Week of October 18, 2019

1. Nobel Prizes: It's a little weird writing about the Nobel going to Banerjee, Duflo and Kremer in the faiV--this is mostly stuff we cover all the time, and it's probably not news at this point to anyone who cares. So it's not entirely clear what to write. But here goes.
First, I have to point out that 1 in 5 people I interviewed for my book have gone on to win a Nobel. So any of you who aspire to future laureate status should probably make time for me (Yes, I'm talking to you Sendhil). All I'm saying is that both an event study or an RDD would show strong indications of causality. Given that my ability to predict the winner of the prize also is remarkable, wouldn't you say now is a great time to recommend subscribing to the faiV to all of your friends?
More seriously, I suppose I should link to some of the responses. From the "pro" camp here's Karthik Muralidharan and here's Pam Jakiela who notes that Esther is the first woman with an economics Ph.D. to win (Elinor Ostrom's Ph.D was in political science) while also noting the quite different family structure of this set of winners in comparison to many in the past (though not, it should be noted, the other Nobelist who won after appearing in my book, Angus Deaton). Here's Tim Harford, who unusually, quickly shifts the focus to Kremer's O-ring theory. On the more neutral side, here's Maitreesh Ghatak.
There's a critical side as well. For example, here's Duvendack, Jolly, Mader and Morvant-Roux on how the prize reveals the "poverty of economics." And here's Grieve Chelwa and Sean Muller with "the poverty of poor economics." I have serious issues with both of these. The Duvendack et al. piece seems to intimate that Esther and Abhijit were pro-microcredit and tried to rescue the sectors reputation from their unexpected results. That is just bizarre--the title of their paper "The Miracle of Microfinance" could be better described as an intemperate twisting of the knife; that's certainly how the microfinance industry felt. Chelwa and Muller accuse the randomistas of "imitating" science but not doing it--which can only mean they are paying very little attention to what happens in other domains of science. Here's a Twitter thread of response to Chelwa and Muller from Oyebola Okunogbe. As Okunogbe points out while pushing back, each of the essays make some good and reasonable points, which is part of what makes the critiques of the RCT movement so maddening: the blending of good points with silly ones blunts the impact of the critics, in my opinion.
Now if you're interested in a long and more balanced, but still critical (in the better, broader sense) take, here's Kevin Bryan's overview at A Fine Theorem.
The next big question for me is what comes next for the RCT movement and it's critics. There are several possible futures. One is that the prize permanently solidifies the value of RCT movement and allows more constructive engagement by proponents with critics since the randomistas no longer have to worry about an existential threat to their work and legacy. Another is that the critics will realize that their long rearguard campaign against the movement has been lost, and rather than devoting energy to grand sweeping critiques of the movement as a whole, will focus on more specific critiques of individual studies, designs, interpretations and findings and the application of research to policy, yielding better overall outcomes. And of course, there is the possibility that this changes nothing and we'll be still be having these same conversations about the use or uselessness of randomized trials in development economics 10 and 20 years from now.

2. Migration: It's here, at long last. Something like 7 years ago, I was talking with Michael Clemens about households, finances, migration and remittances. We got ourselves in a good dudgeon about the way most research approached remittances and agreed we should write a paper about re-conceiving migration as an investment and remittances as a cash flow return on that investment. It took us, I think, about 2 years to actually write the thing. That version turned into a couple of Lego stop motion videos--it was a weird time in the development internet back then--and we submitted it to a journal. Then, 5 years later we got a response. I'm not kidding.
But there's a happy ending. We were invited to revise and update (there was of course a lot to update after 5 years) and re-submit. And this week the finished product is finally published: Migration and Household Finances: How a Different Framing Can Improve Thinking About Migration (though I'll keep thinking of it as "Migration as a Household Finance Strategy").
And since Michael is so prolific on questions of migration, here's a thread from this week, with papers, on the old argument that physically coercing people to stay where they are is justifiable. (Spoiler: it's not).

3. US Inequality: Since the US Financial Diaries, a common refrain around here has been the hidden dimensions of inequality in the US--not just the easily quantifiable things like income or wealth, but the life and work circumstances that amplify and entrench income and wealth inequality. Things like irregular work schedules.
Kristen Harknett and Danny Schneider have been investigating the prevalence and impact of irregular work schedules for a few years. Earlier this year they had a paper about the consequences of irregular schedules on worker health and well-being. They have a new report out on how schedule irregularity "matters for workers, families and racial inequality." Here's an overview of their whole research program with links to other papers, and a very consumable summary from the Center for Equitable Growth.
I mentioned the strange times a few years ago as we all struggled with how to use the tools the internet was serving up to us to better communicate research and ideas. I have to say I'm impressed by the what is in evidence here in the partnership between Harknett and Schneider and the Center for Equitable Growth to get these ideas out through multiple channels.
On not just a US inequality note, I'll be at the Global Inclusive Growth Summit hosted by the Mastercard Center for Inclusive Growth and the Aspen Institute on Monday and a Center event on driving financial security at scale on Tuesday. If any faiV readers will be there, be sure to say hello.

4. SMEs and Women: A long standing puzzle in the study of microenterprise and SMEs is the differential growth rates of male-owned and female-owned firms. de Mel, McKenzie and Woodruff documented this in the microenterprise space (most famously in Sri Lanka, but also in Ghana and elsewhere); but it's not just a developing country phenomena. On average female-led firms grow more slowly and less than male-led firms in the developed world too.
Over the years we've gotten lots of different peaks into why. There is certainly the aspect of gender roles--a big part of the explanation for the different returns to capital in Sri Lanka were the industries that are traditionally male and female. That turns out to be a factor in Ghana as well as demand constraints limit returns for female tailors. There's also a gender roles explanation around how capital is invested--the differential returns de Mel, McKenzie and Woodruff find are driven by households where both the husband and wife own businesses. When only the wife is running an enterprise, the gap in returns to capital disappears. Emma Riley finds another way to eliminate the gap in Uganda: give the women loans via a mobile money account that only they control.
There's a new paper this week with another part of the answer--I like to think about it as a new version of the debunked "missing middle". Nava Ashraf, Alexia Delfino and Edward Glaeser consider the effect of men's ability to physically coerce women through the threat of violence and how that can play into who starts businesses, what kinds of businesses they start and how they grow. Basically, if women can't trust rule-of-law to protect themselves from violence, then they will avoid making themselves targets of violence by starting growing businesses. They lay out the theory and then use data from census of Zambian manufacturers to show that women founders collaborate less with others and segregate into primarily female sectors. But that effect is dampened when women have access to institutions to protect their (commercial) rights.

5. Microfinance: A couple quick hits on the microfinance side of things. First, a hat tip to faiV reader Henk-Jan Brinkman who pointed me to the recently released IMF Financial Access Survey results. It's not nearly as famous now as the Global Findex (which owes a lot to the tireless work of Leora Klapper), but there's lots of interesting material to dig into here if you think about financial inclusion from the provider side of things.
One thing those providers, at least the ones using agents to traverse the last mile, should be thinking about is "rogue agents." CFI has a report on rogue agents and black market SIMs in DRC. It may seem like a fairly niche issue, but these are the sort of things that often can be a much bigger deal than they appear at first for two reasons. One, it shows that there are always ways around the systems that are designed to protect the integrity of the transactional system--we can't ignore those. Second, it distorts our view of important questions like how sustainable is the agent business model, and how well are agents doing at delivering high-quality and reliable services. On the topic of CFI, here's an interview with Beth Rhyne on her thoughts about the past, present and future of financial inclusion as she step down from leading CFI after more than a decade (thanks to Paul DiLeo for pointing me to that).
And finally, a hat tip to Shivani Arora who pointed me to this new Economist Intelligence Unit and Pew Charitable Trusts evidence gap map (Does anyone know why Evidence Gap Maps are suddenly all the rage?) which includes some material on financial inclusion but is just generally interesting in pointing out the gaps in the data that is being gathered around the world on important policy questions.

Return to the Weekly faiV