Random financial inclusion thoughts

The buildup around Prime Minister Modi’s Independence Day speech was palpable in the EPoD/BCURE office last week. My research group does quite a bit of work on financial inclusion in India and so rumors that Modi would announce a financial inclusion plan had not a few people talking.

In fact, the PM did announce a financial inclusion plan to open bank accounts for 75 million Indians by August 2018. It’s an ambitious plan, to be sure, but it struck me as rather odd. The way the papers presented the plan, Modi introduced the plan by talking about how many people have mobile phones in India, but nobody has a bank account. My head went immediately to the thought of “well, maybe he wants to expand mobile money use in India.” Despite the presence of quite a few mobile money providers in India, mobile money is used in very few transactions. This is very different than a place like Kenya, where mobile money is extremely widely used.

I’m not sure that mobile money is the best answer, but I think it’s at least an interesting use of existing infrastructure, as opposed to brick and mortar banks with minimum transactions and high withdrawal fees, for instance.

The impact of rainfall, directly

As a development and labor economist, it’s unusual to see colleagues concerned with the impact of rainfall, full stop, on anything. We’ve become so accustomed to seeing rainfall used as an instrumental variable, a pathway to causal results, rather than a driver of some effect in and of itself. A new working paper by David Levine and Dean Yang (gated), however, looks at rainfall itself, or rather deviations from mean rainfall levels, which is actually pretty important. If we’re going to use rainfall as an instrument, or think of it as an exogenous shock that can be modeled linearly (or non-linearly, but modeled nonetheless), then it’s a good idea to make sure those assumptiosn actually hold.

Abstract here:

We estimate the impact of weather variation on agricultural output in Indonesia by examining the impact of local rainfall shocks on rice output at the district level. Our analysis makes use of local meteorological data on rainfall in combination with government administrative data on district-level rice output in the 1990s. We find that deviations from mean local rainfall are positively associated with district-level rice output. 10% higher rainfall leads metric tons of rice output to be 0.4% higher on average. The impact of rainfall on rice output occurs contemporaneously (in the same calendar year), rather than with a lag. These results suggest that researchers should be justified in interpreting higher rainfall as a positive contemporaneous shock to local economic conditions in Indonesia.

The second life of RCTs and implications for child development

In the last few weeks, I’ve come upon two research programs (each with a few related papers) that utilize a combination of an RCT or phased-in intervention and follow-up data 7-10 years on to examine new research questions. They both happen to be focused on the lasting effects of childhood health and wellbeing initiatives, but I doubt that this trend will be confined to child health and literacy. Barham, Macours and Maluccio have a few papers (gated) that use the phasing in of a conditional cash transfer program in Nicaragua to test later childhood cognitive and non-cognitive outcomes, distinguishing effects by timing of the intervention. A working paper out last week shows that deworming programs in Uganda not only increased short-term anthropomorphic outcomes, but also contributed to children’s numeracy and literacy several years later.

In short, we’re seeing more evidence that these early health and wellbeing interventions can have profound impacts not just on the immediate outcomes–Under-5 mortaility, school attendance, etc–but also on future outcomes. I think it’s a neat use of experimental design to examine questions we might not have thought about when the programs were first put in place.

India-bound!

It’s (almost) official! I think I actually have a ticket and am leaving for India and the Philippines for the rest of the summer on Friday. I’ll post updates here as the mood strikes me, but feel free to follow @ekfletch and @EPoDHarvard on twitter for more frequent (and perhaps less related) content (pictures of all the momos I’m going to eat? Anyone?).

For now, I’ll leave you with the World Bank’s new project to determine the economic cost of child marriage, a well-funded, but really huge undertaking:

What is the economic cost of child marriage? We don’t really know. Studies – including those by the World Bank – suggest a range of negative impacts of child marriage on human development outcomes. For example, Bank staff have estimated that in sub-Saharan Africa child marriage may account in some countries for up to one-fifth of drop-outs among girls at the secondary level, and each additional year of delay in the age of (child) marriage could potentially increase the likelihood of literacy and secondary school completion by several percentage points for the affected girls. Another study published a few years ago in the Journal of Political Economy suggests similar impacts in the case of Bangladesh.

Insert joke here about Boston accents…

It’s been a crazy spring. Weather-wise, life plans-wise, travel-wise, just kind of nuts all around. I realize much of this is self-induced craziness. I’m the one looking for a job. I’m the one who jets off to Portugal for the weekend. I’m the one who can’t sit still.

It seems, though, that I might have found something to help calm the waters of a few of those things, and perhaps stir up some others. I’m excited to announce that I have accepted a position as a postdoctoral researcher at Evidence for Policy Design, a group within Harvard Kennedy School‘s Center for International Development. I will be working with Rohini Pande and Erica Field, spending some time in India, and working on several really cool research projects pertaining to women’s labor force participation, banking, the environment, and policy making in India. It’s an opportunity to continue my own research on gender, violence and discrimination in the developing world, to get some experience in the field, and to work with and around a large group of incredibly smart people doing awesome research on gender, development, and related fascinating topics.

I’m absolutely over the moon excited. I will be learning from the very best and there is likely no job that better fits my interests and skills.

I will be very sad to leave Lafayette College. The students here are wonderful. My colleagues here are phenomenal. They have become fantastic friends, mentors, coauthors, yoga buddies, running partners, cycling partners, and so much more in a very short time. I don’t imagine that those things will change; I know how to make sure I’m not forgotten. (mwahahaha).

I’m also grateful for the outpouring of congratulations and support I’ve already received from friends, family, and colleagues. I feel so fortunate to have all of you in my life. The best responses I’ve gotten so far have been from my dad and the woman who cleans the room I teach in at 8am. My dad said, “buy a plane ticket home and we’ll drink the ’82 Mouton!” (I didn’t, for the record). The woman who cleans my classroom said, “Congratulations! When are you moving to Connecticut?” A wonderful, subtle reminder that Cambridge is not the center of everyone’s universe, even if it’s about to become mine.

On vocabulary and observation at the ASSA (a little late, but you know what they say…)

As a first-time job market candidate, the annual ASSA meetings every January are stressful and busy and kind of terrible, but as I’ve gone more and more, I’ve realized they’re kind of awesome. My two favorite events are the CSWEP mentoring breakfast and the CU reception, but everywhere you go, you’re running into people you want to have a conversation with, people you haven’t seen in a year or more, people who want to ask you something or share something exciting. I spent most of the weekend hearing about cool papers, having great conversations about economics, and seeing people I care about. I’m a big fan, turns out.

Even if it’s 0 degrees F and we’re all tromping around in the snow that the city won’t clear.

But I digress. One of the other events I was excited for this time around was the T. Schulz memorial lecture put on by the Agricultural and Applied Economics Association. I like ag economists.

The lecture was given by Michael Kremer of Harvard. It wasn’t a traditional lecture in the sense there wasn’t much talk of big ideas or themes. He really just presented a new paper, which was a bit disappointing, but, taken at face value, ultimately interesting.

The paper was trying to ascertain the extent to which asset-collateralized debt would be successful in an experimental setting in East Africa (yes, likely a community that has seen plenty of these interventions). Most of the debt we take on in the US is asset collateralized, if you don’t pay your car loan, they take your car, for instance, but it’s not like that in many other parts of the world. Collateral for loans, especially small loans, often comes in the form of guarantees from family or neighbors, or some cash reserve itself, or sometimes none at all. So, asking whether individuals saw these loan as different is an interesting question if someone is trying to institute them.

Perhaps the most important result is that people were paying back their loans, and not only paying them back, but paying them back early, which Kremer attributed to debt aversion.

As Kremer started in on his preliminary results, the first things I heard were not his interpretation, but rather whispers from all sides around me.

“Neighborhood effects.”

“Peer effects.”

“Why should we think debt aversion is driving this behavior?” There seemed to be a consensus, at least in my part of the audience, that individuals were paying back their debts not because they disliked having debt, per se, but that they thought it made them look bad in the eyes of their neighbors. Some of the first questions following the lecture pertained to the interpretation of the observations.

Two ideas immediately came to my mind during this exchange. The first has to do with quantum physics and how when we observe something, we change it. The second is that many of the whispers around me could be re-interpreted as a discussion of social norms. In the peer effects interpretation, borrowers could see their peers repaying and thus be more likely to repay. And in the social norms sense, borrowers could perceive that having debt is not seen well by the community and thus be more likely to repay. It seems that much of the debate could have been settled by a survey question or two regarding attitudes about debt, social norms around debt, and the perception of debt aversion on a community level. “What percentage of people in this community pay their debts on time?” or “How are people who don’t pay their debts treated in this community?” Or something like that.

It strikes me that the language economists and other social scientists use to explain similar phenomena are often very different. Also, it seems that Kremer could have fairly quickly disabused his critics of their notions had he conducted at least a little surveying on debt aversion and social norms.

Standard of living and measuring welfare effects

A few posts caught my eye today by bloggers discussing different, but related topics. All of them suggest that the most measurable outcomes are not necessarily the metrics of policy success or failure we should focus on.

Francisco Toro, at his new blog the Campaign for Boring Development, comments on how microfinance may not raise the incomes of participants, but it does have the potential to increase standards of living.

Matt Yglesias, at Slate, slams the media for misinterpreting (willfully?) the CBO report that says the equivalent of more than 2 million full time (equivalent) jobs will disappear as a result of the ACA. The Plum Line says it’s not a “job-killer,” but people might choose to work fewer hours because now they can afford healthcare. Is that really so bad?