1. Jobs! Jobs! Jobs!: For quite a few years now, my mental model has been that most poor households are "frustrated employees, not frustrated entrepreneurs." In other words, most people aren't held back from their entrepreneurial dreams by lack of access to credit, but they are held back in their dreams of having a job by the lack of jobs. That view is tied heavily to the fact that most microenterprises don't grow at least in part because the owners don't appear to be trying to grow them. This week Chris Blattman and Stefan Dercon released a new working paper about an experiment in Ethiopia where they were able to compare factory jobs to grants for self-employment. They find, among many other details, that those who randomly receive factory employment leave the jobs quickly and those who receive grants for self-employment tended to stay in self-employment and out of the industrial sector. There is a lot going on in this paper so it requires careful reading and some thinking, but it will definitely alter at least my confidence level in my priors.
But the discussion of the new Blattman and Dercon paper revived my memory (hat tips to Rachel Glennerster and Asif Dowla) of this Heath and Mobarak paper on the positive impact of factory work in Bangladesh so there's multiple updating going on for me this week.
I discuss this experiment with Chris Blattman a good bit in my upcoming book--it will be available on January 2nd, 2017. Sign up here to get notified when it's available for order.
2. But Wait, There's More Jobs! Jobs! Jobs!: Karthik Muralidharan and Paul Niehaus have a new paper based off of one of the world's largest RCTs, the roll-out of the new and improved NREGA guaranteed work scheme in India. They find that the program raised incomes of poor households dramatically, but that most of the gains comes from pushing up private sector wage rates, not from income from the program itself. Jonathan Morduch notes that the jump in wages was a factor in the ultra-poor program he studied in Andhra Pradesh not having much impact (many participants left the program to take jobs).
The Muralidharan and Niehaus paper also brings to mind this earlier paper from Breza and Kinnan looking at something similar--how the availability or unavailability of microcredit in India to fund self-employment had generalized effects by altering wage rates. That paper is one of the reasons I believe in the "frustrated employees, not frustrated entrepreneurs" thesis, so now my brain hurts.
3. Even more on Jobs and Wage Rates: The New York Times has a new "Room for Debate" with several perspectives on whether the rising minimum wage in the US is raising incomes and how much of a role minimum wage hikes had in the reduction in poverty reported in the latest census report.
4. FinTech and Intrahousehold Bargaining: Simple, a US FinTech company announced this week a new product that tackles the age-old problem of intrahousehold bargaining head on: a hybrid shared account. In the new Simple account, two people have separate accounts, but each can see the other's activity and they can mutually contribute to and track shared goals (like savings). It's an interesting product for a variety of situations beyond traditional romantic partnerships like parent/child or child/parent in situations of aging parents, or in situations where disability requires something less than complete guardianship. I really hope someone is doing something randomized on this to test effects.
In other US FinTech news, D2D Fund has changed it's name to Commonwealth and EARN has a new version of its Starter Savings Program.
5. And Now For Something Completely Different: Some non-financial but definitely interesting and thought-provoking things from this week: Maria Konnikova has a lengthy article pushing back on the "practice makes perfect" conventional wisdom, and particularly the 10,000 hours hypothesis. Tyler Cowen "doesn't believe in progress, and he wishes you didn't either." Duncan Green on "Why is it so hard for academics and NGOs to work together?" NYU Law has launched what it says is the first center on law and social entrepreneurship at a law school. Cass Sunstein on "the real reasons so many Americans oppose immigration reform." Having five things in the fifth point of the faiV just seemed right.
Masquerading as a video, here's Paul Niehaus talking about the logistics of GiveDirectly and delivering cash transfers.
