that left me thinking the most is a long-term update to the Blattman and Dercon experiment randomizing employment at factories in Ethiopia. If you need a catch-up, the original experiment had three arms: control, a $300 cash grant plus business training and a job in a "sweatshop"-type factory. While there were positive effects for the entrepreneurship group, the jobs didn't improve income and had negative effects on physical health. After five years, all the differences dissipate (hours worked, income, health, occupational choice). Pause to think about that for a moment--after several years of higher incomes from entrepreneurship, the average person in that arm shut down their business. And the control group started microenterprises and got factory jobs (filling the gaps left by the treatment arm participants who dropped out?). It's another piece of a growing puzzle about why microenterprises don't grow, or more specifically why people don't seem to invest in their microenterprises, even when the income is higher than the alternatives. Stuart Rutherford has been thinking about that too, and because it's Stuart, he went out and interviewed participants in the Hrishipara Diaries to try to get some answers.