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Viewing all FaiV posts with topic: Microcredit  

Week of August 16, 2019

The Dog Days Edition

1. The Great (Household Finance) Convergence: I've been teasing this for awhile and now it's finally out: my essay for Aspen's Financial Security Program laying out the convergence between the US and developing, especially middle-income, countries especially when it comes to financial inclusion. The essay also highlights areas where mutual learning and collaboration should prove particularly fruitful. While you're there check out the rest of Aspen FSP's work on financial inclusion and keep an eye out for my next essay on "Reinvigorating the Financial Inclusion Agenda" (or, y'know, just wait until it shows up in the faiV; or you could check out this piece I did for CDC (UK) on the value of investing in financial system development).
Now the work for that essay was done a while ago, but the evidence for the convergence thesis (and it's related "corrupted economy" thesis) keeps coming. The past few weeks there were several stories in this vein. For instance, the growing number of American families relying on debt to pay their bills. Sorry, I meant the growing number of Russian families relying on debt to pay their bills. Sorry, I meant the growing number of post-retirement Americans relying on debt to pay their bills and being forced into bankruptcy.

2. Moving to Convergence?/Evidence-Based Policy: Here's a different area of convergence--my interests in the Great Convergence and in evidence-based policy in general and the RCT movement in particular. Part of the argument of the Great Convergence/Corrupted Economy is that the bottom 40% of the American income distribution faces an economy characterized by limited opportunity, with poor jobs, poor education, poor healthcare and housing that closely resembles the economies of middle-income countries. Escaping from these circumstances requires something akin to winning the lottery (Oh, did you hear about Virginia's new program for automatic purchases of lottery tickets? Set it and forget it!). People do win, but it's hard to justify the mental, physical, emotional and economic investment in hard work and building human capital when you are facing a lottery economy (and frequently witness things like this which don't seem to horrify very many people beyond Paddy Carter).
Perhaps you heard about or read the new paper from Chetty et al. on an experiment to revive the Moving to Opportunity program that showed next-generation benefits (but not much in terms of short-term benefits) from moving from poor neighborhoods to wealthier neighborhoods. The results from the experiment were met with a good bit of enthusiasm--here's Nick Kristof, and here's Dylan Matthews.
But the whole thing leaves me pretty uncomfortable for four reasons. One, the whole thing really is a lottery. Jake Vigdor does a good job in this thread of laying out the issues. First, the underlying program is literally a lottery. In fact, all housing assistance in Seattle is the functional equivalent of lottery. So to benefit from the program you would have had to win the lottery of applying for housing assistance at the right time, when there were slots open, and then when the lottery to get one of these vouchers specifically for this type of move.
Second, the program isn't an anti-poverty program as they are traditionally conceived of--it's a test of a program to encourage people who win the double lottery to follow through and actually move to higher-income neighborhood. It turns out that a remarkably small number of people who get housing vouchers like this actually use them--see above on the difficulty of motivating action in a lottery economy. The program works on its own terms--it significantly increases the percentage of people who actually move. But the anti-poverty effects in the theory of change won't be felt until the children of these movers become adults--at least 10 to 15 years from now.
Which raises the third issue. To really consider this an anti-poverty success you have to believe that the things that made the high-income neighborhoods in Seattle good for generational mobility 20 years ago, remain true today, AND that the labor market faced by today's kids will be same in 10 to 15 years further into the future. Those seem to me to be large assumptions.
It's not just that they seem so, the fourth reason is that they are large assumptions. Because the underlying mechanisms that lead to next-generation income mobility haven't been identified in any meaningful way. Other work by Chetty et al has documented the clear existence of high-mobility and low-mobility neighborhoods in the US--that work is a big part of what informs my views on the Great Convergence/Corrupted Economy. But it doesn't make it clear why the good neighborhoods are good, and therefore you have to believe that those factors are invariant over time, which maybe you shouldn't.
Here's the connection to evidence-based policy, and the fourth : this work and the reactions to it seem to me to be a much clearer example of the criticisms of RCTs by folks like Lant Pritchett, Angus Deaton, Glenn Harrison and Martin Ravallion than anything I've seen in the economic development space. You've got black boxes, large unexamined assumptions, a suspension of disbelief due to the methodology, and ultimately the possibility of gains so small (e.g. once you narrow from the winners of the lottery to the people who follow through to the kids who benefit; and all of this is just in one county in the whole country) that you should say, "so what?" instead of cheering.
By the way if you're interested in a different critique of this body of work, and other takes on economic mobility in the US, check out this thread from Scott Winship.
Wrapping up on the evidence-based policy front, it turns out that policy-makers have a lot of behavioral biases.

3. SMEs: A few years ago David McKenzie had a couple of papers on the difficulty of assessing impact of interventions focused on small business: revenue was very noisy, and complicated by difficulty with recall, profits even more so. Anyone who is familiar with those papers will feel a bit of deja vu in this new report from the JP Morgan Chase Institute looking at how volatile cash flows are for US small businesses. It's no surprise, but important to document, that volatility of cash flows and firm survival are inversely correlated. Using high frequency data to better understand the variety of cash flow patterns and the importance of cash flow/liquidity management in relation to access to capital is very useful.
And here's a review of the effectiveness of programs to induce small businesses to formalize in low- and middle-income countries. In a twist on the common finding that effects dissipate at scale, in this case it seems that impact at scale significantly exceeds that of smaller programs.

4. Global Development: There's a lot of big news on the global health front lately. Let's get the bad news out of the way: malaria is back on the rise in Kenya (and based on the reasons, I suspect this is going to be largely true of any other country where malaria is endemic.) On the other hand, researchers seem to have found a treatment regimen that is highly successful for XDR-TB (though frustratingly the article doesn't talk much about the inevitable evolution of resistance to this regimen, into XXDR-TB(?)). And Ebola treatment trials are showing promising results, with one approach appearing to offer major improvement within a day which would be a huge benefit to overcoming trust issues that have plagued the Ebola response.
In keeping with my Great Convergence theme, I'm going to cover two new education papers in the US under the heading of global development because I think they are very relevant. First, here's Elizabeth Setren et. al. reporting the results of an RCT of "flipped classrooms" where instruction happens at home, while class time is spent on the sort of practice that would traditionally be "homework." It turns out that not only does this not have a sustained positive effect on learning, but it widens the achievement gap. From a global perspective this is an important paper for thinking about why "scripted" classrooms seem to work and for caution on technology-based approaches to pedagogy.
Another paper looks at the effects of technical high schools in Connecticut, and using an RD approach finds that male students have large (31%) increases in quarterly income, but no effects on female students. Given that vocational training is a big part of the global development story these days due to concerns about youth unemployment, this again seems quite relevant.

5. Jobs!: I'll close out with some "service journalism." The Gates Foundation has two new jobs in their Financial Services for the Poor team: a program officer focused on Bangladesh and a senior program officer focused on consumer protection (yay!).
While there is no posting/job description yet, I'm going to be hiring a Jill/Jack of all Trades to for FAI with duties including program administration, events management, communications and even the possibility to be included in our primary and secondary research. So feel free to reach out if that seems like something you might be interested in.

The reporter for the piece on retired Americans filing for bankruptcy has some wildly different priors than I do. Via  Financial Times .

The reporter for the piece on retired Americans filing for bankruptcy has some wildly different priors than I do. Via Financial Times.

Week of July 12, 2019

The Research Production Process Edition

1. Research, Evidence, Policy and Politicians: We talk a lot around here about evidence-based policy and often about the political economy of adopting evidence-based policies. In the last faiV I featured some of the first evidence that elected officials (in this case 2000+ Brazilian mayors) are interested in evidence and will adopt policies when they are shown evidence that they work.
Far be it from me to let such encouraging news linger too long. Here's a new study on American legislators (oddly also 2000+ of them) that finds that 89% of them were uninterested in learning more about their constituents opinions even after extensive encouragement, and of those that did access the information, the legislators didn't update their beliefs about constituent opinions. Here's the NY Times Op-Ed by the study authors.
But wait, there's more! In another newly published study using Twitter data on American congresspeople, Barera et al. find that politicians follow rather than lead interest in public issues. But also that politicians are more responsive to their supporters than to general interest. Which perhaps goes some way to explaining the seeming contradictions between these two studies: American legislators are not interested in accurate data on all of their constituents' opinions, but will follow the opinions of their most vocal supporters.

2. Research Reliability: Two studies of the same population finding at least nominally opposing things published in the same week is kind of unusual, shining a brighter light on the question of research reliability than there normally is. But there have been plenty of other recent instances of the reliability of research being called into question for lots of different reasons:
* The difference between self-reported income and administrative data: the widely known finding that Americans living in extreme poverty (below $2 a day) was based on self-reported income. Re-running that analysis with administrative data that presumably does a better job of capturing access to benefits and other sources of income and wealth finds that only .11 percent of the population actually has incomes this low, and most are childless adults. Here's a Vox write-up of the findings and issues.
* A "pop" book on marriage from an academic claimed that most married women were secretly desperately unhappy. But that's because he misunderstood the survey data, believing that the code "spouse not present" meant that the husband was not in the room when the question was answered, when it really means that the spouse has moved out. Again, Vox does some good work explicating the specifics and the context: most books aren't meaningfully peer reviewed.
* But you probably should be very skeptical of any research on happiness regardless of whether it's peer reviewed because "the necessary conditions for...identification..are unlikely to ever be satisfied."
* And you should be skeptical of many papers studying the persistence of economic phenomena over time, and spatial regressions in general because of the possibility of inflated significance that is really just noise.
* You should also perhaps be skeptical of any claims based on Big 5 personality traits outside of WEIRD countries because the results are not stable across time or interviewers.
* And there are still a lot of issues with the applications of statistical techniques across the social sciences, including, for instance, the misapplication and misinterpretation of RDD designs, or conditioning on post-treatment variables (that's a paper from last year that finds 40% of experiments published in top 6 Political Science journals show evidence of doing so), or using estimated effect sizes to do ex post power calculations.
* Or this Twitter thread about a series of papers published in top medical journals that defies description, other than you really have to read it.
It's enough to make you despair.

3. The Research Production Process and Reliability: There's another aspect of research reliability in economics that doesn't get enough attention I think--how the research and publication process is set up in ways likely to create inadvertent errors. Now what follows is all speculation, but it is speculation informed by experience.
The bar for empirical research keeps going up--and that's a good thing--requiring more sophisticated experiments/analyses, with more data, bigger samples/datasets etc. But data is hard to deal with. It's messy and noisy and all sorts of other things that require a lot of time and attention that grows if not exponentially at least more than linearly as the amount and complexity of data increases. The research production process and the expectations of productivity from researchers hasn't changed though--you don't really get any more credit for a paper with a sample of 10 thousand than you do for a sample of 1000. So most of these more sophisticated projects with longer time frames and more data involve more and more collaborators and especially more and more of changing cast of RAs working on the data. And that's a recipe for inadvertent errors.
That is how I've been thinking about this recent "re-analysis" by Bedecarrats et al. of the Crepon et al. study of microcredit impact in Morocco (one of the famed 6 RCTs on microcredit impact) which incredibly ambitiously recreates the entire analysis from scratch, including rewriting all of the code into R. Bedecarrats et al. find plenty of errors in the analysis and code and question the reliability of the entire effort. I think they overstate the case, as it's not at all clear that the errors they uncover would yield a different conclusion than the original paper, but the variety of small mistakes is noteworthy.
Crepon et al. have now responded, acknowledging some errors, pushing back on others, finding some errors in the Bedecarrats et al. analysis etc. They also reiterate that the errors that are there are not sufficient to change the conclusions of the original paper.
If you follow microcredit research it's definitely worth looking at both the re-analysis and the response. But, clearly I think the more important thing is recognizing that these kinds of errors are likely common, are incredibly hard to notice, and are most likely going to become more common unless the research production process changes in some meaningful ways.
In that regard there is some good news and bad news. On the good news side, as Crepon et al. highlight in their response, J-PAL has recently launched a service for researchers where graduate students will attempt to replicate code and analysis, looking for errors. The French government has recently launched a new agency to certify the replicability of research that uses confidential administrative data, which until now hasn't been possible at all.
The bad news is that more and more data is going to become confidential as data tools allow exposing the identity of individuals involved in research. Which is going to make it even more difficult to find errors and mistakes in research.

4. Research Ethics: The reliability of research is an important question, but it's a second order one. The first order question is, "Should this research be done." There's been a lot of discussion of that question this week, as a new paper based on an experiment encouraging participation in protests in Hong Kong was released. Follow this thread for some reactions, this thread from Sheena Greitens for others (and check out her paper with co-authors on "Research in Authoritarian and Repressive Contexts"), and this thread that has some particular development econ perspectives. Spurred by the controversy, Andrajit Dube started a thread which raises the ethical questions up a level from this particular paper. And if you do a little searching there is a lot more out there.

5. Mortality: OK, we'll head in a different direction in closing. Here's an essay from Arthur Brooks that is hard but worthwhile reading: Your Professional Decline is Coming Much Sooner than You Think.

L-IFT , a diaries research firm, is a proud sponsor of the faiV. See our video on  diaries research with 800 women microentrepreneurs in Myanmar .

L-IFT, a diaries research firm, is a proud sponsor of the faiV. See our video on diaries research with 800 women microentrepreneurs in Myanmar.

This came across my Twitter feed yesterday and I thought it would be a nice diversion from all of the more serious topics above. It's a murmuration of starlings in Costa Brava, photographed by  Daniel Biber .  Source .

This came across my Twitter feed yesterday and I thought it would be a nice diversion from all of the more serious topics above. It's a murmuration of starlings in Costa Brava, photographed by Daniel Biber. Source.

Week of April 26, 2019

The Waste of Time and Money Edition

1. Household Finance: I'm as surprised as anyone that this piece I wrote on the waste of time and money that is mandatory financial literacy classes in the Washington Post seems to be getting as much traction as it is. It's the closest I've ever come to going viral on Twitter (if you want to, here's the tweet just ready and waiting for you to retweet and further drive up those numbers). The comments, by the way, are about what you would expect--and further evidence for Morgan Housel's "you have to live it to believe it" thesis on perspectives of finance. I'm not the only one banging the drum against financial literacy classes: here's Jen Tescher of CFSI imploring banks to stop funding finlit classes and focus on tools that actually help customers. 
One of the likely reasons (but certainly not the only one!) that finlit makes such little difference is the mismatch between what is taught and the actual financial lives of most households. Take for instance figuring out income taxes in the new economy. Most people in the US got a tax cut in 2018 but most of those think their taxes actually went up, because the connection between taxes and paychecks is so damned complicated in the US. And trying to figure it out if you're a contractor rather than an employee...
There is something worse than legislators mandating financial literacy. Intuit engaged in shockingly (even for cynical me) deceptive behavior by tricking people into using their paid product rather than the free product that they were eligible for--even going so far as to make sure that search engines didn't index the web page to use their regulatorily mandated free file service so it was for all intents and purposes invisible. No amount of financial literacy is going to fix that. If you were thinking that this sort of behavior was exactly why the CFPB was created you would be right, but since Mick Mulvaney has destroyed the agency, don't expect any meaningful action against Intuit.
This isn't just a US problem. This sort of thing--hiding the information customers need to make good financial decisions--happens everywhere. Think of the changes in transparency of pricing of M-Pesa. Or this audit study by Xavi Gine and Rafe Mazer finding bank personnel in Ghana, Mexico and Peru don't tell customers about the best account for them (the customers that is). This seems like the right time to bang on one of my pet drums: middle-income countries, look to the US to the see the future of your financial system and tremble.
Looking from the other side, the US has a lot to learn from international contexts about how households manage volatile financial lives. Stuart Rutherford has a fantastic write-up of the 3 years of ups-and-downs and coping strategies of a family in the Hrishapara Financial Diaries. Stop what you're doing and read it. But let me also call-out that Stuart is now funding the Hrishipara diaries out of his own pocket. Any funder who is reading this: send Stuart some money to keep up this remarkable work. Please. 
My friends at the Aspen Institute Financial Security Program have a new report on short-term financial stability and how important it is for any larger goals, based on the work of a number of organizations focused on the issue (NB: I'm a senior fellow of Aspen FSP and was involved in the early discussions that led to this report). Before you international folks keep scrolling...there is a lot of overlap between the insights here and the situation in middle-income and developing countries. And you could easily frame it in the same way that most on the international scene do: the importance of building resilience to shocks.

2. Financial Inclusion: I'm one of the retrogrades who refuses to give up on the term "financial inclusion" (while acknowledging the points made by advocates of "financial security" and "financial health"). Speaking of retrogrades, Matthew Soursourian at CGAP is even more retrograde than I am, making an argument that "access" is important and we shouldn't fetishize "usage." One of the reasons is that usage may be harmful--and Greta Bull argues that we need to talk about that, particularly around credit. Over at Next Billion, Graham Wright of MSC (formerly MicroSave--apparently I'm also retrograde in not changing FAI's name), has some speculation on the next 20 years in financial inclusion (which I take as explicit endorsement for "inclusion" whether Graham meant it or not). One of his key points is on the issue of consumer protection, which in addition to dovetailing with Greta's post, allows me to point out that in every other domain the word "inclusion" means fair and equitable participation and so we should make that part of the defacto definition of financial inclusion. Drawing things fully back to Matthew's post, the one thing I think he misses in the argument for access is network effects. The value of an account has a lot to do with who else has and uses accounts and we should expect usage to trail substantially behind access especially when less than, say, 60% of people have accounts.
Two quick hits on China and financial inclusion: Here's a piece that argues that China's "social credit score" is less coherent and more complex than it is usually portrayed. But then at the Avengers:End Game premiere, one of the trailers was a public shaming of delinquent debtors. I don't know if that's confirmatory or contradictory evidence.
Finally, there is a lot to learn from the history of financial systems and the way they include and exclude. Rebecca Spang reviews a new book (The Promise and Peril of Credit--which would have been a great title for Greta's post--by Francesca Trivellato) about the development of financial instruments in Europe and anti- and philo-semitism and how it shaped economies.
  
3. SMEs: I'll admit this is a bit of a stretch in the initial framing but it's something I've been thinking about a lot and I don't have a better place to put it. So to start, here's Gabriel Rossman live tweeting an overhead conversation in coffee shop where a couple is being recruited into Amway (one of the original multilevel marketing schemes if you're not familiar with Americana). The couple doing the recruiting keep returning to how inspirational the training is and how important it is to commit to the program. Like Gabriel, you're probably cringing and wishing there was a way to warn the "marks." But at the same time, the body of evidence finding that inspiration is effective is growing, and may work better than business training at driving positive outcomes.
Think about this with me a little more. Specifically think about Ubaydullah in Stuart's post mentioned above. Ubaydullah's main occupation is breaking bricks, and when asked what he thinks about while he is doing this, he replies, "mostly nothing." Now think about Blattman, Franklin and Dercon's sweatshops versus microcredit in Ethiopia experiment, recently updated, that finds that after five years all effects fade out--specifically that people leave their factory jobs and close their microenterprises. Or one of Stuart's earlier posts about Hrishipara diaries looking at why so many microenterprises don't grow--people don't want them to. Or this Pearls Before Swine comic this week. Or the findings from lots of studies of forced or semi-forced migration that makes people better off even though they didn't want to move. Or even the Gine, Goldberg and Yang experiment with fingerprinting leading to more investment by borrowers.
I don't have answers here, but I have a lot more questions than I used to about how to think about inspiration and the determinants of micro and SME growth. My current working model though is that people have a type and that type is hard to discover, particularly in developing contexts, and even when you have opportunities to do so, causality is really hard so people can't figure out if they are good at something or not, even when they are doing it, and that inevitably discourages effort...and maybe I should be shifting my priors about Amway.
Here's a semi-related piece on perceptions of risk among potential investors in SMEsand the (non-existent I have to note) "missing middle" and the need for social investors to reduce systemic risk. And here's a review of a book from last year that I missed (Big is Beautiful: Debunking the Myth of Small Business) arguing we should stop paying so much attention to small business. And here's Tyler Cowen's new book, Big Business, arguing roughly the same.

4. Our Algorithmic Overlords: Usually I try to draw in lots of sources in each item, but the New York Times is running a series on the topic beginning with "It's Time to Panic About Privacy." Other pieces cover how the police use Google Maps location data to do post-hoc identification of who was near a crime. How China'smass surveillance and detention of the Uighurs works. And how those surveillance systems that China has developed are being exported around the world to places like Ecuador, which is certainly a different take on One Belt, One Road. But it's not just China of course--the consequences of being caught in a digital dragnet or exposing one's digital data are especially dire for low-income households in the US (who are forced by state surveillance to put their private information on file in less than secure places). Which ties us back nicely to Graham's and Greta's posts and helps me reinforce the point about breaking down the silos of attention between the US and developing countries on these topics. And finally, here's an article at how hard it is to "fix" algorithmic bias from Vox, so I'm not completely unisourced. 

5. African Development: Is Africa industrializing in ways that will make it the next growth story? Here's Noah Smith in thread form and in article form arguing that it is, largely because of Chinese investment both directly in building factories and in infrastructure via the (actual) Belt and Road Initiative. By the way, today there's a big conference in Beijing where China seems to be offering some concessions on debt related to BRI. Here's Dani Rodrik arguing that it's not (in 2017, but he affirms this take). And a dose of realism on how far African countries have to go just to catch Latin America.
There are other parts of development than industrialization, like public health, and there's big news there too. Two different malaria vaccines are being rolled out--the first, which is about 40% effective in earlier trials, will be delivered to 360,000 people in Malawi, Ghana and Kenya. The other, which was 100% effective in a clinical trial, is moving to the first field trial next year on an island in Equatorial Guinea, where 2100 people will receiving the vaccine next year.

Week of March 8, 2019

The IWD Edition

1. The OGs: I can't think about who influences me without beginning with Esther DufloErica FieldRohini PandeTavneet Suri (special links to two new papers that would have been in the faiV in a normal week--on the impact of digital credit in Kenya, and UBI in developing countries) and Rachel Glennerster

2. New Views on Microcredit: Because I'm framing this around research that has influenced me and appeared in the faiV, I've organized these into topical buckets that make sense to me. But keep in mind, that may not be the only thing these economists work on.   Cynthia Kinnan and Emily Breza have dug into the Spandana RCT to understand heterogeneity of results, and to used the AP repayment crisis and fallout to understand the general equilibrium effects of microcreditNatalia Rigol with some of the OGs above followed up on the differential returns to capital between men and women from earlier studies finding the differences are largely due to intrahousehold allocation, not gender; she's also looked into how to better target microcredit to high-ability borrowersGisella Kagy and Morgan Hardy uncoverbarriers that women-owned microenterprises faceRachael Meager creatively usesstatistical techniques to better understand heterogeneity in microcredit impact resultsIsabelle Guerin provides insight on why microcredit can go wrong. 
  
3. Savings: I will confess that I have a lot of questions about the savings literature. But that's mainly because  of the work of these economists. Pascaline Dupas, of course. Silvia Prina tests encouraging savings in Nepal, while Lore Vandewalle tries to build savings habits in IndiaJessica Goldberg runs very creative experiments to understand how savings affects decisionsSimone Schaner studies intrahousehold choices around savings.  

4. Related Development Topics: I feel a special burden here to point out the non-comprehensiveness of this item. These are economists whose work comes to mind often as I try to puzzle through evidence. Dina Pomeranz could have been in the savings items above, but she also does lots of interesting things on taxation in developing countriesSeema Jayachandran on cash transfers and changing behavior via payments. Pam Jakiela's work on intrahousehold bargaining and on occupational choicesOriana Bandiera's work on labor markets.  

5. US Household and Micro- Finance: A different kind of caveat here. These are women I work with closely who aren't economists, but whose work is important to understanding household and microfinance in the United States. Joyce Klein is the expert on US microfinance in practice as far as I'm concerned. Ida Rademacher,Joanna Smith-RamaniGenevieve Melford and Katherine McKay are doing great work delving into US household finance, particularly through the Expanding Prosperity Impact Collaborative on topics like income volatility and consumer debt.

From  Tatyana Derugina , via  Annette Brown . Though in my experience the trend line is similar to publishing in every other domain I've been a part of.

From Tatyana Derugina, via Annette Brown. Though in my experience the trend line is similar to publishing in every other domain I've been a part of.

Week of January 21, 2019

1. MicroDigitalFinance: Many of you will be familiar with the story of microcredit's rise and sort-of fall, and it's current state of--I don't know, existential angst? But if not, the story is ably told in a new Vox piece by Stephanie Wykstra, with some comments from Jonathan and I included. Not too long after that, the Campbell Collaborative and 3ie issued a "systematic review of reviews" of the impact of financial inclusion, led by Maren Duvendack. I have to say it's kind of weird. The one sentence conclusion is "Financial inclusion interventions have very small and inconsistent impacts." Which apart from appending an "s" to the perfectly plural "impact", I don't disagree with. But this format is a review of reviews which imposes some weird constraints. Ultimately only 11 of 32 identified studies were included, and only one of those was from an economics journal, two are earlier Campbell or 3ie publications, two are specifically only about women's empowerment, and three are about strangely specific topics like HIV prevention. So I'm left really uncertain what to think of it.
Of course, the hot topic isn't generic microfinance but digital finance. The Partnership for Finance in a Digital Africa has an updated "evidence gap map" of research on the impact of digital finance featuring 55 studies (which is more than I have had the time to delve into so I can't compare it to the Campbell/3ie inclusion set). There's a summary of the findings at Next Billion.
Finally, here's an interesting story about Econet, the Zimbabwean mobile money provider--interesting in that it is really about the evolution of mobile money providers from following M-Pesa to following Tencent.
  
2. US Inequality: A big part of the story of understanding US inequality specifically, and inequality in developed countries in general, is understanding what has happened to wages of low-skill workers. The NYTimes has a piece on how cities have shifted from being the "land of opportunity" for such workers to a trap, based on work that David Autor presented in his Ely Lecture at the AEAs (by the way, AEA, it's still a good time to rename the Ely Lecture!).
One policy option for addressing stagnant wages for low-skill workers is to raise the minimum wage. Cengiz, Dube, Lindner and Zipperer continue their long-running work on the effects of 138 minimum wage changes between 1979 and 2016. They find increased earnings and essentially no effect on number of low-wage jobs
That's encouraging. Less encouraging is a new paper from Rodrik and di Tella finding that people are really, really happy to support protectionist policies, regardless of their politics, as a policy response to trade shocks.

3. Our Algorithmic Overlords: Speaking of people's attitudes, there's a big new report on Americans' attitudes on artificial intelligence from something called the Future of Humanity Institute, which as a name is somewhat creepy in my opinion. Maybe I've seen/read too much dystopian fiction. Anyway, they find that Facebook is the least trusted institution when it comes to AI development (no surprise) and the US military is tied for most trusted (big surprise, apparently these people haven't seen/read the same dystopian fiction I have). Also of interest, the median respondent thinks there's a 50% chance that robots will be able to fully replace human beings in less than 10 years. And just because, here's a Night Before Christmas style poem about the future of AI.
Meanwhile, MIT Technology Review "analyzed 16,625" AI papers to predict directions of future research. As someone interested in the future of humanity who doesn't trust either Facebook or the US military to develop AI, I'm encouraged to see cyclical patterns of research consistent with over-confidence.
One of the questions about the development of AI and machine-learning is how it will integrate into existing procedures. Flint, MI is a particularly fascinating case study on those challenges--and they are large. In a community with every incentive possible (they are literally being poisoned by their water and have extreme budget constraints) except politics to adopt the most efficient approach, the machine-learning approach was abandoned. I guess that should make me re-think my attitude toward phrases like "The Future of Humanity."

4. Methods and Evidence-Based Policy: Back in the fall I featured a paper about the effect of political connections on business success because I was so impressed by the method: Abhit Bhandari set up an actual company in Senegal and had his salespeople vary their pitches to signal political connections. Turns out Bhandari is not alone. David McKenzie has a new post at Development Impact on the apparently hot new trend in experimental development economics: setting up your own firm so you can run experiments on it. If you thought the barriers to running and publishing an experiment were high before...
Eva Vivalt has a new paper on specification searching and significance inflation in impact evaluations (see, you don't need to add an "s" to impact!). She finds less bias in economics and health papers than what's been found in political science and sociology. She also finds significance inflation in RCTs is lower than other methods and has fallen over time.
Here's an article from Gelman, Goel and Ho on what statistics can't tell us about affirmative action at Harvard. I'm a sucker for experts writing about the limits of their field.
I mentioned new research earlier punching some gaps into existing evidence bases. Here we go. Money priming, like other forms of priming, doesn't actually have a meaningful effect on behavior. The charts in this one are particularly striking. And an at-scale implementation of CBT for disruptive kids in Chilean schools radically backfired.
And because I have no other place better to put it, but wanted to include it, here's Ray Fisman and Michael Luca on how free pens are killing so many people in the US that average lifespans are falling. And on a related note, ugh, ugh, ugh. There are some things that need to be re-named more urgently than the Ely Lecture.

5. Global Development: When you can write about industrial policy and subsistence agriculture in the same item, you have to take advantage. Thanks VoxDev! Dani Rodrick has an overview on the resurgent economics of industrial policy, which is a very helpful refresher if you've looked at David's post on setting up your own firm to run experiments and are thinking it may be time to change your topics of interest. But VoxDev also has a summary of work reviewing what's been learned about improving agricultural extension services from the Agricultural Technology Adoption Initiative. Which is a very helpful overview if you, like me, have long-standing plans to look at what we can learn from research on subsistence farming to design programs for subsistence retail.
But there's still a long way to go, because even after all this time studying small-scale agriculture we still don't know a lot. Like how much of the difference in productivity from farm-to-farm is real or just mismeasurement. That paper should also be of interest to anyone thinking about studying firms, by setting up their own or otherwise, or in industrial policy.

Apropos of nothing, I found this chart, and  the related blog post  looking at data from lots of different drugs, on the frequency of use of marijuana quite interesting.

Apropos of nothing, I found this chart, and the related blog post looking at data from lots of different drugs, on the frequency of use of marijuana quite interesting.

Week of January 7, 2019

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.
If you're a regular reader of the faiV, you know that one of my standard soapboxes is the need to pay more attention to the commonalities between the US and developing countries. And this is anther example. At AEA, Fiona Grieg of the JP Morgan Chase Institute presented updated data on participation in the gig economy in the US (not publicly available yet, here's the older version). Of the various forms of gig work, driving is arguably the most similar to the low-skill self-employment options, which I generally term "subsistence retail", available in developing countries (indeed, that's one of the jobs Stuart discusses in his piece). In that sector, specifically, the striking finding is that participation is sporadic, irregular and incomes are falling, in part apparently because of competition but also because participants are spending fewer hours doing it. It's a pattern that looks to me much like the Ethiopia experiment, and Blattman's similar experiment in Uganda which also saw all effects dissipate after nine years. 
Here's a nascent explanatory theory, based on a new NBER paper about demographic change in the US. The authors show that all of the troubling changes in the US economy related to job creation, start-up rates and the labor share of income can be explained by the US's aging population. The basic idea is this: older people start fewer firms, particularly firms that grow and add employees, than young people. With fewer start-ups you get less creative destruction and more mature firms which tend hire fewer new workers and, at least partially as a consequence, have more unequal wages and less wage growth. Now apply those ideas to developing economies which tend to be quite young demographically. There young people are trying a lot of things to figure out what the best option for them is. Because of other market failures, the need for extraordinary entrepreneurial ability to succeed is much higher and therefore much fewer small firms grow to any size. And even survival takes a huge amount of effort, especially since there are so many other low-skill young people trying out the same things at the same time. So people drop out of microenterprises before learning enough to improve them, and then bounce through other options because none of them are particularly good. And that's what we are also now seeing in the US economy, with the gig economy as one example. The jobs just aren't good enough to justify investment. Any thoughts on this very welcome. 

4. Blind Spots and Privilege: The two things that generated the most attention at AEA this year had to do with blind spots. You've likely heard about the investigations into harassment and bullying of women by (former) superstar Roland Fryer. That gave real energy to the sessions on gender discrimination in the profession that were already on the agenda by the time the story broke. Here's video of a session featuring Susan Athey, Marianne Bertrand, Sebnem Kalemli-Ozcan and Janet Yellendiscussing their experiences being economists while female. The sessions and conversations certainly caught the attention of the news media with follow-up stories, from the NYT and NPR. The conversations have brought to light plenty of blind-spots and privilege. For instance, the AEA has not had any way to remove someone from the executive committee. There is now a code of conduct, but no mechanism for enforcing it. And the post-conference conversation on Twitter has been turning to more of the blind-spots, like the persistence of one-on-one job interviews in hotel rooms. It remains to be seen how much of a reckoning there will be. Case in point is the death this week of Harold Demsetz, an economist who, the consensus seems to be, should have won a Nobel (with Armen Alchian). The third comment on Marginal Revolution is a very credible story of years of harassment by Demsetz. But here's a Twitter thread lamenting his passing in which I can't help but notice an imbalance among the commenters who knew him personally.
OK, here's a huge pivot. The other session that inspired the most passionate response, at least as far as I could tell, was about coming changes to how the US Census Bureau anonymizes data. Here's some quick background: the ability to de-anonymize anonymous data is increasingly a concern in many areas of life; and the Census Bureau is moving toward something called "differential privacy" to make it harder to do, with unclear but probably negative effects on the ability of researchers to use Census Bureau data. Whether there are real threats to privacy and how the Census plan is being implemented are apparently deeply controversial. Here's a "live" thread from Gary Kimbrough, with follow-up responses from some of the participants, that reveals some of the tensions and problems. Something that emerges from the thread of particular note is an issue I was not aware of: Raj Chetty has more access to Census data than anyone else, apparently, and that is a source of a lot of tension among researchers. There is real concern that the Census' plan will create a hierarchy of who has access to useful data and put even more power in the hands of privileged researchers--and the extreme hierarchy that already exists in Economics is certainly a part of the culture problem. 

5. Replication and Causal Inference: OK, let's expand our horizons beyond things drawn directly from AEA. David Roodman has a new piece on the lessons from his work attempting to replicate two important public health economics papers over the last few years. Roodman doesn't see a replication crisis in economics similar to that in psychology, because "most...original results can be matched when applying the reported methods to the reported data." He thinks, though, that re-analysis is more important than replication and there economics has a "robustness" crisis.
There is a new study of "push button replication"--the ability to get the same results from the reported data and methods with the resources made available--of impact evaluations from low- and middle-income countries. Brown, Muller and Wood find that only 27 of the 109 studies they find are "push button replicable." Of those that were not, 59 did not provide the necessary data and code (similar to another paper from a few years ago that David cites); 30 of those were published in journals that nominally required the data and code to be posted. Not great, Bob
Finally, a clash of titans in the world of causal inference erupted this week, with Andrew Gelman posting a review of Judea Pearl's newish book, The Book of Why. AsSue Marquez notes, the comments are where it gets really interesting (which also got me to wondering, why are the comments on Gelman's blog must reads and the comments on Tyler Cowen's blog must-not-reads?). Pearl himself responds, (eventually in multiple places in the thread) and if you thought the culture in economics was unique, maybe not so much. Most of what is in the comment thread at Gelman's blog is statisticians. The economists got to discussing it on Twitter. I wish I could provide a useful guide to that, but the conversation got so fractured that even I was stymied trying to follow it. The best I can offer is to start with Marquez's tweet, and then click on various replies to see the conversation branching. It's frustrating but worth it, and if any faiV readers end up making sense of it (nudge, nudge Marc) and summarizing the conversation in a useful way, let me know.

There were a lot of things I considered including this week, but in the end I decided that everyone could use a smile to start the year with. So without further comment, click play.

There were a lot of things I considered including this week, but in the end I decided that everyone could use a smile to start the year with. So without further comment, click play.

Week of December 10, 2018

1. Targeting: I intended for the faiVLive conversation to spend more time on targeting than we did--it's a sort of rushed conversation at the end. Targeting is something that I've been thinking about a lot, but I'm not sure what I think yet. So forgive me for just ruminating on a few things here.
The whole concept of microcredit is based on targeting--every lender has to target not only those interested in taking a loan but those interested in repaying a loan. Hand-in-hand with targeting repayers was targeting borrowers who were "entrepreneurs," people who would start a business, since the belief was a new microenterprise was the only plausible way for these very poor households to repay. But since the rhetoric emphasized that the poor were natural entrepreneurs, targeting repayers substituted 1:1 for targeting entrepreneurs. Given the findings of microcredit impact studies--namely that while average impact is minimal, there are people who see large gains--the focus on targeting has returned. See for instance, asking middle men who the best farmers are, or surveying other microenterprises.
But if your aim is reducing poverty, then you have to care about more than just finding the borrowers who will repay and have the highest returns on capital--you have to care about equity as well and the effect on, or exclusion of, the poorest or least able to generate high returns. Earlier this year I linked to a paper by Hanna and Olken on the equity effects of targeted transfers vs. UBI. Here's an interview with the two that summarizes their findings: for most poor countries, targeted transfers far outperform a UBI in terms of total welfare. And by the way, here's new Banerjee et al paper from Indonesia showing limited distortions from proxy-means tests.
Of course, in targeting microcredit we are doing the opposite essentially: looking for a proxy-means test to exclude the least-able to generate high returns. What effects might that have? If we boost market efficiency, it could be good for most everyone. That's not just theoretical--here's an empirical finding from Jensen and Miller on improving market efficiency in Kerala boat-building finding higher aggregate quality, lower production costs and lower quality-adjusted prices. But maybe not. That paper above on using middle-men to target finds that traditional allocation of loans does better for the poorest. And as we discussed on the faiVLive conversation, there can be systematic differences in market structure that limits who can generate high returns (in this case, among women seamstresses in Ghana). It's why I worry about what exactly is being measured in targeting algorithms like EFL/Lenddo.
The possible gains and losses have to be measured against the cost of targeting. The cost of microcredit as it exists, without targeting, is pretty low. The median subsidy per loan is about $25, not much for spreading access to the liquidity management features of microcredit well beyond those with high returns to capital. And then there is reason to think about the effect of greater targeting on the microfinance business model. Here is one of the few economics papers to make me actually angry, suggesting that microcredit contracts were purposefully designed to limit the growth of borrower's businesses. While I wholly reject that claim, the underlying idea is worth considering: microcredit's low relative costs are based on a mass-lending business model and MFIs have largely failed to find a way to compete higher up the banking value chain. Altering that business model could have unintended consequences. That's not just based on that paper. As I mentioned last week, City of Debtors, a book about small sum lending in New York City during the 20th century confirms the business model problem is real and pervasive.
So I don't really know what I think. I'll keep thinking about it, but as always I appreciate your thoughts if you're willing to share them.
    
2. US Inequality: I haven't covered US Inequality for several weeks, and so things have been building up. And there's been a whole lot of new stuff in the last few weeks. Let's start with the state of median US income over the last 30 years. The widely held current view is that incomes for all but the top quintile or decile have been stagnant. But that's heavily dependent on all the adjustments that need to be made for taxes, transfers, inflation and innovation. Stephen Rose at the Urban Institute summarizes the past and new work trying to measure changes in median income, and then writes in more detail about the methodological issues. One thing that had particularly slipped by me: Picketty, Saez and Zucman have a newish paper updating the famous results that showed stagnation and find median incomes have increased about 30% over the last 30 years. That shifts the proportion of gains by the top decile from around 90% to around 50% (I'm intentionally rounding these numbers because they are so sensitive to methodological choices, that I think we're all better off not reporting precise numbers because of the illusion of certainty that goes along with them). Perhaps one of the reasons that these new findings didn't seem to get as much attention as the idea of stagnation for the middle class, is that the new paper also finds that stagnation is true for the bottom 50% of the income distribution.
This week the US Census also released it's "Small Area Income and Poverty Estimates" for 2017, with county-level data on incomes and poverty rates. They find that over the last 10 years, median incomes in 80% of US counties were unchanged, with 11% of counties seeing an increase and 8% seeing a decrease. When you look at the maps, it's apparent that a majority of the counties seeing an increase are related to the fracking boom (and thus mostly in places with very few people). On the poverty front, there's a whole lot of stagnation too, with almost 90% of counties seeing no change, but 8% seeing an increase and only 3% seeing a decrease. Not an encouraging picture.
Whenever you talk about incomes and poverty, it's worthwhile to think about the definition of poverty. Here's Noah Smith on updating the definition of poverty to include volatility (though he shockingly fails to mention the US Financial Diaries). And here's Angus Deaton on "How  America poverty became fake news"--with some more methodological detail and the horrid engagement of the present administration with international attempts to measure poverty.
There's plenty new on the policy front as well. Here's a new paper estimating the total budget effect of the EITC--finding that the program self-finances 87% of its cost by reducing use of other transfer programs and increasing taxes collected. And here's The Hamilton Project on the work histories of people receiving SNAP and Medicaid benefits, finding that the majority are working, but irregularly and a substantial portion would "fail to consistently meet a 20 hour per week-threshold" because their hours worked vary so much from week-to-week.

3. US Inequality, Part II: I told you things were building up. Here are a few more things that are a bit less connected, to each other at least. People born in the late 1920s have had consistently higher mortality rates beginning at age 55, "rendered vulnerable by being born during and just after the Great Depression."
The Federal government took over the public housing system in Wellston, MO, near St. Louis, 20 years ago because of chronic mismanagement. It didn't get any better and now it's being shut down. That means 20% of the town's population is going to receive vouchers to leave the town and find housing elsewhere. Here's a thread from Jenny Schuetz of Brookings on the issues. She's a lot more concerned about moving people than I am.
Finally, some new data on women's earnings. You probably saw the study that measures the wage gap not based on hourly earnings, but on what people earn cumulatively over 15 years, finding that women earn about 50% of what men do because of lower rates of participation (hey Stephen Rose is a co-author on this one too). It's an interesting way to look at the issue, but I haven't figured out how to think about it yet. But that finding very interestingly dovetails with new work on the effect of attending an elite college. The traditional finding is that on average, the selectivity (I'm purposely avoiding using the world "quality") of the college someone attends doesn't matter. But for women it does matter--it substantially increases wages through the labor participation rate. But it also decreases the chances of marriage.

4. Our Algorithmic Overlords: I haven't been neglecting this category as much as US Inequality but I have been curtailing the entries because of time. Which means that there's also plenty built up here too.
I've frequently covered stories about China's surveillance state, especially when it comes to Uyghurs in Xinjiang province where it's increasingly clear that hundreds of thousands of people are being sent to concentration camps. Here's a first person story about how that surveillance state works.
Most of what I feature here is from academics researching the application of AI or machine learning or skeptics. But I occasionally like to cast my eye over what the business world is saying. Here's how AI can make us more human. Though I have to confess, of late, I'm not sure I can fully endorse anything that makes us more human. For the more traditional, at least for the faiV, perspective here's the new AI Now Institute report. They use the phrase very differently than, say, Prosperity Now: the headline is 10 recommendations for immediate and significant regulation of tech companies in general and AI applications in particular.
The other frequent area of coverage in this heading is mocking blockchain. Was there ever a more perfect item than blockchain projects in development have a 0.0% success rate. Here's a post with more details and less snark, but the same scathing conclusions. In an attempt at a veneer of fairness, here's a thread for Vitalik Buterine making a case that as the transaction costs of blockchain entries fall, there are some compelling use cases. Your mileage may vary.

5. Methods and Evidence-Based Policy: A special edition of the faiV focused on these built-up items is coming later this week.

Very  relevant to the inequality conversation, and whether people should  move, here's new data from the US Census on the cratering rates of  Americans moving geographically. This remains to me one of the great  mysteries of the current US economy. Source:  Quartz

Very relevant to the inequality conversation, and whether people should move, here's new data from the US Census on the cratering rates of Americans moving geographically. This remains to me one of the great mysteries of the current US economy. Source: Quartz

Week of December 3, 2018

1. faiVLive Background: The motivation for the faiVLive experiment is discussing what to think about microcredit impact given all the research in recent years. If you can't make it, or if you can, here's your quick cheat sheet to the recent research.
Of course it's starts with the average impact of microcredit being very modest. A Bayesian Hierarchical model look at the data confirms those findings. But there is important heterogeneity hidden within those average effects--"gung-ho" microborrowers do see substantial gains from increased access to credit. It's also true that these are mostly studies of expanding access to formal credit, not introducing it. That's hard to measure, but we can get a cleaner view of the value of credit when it gets taken away from most everyone--and that shows significant benefits, though through a somewhat unexpected channel: casual labor wages. Changes in labor wages can matter a lot for understanding the impact of a program, even entirely masking any benefits of an intervention with evidence that it makes a substantial difference in many contexts. And it's clear that changes in labor supply are quickly passed through into labor rates--in this case, the markets seem to be working fairly well. But it's not just labor markets. When microcredit affects local markets--by increasing or decreasing the supply of tradeable goods--the benefits may be substantial but mostly captured by the people who aren't using microcredit (what economists call general equilibrium effects). Which makes it all the more important to understand local market dynamics, especially when in many cases microenterprises are operating in sectors where supply exceeds demand. That being said, microcredit is a cheap intervention relative to other options. And it's possible we could increase the returns to microcredit for more reluctant microenterprise operators by boosting their aspirations. Or perhaps by doing better targeting of lending. But is it worth targeting? Households do seem to do a pretty good job of allocating access to capital to its most productive use within the household, and the gung-ho entrepreneurs are benefiting even without the expense of targeting.

2. MicroDigitalFinance and Household Finance: I suppose all of the above would qualify here as well, but here's a bunch of different new stuff, starting with the digital side of things. There are two new papers about the effects of SMEs adopting digital payments. In Kenya, an encouragement intervention led to 78% of treated restaurants and 28% of pharmacies adopting Lipa Na m-Pesa, and consequent increases in access to credit. In Mexico, a different kind of encouragement--the government distributed massive numbers of debit cards as part of the Progresa program--led small retailers to adopt POS terminals. That led to wealthier customers shifting some of their purchasing to these smaller retailers, and increased sales and profits for the retailers, but not an increase in employees or wages paid. On a side note, it's curious that the smaller shock of debit card distribution (pushing debit card ownership to 54% of households) had a large effect on retailers but the larger shock of m-Pesa being adopted by practically everyone has not led to more Lipa Na m-Pesa adoption.
A few weeks ago I featured a puzzle in savings from two savings encouragement experiments--the encouragement worked but savings plateau at a level well below what would seem optimal. Isabelle Guerin sent me a couple of papers that I'm still reviewing that might help explain why, but this week I stumbled across another example. The US CFPB, back in the days when it was allowed to do stuff and wasn't a hollow shell of existential dread, ran an experiment using American Express Serve cards and the "Reserve" functionality. They find that encouraging savings works--people boost their savings--but that the savings plateau after the 12 week encouragement and stay at roughly the same level for 16 months. That's consistent with the results from India and Chile but not with a model of accumulating lump sums or precautionary savings. You would expect among this population that they would experience a shock in that 16 month period and draw down the savings. Participants say they reduce payday loan use, but frankly I don't believe any claims about payday behavior that isn't based on administrative data (and it doesn't make sense if balances were stable).   
And finally because I want to encourage this behavior, Maria May sent me an interesting new paper on offering microcredit borrowers flexibility in repayment--customers get two "skip payment" coupons to use during the term of their 12 month loan cycle. Consistent with the much earlier work from Field et al, it yields more investment from borrowers, better outcomes and lower defaults.

3. Evidence-Based Policy: I noted last week that GiveWell, where I have served on the board since it's founding, released it's Top Charity recommendations. One of those is GiveDirectly. GiveWell, as is it's wont, wrote up some details of it's analysis of GiveDirectly, particularly about spillovers from cash transfers. That analysis was significantly informed by a forthcoming paper on general equilibrium effects and spillovers from one of GiveDirectly's programs that GiveWell was given access to even though it is not yet public. Berk Ozler took issue with that. And GiveWell responded. I have nothing whatsoever to do with GiveWell's research process or conclusions, but I was heavily involved advising GiveWell on its response to Berk's questions.
All of that is interesting, but I wanted to quickly draw attention to the Evidence-Based Policy subtext: internal and external validity. As Berk noted there are a number of papers that show negative spillovers from cash transfers in other contexts, and he makes the implicit argument that those papers are more internally valid because of public scrutiny and peer review. But are they externally valid--do their findings apply in other contexts? And more specifically, how should one weight research that has not had it's internal validity "boosted" by public scrutiny but is presumably more internally valid for being a study of the actual program being considered? GiveWell is putting a lot of weight on the non-public study because it has a large sample, is randomized and is pre-registered. Of course, one of the co-authors is a co-founder of GiveDirectly, which obviously presents some conflict-of-interest concerns. But one of the other co-authors might be called a godfather of the research transparency movement (OK, I'm doing it; I'm calling Ted Miguel a godfather of the research transparency movement).
Evidence-based policy is hard.
And that's before we factor in any of the complications of working with government and trying to incorporate community voice and self-determination. Susannah Hares reviews some lessons on "how, why and when to evaluate government-led reforms" through the lens of three impact evaluations of education policy reforms, from Delhi, Madhya Pradesh and Liberia. And since I'm speaking with Karthik Muralidharan later today, here's a throwback to a discussion he kicked off with comments at a recent RISE conference on evaluating policy reforms.  

4. Methods: I suppose that last link might belong more in a methods category, let's go right there. Well, let's go back to those internal validity questions. There's no shortage of discussion on the internet of whether peer review makes a difference or not. But it's much more rare to be told that "robustness checks are a joke." Double faiV points if you guess who wrote that before clicking. Quadruple points if you can guess who it links to. 
On the other hand, sometimes the rigors of peer review, robustness checks and working to have your research finding integrated into policy are just too much. It would all be much easier if your findings were suitably dramatic, surprising and large, even if that's not consistent with the data you've gathered. Here are ten simple rules for faking your research and getting it published (and not retracted).

5. Global Development : Please don't interpret that last link as having anything to do with what is in this item. Esther Duflo famously has noted that an advantage of RCTs is they have the ability to surprise. For my part, I'm frequently surprised by what expermenters manage to convince people to randomize. For instance, how about randomizing the religious content of a poverty intervention delivered by a Christian charity? That happened, in the Philippines, and here's a Freakonomics podcast about it. The results indicate that the evangelical Protestant content does increase effort and earnings. That's consistent with historical work in Germany, and by the way with the wave of work on the role of aspirations and hope. 
Speaking of aspirations and hope, those two characteristics would seem to be disproportionately held by migrants. Here's Michael Clemens and Katelyn Gough on the "best ideas for making migration work.
Finally, I've had a few links on updated work on the impact of the Green Revolution, which remains surprisingly controversial, hanging around waiting for the right faiV to include them, and well, I'm going to include them today. Here's a paper exploiting time variation in the development of high yielding crop varieties and their diffusion that finds that a 10% increase in use of HYVs increases GDP per capita by 15% (within a sample of 84 countries). Alternatively, here's work that finds that HYVs delayed industrialization and urbanization in India, and thereby limited GDP growth. But here's another new paper that finds that while HYV may have kept people in rural areas, it did decrease infant mortality. So if you weren't feeling bad enough about the difficulty of evidence-based policy and evaluating policy reforms as they happen, keep in mind that 30 years later people will still be arguing over whether the reform was good or bad.

Whether you survey husbands or wives about household assets matters, and can have a substantial effect on poverty measures. Via  Development Impact Blog , Source:  Adnan Silverio-Murillo .    

Whether you survey husbands or wives about household assets matters, and can have a substantial effect on poverty measures. Via Development Impact Blog, Source: Adnan Silverio-Murillo.    

Week of November 26, 2018

1. faiVYourJMP: Let's start there with a paper from Ryan Edwards on palm oil plantation expansion in Indonesia. That he finds trade-offs certainly shouldn't be surprising, much less astounding, but it is surprising how well he documents how the growth of export-led agriculture reduces poverty and increases consumption--including the specific channels by which that happens--and the connection to deforestation. Specifically, "each percentage point of poverty reduction corresponds to a 1.5-3 percentage point loss of forest area." Put another way, it's astounding to be able to see the price of poverty reduction outside of a carefully designed cash-based experiment.
And let me give a shout out to the Development Impact Blog team at the World Bank who were the inspiration to do this. Their crop of "Blog your JMP" posts is growing by the day and includes many entries worthy of your attention.
 
2. MicroDigitalFinance: Here's an astounding story about predatory lending and debt collection in New York (and from there, across the US). And I don't care how cynical you are, this is stunning because it's perfectly legal--so legal that there are registered investment companies gathering capital in public markets to do more of it.
That story then led me, via Rebecca Spang, to a book that came out at the beginning of this year that I'm embarrassed that I didn't know about, City of Debtors: A Century of Fringe Finance by Anne Fleming. It tells the story of small dollar credit in New York City and the attempts to regulate it and protect consumers, with lots of unintended consequences along the way. Although I've only begun to read it, what's astounding is how easily, if you changed the names of places and people, you could convince someone this was a book about modern microfinance. There's one chapter that could easily be pasted into Portfolios of the Poor with no one the wiser. Fleming is a law professor, and so she doesn't make the connection to the economics literature, past or present (at least that I've seen so far), which is frustrating but also assuages my guilt at being unaware of the book. Anyway, if you care about financial services for low-income households, regulation and/or consumer protection, you need to pick up this book.
It would be easy to make a snide and cliche comment about those who cannot learn from history, but is too much to ask to learn from present in other places? Here's a story about "neo-banks" in the US attempting to remake the banking industry, while confronting the hard reality that even without a physical presence, the margins on transactional accounts are razor thin. But, like Fleming's book, it's easy to read this as a story about how banks and MFIs are struggling to cope with the threat of digital financial services being provided by telecom firms which are built on a high-volume, low-margin business model.
That is a major theme of the e-MFPs new report on trends in microfinance/financial inclusion, released this week. It's the output of a survey of providers, funders, consultants and researchers on where the industry is headed. I was encouraged to read that other major challenges noted include "client protection, privacy...and preventing an erosion of the social focus of financial inclusion...in the face of new entrants." I'm betting those aren't on the list of very many people in the fintech/neobank space in the US.
Finally here's a story from September that somehow slipped by me: Kiva is working with the government of Sierra Leone to use blockchain to create a national ID/credit bureau. I'm still trying to wrap my head around this one but it definitely seems like the kind of thing that would benefit from and generate lots of opportunities to learn from other places. If any of the faiV readers at Kiva want to share more, please call me.

3. MicroSmallMediumFirms: I'm often frustrated that I don't get to spend more time thinking about firms--those of you who know me know I've been wanting to start a project on "subsistence retail" for years. Hope springs eternal--maybe next year is the year I get to do that.
But in the meantime, here's a job market paper from Gabriel Tourek featured on Development Impact that finds an astounding reaction to a tax cut in Rwanda: the firms pay more even though they owe less. What's going on? The firms don't know their annual revenues so they don't know how much tax they owe, so they anchor on prior year tax payments. And that's even more true of the least able/least profitable, which isn't surprising but is depressing.
Relatedly, here's Chris Woodruff talking for 2 minutes about research on firms at VoxDev, including the difference between studying large firms and small firms.
And, new in AER, here's Jensen and Miller delving into that great puzzle of small firms: why don't they grow? Really, though, given what we know about small firms around the world the astounding thing is that any of them do grow. Anyway, Jensen and Miller use a natural experiment that affects boat builders in Kerala and find that consumers tend to buy local, which limits the ability of productive small firms to grow their market beyond their "neighborhood." When consumers can learn about non-local providers, competition makes things better for everyone (except the low-quality/low-productivity builders).

4. Philanthropy: This was the week of Giving Tuesday, which has become a global phenomenon. And as with any global phenomenon, there is good and bad. The good wouldn't be that astounding, so let's start at the other end. Here's a fundraising consultancy providing advice on how to use behavioral biases to trick people into giving more. You may not find that terribly surprising, but I found it amazingly cynical. This isn't about a nudge toward a positive outcome, it's guidance on how to mislead people to induce them to overspend their budgets. And if that's not cynical enough to surprise you, here's Lucy Bernholz on the first Giving Tuesday astroturfing she's seen--a charity created by a PR firm to raise money to hire the PR firm.
Giving Tuesday's growth also inspired a lot of debate on Twitter about critiques of the day itself and of philanthropy in general. Here's a thread that includes a collection of links to my longstanding Giving Tuesday skepticism and some thoughts from Ben Soskis, a historian of philanthropy and Asha Curran, one of Giving Tuesday's leaders. That thread bleeds into a couple of other threads. Here's one posted by Rob Reich, whose book Just Giving I highlighted last week, on the need to think critically about philanthropy. That then created this thread including Rob, Phil Buchanan from CEP, Felix Salmon, Asha, Ben and I and connecting back to the earlier conversation. Perhaps the message here is that we should all be astounded that Twitter continues to hold its place in the discussion of ideas.
This week also included the release of GiveWell's Top Charities list--note, that I'm the vice-chairperson of GiveWell's board--which continues to focus on deworming and bednets as the most effective use of marginal giving. There is one change to the list which is surprising, in a surprising way. Last year, Evidence Action's "No Lean Season" program to encourage seasonal migration in Bangladesh was a recommended charity. Results of the on-going RCT of the program showed the scale-up wasn't working, which Evidence Action shared with GiveWell and publicly. Both agreed that it should no longer be a recommended charity until Evidence Action can implement changes and document that the results are closer to what the initial impact evaluation found. Here's GiveWell's post about it, here's Evidence Action's post, and here's Dylan Mathews at Vox on how astounding this is.

5. Our Algorithmic Overlords: It would be tough to find anything surprising about the behavior of tech companies after the revelations highlighted in the last faiV. But you may be surprised which company said this: "We already know and have data on our customers...they trust us...We know what people make...we know where they work...We know if they’re married. We know how long they’ve lived in their house...We’ve never ever been challenged on how we use that." No I'm not going to tell you here, you have to click, but make sure you guess before you do.
In related news, electric vehicles in China made by Tesla, Volkswagen, GM, Ford, BMW, Nissan and more are sending real time data to the government about their usage patterns and precise location.

Ever struggle to understand what is  happening to data with a particular statistical method? Me too. Nick  Huntington-Klein has created a fantastic new resource to help  conceptualize what various statistical methods are doing rather than how  to do them. It's astounding work, and astounding that it didn't already  exist. The world needs more of this. You can see the  full page of animations and explanations here . Source:  Nick Huntington-Klein

Ever struggle to understand what is happening to data with a particular statistical method? Me too. Nick Huntington-Klein has created a fantastic new resource to help conceptualize what various statistical methods are doing rather than how to do them. It's astounding work, and astounding that it didn't already exist. The world needs more of this. You can see the full page of animations and explanations here. Source: Nick Huntington-Klein

First Week of May, 2018

For the First Time in Forever

Editor's Note: I apologize if the phrasing on the first item triggers PTSD symptoms in parents of children under 10. In other news, the paywall revolution seems to be gaining steam. I may need to start a Patreon for the faiV to afford subscriptions, but for now I'm just mourning my two favorite columnists, Justin Fox and Matt Levine, disappearing behind Bloomberg's odd paywall. --Tim Ogden

1. Microfinance, Part I (Uses of Credit): For the first time in forever, it seems there's enough new and interesting stuff on microfinance to support not only one, but a couple multiple-link items. Let's start with a useful piece that summarizes findings from several studies that have loomed large in our understanding (or questions about) of how microenterprises use credit, and apparent differences between male-owned and female-owned enterprises. I do find the framing a bit odd, as I don't know anyone who interpreted the results as "women aren't as good at running microenterprises as men" rather than, "women tend to be constrained to operating microenterprises in less profitable industries." When the newer results from Bernhardt, Field, Pande and Rigol emerged, I think the standard take was, "Households optimally allocate credit to their highest-return enterprise." So I think the intriguing thing here is not "women vs men entrepreneurs" but "maybe the industries women are concentrated in aren't less profitable after all." And that makes me think back to a paper from AEA (there's no version online that I can find, but this seems to be a significantly revised version using the same data) finding that female tailors in Ghana earn less than male tailors because they are constrained to making womens' clothes, a sector where there is more competition and lower prices.
Another use of credit for poor households is not to invest in a microenterprise but to smooth consumption when income is seasonal (or volatile for other reasons). Here's a new paper from Fink, Jack, and Masiye examining that dynamic in rural Zambia. Providing credit during the lean season affects the labor market, allowing liquidity-constrained farmers to avoid wage labor for their comparatively less-constrained neighbors, and pushes up wages. The intriguing thing here is another piece of evidence on the general equilibrium effects of microcredit via commodity (in this case, labor) markets.


2. Microfinance, Part II (Everything Else): Well, not everything else, see item 4. Access to credit and other financial services is a tricky thing--and it's not just the financial system that affects it, the justice system, criminal and civil, matters a lot too. Here's a new paper on alternative credit scoring using digital footprints--I haven't read it yet but am generally very skeptical of things like this. Grassroots Capital and CGAP are hosting a webinar on May 15th under the heading "Microfinance: Revolution or Footnote?" based on a conference last year (full disclosure, I was a participant). Of course, now I would want it to be called "Revolution, Footnote, or General Equilibrium Effects Eat Us All in the Long Run?" And applications are open for the 2018 European Microfinance Awards (until May 23) with the theme "Inclusive Finance through Technology." Whoever said the faiV didn't have news you could use? 

3. Methods/Statistics/Etc: Here's even more service journalism: A tool that will convert charts into data points automatically. I actually expect this to be the most clicked link in the history of the faiV. RAs, the robots are coming for your jobs sooner than you think.
Does everyone who cares about statistics read Andrew Gelman's blog regularly? Just in case, there were several posts recently that drew my attention. One is a fairly-standard-but-always-useful post about a specific example of dubious practices, on early childhood education (which morphs into some commentary on how the field of economics deals with these issues with a bonus appearance from Guido Imbens in the comments); another is a pointer to a new paper that tries to avoid some of the more dubious practices on a topic of a lot of interest and a lot of noise--the relationship of macro-growth and child development. But the most interesting is a post about how economists tend to see the world, specifically explaining why apparent bad behavior is good, and apparent good behavior is bad. Behavior in the economics profession is the best segue I can find into this short (audio) interview with Claudia Goldin.
But back to the use and misuse of metrics and statistics. If you don't click on anything else under this item, I do think you should look at these last two links. First, a thread about how most of the world thinks about statistics--as a tool for arriving at the answer you're looking for. And a column from Justin Fox on how pro- and anti-metrics authors end up in basically the same place--measurement is hard, and is only useful if you put the effort into doing it right.

4. Household Finance: Maybe the grab-bag is the right frame for this week's edition of the faiV. I'm including this item just so I could add this link to a look at how terribly non-poor people manage their money. One of the themes I've been increasingly talking about since the US Financial Diaries is how much even small amounts of slack obscure the sub-optimal decisions of the upper 60% of the income distribution. The analogy I make is to lean manufacturing: for the poorest people, we have drained all the slack out of the system so that when any mistake is made the consequences are large and obvious--that's the point of lean! But of course, unlike Toyota which spends massively to train workers on how to deal with mistakes, we give no useful training to these people to cope with their lack of slack, instead just blathering on to them with useless financial literacy training. Meanwhile, those with some slack are the American car companies of the 1970s, oblivious to their poor management of money. This week is when people who filed their US taxes right before the deadline will receive any refunds they were due; my strong prior is that there will be much more money wasted--even as a percentage--in the next 30 days than when the comparatively lower income families received their refunds back in February.
While we're at it, would you consider $200,000 of debt and a payment plan with the IRS for back taxes an example of "bad" financial decisions? What if the person in question was running for governor?

5. Cash Transfers: To round things out, Finland is giving up on it's "not-universal basic income" experiment since voters don't like it and they sort of already have an actual "universal basic welfare" system. There's another "not-universal basic income/cash transfer" experiment starting in the US. And here's Martin Ravallion on the pros and cons of guaranteed employment versus guaranteed income. (Channeling my inner Lant Pritchett: It's about state capacity!).   

Part of the US inequality story that doesn't get quite as much attention, via the  NY Times Upshot .

Part of the US inequality story that doesn't get quite as much attention, via the NY Times Upshot.

Week of April 9, 2018

Editor's Note: I'm very disappointed that no one commented on my clever pun in last week's editor's note. Given the beautiful weather outside, that's my only explanation for my perhaps snarkier-than-recently tone this week. --Tim Ogden

1. Global Development: Hey, does anybody remember the Millennium Villages Project? It seems an age ago in terms of development fads, now that we're all focused on cash grants and graduation programs, and according to some papers would fall into the "long-run" category. Andrew Gelman has a post about a new retrospective evaluation of the program (that he participated in), including a link to an evaluation of the evaluation. The results are surprisingly good, given what I expect most people's priors were at this point. Though I suppose the TUP evaluations should perhaps have shifted those priors in a positive direction. I guess I'm kind of surprised that the results don't seem to have gotten the attention I would have predicted. Of course, I don't think anyone has argued that the MVP should be a model for other programs since Nina Munk's book, so maybe I shouldn't be so surprised.
Lant Pritchett has a list of six other things in development that people aren't paying (enough) attention to, mostly variations on the continuing large gap between even the lower part of the income distribution in rich countries and the upper part of the distribution in poor countries.
Lant's first point is about the huge gains from moving. Here's a piece from a few weeks ago about the lack of geographic mobility, specifically rural to urban migration, in the United States where the overall tone is exasperation at these benighted people who stay in small towns (and ruin things for everyone else; it's an interview with Robert Wuthnow about his new book). It caught my eye because I can't imagine something like this being written about rural people in developing countries (without touching off a lot of blowback). But perhaps we should see more stuff like this about all forms of poor-to-rich geographic mobility. Speaking of those rural people, here's a new paper from Marc Bellemare about one of the dynamics that may be keeping the poorest people in rural areas (at least in Madagascar)--the intensification of income from agriculture.


2. Jobs: Last week I linked to the recent study of scheduling practices at The Gap that found that encouraging managers to set more stable schedules for retail employees led to higher productivity and sales for the firm. The exact mechanism for increased sales isn't completely clear, but it appears that managers shifted hours to more experienced workers, who unsurprisingly were more productive. While the study is encouraging overall--stable schedules are better for (most) workers and for employers--it also has a dark tinge. To see why, consider this Atlantic article about the future of jobs at Walmart (which, to its great credit, was well ahead of The Gap in experimenting with more stable schedules for its hourly workers, and other efforts to stabilize workers income). The macro trend is toward fewer jobs, at least in terms of how we used to define that term, for less-skilled and less-experienced employees, and declining job quality for those people. That's been happening at many companies (think of outsourcing of janitorial, security and similar jobs) for a long time. It seems an awful lot like what I understand has happened in European labor markets which are more regulated--stable jobs are limited, more workers, particularly the young pushed into contingent labor contracts with limited benefits, stability or security. From a distance this is fascinating: similar outcomes from radically different processes. But from a policy perspective it's frightening. In the economic development world, we've been talking for a long time about how to move more people into formal employment, like in developed economies. Meanwhile the developed economies are making great progress moving people into informal employment, like in developing countries. Maybe I should have called this item Global Undevelopment.
And to play to the academic part of my readership for a moment, here's a piece about how every effort to create better incentives in academic jobs makes things worse. I remain baffled at the general assumption in economics that managers know what they are doing, given the management they experience on a daily basis. While I can't vouch for the management abilities at the Open Philanthropy Project, chances are if you're a reader of the faiV you, or someone you know might be interested in these job openings.

3. MicroDigitalFinance: Is a neologism a step too far? Probably. But check out CFI's fellows program research agenda. There's a whole lot of "microdigital" there. Interestingly, to me at least, is that you could copy and paste these questions into a research agenda for the US financial services marketplace and no one would bat an eye, especially the ones about the changing nature of work.
A brief interruption for a public service announcement: If you're going to be in Uganda, for God's sake, DO NOT LOSE YOUR SIM CARD. Matt Levine has a line about fintech re-learning all the lessons of modern finance, painfully and in public. Seems that could apply equally well to a lot of actors in the financial inclusion space, but relearning the lessons of the need for explicitly pro-poor services, institutions and regulations. Take for instance this post from CGAP about pricing transparency for digital services. Who knew that digital finance providers might not be very upfront about their pricing without regulation?
There is still innovation and research happening in "traditional/nondigital" microfinance, thankfully. Here's a new paper from Burke, Bergquist and Miguel on lending to Kenyan farmers to enable them to buy low and sell high, rather than the inverse which is the status quo ex ante. The most interesting part is not that it does help farmers profitability but that they can track general equilibrium effects on prices of both inputs and outputs--and there are effects. It's another piece of evidence that microcredit can have positive general equilibrium effects that are missed in individual-focused impact evaluations (cf. Breza and Kinnan).

4. Our Algorithmic Overlords: With ongoing questions about how automation, AI, tightening labor markets, and shifting skills will affect employment, I suppose we can take some heart in this "against the run of play" piece claiming that progress in AI research has hit a wall. Maybe we have more time for structural adjustment than we thought. Of course, that may give more time for big tech companies to lobby for privacy laws that look tough but actually enable much of their ongoing gathering and use of data outside public view. And here's Lucy Bernholz on the need for civil society organizations to quickly come to terms with "the burden of data." I guess Lucy would be encouraged about CFI's research agenda, above. And I got through that without mentioning the Zuckerberg hearings. Oops.

5. US Poverty and Inequality: You may have already seen that Matthew Desmond and colleagues have "kicked on" from their work on evictions in Milwaukee and built a database of eviction records that covers a good portion of the US. Here's the NYTimes coverage of evictions in Richmond.
Here's a new report on the racial wealth gap and small business, that while useful continues my frustration at focusing on the idea that starting small businesses will directly address the wealth gap. Business ownership only increases wealth if there are buyers of those businesses at some point in the future. Given the pre-existing wealth gap, and the businesses that minorities are able to start, who is going to put a residual value on those businesses high enough to affect wealth? Perhaps we should consider the lessons of the global microfinance movement in building wealth through small business financing?
In case you were wondering, here's a new paper on immigrants and entrepreneurship in the US. First-generation immigrants create about 25% of the new businesses in the US, but this is as high as 40% in some regions. But, of course, those firms create fewer jobs and those jobs aren't as good as jobs in native-owned firms. In other words, they may be very good for boosting incomes (though in general there is no wage premium for entrepreneurs versus their likely earnings from employment) but likely not for building wealth.

Kieran Healy has a couple of blog posts in recent weeks looking at various ways to represent time series data,  using birth data in the US  and in other countries. In addition to my general interest in data viz, this caught my eye because, well, did you know how much birth rates varied from month-to-month? After contemplating whether there were some basic biologic facts I was unaware of, and soliciting help from a L&D nurse friend, I discovered that birth seasonality is a thing, is consistent across time, culture and geography, and  there is still lots of debate over what factors account for it . And I also discovered that  I have the most common birthday in the US (at least among people born 20 to 40 years after me) . You can see more of  Kieran's visualizations of the baby boom here , and some  cool animated population pyramids (with discussion and code) here .

Kieran Healy has a couple of blog posts in recent weeks looking at various ways to represent time series data, using birth data in the US and in other countries. In addition to my general interest in data viz, this caught my eye because, well, did you know how much birth rates varied from month-to-month? After contemplating whether there were some basic biologic facts I was unaware of, and soliciting help from a L&D nurse friend, I discovered that birth seasonality is a thing, is consistent across time, culture and geography, and there is still lots of debate over what factors account for it. And I also discovered that I have the most common birthday in the US (at least among people born 20 to 40 years after me).
You can see more of Kieran's visualizations of the baby boom here, and some cool animated population pyramids (with discussion and code) here.

The First Week of February 2018: The Morduch Edition

Editor's Note: this week’s faiV is guest-edited by none other than Jonathan Morduch. I'll be back on regular faiV duty next week. --Tim Ogden

Guest Editor Jonathan Morduch's Note:
Thanks, Tim Ogden, for letting me take the wheel for this week’s faiV. Sean Higgins did a great job with last week’s faiV, and I’m feeling a bit of pressure to meet their high standards. Here we go:

1. Development Economics Superstars: You know by now that NYU economist Paul Romer is heading home to downtown NY, leaving his post as the World Bank Chief Economist. It’s good news for the NYU development economics community. Don’t worry about the World Bank, though – if this list of amazing seminar speakers is any indication, the World Bank continues to be a place to find exciting ideas and research. The first speaker was this week: MIT’s Tavneet Suri talking about digital products and economic lives in Africa (video).

2. Dueling Deatons: It would be embarrassing to let on just how much I’ve learned from reading Angus Deaton over the years. But there are different versions of Deaton. One of them is a careful analyst of income and consumption data with a no-BS attitude toward poverty numbers. Another wrote an op-ed in the New York Times last week.
Deaton’s op-ed argued (1) that there’s quite a lot of extreme poverty in the US, not just in poorer countries, and (2) perhaps we should move budget from anti-poverty efforts abroad to those at home. Development economists & allied cosmopolitans rose up. Princeton ethicist Peter Singer argues that argument #2 clearly fails a cost-benefit test: it’s simply much cheaper to address needs abroad. Charles Kenny and Justin Sandefur of the Center for Global Development reject the idea that spending more in Mississippi should mean spending less in India, and they take a good whack at the US poverty data. But if you’re going to read just one rebuttal, make it Ryan Brigg’s essay in Vox. It’s the rebuttal to “provocative Deaton” that “no-BS Deaton” would have written. The main argument is: no, actually, there isn’t much “extreme poverty” in the US once you look at the data more carefully. Deaton’s basic premise thus falls away.
On a somewhat more personal note: in recent years, I’ve spent time down the back roads of Mississippi with people as poor as you’ll find in the state. I’ve come to know the kinds of Mississippi towns that Kathryn Edin and Luke Shaefer describe in their powerful US book, $2 a Day (one of Deaton’s sources). At the same time, I’ve worked in villages in India and Bangladesh where many households are targeted as “ultrapoor”. So I think I have a sense of what Deaton’s getting at in a more visceral way. He’s right about the essential point: It’s hard not to be angry about our complacency about poverty – both abroad and in the US. We should be more aware (and more angry). But Deaton picked the wrong fight (and made it the wrong way) this time. 

3. Risk and Return (Revisited): A big paper published this week. It’s nominally about farmers in Thailand, but it challenges common ways of understanding finance and inequality in general. The study holds important lessons but is fairly technical and not so accessible. The paper is “Risk and Return in Village Economies” by Krislert Samphantharak and Robert Townsend in the American Economic Journal: Microeconomics (ungated).
Why does poverty and slow economic growth persist? A starting point is that banks and other financial institutions often don’t work well in low-income communities. One implication is that small-scale farmers and micro-enterprises can have very high returns to capital -- but (or because) they can’t get hold of enough capital to invest optimally. The entire microfinance sector was founded on that premise, and there’s plenty of (RCT) evidence to back it.
Samphantharak and Townsend use 13 years’ worth of Townsend’s Thai monthly data to dig deeper. The paper gathers many insights, but here are two striking findings: The Thai households indeed have high average returns to capital but they also face much risk. Making things harder, much of that risk affects the entire village or broader economy and cannot be diversified away. As a result, much of the high return to capital is in fact a risk premium and risk-adjusted returns are far, far lower. That means that poorer households may have high returns to capital but they are not necessarily more productive than richer households (counter to the usual microfinance narrative). The action comes from the risk premium.
What is happening (at least in parts of these Thai data) is that poorer farmers are engaged in more risky production modes than richer farmers. Once risk premia are netted out, the picture changes and richer farmers are in fact shown to have higher (risk-adjusted) returns.
A few implications (at least in these data): (1) better-off farmers are both more productive and have more predictable incomes. So inequality in wealth is reinforced by inequality in basic economic security, the kind of argument also at the heart of the US Financial Diaries findings. (2) Poorer farmers face financial constraints, but not of the usual kind addressed by microfinance. The problems largely have to do with coping with risk. That might explain evidence that microfinance isn’t effective in the expected ways. (3) The evidence starkly contrasts with arguments made by people (like me) who argue that rural poverty is bound up with the inability to take on riskier projects.

4. Our Algorithmic Overlords:
 Political scientist Virginia Eubanks has a new book, Automating Inequality, [Tim will have a review in next week's faiV] about poverty in the digital age. Eubanks argues that we’re creating “digital poorhouses” akin to the poorhouses of old. The basic story is that data-driven policy approaches hurt the most disadvantaged – but seem hard to understand and thus hard to criticize. Eubanks, though, says they’re not in fact so complicated. Eubanks is featured in an interesting interview in MIT’s Technology Review. One snippet on politics and activism:I do think it’s really interesting, the way we tend to math-wash these systems, that we have a tendency to think they're more complicated and harder to understand than they actually are. I suspect that there's a little bit of technological hocus-pocus that happens when these systems come online and people often feel like they don't understand them well enough to comment on them. But it’s just not true.” 
Bonus: Just learned the phrase “math-wash”. 

5. Paychecks as Commitment Devices: If you’re like me, you’re probably paid monthly by your employer. A 2016 working paper by Lorenzo Casaburi and Rocco Macchiavello (which I just saw Lorenzo present – I’m very late to the party) argues that – for members of a Kenyan dairy cooperative at least – being paid monthly has an advantage that is easy to take for granted: It helps overcome saving constraints. In effect, the cooperative is saving weekly earnings so the members don’t have to. What’s most striking is that members are willing to pay (by foregoing earnings) for the chance to be paid monthly. The result lines up with other (surprising) evidence that people are willing to pay for saving mechanisms that transform small cash inflows into meaningfully large sums (to take a phrase from Stuart Rutherford).

Week of January 8, 2018

Editor's Note: I took some time off from my time off to attend what is officially the Annual Convention of the Allied Social Sciences Associations, but I prefer to be transparent for people outside the economics profession and just call it the American Economic Association annual meeting. Herewith are some papers I encountered in the three days of the meeting, along with related thoughts and a few other items thrown in for good measure.

Next week, Sean Higgins of CEGA will be guest editing the faiV--Tim Ogden


1. The Economics Production Function: Over the last few years, papers on microenterprises generally shared a couple of remarkable--given the general narrative--findings: microenterprises (on average) didn't grow no matter what you did to try to boost them, and women-owned microenterprises performed worse than male-owned ones. Those findings led to plenty of yowls from practitioners whose work, livelihoods and in some cases core beliefs were based on the opposite. In many conversations I had, I got the impression that people outside the profession believed that economists would publish these findings and then move on. But that perception really misunderstands the motivations of economists and the way the field works. Economists don't leave puzzles alone once they find them--the field pursues them relentlessly.
The best session I attended this weekend was based on the particular puzzle of why female-owned microenterprises are less profitable. Natalia Rigol presented work following up on an earlier studies that documented the profitability gender gap, finding that the source of the gap is mostly due to lower returns from female-owned enterprises where there was another (male-owned) enterprise in the household. Those male-owned enterprises were in more profitable industries (something documented in the original studies), so the households were making quite rational decisions to allocate additional funds to the more profitable business (and making it look as if the female-owned business had 0 or negative returns). In households where there was only a female-owned business there is no gap in returns to capital. Leonardo Iacovone and David McKenzie presented on efforts in Mexico and Togo, respectively, to provide training to help women entrepreneurs improve their businesses with positive results--in both cases seemingly based on personal initiative training rather than business skills. And Gisella Nagy presented results (unfortunately there's nothing yet to point to on this one) that women tailors in Ghana show lower profitability than male tailors because there are more women tailors which drives down prices they can get in the market. This last finding is particularly important because it suggests that part of the way forward for microcredit aimed at building women's businesses is to do a much better job targeting, or as I've called it elsewhere, abandoning the vaccine (everyone gets one!) model of microcredit for an antibiotic (only people who really need it get one!) model.
And all of that is just a very small sample of work being done on the puzzle of heterogeneity of returns to microenterprises and what can be done about it. I'm now sorely tempted to write an overview on all these studies, but dammit I really want to get to "subsistence retail."


2. Causal Inference is Hard: Those two topics aren't orthogonal to each other of course. One way they are joined together is my common theme about how hard causal inference is for the average person, and in particular for the subsistence (or just above) operator of a microentrprise (whether farming or retail). That's what I kept thinking about when reading this new post from David McKenzie on "Statistical Power and the Funnel of Attribution". David is writing for economists trying to write convincing papers, but this point "Failure to see impacts on your ultimate outcome need not mean the program has no effect, just that the funnel of attribution is long and narrows" is equally important for the people being treated. If the funnel of attribution is long and narrows, then its approaching impossible for the individual (not gifted with a large sample size or a deep understanding of statistics) to figure out which of their actions actually matter.
There is a connection to AEA here. As I was perusing the poster displays (also known as "the saddest place on earth") I kept hearing people arguing with Jacob Cosman, the creator of a poster about how the opening of new restaurants in a neighborhood affects the behavior of existing restaurants. The answer: a very precisely estimated no effect at all. (Here's a link to an old version of the paper with somewhat different results) Economists walking by simply couldn't believe this and were constantly suggesting to the author things he must have done wrong. I was amused. My strong prior is that a person would not open one of these restaurants unless they believed that their restaurant was unique (otherwise, you would believe that your restaurant would quickly fail like the 90+% of other small restaurants and you wouldn't open in the first place). So when another new restaurant arrives, you don't actually see it as a threat that needs a response. You are, after all, different! But even if you did think you needed to respond, how would you possibly know what the right response was? Do prices matter? Menus? Advertising? Item descriptions? Coupons? The funnel of attribution on all of these is so long and imprecise we should assume that individual entrepreneurs have no idea what to do even if they wanted to do something. Which ultimately brings us back to why it's so hard to get microentrepreneurs to change their behavior in a lasting way, and why personal initiative training may work much better than business skills. Personal initiative training teaches you that what you do matters, even if you can't tell, while business skills training teaches you to do something even though you can't tell that it matters.  

3. More from the Saddest Place on Earth: There's more than a whiff of desperation about the poster display area at AEA, where you often find young economists-in-training doing their best impression of a street-corner evangelist/panhandler hybrid. The possibility of being accosted by a well-meaning but overly eager job-seeker seems to keep most attendees away from the area, which is a shame because I always find some quite interesting posters. Two of note this year were about microfinance loan officer behavior. Marup Hossain looked at the behavior of BRAC loan officers after the famous (at least in these parts) TUP experiment and found that they were using TUP participants relative performance in livestock husbandry in that program to determine who to approve for microcredit loans--and that this was a good way of targeting the loans to those most likely to achieve high returns. Sarah Wolfolds had a poster on performance pay in non-profit microfinance institutions in Latin America finding MFIs making smaller loans have smaller pay-for-performance payouts but more targets--I can't find a paper behind it but I always like to highlight work looking at principal-agent issues within MFIs since I don't think that gets nearly enough attention. 
Other "fun" posters amidst the sadness: Declining investment in infrastructure led to rebellions against the Qing dynasty; There's a lot less excess sensitivity to income than most measures suggest; eliminating a small debt account improves cognitive function of the poor more than paying off a larger amount of debt (but not fully paying it off); and digital (non-tangible) innovations tend to contribute more to income inequality than tangible innovations.

4. Our Algorithmic Overlords:  Due to a series of regrettable automotive incidents I missed several of the machine learning/AI/FinTech sessions at AEA on Friday morning that I was really looking forward to. Links to sessions here, here and here. To compensate, here are some completely different algorithmic overlords pieces to contemplate. Wired has a lengthy story about the growth of China's digital panopticon and social ratings. You should click on that and read it before coming back here to click on this link to an excerpt of Virginia Eubanks' forthcoming book Automating Inequality, so that you'll especially feel the bite of discovering how much Americans in poverty already live in an automated panopticon. I've just gotten a review copy of the book, so there will be more on this when I come back from vacation (which will be partially spent reading it). 

5. It's a Small World After All: There's another of my regular themes connecting those last two links: there's not so much difference between here and there. Want another example? At a session at AEA on savings and financial inclusion Simone Schaner presented research on a commitment savings account for serial checking account overdrafters in Ghana (hey, they have them in Ghana too!). The commitment account had shockingly high take-up (over 70% if I remember correctly) and savings in the accounts accumulated at an impressive rate. But decomposing the sample, and looking at savings outside the account, Schaner et. al. find that above median overdrafters drew down there other savings and took on debt, while below-median overdrafters actually built up savings. Oh, and here's Beshears et. al. taking a similar look at the big picture for people defaulted into the commitment savings account we in the US call 401(k)s. Defaulting people in raises the amount they save in the 401(k)substantially. But it also increases the amount of debt those people have 4 years later (though at least it's auto and mortgage loans and not revolving debt). 
There are of course some differences. Compare/Contrast these two pieces on solar home systems in Myanmar and the United States. First, here's a complaint that government subsidies ruined the business of a solar business in Myanmar, and a plea for governments to stop making it so cheap for people to get solar. Next, here's a complaint that government is making it too expensive for people to get solar home systems in the US with a plea for government to start making it cheaper. What brings the world together, apparently, is complaining about government interference in markets. That's something that would be right at home at AEA 2019.

There were a few sessions at AEA that were recorded and "webcast." Here's Alvin Roth's presidential address on  Markets and Marketplaces . Here's David Laibson on  Competition, Equilibrium, Freedom and Paternalism . Here's a session on the  Economics of AI and Robotics . And below there's a panel on Global Inequality and Policy.

There were a few sessions at AEA that were recorded and "webcast." Here's Alvin Roth's presidential address on Markets and Marketplaces. Here's David Laibson on Competition, Equilibrium, Freedom and Paternalism. Here's a session on the Economics of AI and Robotics. And below there's a panel on Global Inequality and Policy.

Week of December 4, 2017

In terms of this week's through-line, I figured I might as well get in on the Star Wars jokes that are going to plague us all, apparently, for the rest of time--Tim Ogden

1. Social Investment: Last week I was at European Microfinance Week. Video of the closing plenary I participated in is here. My contribution was mainly to repeat what seems to me a fairly obvious point but which apparently keeps slipping from view: there are always trade-offs and if social investors don't subsidize quality financial services for poor households, there will be very few quality financial services for poor households.
Paul DiLeo of Grassroots Capital (who moderated the session at eMFP) pointed me to this egregious example of the ongoing attempt to fight basic logic and mathematics from the "no trade-offs" crowd. This sort of thing is particularly baffling to me because of the close connection that impact investing has to investing--a world where everything is about trade-offs: risk vs. return; sector vs. sector; company vs. company; hedge fund manager vs. hedge fund manager. The logic in this particular case, no pun intended, is that a fund to invest in tech start-ups in the US Midwest is an impact investment, even though the founder explicitly says it isn't, because it is "seeking potential return in parts of the economy neglected by biases of mainstream investors." If that's your definition of impact investing you're going to have a tough time keeping the Koch Brothers, Sam Walton and Ray Dalio out of your impact investment Hall of Fame. Sure, part of the argument is that these are investments that could create jobs in areas that haven't had a lot of quality job growth. But by that logic, mining BitCoin is a tremendous impact investment. You see, mining BitCoin and processing transactions is enormously energy intensive. And someone's got to produce that energy, and keep the grid running. Those electrical grid jobs are one of the few high paying, secure mid-skill jobs. Never mind that BitCoin mining is currently increasing its energy use every day by 450 gigawatt-hours, or Haiti's annual electricity consumption. And, y'know, reversing the trend toward more clean energy. Hey anyone remember the good old days of "BitCoin for Africa"?


2. Philanthropy: There are plenty of trade-offs and questions about impact in philanthropy, not just in impact investing, and not just in programs. Here's a piece I wrote with Laura Starita about making the trade-offs of foundations investing in weapons, tobacco and the like more transparent.
I could have put David Roodman's new reassessment of the impact of de(hook)worming in the American South in early 20th century under a lot of headings (for instance, Roodman once again raises the bar on research clarity, transparency and data visualizations; Worm Wars is back!; etc.). The tack I'm going to take, in keeping with the prior item, is the impact of philanthropy. The deworming program was driven by the Rockefeller Sanitary Commission and is frequently cited, not only as evidence for current deworming efforts, but as evidence for the value and impact of large scale philanthropy. Roodman, using much more data than was available when Hoyt Bleakley wrote a paper about it more than 10 years ago, finds that there isn't compelling evidence that the Rockefeller program got the impact it was looking for. Existing (and continuing) trends in schooling and earnings appear unaltered. 
Ben Soskis has a good overview of the seminal role hookworm eradication had in the creation of American institutional philanthropy. His post was spurred by an article I linked back in the fall about the return of hookworm in many of the places it was (supposedly?) eradicated from by Rockefeller's philanthropy. We may need to rewrite a lot of philanthropic history to reflect that the widely cited case study in philanthropic impact didn't eradicate hookworm and may not have had much effect. And while we're in the revision process, it may be useful to reassess views on the impact of the Ford Foundation-sponsored Green Revolution: a new paper that argues that there was no measurable impact on national income and the primary effect was keeping people in rural farming communities (as opposed to migrating to urban areas). Given what we now generally know about the value to rural-to-urban migration, that means likely significant negative long-term effects.
If you care about high quality thinking about philanthropy, democracy and charitable giving in general, which I of course think you should, you should also be paying attention to some of Ben Soskis' other current writing. Here he is moderating a written discussion of Americans' giving capacity. And here's a piece about how the Soros conspiracy theories are damaging real debate about the role of large scale philanthropy in democratic societies.
In the spirit of the holidays, I feel like I should wrap up an item on philanthropy with some good news. In the last full edition of the faiV I mentioned the MacArthur Foundation's 100&Change initiative, which is picking one idea to get $100 million to "solve" a problem. For all the problems I have with that, the program is doing something really interesting, thanks to Brad Smith and the Foundation Center. All of the proposals, not just the finalists, are now publicly available for other foundations to review.

3. Frustrated Employees: One of the core conceits of the microfinance movement is the idea that many (most?) poor people are frustrated entrepreneurs, with lots of ideas and opportunities available if only they had access to credit. It's one of the reasons that we didn't get the impact we were looking for from massive expansion of microcredit.
The idea of frustrated entrepreneurs still lives on for a lot of the general public, but I think (hope?) it's been largely abandoned within the core of the industry. But just in case, I thought I would pass along some more evidence that the poor are frustrated employees, not frustrated entrepreneurs. Here's a paper looking at small enterprise owners in Mexico, who shrink their businesses when jobs come to town, in anticipation presumably of giving up the grind of entrepreneurship for the dream of a paycheck. And here's a look at Thai entrepreneurs operating multiple micro-enterprises that concludes that it's not lack of credit that's holding back their businesses, but their own lack of skills.
One of the paradoxes of the microfinance movement was that co-existing with the idea that the poor were frustrated entrepreneurs just waiting to be unleashed was the emphasis on providing a loan with conditions that made entrepreneurial risk-taking difficult if not impossible. Field and Pande showed quite a while ago that if you relaxed the constraints on loan payment, some borrowers would make riskier investments and gain from it. Here's a recent follow-up to that work which adds further evidence--again finding that borrowers with a more flexible contract end up with higher business sales, but also that the contract does a good job of inducing self-selection of borrowers who do have more of the necessary characteristics for entrepreneurial success.
It's not just people in lower income countries that are frustrated employees. Many employees are frustrated employees--frustrated that the jobs they have are terrible. Here's Zeynep Ton on the case for relieving that frustration and creating better jobs.

4. Our Algorithmic Overlords: A couple of quick hits here. First, the Illinois Department of Children and Family Services tried to use big data and algorithms to predict which children were at most risk. They're scrapping the program "because it didn't seem to be predicting much."
And here's Zeynep Tufecki on the dystopia we're building "just to make people click on ads." Definitely not the impact we were looking for.

5. Household Finance: If there's any impact the microfinance movement was not looking for, it was to replicate the troubling situation with debt that we see in many lower income American (and European, though to a lesser extent) households. It's one of the reasons the industry was so fixated on emphasizing that they were making entrepreneurial loans not consumption loans. The Urban Institute has a new interactive map on debt in America, with data down to the county level. There's a lot to explore there--CityLab has a nice summary overview if you just want some takeaways. The Mimosa Index is doing something conceptually similar for microfinance, albeit at a much grosser level due to data constraints. Hey, MicroSave what about doing something like this for digital credit in Kenya?
And to tie everything together, from trade-offs to impact, here's some new work from Emily Gallagher and Jorge Sabat (via Ray Boshara's blog post) on the trade-offs households have to make between savings and debt--finding (in the US) that the short-term sub-optimal choice of saving at low interest rates while carrying high-interest debt pays off in the medium-term. The mechanism is having some liquidity to meet shocks without running up more debt. I have some ideas (and some organizations willing to try them) about how to maintain liquidity while reducing debt, so if you'd be interested in funding a pilot, just let me know. 
Ray's post is motivated by thanking his dad for giving him advice as a teenager to always have some savings on hand, even if it meant ultimately paying more in interest on loans, advice that now has an empirical basis. I can't let that opportunity for one of my standard harangues pass by: the state of personal finance advice is horrific. Here's a piece from the NY Times this week which under the heading of getting "better at money in 2018" advises readers that cutting out small indulgences can add up and that they should spend more on take-out to be happy. Gosh I wonder which of those pieces of advice is more likely to be taken?  

Via Barbara Magnoni of EA Consultants, a little video about international remittances to hopefully brighten your weekend. It's certainly better than a Star Wars joke.

Week of November 6, 2017

The Conundrum Synthesis Edition

Editor's Note: This week I attended a 2-day AspenEPIC meeting on consumer debt (in the US) and then a day with the Filene Institute on the "Mind-Money Connection." This week's title is inspired by some of Ray Boshara's comments at EPIC about conundrums in understanding consumer debt. But both events once again illustrated the desperate need for more synthesis of ideas and experience between the developing world and the developed world on financial inclusion. Ray also pointed out to me that while I introduced myself when I took over writing the faiV nearly 2 years ago, it's not apparent on a regular basis who the "I" is. So from now on, I'm going to sign these notes each week--Tim Ogden

1. Appropriate Frictions and End-User Behavior: A key theme of the EPIC conversations on debt from my perspective was the importance of differential frictions in access to various kinds of debt. One example: it's much more time consuming to open a home equity line of credit than a credit card account. There are reasons for that of course: we want people to be careful about borrowing against their home, because we fear the consequences for people if they default. But the cost of unsecured credit is so much higher, and various forms of debt are so interlinked, that households can end up in worse straits precisely because we tried to protect them. The true conundrum of appropriate frictions is that the process of determining the best form of credit for a household is in itself a friction that drives consumers toward those willing to provide credit without a care for its impact on the household--a somewhat obtuse but accurate way of describing predatory lenders.
This is one of the lessons from microcredit. Demand for microcredit in most contexts is actually quite low, and rarely did microcredit have much of an impact on local moneylenders. The reason of course being that taking a microloan usually involves a lot of friction, while borrowing from a moneylender is low friction. Those operating in the US will immediately see the exact overlap with payday/auto-title lending vs. working with a community development credit union.
But it's not just a question of the behavior of consumers. Front-line staff also play a role; they are an under-recognized form of end-user that has to be taken into account. Here's some new work by Beisland, D'Espallier and Mersland on "personal mission drift" among credit officers of Ecuadorian MFIs. Now don't look away because this is about microcredit or Ecuador--it's directly applicable to any kind of financial service offered to any kind of customer anywhere. Beisland et al. find that as credit officers gain experience they tend to serve fewer "vulnerable" clients (e.g. smaller loans, young borrowers, disabled borrowers). Why? Because it takes too much time--there are those frictions again. Figuring out how to offer quality products, especially credit, with appropriate frictions for both the borrowers and the credit officer, is a conundrum everywhere.
For further evidence of this, check out the similarities between this piece from Bindu Ananth about conversations with newly banked customers in Indian cities, and this report on "Generational Money Chatter" in the US from Hope Schau and Ignacio Luri (especially from GenXers and Millennials). The common theme I perceive: lots of questions and uncertainties about products and providers, little faith in the "systems," and confusion about where to turn for trustworthy advice.    


2. Frictions, Temptation and Digital Finance: Those of you working in the digital finance world may already be thinking about how digital tools can lower frictions--after all, not only can FinTech tools more quickly and easily gather data from consumers, but they often cut the front-line staff right out of the equation! Take that, friction!
Oh but friction can be useful. This is one of those areas where I'm constantly baffled at the disconnect between the developed and developing worlds. In the developed world, it's generally understood that the goal of payment and digital finance innovation is usually to remove friction specifically for the purpose of getting people to spend more money, more often. Amazon didn't develop and patent one-click ordering out of concern for saving people time (Interesting side note, Amazon's patent on one-click expired last month--exogenous variation klaxon!). The sales pitch that credit card issuers make to merchants has always been that credit cards induce people to spend more.
Here's one of my favorite new pieces of research in a long time: a study of how people in debt management plans handled spending temptation (if that description is too dry to get you to click, try this one: "Target is the Devil!"). The sub-text, and sometimes text, is how hard retailers and some credit providers work to break down the frictions that prevent people from spending.
What's the connection to digital finance, particularly in developing countries. I'll enter there through this piece from Graham Wright based on a debate at the recent MasterCard Foundation Symposium on Financial Inclusion. Graham was asked to make the argument against the hope for digital finance serving poor customers. His list of five reasons why digital finance is "largely irrelevant" in the typical rural village is worth reading at face value. But it's also worth thinking about in terms of how much of digital finance is aimed at removing frictions, how it's failed to remove some of those frictions for poorer customers and what can (or will) happen to poor households when appropriate frictions are removed.

3. Quality Jobs: Another conundrum that deserves more global synthesis is the struggle to create quality jobs for low-income households. Certainly one factor of quality jobs is how much they pay. While there's little doubt that productivity has a big role to play in wages, it's not always clear, particularly since 1973 (the year I was born, coincidence?) how close that link is. Stansbury and Summers have a draft of a paper arguing that the link is still pretty strong. Josh Bivens and Larry Mishel push back, arguing that policies that undermined workers' power led to a divergence of wage growth and productivity growth, and a continuing decline in jobs that pay well enough to be quality jobs.
The stagnant wages for many workers since the 1970s is one of the reasons it's clear to me that it is no longer sufficient to look at having a job as binary. Here's a new review on jobs and recidivism that finds evidence that the quality of job is what matters in helping the formerly incarcerated stay out of prison. Here's a paper from Haltiwanger, Hyatt and McEntarfer on another aspect of job quality--a chance to move up the "job ladder"--and who is getting the opportunity to move up. The surprising news: less-educated workers are more likely to move from a low-productivity firm to a high-productivity one (which should lead to higher wages, but per Mishel et al above, perhaps not).
There's more than one way to take on raising the quality of jobs. Here's work from Akram, Chowdhury and Mobarak on the effect of people moving out of poor areas for better jobs. In short, they are studying a program that subsidizes rural Bangladeshi villagers migrating to cities during the low agricultural season. We already know that raises the wages of the migrants, but it also helps those who don't migrate by tightening the labor market in the villages. Here's where I have to mention that geographic mobility in the US is declining. Meanwhile, take the example of Chicago where segregation continues to shut people out of access to quality jobs, and more. Time for more programs to help Chicagoans migrate, I think, perhaps by reducing some of the frictions.

4. Evidence-Based Policy: Rachel Glennerster examines several cases where evidence led to scaling up programs, asking "When do innovation and evidence change lives?" She doesn't mention the scale-up of the seasonal migration program in Bangladesh mentioned above, but highlights several different models of research and scaling. For those more technically minded, Eva Vivalt has a new version of her paper and an accompanying blog post on research generalizability--how much we can expect a research finding to hold when it is tried elsewhere (or just scaled up). But if you're just looking for examples of research findings that did or didn't hold in differing contexts, take a look at this thread responding to Jess Hoel's appeal for examples to use in her teaching. 
Of course one factor in how generalizable research findings are is the contexts the research is conducted in. David Evans mapped the papers presented at the recent NEUDC conference in three ways (see the comments for the third one). Do you see too much concentration?

5. Neoliberalism: Finally, here's Dani Rodrik on the state of economics and the use of the term neoliberalism. I'm not going to pretend that I can do the piece justice in summary form, so I'll just provide the link and tell you to click on it. Here's the backstory of how the piece ended up in Boston Review.

In case you were too lazy to click on the link to  David Evans' mapping  of 2017 NEUDC papers, here's the first chart. To get the other two, you're going to have to click. And scroll. Via  Development Impact .

In case you were too lazy to click on the link to David Evans' mapping of 2017 NEUDC papers, here's the first chart. To get the other two, you're going to have to click. And scroll. Via Development Impact.

Week of September 18, 2017

The New and the Old Edition

Editor's Note: Most of the items this week are in some way new additions to items that have been featured in the faiV the last few months, or at least updates on some long-running themes.

1. Microenterprise and Household Finance: I assume that most of you are familiar with David McKenzie's business plan competition in Nigeria (there's even a Planet Money episode about it!) and his cash drop work (I have to use this self-serving link of course). David and co-authors have a new paper in Science (summary/blog version here) testing the effectiveness of business training for microenterprises in Togo and find that a standard business curricula did not do much (in line with lots of other business training studies, though most are plagued by too little power) but a curriculum based on boosting personal initiative did have large effects.
I see this as lining up with a stream of research finding that boosting aspirations or "hope" can have meaningful impact in many different contexts (see for instance, this recent work on effects of watching Queen of Katwe) and through a variety of interventions (any one know of an overview of recent work in this vein?). It also helps explain why there seem to be only small effects of business training on businesses that objectively should have lots of gains from marginal improvements in operations--if you don't believe that running your microenterprise better will matter...
In other microenterprise/microcredit news, I learned this week about a study (new draft coming soon apparently) that tests allocating microcredit based on peer views of microenterprise owner business skills. Those ranked highly do in fact see large returns to a $100 cash drop (8.8 to 13% monthly returns). I heard about the study from this excellent thread from Dina Pomeranz on a talk by Abhijit Banerjee and Esther Duflo on what new they've learned since that "old" book Poor Economics came out.
Finally, here's a new piece from Bindu Ananth that should go on your "must read" list. I couldn't agree with this statement more: "[T]he field of household finance has failed to examine the financial lives of low-income families in sufficient detail." She examines specifically issues with how to think about insurance vs. savings, high frequency saving and borrowing, and financial complexity. I will continue to beat the drum on two points: 1) low-income households are having to make financial decisions that would challenge a finance MBA, with large consequences for sub-optimal choices, and 2) almost all the advice we have on making wise financial choices is built on an assumption that the life-cycle model holds true, and may not in fact be good advice if the life-cycle model doesn't hold.


2. Premium Mediocre and American Inequality: I'll lead this off with a concept that I'm not quite sure what to make of, but does have me thinking: Premium Mediocre. The post goes on way way too long, but it's worth reading at least through the first couple of scrolls for some new ways to think about the old problems of inequality and mobility, or lack thereof, and what it does to household decision making.
This summer I mentioned but failed to link to a study on how delivering food stamps more frequently lowered the rate of shoplifting in grocery stores in Chicago. Here's a new paper that shows a much larger and long-term effect of food stamp receipt. Children whose families received food stamps for more years (due to staggered roll out of the program in the 60s and 70s) were less likely to be convicted of any crime as an adult, with larger effects on violent crime.
The importance of such safety net programs in the United States is growing as we learn more about how household finances are changing. Not only is year-to-year volatility seemingly increasing, and month-to-month volatility seemingly spreading, but lifetime earnings aren't just stagnant--they're falling. Some new work indicates that since the late 1960's American men's expected lifetime earnings began falling each year (into the present). That can make premium mediocre a stretch for each new cohort. It also perhaps helps explain this new and fairly shocking chart, based on Case and Deaton's work discussed extensively in the faiV this spring, that has been circulating on Twitter this week.  


3. RCTs, observations and fieldwork: A new entry into the "value of RCTs" debate from well outside the development economics field: online advertising. Gordon et. al. look at data from 15 Facebook advertising experiments (500 million observations) and find significant differences in results using RCTs vs more post-hoc observational methods. The major conclusion as I see it: you're never going to figure out the unobservables well enough to control for them. In related news, here's a good piece about "researcher degrees of freedom" from the Monkey Cage Blog. And in only sort of related news, here's Tyler Cowen on the manifold harms of Facebook (besides making researchers jealous about the size of their n's)
Closer to home in development economics, here's 6 questions for Chris Udry about fieldwork and learning and teaching economics. I would have asked different questions but then you knew that.

4. Philanthropy and Systemic Change: Last week I linked to a piece about the return of hookworm in impoverished parts of the US. There's another side of that story: the supposed eradication of hookworm in the American South has long been the benchmark example of philanthropic success (and the gains from the eradication campaign are part of the evidence base for deworming today). Ben Soskis takes a look at what the persistence of hookworm, or the lack of persistence of the eradication campaign, says about the limits of public health philanthropy (or any kind of "systemic change" driven by philanthropy).
Here's Felix Salmon reporting from what was apparently definitely not a "premium mediocre" philanthropy conference, where the focus was apparently on "invisible causes and effects." If you have any interest in philanthropic strategy or a bent toward "evidence-based giving" it's worth a read.

5. Household Finance and American Inequality Redux: It's new and old all in the same edition. Here are a couple of things that I wanted to include before they got too out-of-date. First, PWC has a new report on the effects of financial stress on workers. It's almost comically bad, honestly, because they so often seem to miss the story. For instance, while focusing on how self-identified "stressed" workers are likely to withdraw early from their retirement funds (or not have made deposits in the first place), they miss the large percentage of "not stressed" employees who are acting the same way as the stressed ones. When 30% of "not stressed" people already know they are going to need to draw down their retirement savings early, you have a problem with your system.
Finally, here's a proposal to allow people to withdraw up to $500 from their Earned Income Tax Credit early in the year to help cope with financial emergencies. Alex Horowitz sounds the proper notes of skepticism on the Federal Government being able to deliver funds in anything like the amount of time that a financial emergency necessitates. One challenge the piece doesn't discuss is that people generally don't know what size their credit is going to be (or even that they qualify for it at all), a challenge exacerbated by income and other household volatility. That's the subject of a paper USFD co-authored with Urban and the topic of a panel next week at the Tax Policy Center. If you're in DC, come along.

Week of April 3, 2017

War is Hell Edition

1. Cash vs Chickens Wars:  Within development circles, the most widely read point/counterpoint began with Chris Blattman's piece in Vox, written almost as a letter to Bill Gates. Blattman takes issue with Gates' idea to provide livestock, specifically chickens, to poor households and instead proposes a test of the benefit of just giving cash. To be clear Blattman isn't saying that cash is better, but that we don't know--and we do know that giving chickens is much more expensive (and everyone who's been involved in aid knows at least one story about how "the chickens all died")--so we should run a test and compare. Lant Pritchett responds on CGD's blog, saying in all his years in development, never once has the question of "chickens versus cash" arisen as a pressing question. One reason is that Pritchett believes the goal of development shouldn't be marginal improvements for the poorest but generating the kind of growth that has seen hundreds of millions escape poverty in China, Vietnam, Indonesia and other countries. Of course, Blattman responds and does a good job keeping the focus on what I would call the competing theories of change proposed by Chris and Lant. In fact, I have called it that, and if you're interested in a deeper dive into the issues in this debate, I know a good book you should read (or at least check out Marc Bellemare's and Jeff Bloem's review of it).

2. Mortality Wars: Those in the US policy community, on the other hand, have probably been too occupied following the "mortality wars" to even know there's a battle between cash and chickens happening next door. Here's the quick background: Anne Case and Angus Deaton have a new paper about mortality rates in the US--I would say more about their results but, of course, this wouldn't be a war if there wasn't vehement disagreement over what their results actually are. As with an earlier paper, Jonathan Auerbach and Andrew Gelman take issue particularly around the composition of Case's and Deaton's aggregate results, and provides charts decomposing mortality rates by race, gender and state. There are a lot of other critiques, including about the data visualization in Case's and Deaton's paper, but you can save yourself a lot of time by just reading Noah Smith's excellent post about the data and the debate which brings the attention squarely to where it should be: that mortality rates for white Americans stopped following the trajectory of other developed countries and a massive gap has opened up between the US and others. 
Then there's a secondary discussion of why this is happening and what it all means so here's some supplementary reading on that, courtesy of Jeff Guo at the Washington Post: An interview with Case and Deaton; "if white Americans are in crisis, what have black Americans been living through?"; and it's more than opioids. But if there's one related thing you aren't likely to read, but should, it's this article from Bloomberg on automobile manufacturing in the South.
This also seems like the best place to insert my favorite new aphorism: "Being a statistician means never having to say you are certain." (via Tim Harford)  

3. Social Enterprise and Investment Wars: So now we're progressing to the areas where there isn't so much of a war but there are some differing perspectives worth paying attention to. On the Center for Effective Philanthropy blog, Phil Buchanan has an incisive post decrying the idea of "sector agnosticism" between non-profits, for-profits and social enterprises: the legal form of an institution matters, not just its impact. For-profits have to make trade-offs that non-profits don't. In a similar vein, Miya Tokumitsu writes in the New York Times about accusations that a celebrated "social enterprise", Thinx, was treating employees in some less than socially conscious ways like substandard pay, verbal abuse and sexual harassment. What's notable about the piece is not only lines like, "[funds for social causes] will be taken from the same pool of funds from which her employees are paid," but that the writer is an art historian. The social investment world should be embarrassed that such fundamental concepts as fungibility, trade-offs and principal-agent problems seem to be better understood and articulated by non-profit executives and humanities teachers than by proponents. 
The other major news this week was the Ford Foundation's announcement that it will, over the next decade, move $1 billion from its corpus into "impact investing"--a nebulous term precisely because of the sector's general refusal to acknowledge such things as trade-offs. The funds will be specifically dedicated to affordable housing in the US and expanding access to financial services in developing countries. I have some ideas on how Ford should think about investing those international funds so that they spur innovation rather than the status quo in microfinance.

4. Migration Wars: If you've been reading the faiV for any length of time, you know I frequently include papers and related items on the benefits of migration. Like this new paper that looks at historical data and finds that areas with higher historical rates of immigration today have "higher income, less poverty, less unemployment..." and more. Or this piece on "The Case for Immigration" from Matt Yglesias. But there's also this new paper from Hamory Hicks, Kleeman, Li and Miguel that looks at longitidunal data from Indonesia and Kenya rural-to-urban migration and finds that the productivity gains from migration are primarily due to the individuals that migrate. That's a big concern. Right now I'm thinking through my Bayesian updating--in other words, I don't know yet how to think about this, other than possibly ratcheting down my own enthusiasm for migration." Also of note, here is Tyler Cowen on declining rates of migration in the United States


5. Microfinance Wars: Well at least there's something happening in Cambodia, where the government announced a new interest rate cap at 18 percent per year. Dan Rozas writes on how that will shut off access for many in rural Cambodia. I guess the format I've chosen for this week compels me to link to Milford Bateman's response in Next Billion in which he asserts that moneylenders care more about their communities than MFIs (really!) and explains the growth differences between Vietnam and Cambodia are materially a causal effect of lots of microcredit in Cambodia and much less in Vietnam (really! paging Lant Pritchett!).
Over the past month, however, I've been struck repeatedly by the lack of convergence about thinking about microfinance internationally and the credit and savings needs of lower income households in the US. I recently had a conversation with an executive at a US credit union, who said, "I'm so excited we finally have a 501(c)3 set-up so we can get into the payday lending business." Which seems like a very strange thing to say, but only in the United States. In related news, here's a story about SoFi's, short for Social Finance, Inc. (hmmmm....), a fintech heavy lender in the US, default rates rising rapidly. And here's an interesting paper following up on earlier work on a microcredit innovation detailing a potential trade-off (there's that word again!) between efficiency and equity in the operational choices of MFIs

Here's  video  of Jonathan Morduch and Rachel Schneider discussing their recently released book,  The Financial Diaries  and the research with David Leonhardt of the New York Times at the Aspen Institute's recent Summit on Opportunity and Inequality.

Here's video of Jonathan Morduch and Rachel Schneider discussing their recently released book, The Financial Diaries and the research with David Leonhardt of the New York Times at the Aspen Institute's recent Summit on Opportunity and Inequality.

Week of January 30, 2017

1. Cashlessness: I continue to be amused that the most commonly written about and discussed issues in the field seem to be "more cash" and "less cash"--and those aren't actually opposing view points. Here's a piece critiquing the "less cash" arguments using the classic Baptists and Bootleggers lens. I remain puzzled that there isn't (even here) more discussion of the increased coercive power cashlessness would provide governments, which is something it appears a lot more people are starting to worry about in other domains. Here's a reading list on one of the arguments for cashlessness that I am least familiar with: how it enables more (and more effective?) monetary policy options. And here's an overview of the possibility of a universal basic (cash) income in India, plausible because of India's progress away from cash, including speculation about Gandhi's attitude about UBI. Meanwhile, Peru is making progress in building the infrastructure for ubiquitous digital payments, but adoption is concentrated among the urban and already banked. To summarize, I fall back to paraphrasing James Scott, "Underbanked is a strategy, not a condition."

2. Digitization: Digitization isn't all about digital payments. A start-up in Chicago is focused on digitizing the process for applying for food stamps. On it's face, it appears to be quite similar to Propel, a somewhat older start-up in New York. I wish much success to both. Interestingly, though, the above discussion of UBI in India contemplates one of the ways to keep program costs under control is to make it time-consuming to certify access so that only the truly needy take the time. It's a reminder, in the spirit of Bootleggers and Baptists, that difficulty in accessing public benefits is often a feature, not a bug.

3. Conspicuous Consumption (Is A Hell of A Drug): Conspicuous consumption is usually thought of as a feature of the spending choices of the wealthier tiers of society. Here's a new paper from Bellet and Sihra examining conspicuous consumption among the poorest in India finding that where inequality is greater, the poorest households substitute toward more visible spending and away from basic necessities like nutritious food. Here's one of the foundational pieces on spending patterns of poor households, The Economic Lives of the Poor, just because if you haven't read it, you should.  

4. QTWTAIN: Perhaps this will become a regular feature of the faiV. (For those of you with better things to do than spend hours on social media, that's "Questions To Which the Answer is No.") Three items this week: "Did a massive reduction in immigrant Mexican laborers in the United States raise wages or employment levels for native-born?", 2) "Does bribery in health care worker hiring necessarily lead to sub-optimal outcomes when access to education is highly unequal?", and 3) "Are public sector workers bystanders in the coalition of forces limiting housing supply?


5. Social Investing: Social investing is hard. That's sub-text of my recent piece on investing in microcredit and NextBillion's recent look at microfinance IPOs. Most often the focus is on balancing financial and social returns. But there's also a challenge in thinking through the various forms of delivering social finance and the implications that come along with them, and the needs of social investors at scale to manage an overall investment portfolio. In a recent piece for Stanford Social Investment Review, Root Capital discusses it's evolving tools for tackling these challenges. If you're interested in these questions, you should check out the Video of the Week, below.

The Centre for European Research in Microfinance at ULB has just launched a MOOC on the commercialization of social enterprise, which draws on the lessons of the microfinance industry. It's free and begins February 27th. Contributors include Paul Collier, Johanna Mair, Dan Rozas and FAI's own Jonathan Morduch. Register here.

Week of January 23, 2017

1. Cash Crisis (India): India's demonetization "adjustment" continues. IMTFI has begun a special series on their blog focused on demonetization; the first post has an overview of the issues with links to work from many researchers from many disciplines, and the promise of more to come. The New York Times takes a look at the knock-on effects three months after the announcement--my only quibble is the headline which implies that demonetization only now "begins to bite." 

2. Cash Crisis (US): It's certainly not sudden demonetization that's the cause of US household's troubles managing cash and cash flows. But there are struggles none-the-less. Diana Elliott of the Urban Institute looks at the budgetary effect on cities of residents who don't have $2000 in liquid savings, finding that 10 large US cities incur (via missed property tax payments, managing evictions, etc.) costs that amount to .3 to 4.6 percent of their annual budgets (the data can be found here). Lisa Servon has a new book, The Unbanking of America, which looks at how much of the traditional financial services industry has turned its back on customers who need help managing their day-to-day cash flow and short-term needs. Here's Lisa discussing her research, which included working at a check casher, a payday lender, and a debt crisis hotline, on Fresh Air, and a review from The Atlantic.

3. Policy Influence: Every week I link to new (at least to me) research--but does any of it matter? ODI has a new report on "10 Things to Know About How to Influence Policy with Research." It's also a question I ask everyone in my book on the use of randomized trials in development economics (hint, hint, nudge, nudge). Sometimes it's hard to draw the lines between basic research, research designed to inform or influence policy, and advocacy masquerading as research. Other times not so much. That particular instance from Justin Sandefur and colleagues as they respond to critics about their RCT evaluating Liberia's new charter school policy, and consider whether the research will change anyone's mind

4. QTWTAIN: For those of you with better things to do than spend hours on social media, that's "Questions To Which the Answer is No." In this case, the question seems to be "Is behavioral economics dead?" which I had no idea was even a thing people were asking. In the course of answering "no," Noah Smith provides lots of links to interesting work connecting behavioral findings to macro questions. I think the far greater challenge is the on-going roll back of confidence in behavioral/social psych findings, but I don't think anyone really thinks even that is fatal.


5. Microfinance IPOs: While I've been worrying (and continue to worry) about a move away from social investment in microcredit innovation, it's true that there have been a couple of microfinance IPOs recently. Next Billion has an interview with Dan Rozas and Anna Kanze about the new IPOs in India and what they mean for the industry. Next Billion is also hosting a Twitter chat on Microfinance IPOs on Monday the 30th, at 10:00am (GMT-5) on the topic, using #mfichat if that's your sort of thing.

A Brookings study of the relationship between being a good researcher and being a good teacher at Northwestern University, finds a precise "none." Now we just need to find a way to measure "policy influence" instead of "instructor value added." Source:  Brookings

A Brookings study of the relationship between being a good researcher and being a good teacher at Northwestern University, finds a precise "none." Now we just need to find a way to measure "policy influence" instead of "instructor value added."
Source: Brookings

Week of January 16, 2017

Editor's Note: I've been traveling so much at the beginning of the year that I literally forgot that last Friday was Friday. Rather than publish a few days late, I decided to save up for an extra large faiV this Friday, figuring that many of you will appreciate lots of fodder to distract from the events of the day.

1. In Memoriam: In the last edition, I linked to some remembrances of Tony Atkinson. The philosopher Derek Parfit died the same day as Atkinson, and was equally concerned with inequality though in a quite different way. Here's a 2011 profile in the New Yorker by Larissa MacFarquhar that provides a very good overview of Parfit's thinking (by the way, if you haven't read MacFarquhar's Strangers Drowning, it is probably the ne plus ultra of counterprogramming today). Here's Dylan Matthews remembrance and explainer at Vox--with the truly remarkable note that a volume of essays discussing his work On What Matters was published before the book itself came out. Here is a review of Reasons and Persons from 1984 and Parfit's essay "Why Anything? Why This?" both from LRB.


2. Reproduceability, Replication and Meta-Analysis: There are all sorts of arguments about what the defining features of science are, but I think most of them include reproduceability and the ability to make accurate predictions. At the ASSA meetings there were a number of sessions on these issues in economics. Here's a look at published replications in development economics and an overview of the state of replication in the field in general. Here is Eva Vivalt's review of the dispersion of estimates of impact in development impact evaluations (in lieu of the in progress paper she presented on the rate of false positives and false negatives that builds on her earlier work). And here's Rachael Meager's job market paper on using Bayesian Hierarchical Analysis to understand and predict heterogeneity in treatment effects using the microcredit impact literature. And here's Ioannidis et al. on the limited power of most economics papers

3. Household Finance and Cashflow: Expect to hear a lot in this space about cashflow and how it affects households (hey did you know you can pre-order The Financial Diaries, the book about the US Financial Diaries work?). Here's a paper looking at how changing minimum payments affects how much people pay on their credit cards finding a large but not exclusive role for liquidity constraints, estimating that US consumers would save $570 million a year (or credit card companies would lose $570 million a year in earnings) if all companies used the most conservative minimum payment calculation. Here's a look at excessive sensitivity to payday in Iceland--people spend a lot more when they receive paychecks and it's not explained by illiquidity. Here's recent work in Malawi varying timing of paydays (weekly vs. monthly, Friday vs. Saturday) finding that monthly payments helped recipients save more. And here's a video of Meiping Sun discussing the very large effects of the New York City MTA imposing a $1 fee on the purchase of fare cards

4. Cash and Cashlessness: Two big questions remain in cash transfers (whether recipients use them well is settled as far as I'm concerned): when and where do conditions help, and what are the long-term effects of cash. Here's a study from Lesotho on soft conditions--a clear message that the cash should be spent on the "interest and needs of children" yields significant changes in how the funds are spent. Here's work by Baird, et. al. building on their earlier work examining the impact of conditions in cash transfers, finding that the benefits of cash transfers fade out after two years with interesting implications for the role and application of conditions. And while we're talking about cash (albeit in a very different application of the term), here's a Guardian piece on the exclusionary impact of moving away from cash in developed countries. Very soon we're going to have to develop new vocabulary to distinguish between "fully liquid" aid and literal, physical cash.


5. Microfinance Innovation: NextBillion is moving to a new editorial approach by focusing it's coverage on a different topic each month. January is about microfinance and features three pieces by me on innovation in microcredit. The latest is considers the implications of thinking about microcredit as a vaccine or as an antibiotic. All three of the pieces are extensions of my recent paper The Case for Social Investment in Microcredit, which if you haven't read it yet, you should. And sticking at NextBillion (and setting up the next item) here is Graham Wright's take on five ways microfinance needs to innovate in response to digital finance.

6. Tech and FinTech: I confess that this most recent paper on the impact of One Laptop per Child in Peru made me giggle: Getting a laptop makes it less likely that teachers use a more effective approach, less likely that kids do homework, and less likely that they do chores. The effect sizes are huge so I'm skeptical but I don't recall seeing so comprehensive a set of bad news in a long time. The news isn't nearly so bad for FinTech of course, but that doesn't mean that all signs are positive. Here's Graham Wright reflecting on some areas of concern, particularly the troubling statistics on digital credit out of Kenya. Bangladesh is lowering the ceilings on mobile money transactions (both amount and frequency) due to unspecified suggestions of "abuse." And to illustrate the huge gap in thinking about FinTech in the US and in developing contexts here are 10 fairly ridiculous predictions for FinTech in 2017.    

7. Algorithms: Wrapping up on the tech front: In contrast to the late '90s thinking about how the internet was going to a massive boon to consumers, this piece suggests that algorithms could dramatically reduce price competition.

8. Microenterprise: Have I mentioned that my book is out? Yeah, I guess I have. One of the interviewees is David McKenzie--we spend a lot of time talking about his experiments, with de Mel and Woodruff, to understand microenterprises, in particular work in Sri Lanka on whether it's possible to help microenterprises "level-up" or to change their growth trajectory. David's most recent paper on the issue is now out as well, finding that subsidies to employ workers don't have a lasting impact on employment, profitability or sales. The search for ways to help microenterprises continues.

9. Parsimony: Behavioral economics has illustrated the many, many impediments to "rational" and consistent behavior but it some ways those many, many ways inhibit our ability to study and understand specific issues: does each study need to do extensive work to understand each participants risk aversion, hyperbolic preferences, limited attention, etc. etc.? A new paper by Stango, Yoong and Zinman attempts to make such work a bit easier by looking for simpler ways to measure and model behavioral phenomena, with some success and some failure.

10. Deworming: No, there will never be a last word. Owen Ozier has a new paper on long-term effects of deworming that sheds a lot of light on the reasons why long-term effects can be large while short-term effects are small or negligible. And in case you haven't taken the time yet, here's David Roodman's two long posts (one and two) on the deworming literature--a great useful distraction if there ever was one.

Video: Esther Duflo's Ely Lecture on "The Economist as Plumber"

Video: Esther Duflo's Ely Lecture on "The Economist as Plumber"