1. The End of Cash?: Ken Rogoff has a new(ish) book arguing for the end of paper currency. In the New Yorker, Nathan Heller explores Stockholm, one of the most cashless cities on the planet. The move away from cash in Sweden was strongly influenced by high profile robberies of cash depots, making the insecurity and anonymity (for criminals) of cash much more salient. In Heller's piece, there are a few references to issues of privacy, regulation and insecurity of digital tools, but surprisingly little reference to digital payments in less developed countries, or issues in countries where government is less trusted and less trustworthy than Sweden.
2. Cashless in the USA: The US is a very long way away from cashlessness, but one of the primary mechanisms for movement in that direction is prepaid cards. In the last decade they have become increasingly popular alternatives to bank accounts, and as a mechanism for delivering government benefits like food stamps and unemployment and pay to workers without accounts. The Consumer Financial Protection Bureau has released new regulations for prepaid cards to increase consumer protections and bring prepaid cards more in line with credit cards. The regulations include limited liability for lost or stolen cards and new requirements that cards that allow overdrafts have to evaluate customers' ability to repay.
Week of September 26, 2016
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.
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.
Week of September 19, 2016
1. Microfinance Subsidy: Back before there were impact evaluations the heated discussions in microfinance were about costs and subsidies (and business model, which is really a conversation about cost and subsidy). Those conversations have died down as the focus shifted to impact evaluations--appropriately!--but cost and impact are equally important when it comes to policy choices. Cull, Demirguc-Kunt, and (our very own) Morduch have a new paper that does the painstaking work to accurately measure subsidy in microfinance. They find that subsidy is pervasive and long-lasting, but small: meaning the modest impact of microfinance has to be viewed in terms of even more modest cost. I could write the whole faiV this week just on findings from the paper which is another way of saying: read it! Bob Cull has a short overview of the findings here for those with short attention spans, or a day full of meetings.
I have a new paper on "The [positive] Case for Social Investment in Microfinance" that I'm finishing up, and would be interested in feedback. If you'd like to take a look at a draft and provide comments, let me know (by replying to this email).
2. But Wait, There's More Microfinance: While most eyes have been turned to tracking the growth of digital financial services, the microfinance industry in India is growing rapidly again. The industry association reports 60% year-over-year growth, with the majority coming from the large incumbents like SKS and Ujjivan. Apparently the banking correspondent model is playing a significant role in growth. Let me pause for a moment to roll my eyes at the finding that clients say that 94% of loans are for "income generating activities."
Meanwhile, Jonathan Morduch has a review of Lesley Sheratt's new book on achieving an ethical balance in microfinance, a balance that a 60 percent growth rate calls into question.
Week of September 12, 2016
1. Income, Poverty and Volatility: The big news of the week in the US was the release of the US Census Bureau’s report on income, showing strong gains across the board (but best for lower income groups) and the largest drop in the poverty rate since 1999. As always, the story is more complicated than the headline statistics. Annual income measures hide year-to-year and month-to-month volatility. And volatility seems to be rising. That means that even though the poverty rate is falling based on annual income, the number of households that spend part of a year in poverty or bounce in and out of poverty from year to year may be increasing.
Aspen EPIC has a wealth of new materials on the topic of volatility including videos, interviews and blog posts.
2. Measurement: Also prominent in US news was the announcement that Wells Fargo, one of the country’s largest banks, had fired 5300 employees and paid a $185 million fine for creating millions of accounts without customer consent (to hit management metrics). Matt Levine has the most useful reporting on the issues and the problem of measurement, calling it an “evil genie...it grants your wishes, but it takes them just a bit too literally." Case in point, Indian banks have apparently been doing essentially the same thing as Wells Fargo, depositing 1 rupee into dormant accounts, so they don't appear dormant. I won’t miss the opportunity to plug Dan Rozas’ work on the large gap between savings accounts and savings account usage in microfinance banks around the world, not just in India.
Week of August 8, 2016
1. Night of the Living FinLit: I'm increasingly using the persistence of financial literacy programs as a proxy for the "evidence-based" movement. Here's a story about a new $5 million investment in FinLit for low-income youth in Chicago, where apparently half the curricula is devoted to day-trading stocks. Most remarkable is that the story spends its time wringing its hands about the irony of financial services firms funding FinLit, rather than the fact that it doesn't work in any meaningful sense. If the evidence-based movement can't kill FinLit as we know it what hope is there for other policy domains?
2. Priming Zombies: No the zombies aren't doing the priming, nor are they being primed. Here's a new review of studies of the effect of "eyes" on influencing social behavior--it's one of the "neato" findings in the priming literature that became so popular in the last decade. Like recent replications of other priming interventions, the widely reported effects don't stand up. How long will priming hold on as a zombie idea?
Week of August 1, 2016
1. Cash Transfers, Conditions and Fathers: Akresh, de Walque and Kazianga compare the effects of conditional and unconditional cash transfers, and whether they are given to mothers or fathers in 75 villages in southern Burkina Faso. They find conditions matter and that, if anything, children and households benefit more when the father is the recipient. I'm trying really, really hard to fight confirmation bias, and losing.
2. Financial Inclusion and Digital Financial Services: The Bookings Institute has published it's second annual review of progress on financial inclusion and access, with a particular focus on digital financial services. It covers 26 countries reviewing availability, use and the policy/regulatory environment. Kenya and Colombia top the list; Egypt and Ethiopia are bottom.
3. Medicine, Economics, Data and Evidence: The grass is not greener on either side of the fence. A few weeks ago we had Croke, et al's critique of meta-analysis in health research. On the other hand (see what I did there?): "In comparison to medical studies, most economics studies examined do not report important details on study design necessary to assess risk of bias." Meanwhile the medical community is arguing over how and when data from clinical trials should be shared. Larry Husten summarizes the arguments, but be sure to scroll to the end for a discussion of the difficulties of setting up a market for data and whether anyone "owns" the data. I feel like some economists might have something to say about that, perhaps starting with Coase and Ostrom. Though will the market for data end up being a Market for Lemons? And will economists put their data where their mouth is?
Week of July 25, 2016
1. Financial Institution Behavior, Part I: Xavi Gine and Rafe Mazer pull together audit studies of banks conducted in Ghana, Mexico and Peru. You will be shocked, shocked to discover gambling--I mean, failure to disclose true product costs or best-fit and cheapest products--in these establishments.
2. Financial Institution Behavior, Part II: The recovery in home prices in the United States since the housing bubble has left one part of the market untouched: homes with values below $100,000. Banks won't originate loans for mortgages of this size because the fees they can charge are capped below profitable levels, so owners can't refinance or sell. There is a non-profit turned hedge fund that's taking on this market though.
3. Financial Institution Behavior, Part III: OK, so they're not financial institutions, but debt collectors are part of the financial infrastructure. And they've behaved so badly--harassing debtors, pursuing people who don't actually owe the debt, etc.--that they generate more complaints to the CFPB than even payday lenders or frauds. So the CFPB is drafting new rules to govern debt collection.
Week of July 18, 2016
1. Why not What: Chris Blattman posts notes from a recent talk he gave at DfID arguing that focusing too much on "what works?" is a mistake. Via Ryan Briggs on Twitter, here's Angus Deaton's 2010 paper making much the same argument.
2. Why not What, Part II: A new paper from Buera, Kaboski and Shin looks at a host of "well-identified evaluations of the impacts of micro-financial interventions" including the microcredit evaluations, the targeting the ultrapoor programs, and cash grants to try to understand why the results are what they are.
3. American Financial Security (or lack thereof): Americans confidence is their ability to afford retirement is creeping up again, but it's not clear why. A new HSBC study finds that 64% of respondents over age 70 are financially supporting others. Andrew Yarrow writes about "the 45%" who are paid less than $15/hour, are "asset poor" and do not have access to employer-sponsored retirement-savings (note that these are not all the same people).
Week of July 11, 2016
1. Meta-Analysis of Worms: When the dust settled in last year's #wormwars it was clear that a core issue was methodological and interpretive differences between epidemiologists and economists (see Humphrey's section 5). A new meta-analysis of deworming impact studies from Croke, Hicks, Hsu, Kremer and Miguel takes that issue head-on: it's as much an argument about how to evaluate evidence as it is an argument about the evidence on deworming in particular, concluding with, "Under-powered meta-analyses are common in health research..."
2. Police Shootings: Another raging methodological debate on an issue of even greater emotional resonance broke out this week: are African-Americans more likely to be shot by police than whites? Roland Fryer has a new working paper that answers, "No [in some cities, though they are more likely to be physically accosted during a stop]." The initial critical reactions focused primarily on the fact that this is a working paper and not enough emphasis in reporting on the paper was given to the limited context (e.g. only a limited number of cities) of the results. The larger methodological issue though is about how to treat the data in the first place. Michelle Phelps looks at how bias in who gets stopped by police can substantially bias outcomes and puts the findings in context of other research. Radley Balko looks at how the source of the data--police reports--makes it questionable whether the data can be trusted at all.
Week of June 27, 2016
1. LOL Nothing Replicates: Jason Collins looks back over Kahneman's Thinking Fast and Slow post-repligate, finding some distinctly uncomfortable language ("You have no choice but to accept that the major conclusions of these [priming] studies are true"). Meanwhile a new paper in PNAS suggests that fMRI studies have 70% false positive rates.
2. Migration: There's a lot of work to be done understanding intra-household bargaining in the context of migration. A new paper tries to estimate the returns to internal migration in South Africa by looking at the effects on the migrant as well as on the households from which the migrant departs and which the migrant joins. A southern New Zealand town is trying to recruit internal migrants because it has too many jobs. Perhaps they could expand the Tongan lottery. And the New York Times magazine has a long piece on Canada's refugee sponsorship program where you can find this unexpected but lovely statement: "I can't provide refugees fast enough for all the Canadians who want to sponsor them."
3. The Future of Microfinance: Next Billion has a terrific collection of posts on last year's sale of six microfinance banks by Opportunity International to MyBucks, a for-profit fintech firm. Dan Rozas and Gabriela Garcia provide an overview, Chuck Waterfield expresses skepticism that the transaction is good for customers and Vicki Escarra, Opportunity International Global CEO, responds. Anybody else miss the old days when this type of back and forth was common?
