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Mark Natiello
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I found this paper very interesting and informative regarding microcredit which I didn’t have too much prior knowledge on. I learned that microcredit can be extremely beneficial to small businesses, aspiring entrepreneurs, and poor households. While it was identified that increasing access to credit does have positive outcomes for some people, strategies like group lending, saving, delaying of payments, and borrower screening can have larger impacts on people in need of these loans. I found some parallels between this paper and others we have read in previous classes. The section on savings design and commitment savings reminded me of some of the development strategies used by countries like South Korea. Commitment savings accounts require the saver to deposit a certain amount of money in a bank account and give up access to cash for a period of time. Ashraf, Karlan, and Yin did a study in the Philippines that showed that commitment savings accounts are effective in increasing savings, especially for people with self-control issues. In another study regarding commitment savings for farmers, they put funds into a special account where withdrawals were restricted for defined periods. Along with increased savings in previous planting seasons, it was found that the treatment group had a 26 percent increase in agricultural input use and a 22 percent increase in value of crop output in the subsequent harvest. We have identified increased savings as a way to catalyze development because the savings can then be invested into things like working capital that can help increase profit margins and returns for farmers or workers and this is a prime example of that. We see that “forced savings” help prevent purchases that don’t contribute to investments and incentivize people to invest in themselves, their businesses, and working capital.
I thought this paper was very informative regarding international lending, yet much of the jargon was pretty high level and required me to re-read a lot of the sections. However, I thought their argument was logical and supported by substantive research. It was easy to understand that the volume and composition of international lending are affected by US interest rates. I understood that a rise in US treasury yields raises spreads when it affects the demand by investors for developing country bonds but reduces them when its effect is to increase supply. The article talks about the influx and reflux of foreign lending to developing countries based on the interest rate changes in the United States. This dependence on the US seems dangerous for developing countries because there are instances where the US government might need to raise rates and foreign lending will decrease drastically like what occurred in the first half of 1928. Historically, decreases in US lending have hurt Latin American countries for example, and have stunted their development progress. Will the world’s lending always be dependent on US treasury yields? Currently, the United States has taken on huge amounts of debt within the last year, will this contribute to decreasing lending? There are also rumors of the Fed hiking interest rates in the near future due to rising inflation. What countries will this have the largest impact on? I am also curious if the overall decentralization of banks and currency will take the dependence off of the US. As of now, currency value and lending are dictated by the United States and the changes in interest rates, so if money becomes decentralized, how will that positively or negatively impact lending in developing nations.
Toggle Commented Nov 18, 2021 on ... at Jolly Green General
It was interesting to read about the Mincerian method and the full discounting method when it comes to calculating returns to education. I appreciated the explanation of how the full discounting method calculates both the private and social returns of education. I always wondered how something like the social benefit is calculated by economists. The author mentioned that social benefits should include non-monetary benefits of education but there isn’t enough empirical evidence on social benefits from education, so economists must use the observable costs and of education. I also found it interesting to read about the ability bias in the Mincerian theorem. Griliches analyzed the issue and found the bias is small or negative and adding more variables will not solve the issue. I wonder how “ability” is calculated and if it is something that improves over years of education within countries. How much does the ability bias in a developed country like the US compare to developing communities Africa? I also appreciated how the authors recognized that there are multiple views regarding earnings premiums associated with the level of education. One is that productivity increases as people acquire additional qualifications but another is that earnings increase with education can be because of credential effects. I feel like that is very real possibility in certain situations. Many people debate that you can get a better quality education at certain schools in the country but in some cases, the institution provides better name recognition or credential value in a high-paying sector. However, they did ultimately say that by and large, while there is some evidence of weak job screening, education is generally associated with earnings because of productivity. Finally, it was interesting to hear about the “race between education and technology”. This is when the price of education fails to decline proportionately in the face of rapid supply increases. This shows that demand for skill grows faster than the supply of skills.
Toggle Commented Nov 11, 2021 on For Friday's Discussion at Jolly Green General
After reading Duflo’s work, it’s clear that economic development and the empowerment of women go hand in hand. In class, we have talked several times about the importance of investing in women’s education because of the positive externalities it has on society and this paper reinforced that. Education for women will give them more power and agency within the household structure where there is currently so much discrimination. It will also lead to richer women and overall richer, more educated, and more productive societies. As Duflo mentions, this also improves the health of children and the overall cohesiveness of a family. However, as Duflo states, empowerment must be paired with intentional policy changes that promote equality and provide women with fair and equal opportunities. This ties in with the MDG of gender equality and empowering women which we have talked about in earlier classes. It’s also extremely saddening to hear about women the high levels of absorption in areas like China and India as well as overall discrimination and prejudice in both developed and underdeveloped countries. I wonder how these sex-selective abortions would change. As China passes its most rapid period of development, is this an issue they will look into fixing?
Toggle Commented Oct 29, 2021 on For Friday's Discussion at Jolly Green General
I appreciated how the world bank not only identified the potential risks of a 4-degree Celsius temperature increase but also identified the irreversible impacts that have already occurred as a result of the planet heating. It talked about the increased rainfall, drought-prone regions getting dryer, and record-breaking temperatures occurring more frequently. As we talked about in class, these adverse effects of climate change disproportionately impact the poor, underprivileged, children, and elderly the most. Things like higher temperatures hurt poor people in rural communities by harming crop yields and rising food prices in places like Libya, Egypt, and Jordan. Drastic temperature shifts also result in new diseases that adversely affect the poor. I also liked how they talked about the consequences attatched to development because we usually talk about how countries should get to a development stage. They identified how climate change risks can undermine development and poverty reduction for present and future generations. Risks involving food security and crop yields increase in probability if warming approaches a 2-4 degree rise. However, should countries that are trying to enter the development stage acquire assets that help them grow their economy but might emit GHGs, or start good practices and habits when it comes to industrializing and urbanizing in an environmentally friendly way despite the fact that it might be more expensive?
Toggle Commented Oct 21, 2021 on For Friday's Discussion at Jolly Green General
I really enjoyed reading the Miracle on the Han and South Korea’s ascension into a developed nation. It’s always fascinating and exciting to hear about an economy that escaped a cycle of underdevelopment because it is almost always a net good for the people living there and the rest of the world. I was really impressed with how diversified South Korea’s economy became with some policy changes especially with North Korea gaining control of most of the industry, mining, and electric power. Once an export-centric economy of rice, seaweed, iron, and graphite, it expanded into steel, machinery, petrochemicals, and cars. As we talked about in class, land reform and education reform are two policy changes that can help get developp9ing economies up and running. We see a perfect example of this in Korea with their large investments and expansion of primary, secondary, and higher education which helped build the best-educated workforce at their income level. I was really intrigued by their land reform policies as they seemed fairly aggressive since they forcibly took the majority of the and from the top 3 percent. I’m very curious how this strategy would pay off in democratic republics or if it is really only successful in a military-led government. It was interesting to see that foreign aid from the US actually hurt their economy. Although they provided much-needed reconstruction help after the war, South Korea became far too dependent on them and caused corruption within the government. It’s difficult to understand when another country should interfere with another nation’s economy because, on one hand, foreign investment is often a crucial factor in helping with growth and development, but it is also possible that they are looking after their own interests, bring in corruption, and become too big of a crutch for the developing country. I’d like to compare different nations that experience a lot of outside interference in the economy and what the outcome was.
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Oct 7, 2021