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Wednesday, September 26, 2012

The World's Temperature from 1880 to the Present

Using Nasa temperature data.

A hat tip to ReflectionOfMe.

Monday, September 24, 2012

Why Do the Poor Prefer Prepaid? An Unlikely Theory

You know about how prepaid cellular cards are popular. Apparently, I hear now, they're also developing a product for prepaid electricity. Why are such products in demand? Why do the poor seem to shun buying in bulk and instead buy in tiny amounts, but for a higher price? Consider the sachet economy for shampoo in the Philippines. Have you ever wondered why this was somewhat strange? Before today, I thought the answer was obvious. The poor want to time their consumption. They want to have more control over when they need to use mobile technology, or electricity, and are willing to pay a premium for this convenience.

As I was conversing with a colleague today, another interesting explanation was brought to my attention. The poor usually share goods with the community, neighbors, and extended families. In these communities, one potential problem when you own a resource, say a cellphone, is that others free ride. Especially in tight knit communities, the peer pressure for you to share is strong that you actually are not able to consume your private resource optimally.

Buying prepaid is a way to limit other people's free-riding. Aside from limiting the monitoring problem, it's a credible and final way of being able to say, I have nothing more to share, sorry. And this arguably lessens the social pressure. And what's interesting is that people actually are willing to pay a premium for this type of service.

I thought this was brilliant. Okay, how do we translate this into a research project?

UPDATE: Note that my advisor pointed out that the most basic explanation for this is actually liquidity constraints. Why do the poor prefer to buy a single stick of a cigarette than a whole pack? They don't have enough money now to buy the whole pack and can't borrow from their future...

Friday, September 21, 2012

If the Data Would Speak on the Marcos Dictatorship

This is what it would say: A devastating -9.84% GDP per capita growth in 1984, followed by a 9.8% drop again in 1985.

And this:

Yes, I know, I know, correlation here between the Marcos regime and these drops does not necessarily mean causation. Some third factor might be responsible for both the regime and this fall. I could potentially control for these other factors, as any careful economist would do, I suppose.

But let's be honest here. Should I waste my time? In this case, it seems too obvious that it is not coincidence but that the latter part of the Marcos regime would dislodge our economy from its growth path by such a huge margin, it would take us until 2003, to get back on track from where we used to be in 1984. 19 years!

An economy usually grows upward at a steady pace, with some booms and busts - what we call the business cycle. Yes, recessions here and there, a great economy in between, but a steady trend upwards. But in this case, it's apparent it wasn't just a temporary shock; it was a big push downward from our growth trajectory that we never really fully recovered back to.

So to whoever is the revisionist out there, I don't know where you would get the facts. That is the legacy of the Marcos regime. This is what the data says.

An NGO Delivers a 1000% Increase in Income for Poor Workers

And they don't use aid. says Michael Clemens.
CITA is a matchmaker between farms and seasonal agricultural workers. The farms are in the United States; almost all of the workers are in Mexico. CITA brings them together and unleashes the vast economic power of labor mobility for development. 
I don’t use the word ‘vast’ lightly. CITA helps hard-working Mexican laborers legally raise their earnings by roughly 1,000%. (In Mexico they can make about US$10 per day; on U.S. farms they earn US$10 per hour.) There is no aid project I know of that can do that—not even close—in Mexico or anywhere else in the developing world.

Tuesday, September 18, 2012

What Do the Poor Say They Need?

As the Millenium Development Goals draw to a close on 2015, what should be the next set of global goals? Leo and Hoan Tram "ask" households of poor nations what they think in this paper. As I've not enough time to read the whole thing, I'll just present one of their more striking figures.

In sum, it's income. People say they need more of jobs, a stable source of income, and youth employment.

Not for the Philippines though, where people say they need governance.

UPDATE: Note what Jason Kerwin says on the comments below. For the Philippines, I may have erroneously said governance, when it seems like it is economy.

Hat tip to former boss, @mclem on twitter.

Saturday, September 15, 2012

A Gift of Time

What would people do if they were permanently and randomly given more hours in a day? Sleep? Work? Eat more? In A Gift of Time, Dan Hamermesh (aka "the Hammer") and coauthors take advantage of a natural experiment from Japan and Korea, exploiting the lowering of legislated working hours from 48 hours per week to 40, and 44 to 40 respectively. This allows them to figure out what people do with more time in their hands:
Using time-diaries from before and after these shocks, we predict the likelihood that an individual would have been affected by the reform. The direct effect on a newly-constrained worker was a substantial reduction in market time, with the freed-up time reallocated mostly to leisure and personal maintenance, and very slightly to household production.
It's one of the more entertaining presentations I've attended recently. Some of the interesting findings suggest that people watched more TV during weekends (obvious), while men spent more time grooming (at which point a Korean in the audience blurted "That totally makes sense!"). Reduction of market work hours resulted in increased leisure in Japan, while spousal non-work spillovers were minimal.

The policy was intended to combat over-working. At the end of the day, the big question of course is, are these people happier?

Thursday, September 13, 2012

On Over-encouraging Return Migrants to Be Entrepreneurs

From the latest report by the Secretary of Labor and Employment. For some time now, DOLE has been touting their P2 billion peso reintegration fund for migrants to encourage them to be entrepreneurs.
The DOLE had set up a P2 Billion Reintegration Fund to provide OFWs and their legal dependents a loan facility for enterprise development , in cooperation with the Land Bank of the Philippines, where a member can avail of a P300,000.00 to P2 million business loan.
This strikes me as such an odd use of resources. Usually, you would offer loan assistance to those who are credit constrained. But migrants, who have just finished their migration episode from abroad, are the exact opposite. They had just earned enough money. By all means, they're the ones who should be lending to start-ups. Offering lower rates to these people will encourage them to over-invest when they probably shouldn't be.

Not everyone is an entrepreneur. Perhaps in the Philippines, more people should be. But it is a very very risky business. This is my reaction to the latest craze that might leave one to think that everyone should be. By revealed preference, most people who have enough credit would actually prefer stable wage-earning jobs.

I'm not sure the 2billion peso reintegration fund is the best way to use that money. I had rather prefer them to use that to help return migrants find local employment here.

Wednesday, September 12, 2012

Do our Closest Friends Affect Our Voting Behavior: A 61 Million Person Experiment

Discovery Magazine reports an experiment conducted over Facebook during the 2010 US National Elections.
The vast majority of the users aged 18 and over (98 percent of them) saw a “social message” at the top of their News Feed, encouraging them to vote. It gave them a link to local polling places, and clickable button that said “I voted”. They could see how many people had clicked the button on a counter, and which of their friends had done so through a set of randomly selected profile pictures.
But the remaining 2 percent saw something different, thanks to a team of scientists, led by James Fowler from the University of California, San Diego. Half of them saw the same box, wording, button and counter, but without the pictures of their friends—this was the “informational message” group. The other half saw nothing—they were the “no message” group. 
By comparing the three groups, Fowler’s team showed that the messages mobilised people to express their desire to vote by clicking the button, and the social ones even spurred some to vote. These effects rippled through the network, affecting not just friends, but friends of friends. By linking the accounts to actual voting records, Fowler estimated that tens of thousands of votes eventually cast during the election were generated by this single Facebook message...
But the effects, though statistically significant, seem tiny
For each close friend who got the social message, a user’s odds of clicking “I Voted” went up by 0.099 percentage points; their odds of finding out about polling sites went up by 0.012 percentage points; and their odds of voting went up by 0.224 percentage points. The other “ordinary friends” increased the odds of clicking the button, but nothing else – they influence the smallest of behaviours, but not the more substantial ones. 
Gelman is sceptical about these figures. “They are measuring tinier effects on the order of one-tenth to one-hundredth of a percentage point,” he says. “That sounds like zero to me. Or, to put it another way, these effects are not zero, but they are on the same order of magnitude as other things in the air, such as recent news and political advertisements.”

The Key Question About the SinTax...

is probably not whether the tax decreases the consumption of cigarettes or alcohol but what goods consumers substitute for in lieu of these "sinful" goods. This behavioral response is central to any impacts we might see arise from such a policy. It's certainly plausible for instance that consumers substitute into consumption goods that are unhealthy as well like sodas, or junk food, in which case the positive health impacts may be overstated. But of course this is an empirical question, and can easily be figured out from surveys like the Family Income and Expenditures survey before and after the tax.

This is not saying I am against such a policy; in fact, I support it. I just hope we're mindful of the unintended consequences that may come about.

Monday, September 3, 2012

Personal Poverty Coaches For the Poor

At least this is what the newest poverty reduction experiment being run in Haiti is all about. It sounds a bit silly, to be honest, but I like the attitude of trying new things out, and testing whether it works or not.
Half of the commune’s 10,000 households are being assigned a “household development agent” — a neighbour who will work as a health educator, vaccinator, epidemiologist, financial analyst, social worker, scheduler and advocate all at the same time. With the agent’s help, a family will assess its needs and come up with a plan to make things better. 
“The idea is to forge a relationship from the get-go,” said Maryanne Sharp, an official at the World Bank, which is overseeing the $4 million project. “We want the family to say, ‘Yes, we own the plan and we will work on these objectives on this timetable.’  
“The other 5,000 households will function as a control group, continuing as they have, scrounging out a living in one of Haiti’s poorest and most isolated places. 
In two years, the families will be resurveyed and their children and houses re-examined. If those with agents are doing better, then the strategy of coaching people out of poverty may be expanded to the whole country.
On the other hand, I am quite skeptical. Of course they will find statistically significant effects of the program. But in order to convince me that this will be a viable program, they need to show that such it  is 1. viable (come on, how much would a personal assistant cost, their training, etc.?) and 2. are the effects, aside from being statistically significant, economically significant? There is a difference.

HT to Tyler Cowen at Marginal Revolution