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Yuhan Liu
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I enjoyed reading it because it does not just discuss the benefits of Microfinance with anecdotal evidence, instead, it is a rather comprehensive survey of randomized tests’ findings on Microfinance in urban, rural, and peri-urban settings. The paper shows that Microfinance does not always live up to the usual claims of its benefits (empowering women, increasing income…); it has more effect on the behaviors of consumption. Moreover, this paper illustrates the importance of product design in Microfinance and the potential conflict between the interests of the MFIs and the borrowers. I also find the part of the paper on savings design and microinsurance products very interesting. Researches show that there is some very cost-effective savings design that can be implemented. Microinsurance products may be a useful tool to be coupled with traditional microcredits to increase the effectiveness of the products. I think the low take-up rate is one of the most challenging problems facing the Microfinance community, and the paper shows that the most important factor is the lack of trust in financial institutions. Thus, I think promoting trust among the targeted borrowers should be of the highest priority of the Microfinance community.
Although I did not fully understand the methodology employed in this paper, I find it quite clever and meaningful that the authors found a way to include the decision of developing country borrowers to take on debt instead of focusing exclusively on the lenders’ willingness to lend. With this addition, the paper adds to the existing literature on interest rate in the north and capital flow to the south and confirms that higher interest rates in the north have a negative impact on the market for developing country debt. The finding of this paper is significant because it disproves the narrative presented in the Washington Consensus that the low-income countries can regulate inflows through fiscal discipline. Revealing the vulnerable nature of the emerging market to the influence of northern financial market influence should make wealthy countries pause and reexamine their role and responsibilities in the global market. Moreover, the finding also brought questions to the neoliberal principles of Washington Consensus and their applicability. Things I didn’t quite understand when reading this paper are why and how equations 1 and 2 are joined by “maximum likelihood,” and what is the exact meaning/role of “spread” in this analysis.
Toggle Commented Nov 19, 2021 on ... at Jolly Green General
Throughout the semester, we talked a lot about the benefit of education both privately and publicly. We showed that governments should subsidize education for the socially efficient quantity of education with models, and it is no surprise that investment in education is beneficial for development. This World Bank report brings this discussion to another, and more practical, level as it both quantified and qualified high impactful the return to education is. The paper states that the global private return to one extra year of schooling is about 9%, and social return to schooling above the primary level is also high at above 10%. Although knowing that investment in education is worthwhile, I was still shocked by how high the return is. The 2-points difference based on gender is larger than the difference between high- and low-income countries where people received dramatically different quality and quantities of education, which also reaffirmed the importance of investing in women’s agency. One thing that I am interested in reading more about is the factors accounted for in the calculation of social returns because there are so many positive externalities at play, and I am curious as to how accurate this calculation can be made.
Toggle Commented Nov 12, 2021 on For Friday's Discussion at Jolly Green General
I think Duflo provides a balance review for the two-way relationship between empowerment and development in this paper. Instead of claiming that development will sure lead to women’s empowerment or that women’s empowerment will give way to economic development, Duflo emphasizes that this relationship is mutually reinforcing, and working on only one of the two elements is never enough. While this paper provides an encouraging message that women’s empowerment is indispensable for economic development, it can still be a saddening read at times to see the extreme injustices women face from even before their birth, throughout their lives, and until their death. One thing I find apparent and disturbing is how strongly the life of women are tied to the domestic life and especially child bearing and raising. While a household usually consist of a man and a woman, almost all the domestic work become responsibility of the woman, and she is (and it seems that she must, and she is assumed to) make decisions that are beneficial for the entire household and her children. At the same time, the man, spending most of his time outside of the domestic sphere often make decision at odds with the collective interest of the household and to this own benefit/ enjoyment. While this is true, women still have significantly less bargaining power than man within the household particularly because she spends so much time and effort caring for the household and thus almost all her work goes unseen. Not to mention that it is inherently unfair to place women in such a position of responsivity while men get to enjoy time for themselves/ make decisions for themselves. While getting an education, entering the job market, having less children can increase the bargaining power of women and allow better decisions that benefits the household, and particularly the next generation, to be made, I think the gender-relation and expectation that underlay these inequalities are equally worth paying attention to. While investing in women is good for development, it is still not good enough for women if the culture remains unchanged.
Toggle Commented Oct 29, 2021 on For Friday's Discussion at Jolly Green General
My main takeaway from this paper is that climate change is not just an issue of sustainability but a much larger developmental challenge pertaining to poverty, agriculture, global migration, and so on. This report shows that in the interrelated world of development, climate change is a challenge that affects many more aspects of development than one would previously recognize. For example, the report addressed the effect of climate change on agriculture. The devastating effect of severe climate change on main agricultural crops has subsequent effects on the livelihood of not only subsistence farmers but also mankind in general. The farmers will be further improvised because of higher temperatures, irregular rainfalls, and prolonged drought. Further, the reduced agricultural production will make feeding the growing global population an even starker challenge. This is only one way how global climate change can affect the fate of development and mankind. This example also provides one way to see how climate change, while affecting the whole world equally “climate-wise,” actually most adversely affects the well-being of those who are already disadvantaged in our society. Compares to those in developed countries, people in the developing world disproportionally rely on the agricultural sector, which is directly affected by climate change, and many farmers are already experiencing such adverse effects. Thus, climate change is more than a concern for the future generation, but a challenge we need to face and address now for the well-being of our own generation.
Toggle Commented Oct 22, 2021 on For Friday's Discussion at Jolly Green General
I really enjoyed reading this historical piece about South Korea. I think it is especially interesting to see how the rapid development of South Korea first came about under military governments and through the Chaebols which initially gained their advantages because of their relationship with the government. Political systems and “family-run” businesses definitely do not look like the traditional recipe for economic development, so it is even more important to look at the development of countries like South Korea that used non-traditional institution and policies and reflect on our reading for Monday which points out that unorthodox institutions that departed significantly from Western norms can be used effectively for economic development when they are sensitive to local opportunities and constraints. Thus, reading this paper makes it clearer that there is not a one-size-fits-all prescription to development, and each country ought to start with really understanding its own limitations and needs. Also, as the paper points out, the Success of South Korea is inseparable from the historical context in which the country developed its industries, human capitals, and technologies, so it is also not to say that if South Korea is to start the same reforms today, they will necessarily succeed. Therefore, by reading about South Korea and its particularities, I am even more aware of the multifaceted nature of successful development policies.
Using both quotative and qualitative methods, the authors of this paper investigated the role of institutional barriers such as “unnecessary protectionism, government misallocation, corruption, and financial instability” and TFP play in economic development. I think that by analyzing the development path of each individual country within the fast vs lagging development groups, the authors effectively show that while each country has its unique history and politics, it is possible to discern important patterns and trends from this exercise. It is clear that government policies play an important role in determining the economic trajectory of their respective country. Although hardly surprising, I think this finding provides an important insight especially at a time when neoliberalism and the force of free-market have become so popular that the role of government is often overlooked and dismissed. Immediately following this recognition begged the question of how this knowledge can be applied to actual policymaking in these laggard countries. It seems from this paper that good governance and institutions, emphasis on the development of the modern sectors, and openness to new technologies are all indispensable ingredients for economic development. So, does it mean that if the governments adopt these policies, then the country’s economic development is guaranteed? I believe the answer would be in the negative because they all have different social and political structures and thus face different challenges. Then how, can each country, while recognizing their unique challenges, remove these “institutional barriers” and make use of these policies?
Toggle Commented Oct 1, 2021 on For Friday's Discussion at Jolly Green General
I find this piece by Kruger intriguing because it not only presents a simple and effective model of the high development theory but also a fascinating discussion of Hirschman and model building. Rosenstein’s high development theory was largely rejected because the economists of the 1940s and 50s were unable to model the economy of scale. Thus, economists like Hirschman and Myrdal, in the 1950s, proposed a way of doing economics rejecting the drive toward rigour. However, in this paper, Kruger states that while models have their limitations, building models is essential to doing economics. A fascinating point Kruger makes is that the widespread scepticism about the usefulness of economic models is often misplaced. Kruger argues that models should be treated as a kind of guide that economists and policymakers can use to view empirical evidence instead of as some doctrines that hold their truth regardless of what’s happening in real life. On the other extreme, it is not true the existence of assumptions and simplifications in economic models render the whole concept of modelling meritless in practice like Hirschman may imply. Kruger compares the simplification in economic models with some crude modelling done in natural sciences to illustrate the point. He suggests that models are good if they succeed in “explaining or rationalizing some of what you see in the world in a way that you might not have expected.” He even goes as far as saying that rhetorical technique like metaphor used by Hirschman among others is also a kind of modelling because it also offers an abstract way for us to view the empirical world. I find this discussion about the merit and demerit of modelling a crucial one because economic modelling is a dispensable language of the economists’, so knowing how, when, and why to apply them is one of the most important things for students and scholars of economics.
Toggle Commented Sep 24, 2021 on Krugman for Friday at Jolly Green General
The MDGs and the SDGs are designed to be both guides and benchmarks of international development. In this paper, Sachs looked at both the global priorities that the SDGs need to address, and the lessons learned from the MDGs. I think the angle Sachs takes in this paper is extremely well-done because the extension and expansion of the MDG the development of the SDG ought to take into consideration not only the future but also the past. Based on these knowledge Sachs draws the blueprint of the SDGs by affirming the principle of the three bottom lines as well as proposing four specific goals which later became essential parts of the 17 official SDGs. I think the triple bottom line of development (people, planet, and prosperity) emphasized by Sachs in this paper informed the priority of the SDGs. Instead of focusing solely on economic development like early development strategies, the MDGs that came about at the turn of the century put a heavier focus on the human aspect of development. Responding to new and more severe challenges of population growth and hunger, the SDGs add a new layer of complexity to the development goals: environmental sustainability. 5 of the 17 goals focus on the plant, and this is often seen as THE critical new feature of the SDGs, but the comparison between the 17 SDGs to the 8 MDG goals will also show a renewed emphasis on economic development (prosperity) with 5 of the 17 goals focusing on this category. Thus, while Sachs does not address economic development extensively in this paper, the bottom line of prosperity found a new life in the SDGs after 15 years of hiatus in the MDGs. Moreover, although the SDGs are supposed to be actionable goals and guide international development for the next 15 (9) years, I find the four goals Sachs proposed to be somewhat hollow and overtly optimistic about how this new objective will be met. The four goals Sachs proposed are a meaningful standard basic need for all people worldwide, the universal adoption of sustainable economic strategies, non-discriminatory promotion of well-beings, and collaborative good governance. These are all aspirational goals that anyone would have a hard time rejecting. However, much like the claim of “life, liberty, and the pursuit of happiness” written in the Declaration of independence, these goals do not actually provide a guide to how they ought to be achieved. Sachs attempts to addressing this problem by proposing that since the SDGs are not just for the global South alone but for all states of this world, the wealthier countries of the West ought to help the South achieve these goals through financial and technology transfers. He also proposes that government and non-governmental organizations ought to cooperate with the private sector and include multinational corporations in the development process. One should be wary of these proposals because it is evident that developing countries will not have the financial resource to achieve the goals proposed unless they relied on assistance such as foreign aid and business opportunities emanating from the West. Collaborations, under this condition, can easily become dependency. Sachs’s emphasis on collaboration and partnership in this paper is directly reflected in Goal 17 of the official SDGs. By calling for "partnerships for the goals" that "address how to finance all of the previous [goals]," with an emphasis on “partnership” the SDGs deflates the potential dependency relationship between the West and the global South. By designating Western capitals to address the financing of the expansive list of development goals, Goal 17 is consistent with Sachs’s suggestions in this paper and gives the West and its private sector powerful leverage to advance its business interests regardless of the development needs of the people. Thus, while each of the SDG goals proposed by Sachs and presented by the UN seems commendable, the SDGs could breed dependency of Southern economies on Western capitals.
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Sep 16, 2021