Viewing all FaiV posts with topic: Remittances  

Week of October 11, 2019

The Regressive Edition

1. Microfinance: October 2nd was the 10th anniversary of what I consider to be an underappreciated but critical moment in the history of the microfinance movement--David Roodman's piece on how Kiva actually worked. David had already been working on a book about microfinance that was going to be very influential--his open book blog as a whole is a remarkable contribution to the public good, one I wish many more people had decided to replicate--but the Kiva post (based on it being one of the most read blog posts in CGD history according to Justin Sandefur) brought a huge amount of attention to questions about how not only Kiva, but microfinance as a whole, actually worked. I re-read it this week and it's as good as I remember it and definitely makes me pine for the brief glorious time where the development blogosphere was a thing.
There's another important anniversary this week for global microfinance though with a less arbitrarily neat number--Muhammad Yunus's Peace Prize was 13 years ago. Today many were surprised that Greta Thunberg didn't win. The explanation seeming to be both timing and the fact that there is not a direct link between climate change and conflict. There may be a narrowing of the scope of the Peace Prize given that there is certainly no connection between microcredit and reduced conflict. In case you didn't know the winner was Abiy Ahmed, the Ethiopian Prime Minister, who has done some pretty impressive things directly related to peace, like ending the conflict between Eritrea and Ethiopia and freeing thousands of political prisoners. For what it's worth the Economics Nobel announcement is Monday so expect to see more about that in next week's faiV. Some favorites with particular applicability to the faiV include some combination of Donald Rubin, Josh Angrist, John List and Guido Imbens for kicking off "the credibility revolution" and Michael Kremer, Abhijit Bannerjee, Esther Duflo and/or John List for kicking off the experimental revolution. Of course, I'm hoping for the latter because it would likely give a pretty significant boost to my book sales.
But back to microfinance. Banerjee, Emily Breza, Townsend and Vera-Cossio have a new paper (presented at NEUDC) that uses the Townsend Thai village data and the expansion of a credit program to further bolster what should be the clear consensus on the effect of microcredit: on average not much, but very high returns for some. In this case, they find that there are very large gains for high productivity households who get access to credit (1.5 baht increase in profits for every 1 baht increase in credit) and even higher for those outside agriculture. This is broadly similar to earlier work, now in an NBER paper form, by Banerjee, Breza, Duflo and Cynthia Kinnan on Indian microfinance. Keep in mind, as we continue to see these results, that there is another side of the coin: is there a business model that can reach the high productivity borrowers more exclusively?

2. Inequality: If you think about within-country inequality, you think about taxes. Since the United States has had a huge explosion of income and wealth inequality in the last few decades, and there is a presidential election (hopefully) just over a year away there is a lot of discussion about the US tax system and how it has contributed to the growth of inequality and how it might be used to reduce it. This week there has been a lot of focus particularly on whether the US tax system is progressive or regressive, which seems intuitively like it should be a pretty straightforward question to answer. But the US tax system is so complicated, including not only collecting but distributing cash, it's a controversial question. Emmanuel Saez and Gabriel Zucman make the case that since the 1950s the US tax system has shifted dramatically toward being regressive. Here's David Leonhardt's shorter version of their argument with cool animated graphics. But not everyone agrees and those differences can't be traced just to ideology. Here's a thread from Jason Furman, former chair of the Council of Economic Advisors under Obama debating Zucman on methodology and interpretation. Here's David Splinter with a more in-depth analysis illustrating why Saez and Zucman get such different numbers than the traditional approaches to analyzing progressivity.
Meanwhile, there is an entirely different question about whether taxes can be used to effectively address inequality (Saez and Zucman's book is all about how the wealthy evade taxes). There's a new NBER paper on the response of rich taxpayers to an increase in the California tax rate. It finds that just under 1% of those subject to the higher taxes moved out of state, and those who stayed found ways to avoid the tax, so that total income from the tax was about half of what it would have been otherwise. Here's Lyman Stone's Twitter summary.
It's not clear how to think about that 50% cut in additional revenue: on the one hand, there is a big increase in tax collection, on the other hand you have to expect that over time people are going to get even better at evading the tax. Here's Lily Batchelder and David Kamin with a comprehensive review of wealth taxation in implementation with hope that wealth taxes can work.

3. Evidence-Based Policy: Let's talk about the inverse relationship between farm plot size and productivity in developing countries. That's admittedly a strange place to start a discussion about evidence-based policy, but I view it in the same bucket as whether the US has a progressive or regressive tax system. These are questions that seem easy to answer--and very important to answer for policy purposes--but are remarkably complicated to actually answer.
For background, what is known as the IFSP hypothesis started way back with Amartya Sen making the observation (well before the credibility revolution) in the early 1960s about Indian agriculture. Lots of papers over the years have tried to chase this observation down and document it in India and around the developing world. Here's a helpful summary that you really should read even if this is not even close to your area of interest. That was written in 2018, and still there are papers coming fast and furious that related to this basic question. Here's Gollin and Udry looking at measurement error as a big factor in measures of farm productivity, explaining about 90% of the differences between farms (e.g. they aren't really differences). And from NEUDC here's Kibrom Abay, Leah Bevis and Christopher Barrett with a different take on measurement error, where it comes from and how it affects the related policy questions (which are big! Like how much should you redistribute land!). And here's Milu Muyanga and TS Jayne using data from Kenya to document that there at least the U-shaped relationship holds no matter how you measure productivity.
So what is the evidence-based policymaker to think when such basic inputs to policymaking as progressivity of the tax system and whether there is a IFSP are subjects of debate for decades? If you are waiting for "settled science," well the economics publishing industry isn't going to help much. Here's new data from the Journal of Political Economy which, in the fine print, says that the average time from submission to publication--EXCLUDING AUTHOR REVISIONS--is more than 450 days.

4. SMEs and Human Capital: A couple quick hits on two favorite topics of mine these days--especially as they come together. Girum Abebe, Fafchamps, Koelle and Quinn had a paper at NEUDC about how to get management experience to young people in Ethiopia. The paper is, unfortunately from my perspective, most framed around the methods and the algorithms to use to produce the best results, rather than what I find most interesting: is it possible to match young managers with more experienced managers in order to spread the human capital of management? They find that matching high-ability trainees with high-management score firms yields meaningful increases in self-employment (in other words that these trainees go on to start and manage their own firms). What I really want to know though is how much better everyone got at managing and what the effect within firms of better management was.
There's a new paper that starts to answer this question with larger firms in Mozambique--by offering finance training to managers of "medium and large enterprises." Claudia Custodio, Diogo Mendes and Daniel Metzger find that a short executive education style course for these managers has meaningful effects on working capital management and small but still there effects on long-term investment. Perhaps there is hope for the management trap!

5. More from NEUDC: From guest faiVer Jonathan Morduch who actually made it to NEUDC:
Most people know the NEUDC conference by its acronym. Every year, it’s the biggest global gathering of researchers on development economics, drawing participants from around the world. But it started in 1967 as the Northeast Universities Development Consortium and has stuck to the northeast USA. This year, though, the NEUDC landed in Chicago with a successful event at Northwestern. You wouldn’t have been alone if the 4 parallel sessions (most with 4 papers each), had left you longing for a nap. It turns out that naps are powerful. In an NEUDC paper based on a field experiment in Chennai, urban poor individuals averaged 5.6 hours of sleep a night. For those who could get an afternoon nap, the researchers saw “improved cognition, psychological well-being, and productivity. Naps also reduced inattention to incentives and increased patience, as measured by a real-effort task and financial savings.” The big, lurking question is whether behavioral biases are often a function of sleeplessness?
A different NEUDC paper finds that microcredit flexibility may be over-rated. An RCT introduced flexibility into microcredit contracts in Bangladesh. The setting is one with highly seasonal income, and the flexible contract allowed borrowers to pay less during the lean season. I was surprised (and the authors were too) that the intervention made little difference to financial and economic outcomes.
Before I rethink all the lessons on volatility from financial diaries, here’s a different finding that steadiness can in fact be very helpful. The big news in cash transfers from the summer was that Mexico’s long-celebrated conditional cash transfer (CCT) program was shutting down. It was the CCT program that launched dozens of other CCTs -- and also gave early credibility to RCTs (and RCTs of CCTs). Prospera’s demise came despite the NEUDC paper showing that Prospera recipients were much better protected against anticipated income shocks than otherwise similar households. However, households receiving transfers were still sensitive to unanticipated shocks, in line with the Permanent Income Hypothesis.

1950 tax.png
The "money" charts on how the total tax rate has changed in the US since the 1950s that I mentioned in the first item. Source:  NYT

The "money" charts on how the total tax rate has changed in the US since the 1950s that I mentioned in the first item. Source: NYT

Week of July 16, 2018

A Very Rouse-ing Edition

Editor's Note: As mentioned in the last faiV, I'm taking some time away from weekly newsletter writing to work on some other writing projects. This week's edition is guest-edited by Rebecca Rouse, director of IPA's Financial Inclusion Program, which partners with researchers, FSPs and governments to design and test financial products and consumer protection policies.--Tim Ogden

1. Women's Empowerment: Our friends at JPAL released their long-anticipated Practical Guide to Measuring Women’s and Girls’ Empowerment in Impact Evaluations. It comes with a set of questionnaires and examples of non-survey tools that can be more effective at capturing the useful and reliable data. This new study from the U.S. Census Bureau is timely, showing that when a woman earns more than her husband they both tend to exaggerate the husband’s earnings and diminish the wife’s on their Census responses. Gender norms still shape survey responses, no matter where you are. Seems like a good time to revisit IPA’s discussions on mixed methods approaches to women’s empowerment measurement with Nicola Jones and with Sarah Baird from last year. Finally, the US House passed the Women’s Entrepreneurship and Economic Empowerment Act of 2018 this week. The bill seeks to improve USAID’s work on women’s access to finance, and is notable first because of its attention to some (not all) non-financial gender-norms constraints that impact women’s prosperity, and also because it calls for improvements to outcome measurement methods.  

2. Migration: The first ever Global Compact for Migration was approved by all 193 member states of the UN last week except for the United States (Hungary is now saying it won’t sign the final document), and one of its 23 high-level objectives is to “promote faster, safer and cheaper transfer of remittances and foster financial inclusion of migrants.” A lot of the language in here sounds like the same old story on remittances, and I am skeptical of the laser-sharp focus on reducing prices (it calls to eliminate remittance corridors with costs higher than 5% by 2030), promoting financial education, and investing in consumer product comparison tools that aren’t based on evidence. Dean Yang’s 2016 study on financial education for Filipino migrants failed to find any positive impact on financial product take-up or usage, for example.

3. Remittances: What about looking to the behavioral econ world to enhance the positive effects of remittances? Behavioral nudges that can leverage digital finance look promising – Harvard Business Review had a nice piece last month on Blumenstock, Callen, and Ghani’s test of mobile money defaults to save in Afghanistan. This experiment is exciting because it shows that, with the right tools, successful interventions from the developed world, like Thaler and Benartzi’s Save More Tomorrow, can achieve similar results in other contexts.  Linking remittance transfers to digital finance in the receiving country can create additional opportunities to enhance impact beyond savings, for example using data for credit scoring. Here’s an op-ed from Rafe Mazer and FSD Africa on the opportunities and risks surrounding data sharing models in emerging markets.

4. Nudges: Abraham, Filiz-Ozbay, Ozbay, and Turner have a new working paper on the impact of income-based student loan repayment plans on employment decisions in the United States. They find that limiting the repayment plan options that borrowers are offered can lead them to pursue riskier careers and thereby raise their expected incomes in the long run. By only offering income-based repayment plans, which protects them from defaults by linking payment amounts to earned income, students were unburdened from fears of regret and of making the wrong choice. And lastly, Bernheim and Taubinsky summarize the use of behavioral economics in public policy, including an entire section on policies that target personal saving. 

5. Mobile Money: Finally, from Kenya, some experimental evidence on the impact of mobile money on school enrollment in a new working paper by Billy Jack and James Habyarimana at Georgetown. Parents who received a mobile money savings wallet via M-PESA, regardless of whether it incorporated a commitment mechanism or not, increased savings by three to four times, and were 5-6 percentage points more likely to enroll their children in high school. It’s interesting that the commitment savings option wasn’t more or less impactful than just the offer of any mobile wallet, and you can read a new interview with the authors discussing the results on the IPA blog. 

Thanks for the chance to take over the faiV this week! - Rebecca

From a new report by the Urban Institute: “By 2020, the federal government is projected to spend more on interest payments on the debt than on children." Source:  Urban Institute

From a new report by the Urban Institute: “By 2020, the federal government is projected to spend more on interest payments on the debt than on children." Source: Urban Institute

Week of April 2, 2018

April Showers on Parade Edition

Editor's Note: Joan Robinson once said, "The purpose of studying economics is not to acquire ready-made answers to economic questions, but to learn how to avoid being deceived by economists." I often feel like the more modern description would be, the purpose of studying economics is not to acquire ready-made answers, but to learn how to rain on as many parades as possible. Or maybe that's just my natural disposition. Anyway, the recurring theme this week is the reining in of optimistic expectations.  --Tim Ogden

1. Global Development: To start us off, how about some rain on the "rising Kenyan middle class" parade? The core point--that gains from rising incomes that don't translate into durable assets can rapidly be erased, a perspective that should sound familiar to anyone with a passing knowledge of anti-poverty policy in the US. 
But the real parade in global development in recent years has been on the value of delivering cash to poor households. This is a train that's been picking up steam for a long while. I would date the current push back to the first studies of Progresa/Opportunidades, the Mexican conditional cash transfer program. Momentum has steadily built around both the positive impact of cash transfers--that recipients don't waste the money, that they use the money productively--and dropping conditions. That momentum was built on many studies, but probably the two most well known in international circles are Blattman, Fiala and Martinez on cash transfers in Uganda, and Haushofer and Shapiro/GiveDirectly in Kenya. Both showed significant gains by recipients of unconditional cash.
Both of those papers were about relatively short-term effects. Both studies included longer-term follow-ups. And you know what's coming: the large positive effects seem to have disappeared in the medium term. Berk Ozler of the World Bank is currently playing the role of Deng (it's the closest I could get geographically) with two lengthy blog posts. The first, keying off comments from Chris Blattman in the recent Conversations with Tyler, but really delving into the recently released update to the Haushofer and Shapiro/GiveDirectly update is the important one for non-specialists. The second is very useful for understanding the specific details of interpretation. The posts also kicked off a number of useful Twitter conversations (here, here, here, here and here, though that's just a sample; just scroll through Chris's and Berk's timelines for more). Berk's first post also takes on the role that academics have played in stoking that momentum and is worth a close read.
I think it's also important to think through what is happening with cash transfers in light of not only other studies of cash (like this one finding positive effects on the personality of Cherokee Native American kids whose families receive cash that was just officially published) but also other interventions. Deworming is one example--one big source of the controversy over the effects of deworming is that there isn't a medium-term biological effect to explain the long-term economic effects. The Moving to Opportunity study is another--no short-term or medium-term gains, only long-term ones. And I have to note that the Native American paper is a frustrating example of Berk's critique of the role academics can play in raising expectations too high--the paper's title and abstract simply reference a large positive effect of cash transfers with no indication of when (now? 10 years ago? 30 years ago?), where or who the participants are, or even the size or mechanism of the transfers.

2. Social Investment and Philanthropy: In one of those Twitter conversations sparked by Berk's posts, Chris gave Berk the endearing nickname "naysaying grumpy pants" (it's a compliment, honest!). This week I had my own "grumpy pants" moment tied to the release of Henry Timms' just published book New Power. Henry is the main force behind Giving Tuesday--and apparently I am the designated Scrooge on that topic, going back to a few posts I wrote for Stanford Social Innovation Review years ago. In the Chronicle of Philanthropy's long profile of Henry and the new book, I get to say things like, "I can't imagine a more useless number than the amount of money given on Giving Tuesday." Without context, that may sound like hard-hearted parade-raining. And I suppose I am parade-raining on the way that Giving Tuesday is mostly being talked about--as a wildly successful movement based on the amount of money given tied to Giving Tuesday campaigns. But what we really should care about is whether Giving Tuesday is leading to people becoming more generous, not whether their donations happen in response to a specific campaign. I'll write some more about Henry's book and New Power in the coming weeks.
In other social investment parade raining, I've been known to get riled about about the social investment rhetoric about "no trade-offs" and "double bottom lines." Here's a new paper from Karlan, Osman and Zinman that explores the trade-offs of a double bottom line in detail. It finds negative consequences for both social and financial performance. Now that's some first-class parade-raining.

3. Methods: I suppose you could call this recent work on whether regression discontinuity designs are reliable--and finds that they are--to be raining on the parades of other methdological approaches. But for good measure, here's Andrew Gelman, well-known parade-raining statistician, with some notably restrained and subtle raining on everyone's parade in response to the RDD paper. My summary: lots of methods are reliable if you do them right, but you're probably not doing them right.
But tying back to the first item and Berk's discussion of the role of academics in miss-setting expectations, here are two useful pieces from outside economics that are worth thinking about if we think of methods as not just the way a study is done or the analysis conducted but the way the results are communicated (and obviously I think that's the right way to think about methods). First, how the continuing enthusiasm for vitamins came to be. Second, Slate Star Codex takes on adult neurogenesis in humans which is particularly fascinating because it's an example of how commonly held beliefs were overturned by new research, and then more new research overturned the new beliefs. Seems particularly relevant to the conversations about cash transfers, no?

4. Microfinance and Digital Finance: Here are two related pieces raining on crypto-parades, which admittedly isn't that hard these days. But neither is about the crazy part of the crypto world. They are raining on some of the fundamental ideas that are used to justify the ultimate value of crytocurrencies. First, here's a story about Ripple and it's struggles with banks who like the idea of a simplified payments infrastructure but don't see any need for a cryptocurrency to be part of that. Second, here's a story about how crypto trades are actually happening--with a trusted intermediary using Skype, because you know having a trusted intermediary is a useful thing in markets.
In other non-parade-raining news, Walmart is getting into the global remittances game, by partnering with MoneyGram(!?!). I suppose that will rain on lots of other global remittance providers parade. And here's a story about why, after all this time, remittances are still so costly and none of the efforts to bring down the cost have worked. Of course, that was before Walmart got involved.
Finally, it's not often I get to feature some US-based microfinance stuff. Here's a new paper from Aspen FIELD on pricing in US microfinance and why it makes sense for lenders to raise interest rates (Note: I played an role advisory role developing the paper). I think a lot of people in international microfinance will sympathize.

5. US Poverty and Inequality: The role of health care costs in driving bankruptcies got a lot of attention a few years ago and was a big part of the push for the ACA. Since the ACA passage though, there hasn't been a meaningful change in bankruptcy rates even though there was a big increase in the number of people insured. Now there's a reassessment of the data on bankruptcy and health care costs that radically revises down the number of bankruptcies that can be attributed to health care costs directly resulting in papers in the New England Journal of Medicine and in AER. Here's a summary of the work, but the very short version is the culprit is loss of income from poor health more than the costs of health care.
And because it's spring temporarily this afternoon, I feel compelled to leave on some good news--or at least my version of good news. The Gap engaged in a rigorous randomized study (!) to determine if their scheduling practices--which as in most US retail leads to erratic and volatile schedules for retail workers--were helpful to the bottom line. The answer is no. Volatile schedules are bad for workers and bad for business (summary; full report). Hey, did I just suggest there was no trade-off to treating workers better?

First Week of March, 2018

1. Global Development: One of the more encouraging trends in development economics as far as I'm concerned is the growth of long-term studies that report results not just once but on an on-going basis. Obviously long-term tracking like the Young Lives Project or smaller scale work like Robert Townsend's tracking of a Thai village (which continues to yield valuable insights) falls in this category, but it's now also happening with long term follow-up from experimental studies. Sometimes that takes the form of tracking down people affected by earlier studies, as Owen Ozier did with deworming in Kenya. But more often it seems, studies are maintaining contact over longer time frames. A few weeks ago I mentioned a new paper following up on Bloom et. al.'s experiment with Indian textile firms. The first paper found significant effects of management consulting in improving operations and boosting profits. The new paper sees many, but not all, of those gains persist eight years later. Another important example is the on-going follow up of the original Give Directly experiment on unconditional cash transfers. Haushofer and Shapiro have new results from a three year follow-up, finding that as above, many gains persist but not all and the comparisons unsurprisingly get a bit messier.
Although it's not quite the same, I do feel like I should include some new work following up on the Targeting the Ultra Poor studies--in this case not of long-term effects but on varying the packages and comparing different approaches as directly as possible. Here's Sedlmayr, Shah and Sulaiman on a variety of cash-plus interventions in Uganda--the full package of transfers and training, only the transfers, transfers with only a light-touch training and just attempting to boost savings. They find that cash isn't always king: the full package outperforms the alternatives.

2. Our Algorithmic Overlords: If you missed it, yesterday's special edition faiV was a review of Virginia Eubanks Automating Inequality. But there's always a slew of interesting reads on these issues, contra recent editorials that no one is paying attention. Here's NYU's AINow Institute on Algorithmic Impact Assessments as a tool for providing more accountability around the use of algorithms in public agencies. While I tend to focus this section on unintended negative consequences of AI, there is another important consideration: intended negative consequences of AI. I'm not talking about SkyNet but the use of AI to conduct cyberattacks, create fraudulent voice/video, or other criminal activities. Here's a report from a group of AI think tanks including EFF and Open AI on the malicious use of artificial intelligence.

3. Interesting Tales from Economic History: I may make this a regular item as I tend to find these things quite interesting, and based on the link clicks a number of you do too. Here's some history to revise your beliefs about the Dutch Tulip craze, a story it turns out that has been too good to fact check, at least until Anne Goldgar of King's College did so. And here's work from Judy Stephenson of Oxford doing detailed work on working hours and pay for London construction workers during the 1700s. Why is this interesting? Because it's important to understand the interaction of productivity gains, the industrial revolution, wages and welfare--something that we don't know enough about but has implications as we think about the future of work, how it pays and the economic implications for different levels of skills. And in a different vein, but interesting none-the-less, here is an epic thread from Pseudoerasmus on Steven Pinker's new book nominally about the Enlightenment.

4. Household Finance: I want you to look at two pieces that are about household finance, one from the US and one Ghana and tell me if you react to them the same or differently and whether that reaction is positive or negative. I feel like these two stories are one of the most effective rohrshach tests you could imagine to get at people's feelings about financial services for poor households. First we have a blog post from CGAP about PayGo Water--in other words, rather than paying a monthly water service bill retroactively, using digital payments to enforce payment before the water is delivered. Second, this blog post from Aaron Klein about hidden price discrimination based on what payment methods consumers use--in other words the poor pay more.

5. Social Investment: Here are a few other pieces that similarly may spark conflicting responses. Ross Douthat has an editorial on the trade-offs in the behavior of corporate America as it seems to more explicitly blend socially liberal but economic-inequality-boosting policies. Fast Company reviews the state of Social Impact Bonds, a facet of social investment that seems to have fallen out of the spotlight as people realize how complicated they (and the world) are. I'm a long-term critic of the idea that social investing has "no trade-offs." If you're getting market-rate returns you're just investing as far as I'm concerned, not social investing. But this longform critique of the "doing well by doing good" rhetoric seems to me to really be talking about making grants not investments. And finally this piece doesn't truly fit here unless you really squint and cock your head to the side, but it does induce conflicting feelings. It's about continuing large-scale discrimination against borrowers of color by US banks (and in that sense it fits fairly well with the piece above), and the stories they tell will likely leave you seething. But the evidence isn't that strong since they can only see a small portion of the data you would need to really determine creditworthiness. Don't get me wrong, I'm not saying there isn't discrimination. But it seems much more likely to me that the source of the discrimination is the pre-existing racial wealth gap and biases in credit scoring, not purposeful discrimination by the banks or loan officers.

Week of June 26, 2017

Weaponized Data Edition

1. Weaponized Data and American Inequality: Last week I linked to a paper finding minimal effects from minimum wage increases, unaware that a huge explosion of debate on this issue was about to occur. If you follow these things at all, you know that last Friday a paper on Seattle's minimum wage increase was released finding no job losses or cuts in hours. Monday, a different paper finding large losses for households with minimum wage jobs was released. There's a whole lot out there now on the two papers so I'm not going to rehash those arguments (if you need to catch up, try this or this or this or just scroll through Twitter). I want to focus on the backstory of why there were two papers released so close to each other because it's important for the future of research and policy-making. As detailed here, what appears to have happened is researchers at UW shared an early draft of their paper (using tax data that is rarely available in minimum wage studies) with the Seattle mayor's office. The mayor's office didn't like the conclusions so asked a different set of researchers to write their own paper--and release it just before the planned date for release of the UW paper. While I have no special insight into the exact details of what happened, the prospect that the report is accurate disturbs me a great deal. It's a blatant step toward what the author of the Seattle Weekly piece calls "weaponized data." Be afraid for evidence-based policy. Very afraid.   

In other American inequality news on topics that yield strong confirmation bias reactions, Justin Fox reports on new work suggesting that occupational licensing actually crowded-in historically disadvantaged workers--seemingly the transparent rules of licensing reduced formal and informal discrimination that kept these groups underemployed. That's a very plausible story to me, though I generally also buy the anti-licensure arguments.

There's also new work on school vouchers, from Indiana, finding short-term declines in test scores, but later (over four years) gains. It's worth noting how claims for vouchers have down-shifted to "no harm and some students gain." But keeping on the weaponized data theme, the paper is not publicly available and was only obtained by ChalkBeat through public records requests. Apparently the study authors don't think it should be public until it's peer-reviewed, which illustrates the difference in norms in sociology and economics.

2. Our Algorithmic Overlords: Also a few weeks ago I linked to a story about how to tell if borrowers on online lending platforms were going to default, and to the book, Everybody Lies, from which it came. I said I was going to read the book and I started this week--and was immediately dismayed. The opening of the book discusses what search data--particularly searches on pornography websites--can tell us about Americans' hidden desires. You can see a summary in this deeply disappointing Vox piece (isn't Vox supposed to be better at thinking critically about this stuff?). There is no discussion of how such data might be biased or inaccurate, how a site's interface may interact with what people search for, or why we should believe that search data closely corresponds to "real life." In other words, it's an object lesson in the dangers of using data and algorithms without understanding the data or the people, social structures and institutions that generate it. So of course it's a best seller. Suffice it to say that I have radically revised down my faith in any of the book's conclusions.

In other data-generating processes of uncertain usefulness news, Google will stop showing ads inside Gmail based on scans of email content (illustrating the sucker's game that is attention, I had no idea they were still doing this; I hadn't noticed an ad in years). The nominal reason is combating hesitance from corporates to adopt Gmail and Google's suite of web apps. As someone in my Twitter feed noted, the real reason is that Google already gets better information to drive ads to you than your email.

3. Development Economics: David Evans at the World Bank had to teach middle schoolers (6th to 8th grade, also known as Hell on Earth) what development economics is, in 20 minutes. How did he do? I mean, other than not handing out copies of Experimental Conversations.

On a more serious note, here's an interesting new study on the persistence of gains from agricultural extension programs, after those programs end. It's notable both for the cool design, but also for the positive results. I'm always happy to see results that suggest there's hope for getting poor households to adopt productivity-enhancing technology, whether they are farmers or retailers.

4. Household (and Drug Lord) Finance: Stay with me on this one, we'll get to the drug lords. One of the ongoing things I worry about in household finance is that it involves people and people make bad decisions so predictably. Case in point--a major mistake that people make is chasing investment returns via "hot" stock-pickers. There have been major gains in this area as low-cost index funds have grown enormously. But now comes the Quincy Jones Streaming Music Blah Blah Blah Index fund. Yes, you read that right. It's a new kind of index fund that is an arbitrary set of stocks marketed with the name of someone famous nominally connected to the stocks in the index. Yes, the cynicism of the people creating products like this is annoying and frustrating. But the real problem of household finance is the people that will buy them. The enemy is us. Sigh.

In a variety of forums I've complained about over-zealous regulation of remittance providers under Anti-Money Laundering efforts. There's generally been little evidence that this is a significant danger. But last week 11 people were arrested at Atlanta remittance shops for laundering $40 million of illegal drug proceeds and sending them on to Mexico. Here's the kicker: the people doing the laundering were the Anti-Money Laundering staff at the remittance shops. The problem is the people.

And finally, a quick report on planned up-coming M-Pesa outages, for up to 12 hours. It will be interesting to watch for customer behavior effects.

5. Evidence-Based X: Returning to the opening theme, how should (hopefully not weaponized) data be used for making policy decisions? Andrew Gelman has a short post on "clinical significance" and "statistical significance" that should inspire long thoughts. Here's your clickbait: "Forget the hypotheses and the p-values entirely." I should note that Andrew has a new book that I'm going to get to much sooner now that I know I can just skim Everybody Lies: Teaching Statistics: A Bag of Tricks

A reddit group put together a map about the data in maps, illustrating where data is missing. Source:  @maxcroser  and  reddit

A reddit group put together a map about the data in maps, illustrating where data is missing. Source: @maxcroser and reddit

Week of April 4, 2016

1. Poorest of the Poor: There's new data from the Bangladesh "graduation model" evaluation that provided livestock and training to very poor women. After three years, results were strikingly positive. Now there's a 7 year follow-up that suggests those gains hold for the long-term and may even continue to increase--importantly with no evidence of negative spillovers and some evidence of positive spillovers to others in the village. Development Impact

2. Debt vs Savings: If you get an influx of cash, should you pay down debt or build up savings? It's a hard question to answer. Allison Schrager argues that paying down debt is conventional wisdom (is it?) but that saving is better than paying down low-interest, long-term debt for millennials. Of course, by rough calculation only 30% of millennials have such debt while the average American household carries $15,000+ of credit card debt. Quartz

3. Efficient Markets: Omar Al-Ubaydli and John List review the findings of field experiments on markets, finding that while there are behavioral quirks that limit market efficiency, many of those quirks disappear when participants have the chance to learn. A useful reminder when thinking about the use of nudges and the application of behavioral economics.

4. Efficient Markets in Philanthropy: Speaking of efficient markets, I've argued that despite much protestations, charitable giving is an efficient market after all. Here a documentarian discusses the role that story-telling ("propaganda") plays in reinforcing donors' perceptions and expectations, and "legitimi[zing] an entire crooked aid system." Two Dollar Challenge

5. Remittances: Donald Trump revealed his plan for coercing Mexico into paying for a border wall involves threatening remittance flows: a "ludicrous pipedream" that will help money launderers and hurt the poorest. Politico

The rising relative cost of being poor, as seen in housing costs. Source:  Pew

The rising relative cost of being poor, as seen in housing costs. Source: Pew

Week of June 15, 2015

1. Alternative Credit Scoring: In a new working paper, researchers analyze consumer call data from a Caribbean mobile money provider and are able to predict the likelihood of loan default with accuracy similar to credit scoring models that rely on previous financial history. Brown University - Department of Economics

2. Consumer Lending: After 146 years of financing the 1%, Goldman Sachs announced it will venture into consumer (and potentially small business) lending. The New York Times

3. Mobile Money: The prevalence of over-the-counter (OTC) mobile money services in Pakistan means providers are no longer battling for market share among customers but for loyalty of agents. NextBillion

4. Remittances: Europe constitutes just 10% of the world's population, but is home to 20% of all migrant workers and is the source of 25% of all remittance flows worldwide, according to a new report. IFAD

5. Philanthropy: The Ford Foundation (one of the funders of the US Financial Diaries project) announced an overhaul of its strategic funding priorities. Ford will now direct all of its money to reducing financial, racial, gender, and other inequalities as well as doubling the amount it gives in unrestricted operating support for organizations. The Chronicle of Philanthropy

Week of April 27, 2015

1. Impact Investing: There's no clear definition of "impact investing," made apparent by the US Council on Foundations' annual conference and the Milken Institute Global Conference both having impact investing tracks this week populated by quite different people. Read Tim Ogden's reflections from the Council on Foundations (Part 1Part 2 and Part 3) where the emphasis was on starting small, and Jean Case's take on Milken Institute's theme of going big.

2. Microinsurance: Does the microinsurance industry have anything to show after 10 years of experiment, investment and excitement? Not much, according to Peter Gross. CGAP

3. Remittances:  Since their initial launch two years ago, Orange and MTN's cross-border mobile money transfer services have exhibited rapid adoption rates and transfer activity in West Africa. Does this success signal potential disruption in the African remittance market or does the preexisting socioeconomic integration of the region make this a unique case? GSMA

4. Income Volatility: Concerned about managing cash surpluses and dealing with shortfalls? There's an app for that. The New York Times

5. Informal Financial Services:  After decades of economic mismanagement under the previous political regime, poor Burmese turn to informal providers like pawn shops to access credit and manage their financial lives. The Guardian

Week of February 23, 2015

1.  Remittances: A number of large banks are no longer operating in certain countries in the global south in response to growing pressure from regulators to comply with rules on anti-money laundering and financing of terrorism.  But this movement of "de-banking" means less money in the pockets of families who receive remittances as well as more cash traveling through informal channels.  Center for Global Development

2. Behavioral Economics:  From mobile wallets to financial management apps, more entrepreneurs and financial service providers are addressing financial inclusion than ever before. But do they truly understand the needs, habits, and culture of the financially underserved? Tilman Ehrbeck and behavioral economist Dan Ariely discuss the role of behavioral economics in designing effective financial inclusion solutions.  Omidyar Network

3. The World Bank:  In an interview with Jim Yong Kim, Stephen Dubner touches on everything from bringing behavioral economic thinking to the World Bank to Kim's rap performance at a Dartmouth College talent show.  Freakonomics

4. Savings:  A newly published study analyzed personal financial habits of identical and fraternal twins and found the former have very similar savings behaviors - genetic differences explained roughly 33% of the variations in individual savings rates.  Quartz

5. Financial Inclusion: By 2013, 13% of the global population will be over the age of 60.  What does an aging population mean for policy makers promoting financial inclusion? CFI

The chart above (compiled by Chris Said) show the correlation in opinions between every pair of economists based in the IGM Forum, restricting questions to those from 2014. Click here for an interactive version of this matrix.

Week of November 3, 2014

1. Business Training:  Previous evaluations show the effectiveness of business training programs is mixed at best.  But a new paper finds (as with most things in life) it helps to have a friend.  The World Bank - Development Impact 

2. MFIs:  Can financial service providers address domestic violence among microfinance clients?  CFI

3. Savings:  In India, MFIs that offer savings products have a chicken and egg problem – they struggle to attract savings because their clients don't perceive them as a savings provider.  MicroSave

4. Remittances: New tools could help turn short-term remittance flows into long-term investments and allow remitters to have more control over how their funds are spent back home.  NextBillion

5. Agricultural Finance:  Many insurance programs for small farmers have not expanded beyond pilot testing. The challenge today is bring them to scale and make them sustainable.   The Guardian

Week of August 18, 2014

1. Savings: Will increased access to formal savings accounts in India translate to greater financial inclusion? Live Mint

2. Remittances:  FAI's Timothy Ogden spoke with The New York Times' editorial board about some of the macro challenges of remittance systems and the role that the World Bank could play in alleviating the costs and burdens of anti-money laundering regulations. The New York Times

3. Financial Diaries: A financial diaries project in Kenya provides new insights into how low-income Kenyans use and think about their money. FSD Kenya

4. Digital Financial Services:  "Despite being ranked as a low income country, over 50% of the adult population [in Bangladesh] subscribes to mobile services and it has outpaced all its peers in terms of network coverage." GSMA 

5. Mobile Money:  In response to Equity Bank's plans to enter the mobile banking space, Safaricom announced it will reduce its fees for M-Pesa transactions.  Mobile Money Africa

Week of August 4, 2014

1. Retail Banking: Banks may continue to go digital but this doesn’t mean the brick and mortar branch is disappearing.  Customers who use mobile and online banking more than once a week are over 60% more likely to be active retail-branch users than those who do not. McKinsey&Company 

2. Labor Trends: The increasingly common practice of scheduling workers' shifts just before they begin can wreak havoc on the financial and personal lives of many low-wage workers, leading to income volatility and difficulty in arranging childcare.  Al Jazeera America

3. Banking Transparency:  "Low-income consumers want to know not just what the prices are, but in some ways, how banks’ decisions are made. Banks’ failure to communicate a rationale makes clients feel cheated...Clients who feel cheated, often feel justified in 'cheating back.'" Center for Financial Inclusion

4. Poverty in the US: After following 800 children in Baltimore from first grade to their late 20's, researchers found the two factors most correlated with individual success and wealth are family strength and parents' financial status. NPR

5. Remittances:  New research highlights the relationship between remittances and financial inclusion in sub-Saharan Africa. The World Bank - All About Finance



Week of July 7, 2014

1. M-Pesa: All 85,000 M-Pesa agents are now free to sell rival services after a long battle for open networks comes to an end. IT Web Africa

2. Remittances:  Tougher regulation intended to fight illicit use of international money transfers shutters low-cost remittance services for migrants and raises the cost of sending money home. The New York Times

3. Mobile Money:  Global smartphone penetration is expected to double by 2017, leading to faster new product development and more competition in the mobile money industry… GSMA

4. ...but for the present, lack of awareness still hinders the spread of the service.  New data shows only 6% of India's population is even aware of mobile money and only 0.3% has accessed it. CGAP 

5. Digital Financial Services:  Kenya's Equity Bank is hoping to shake up the mobile banking market dominated by M-Pesa by offering slimline SIM cards that lie on top of existing phone SIM cards, allowing users to access bank account information without changing their number or provider. BBC News

Week of May 19, 2014

1. Remittances:  Why have such rapid increases in remittances not resulted in noticeable improvements in economic growth in the recipient countries?  Michael Clemens and David McKenzie investigate possible answers in a new working paper. The World Bank - Development Impact Blog 

2. Poverty in the US: Over the past 30 years, government spending on the poorest Americans dwindled - those living far below the poverty line now receive less government assistance than they did in 1983 and spending has shifted to the relatively more well-off. Slate

3. Cash Transfers:  After receiving $150, five days of training, and intensive supervision, ultra-poor women in Uganda doubled their business ownership and their incomes, according to a newly published study.

4. Financial Services: "India Post, the world’s largest postal network, may become India’s first 'payment bank,' a new classification of bank which will offer payment, savings and remittance services to customers but not loans." The Wall Street Journal

5. Microfinance Regulation:  The history of regulation and deregulation of the US financial sector could provide useful insights for microfinance in promoting a balance between financial inclusion and stability. European Microfinance Platform

Week of April 21, 2014

1. Payments: Wal-Mart launched Walmart-2-Walmart this week – a new service that will allow customers to send and receive up to $900 at a time at more than 4,000 stores.  The Wall Street Journal

2. Financial Inclusion: Shawn Cole of Harvard Business School stresses the importance of design in serving poor customers, specifically how the process of creating products meant to “bank the unbanked” is unique. CFI Blog

3. Cash Transfers: Christopher Blattman and Paul Niehaus discuss the latest developments in the world of cash transfers, including how they can serve as index funds for international development. Foreign Affairs

4. Microfinance: FAI affiliate Daniel Rozas examines equity exits in MFIs and what characterizes one as responsible. CGAP

5. Digital Financial Services:  Facebook may be entering the payments space, but it's not the first time it has dipped its toes in these waters, nor are the challenges different.

Week of April 14, 2014

1. Digital Payments: Facebook is finalizing preparations to begin offering financial services to its users, allowing them to store and exchange money. CNBC

2. Remittances: A new report on the impact of remittance fees on Africa's development investment claims that reducing charges to 5% would increase transfers to the continent by $1.8 billion annually. Overseas Development Institute

3. Financial Inclusion: The next generation of ATM innovations (sending money to someone, paying bills, and loading a portion of a check) may not require a bank account and could potentially provide alternative financial services to the unbanked. American Banker

4. Behavioral Economics: What's next as behavioral economics matures? Is it a unique field that can inspire innovative policies or just "economics plus common sense"?

5. Credit:  David Roodman reviews The Economist's recent coverage of a new World Bank working paper by Shahidur R. Khandker and Hussain A. Samad on the dynamics of microcredit in Bangladesh. David

Week of April 7, 2014

1. Savings: FAI affiliate Ignacio Mas challenges us to step back from usage data and rethink how we approach the development of savings products for the poor. Center for Financial Inclusion

2. Behavioral Economics: According to Helaine Olen, Americans' financial woes have "more to do with the outside economy than their inner psyche."  Bloomberg

3. Payments: New research presents findings on who is using prepaid debit cards and why.  One suprising finding? it's not necessarily the unbanked - 7 in 8 users have or previously had a checking account. The Pew Charitable Trusts

4. Remittances: The latest report on remittance prices shows the global average cost of sending money is 8.36% - a new all-time low. The World Bank

5. Research Methods: How to tell if measuring impact is valuable or if you're just going through the (costly) motions. Standford Social Innovation Review

Week of May 31, 2013

This week’s mostly new and definitely notable list includes a new report on health insurance in Ghana, investigations into calculating global poverty figures, and new thoughts on financial inclusion.

  • Recently the Consortium on Financial Systems and Poverty sat down with Emmanuel Maliti, a researcher and seed grant recipient, to discuss his work in Tanzania. Maliti is investigating the efficacy of direct and indirect punishments on repayment performance among informal savings groups in Dar es Salaam.
  • In this article for the Boston Review, Pranab Bardhan reviews four books on development and poverty alleviation released in the last few years and compares two major approaches - the macro-political camp versus the micro experimentalists.
  • CGAP released the third blog post in its series highlighting themes from its recently approved five-year strategic plan. This installment describes CGAP’s approach to “building an enabling and protective policy environment” for financial inclusion and includes video clips from interviews with Philippine central bank Deputy Governor Nestor Espenilla and his colleague Pia Roman.   
  • new report from the ILO Microinsurance Innovation Facility evaluates the impact of consumer education on health insurance enrolment in Ghana. Researchers found evidence that convenience of registration and timing of premium payments were more common challenges to enrolment than lack of knowledge of health insurance. See also FAI’s Jonathan Bauchet on an experiment marketing life insurance in Mexico. In a forthcoming paper, Bauchet discusses evidence from a natural experiment that ease of payment was a major factor in insurance purchases.
  • MicroSave released a report this week exploring the role of information sources in poor household’s decision-making processes. Researchers review what decision making paths people use to reach a decision, and how information sources accessible to them influence the process in an effort to inform better approaches for increasing financial literacy.
  • The World Bank released a working paper, authored by Asli Demirguc-Kunt, Leora Klapper, and Dorothe Singer, documenting and analyzing gender differences in the use of financial services using data from 98 developing countries. The data, drawn from the Global Financial Inclusion (Global Findex) database, highlights the existence of significant gender gaps in ownership of accounts as well as usage of savings and credit products.
  • Using a RCT of a large-scale micro-entrepreneurship program in Chile, the Consortium on Financial Systems and Poverty assessed the effectiveness s of training and asset transfers on individuals’’ employment and income. The results of the research indicate an increase in both for participants in the program. 
  • In a recent blog post for the Center for Financial Inclusion, Ignacio Mas makes the case that financial inclusion involves both formal and informal channels. He uses a cake analogy "to represent the idea of platforms, of capabilities arranged horizontally and interworking with each other."