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Friday, October 17, 2014

Do locals even work in the UAE?

As a migration researcher, I make it a point to collect facts and interesting stories about international migration whenever I read about them in academic papers or in the news. You know, in case they come in handy in small talk. I cannot always talk about complicated regressions.

Sometimes some facts still startle me, like this one:

"96% of the total labor force in the UAE" are foreign workers.


"[We estimate] on average migrants [in the UAE] are remitting about 85% of their monthly income"

I mean I know there are a lot of foreign workers in the middle east, but I didn't quite know the magnitude. And I know a lot are remitted. But 85% of one's income? That's large.

These figures come from a new paper by Joseph, Nyarko, and Wang. They have a high frequency dataset with administrative records on income disbursements and remittances home of most migrants who live in the UAE. They try to piece together the motivations for remittances: altruism, consumption, savings, equity, or debt repayment.

Monday, October 13, 2014

Happy Uber Drivers

Economists overwhelmingly agree that Uber improves lives that we just had to try this one firsthand. We are now Uber drivers in this household.

Now please don't worry dear advisor because I am still working on that paper we talked about. But in the meantime last weekend's rate, brought about by real-time supply and demand, was $35 per hour. We kept being reminded through SMS: Go out! Too few drivers. There was a Michigan football game.

Uber, Tinder, Airbnb, Grabtaxi, Jobstreet -- it continues to amaze me how all these applications have made our lives easier. And they do so by having one thing in common: bringing search costs down. Who would have thought so much progress could be made by improving matchmaking between
  1. driver and passenger (Uber, Lyft, Grabtaxi)
  2. male and female (Tinder) or
  3. male and male, female and female (Grinder)
  4. tenant and traveller (Airbnb)
  5. employer and job applicant (Jobstreet, JobsDB)
  6. donors and entrepreneurs (Kickstarter)
  7. seller and buyer (Craigslist, eBay)
I am eager to try what's next.

Saturday, October 11, 2014

Bangladesh's bank robbers

To rob a bank in Bangladesh, no need for guns writes Tahmima Anam in the NYTimes. No need for robbers even. Take out a loan.
...the bigger thieves are hiding in plain sight, and sanctioned by the banks themselves. They are the loan defaulters: people and businesses who borrow money from banks with no intention of repaying the debt. The problem, it seems, is the way Bangladesh’s banking sector is organized. 
...The international standard for loan defaults is currently at about 2 to 3 percent. In Bangladesh, it is over 12 percent. In a recent study conducted by the Bangladesh Institute of Bank Management, the percentage of nonperforming loans in state-run banks is as high as 29 percent. 
...This means that an enormous amount of capital is taken out of the banking system, and banks must compensate for this loss by keeping interest rates high. Currently, Bangladeshi banks’ interest rates range between about 9 percent and 16 percent, while deposits earn between 6 percent and 12 percent.
Such a classic case of adverse selection.

HT to @nancymbirdsall over at twitter.

Friday, October 10, 2014

An even larger force than remittances

Today's TedTalk features Dilip Ratha, talking about the hidden force in today's global economy -- remittances.
Here is a fact that might surprise you: 413 billion dollars, 413 billion dollars was the amount of remittances sent last year by migrants to developing countries. Migrants from developing countries, money sent to developing countries — 413 billion dollars. That's a remarkable number because that is three times the size of the total of development aid money. And yet, you and I, my colleagues in Washington, we endlessly debate and discuss about development aid.
Indeed, there is much to love about remittances apart from the fact that they're massive and have already surpassed foreign aid. As Dilip points out, they act as insurance, usually being sent when unfortunate events occur. We know this in the Philippines, as typhoon after typhoon, we have come to benefit from donations of our brothers and sisters abroad. Remittances are also properly targetted, as opposed to aid or government programs that we sometimes suspect are corrupted. Remittances go straight to the pockets of those who need them, because why else would a household send a member abroad if they did not need additional money?

But in the end, all of this of course might just be the tip of the iceberg. Migrant savings could be massive as well, since migrants do not send back everything. We do not have a great idea on how much migrants bring home, when they do eventually return. And what do they use that money for?

But even if migrants don't return, would that at all be bad? Imagine a world where poor migrants were able to bring their whole families abroad and had no need to send remittances? Migrants could double, even triple, their earning power. There are big gains that could be made. Dilip didn't say, but a friend once remarked, one sure fire way to increase the amount of remittances is for richer countries to allow more poor workers from developing countries to come in.

Remittances are today's hidden force in the global economy. But an even larger hidden force could be international migration.

Wednesday, October 8, 2014

Getting back writing

You may have noticed but I was gone for the past 6 months, though I'm slowly starting to write again. I feel the need for a quick explanation.

I was in the Philippines working on two projects. One was on an experiment about financial education and access to finance among migrant households. The idea is basically that financial education is popular these days, and we are interested in measuring how much it could benefit migrant households, whom many suspect waste their remittances (though please see my view on that claim). You can read a short write-up here.

For a separate project, I also conducted an experiment on Filipino firms, the details of which I do not yet wish to disclose. But the results so far appear exciting and I'm furiously rushing to write that paper. I'm due for a short presentation this November here at Michigan. I'm hoping this could be the final key to unlocking that PhD.

So I haven't been reading much, which is a shame. And as a result, I haven't been writing much. Nor posting on twitter or any sort of social media. I operated on blinders just trying to make the most of my time back in Manila.

I'm slowly starting to get back to the rhythm of posting every now and then, and looking to learn from all of you.

Monday, October 6, 2014

No Left Turn

In a move that they probably hoped would ease the flow of traffic, the government decided to implement a no left turn at the junction of Kamias Rd and Kalayaan Ave. As I was weaving through traffic one day, traffic enforcers camped at the side looking to catch violating drivers. But what I noticed was that cars instead drove straight through, made a U-turn nearby, and went back to the intersection to turn right. It amazed me, and perhaps it shouldn't have been. People are smart. And the no left turn was effectively undone.

Sometime in the 1990s, Metro Manila instituted a number coding scheme for cars. Cars were barred from being on the road on particular days depending on their plate number's last digit. That way, there would be less cars on the road to congest the city. But had it worked? I have heard of many anecdotes of "smart" consumer behavior: People switching plate numbers on particular days; people buying fake stethoscopes for exemption from the scheme to pretend to be doctors (as doctors are exempt when they are on call); and the rich just buying new cars. The policy has never been comprehensively evaluated as far as I know. But research on a similar policy implemented in Mexico City provides disheartening news. The scheme increased car consumption. People are smart.

It is a common story that I believe plagues many of our traffic rules in the city. So Manila bans trucks. Did we really expect trucks to simply disappear? Trucks would go elsewhere and traffic too.

As I leave Manila after 8 months, I share the despair of many that the traffic situation has gotten worse. I don't know and am unqualified anyway to offer any good solution. But one thing I know is we will need smarter policy. Policy which will be able to take into account unintended effects. And policy which will be able to outsmart smart people.