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In this paper, Juliana Milovich looks to analyze the relationship between foreign aid and poverty. She criticizes earlier studies regarding the impact of foreign aid in developing countries, as they inappropriately determined whether or not aid was effective by looking at overall economic growth. While growth may facilitate the overall reduction of poverty, it does not account for a number of other factors. Thus, in her study of 64 developing countries that at one point received U.S. aid between 1946 and 1999, Milovich uses the Multidimensional Poverty Index to capture the degree of poverty in these countries between 2000 and 2014. She finds a statistically significant relationship between aid received during the twentieth century and lower multidimensional poverty levels in the twenty-first century. However, she does not find a statistically significant relationship between previous aid received and contemporary poverty measured by income. I found this article to be a great way to end the term, as it really emphasized one of the most central points of the course: poverty is complex and cannot be measured merely by income. Other factors, such as access to housing and basic services, investment in human capital, and political and social freedoms, have played a role in dictating the experience of the poor. By superficially reducing poverty to being a mere lack of income, we are not giving enough attention to a problem that is affecting millions around the globe. In order to reach the ultimate goal of eliminating poverty, we must first acknowledge that it is a more comprehensive issue that takes social, economic, and political factors into account.
Toggle Commented Nov 13, 2020 on Last Post of the Year at Jolly Green General
Given my lack of familiarity with the subject and its high degree of technicality, I found this paper by Barry Eichengreen and Ashoka Mody to be challenging. While I have a firm comprehension of the general argument, I found the section related to the empirical strategy to be particularly complex. Thus, I am looking forward to tomorrow's discussion, as it will help me better understand this paper. Still, I found the work to be interesting. Here, the authors explore one of the most fundamental aspects of economic development: the roles of policy and interest rates in regard to stimulating growth. Historically, different economists have argued for the predominance of one of these devices. Some have maintained that policy that promotes macroeconomic stability and economic liberalization is the main driver behind development. On the other hand, others contend that low interest rates in industrial countries play a larger role, as they facilitate the flow of capital abroad due to the more appealing returns. To put it simply, some uphold the importance of internal factors while others uphold that of external factors. Previously, studies conducted using an ordinary-least-squares regression have downplayed the role of interest rates. However, the authors argue that such a regression is too simplistic to measure such a complex phenomenon. In their own empirical analysis, they find that lower interest rates in industrial countries are strongly associated with development abroad. Such results bare tremendous consequences going forward, as governments in developing countries will be more knowledgeable when forming policy to facilitate growth. One area of the paper that I found specifically interesting was the section related to how the effects of interest rates differ across regions. For example, they find significant differences between Latin American and East Asian bonds. Such a finding is reminiscent of our previous discussion related to the "Confucian Ethos" or "Protestant Work Ethic." Clearly, while economics has become a largely quantitative field, more qualitative things like culture still play a significant role. It would be interesting to further explore this topic.
Toggle Commented Nov 6, 2020 on For Friday's Discussion at Jolly Green General
In this article, the authors discuss the use of conditional cash transfers in the context of combatting poverty and spurring economic development. To shed light on the matter, the authors specifically focus on Mexico's Progresa program, one of the longest running CCT programs and one that is renowned for its initial randomized testing. While previous studies on the program have found that Progresa has had a positive impact on the education level of poor youths, these analyses have only focused on the short term effects. To add to the existing body of research, the authors want to explore the matter in the long term, focusing on the educational, labor market, household, and demographic outcomes for youths who grew up with the Progresa program. Through an empirical analysis, they find that poor youths who experienced the Progresa program before the transition from primary to secondary education had far better outcomes than those who experienced it when they were older. Specifically, these children who benefited from early exposure had more years of schooling, improved labor outcomes (like the transition from agricultural to non-agricultural work), higher housing quality, ownership of more durable goods, and higher geographic mobility. These results were especially strong for women, given their relative position in Mexican society. I found this article, while very technical, to be especially insightful. Conditional Cash Transfer programs are a very popular topic in regard to economic development, and this study shows that they can be of real use in reducing poverty. Other third-world countries can look to Mexico and model a program based on theirs that will in turn promote economic equality. One thing that I am curious about, however, is the relationship between a country's culture and CCT programs. Previously, we have discussed notions like the "Protestant work ethic" and "Confucian Ethos" in regard to economic development. In the case of Mexico, how does culture influence the outcomes of CCT programs? Additionally, when comparing CCT programs between countries, how would one control for differences in culture? In a previous blog post, I mentioned how I am familiar with the notion that women are better money managers within the family, given my experiences working in a township outside of Cape Town. Again, I would like to emphasize this finding, as the Mexican CCT program - knowing that there is a significant chance that the father spends the money inappropriately - sends payments to the mother of the family. It is very interesting for me to see this phenomenon stretch across two very different countries, Mexico and South Africa. What is it that makes women better money managers for the family? Clearly, it is not something related to culture, given the sharp cultural disparities between South Africa and Mexico. Are women inherently more financially responsible than men?
Toggle Commented Oct 29, 2020 on For Friday's Discussion at Jolly Green General
In this report by the World Bank, the authors George Psacharopoulos and Harry Antony Patrinos examine economic development, specifically focusing on the returns to investment in education. To begin their discussion of the topic, they refute the screening hypothesis, or the idea that education mainly serves as a signal to employers that a prospective employee has a high capacity to learn. In this sense, education is not primarily a means of enhancing productivity. After disproving this claim and upholding the productivity-inspiring aspect of education, the authors look at two different methods for measuring the rates of return on education: the Mincerian (accounts for only private returns) and full-discount (accounts for private and social returns) method. In their econometric analysis, they obtain several significant results, such as that investment in education has a higher rate of return for women, those in the private rather than public sector, and those in low income countries. They also determined that the private returns of education have increased over time. Overall, I found the paper to be particularly interesting, given my limited familiarity with the economic discussion of investment in human capital. After gaining an initial understanding of the topic through the textbook reading, it was nice to explore it further by reading a study related to the progression of and recent trends in investment in education. Given my interest in the mentioned case study of Argentina, I would enjoy exploring analyses of specific countries. One that I believe would be specifically interesting is South Africa. As it has one of the highest Gini coefficients in the world, it is a highly unequal society, with people of both extreme wealth and immense poverty. Therefore, there are accordingly sharp differences in education and the degree of investment in it across the nation. I believe that it would be of particular interest to explore said differences and gain a more comprehensive understanding of the phenomenon on a more micro level.
Toggle Commented Oct 23, 2020 on For Friday's Discussion at Jolly Green General
In this piece, Duflo provides an interesting analysis of the relationship between gender dynamics and economic development. She asserts that the empowerment of women and development are complementary; while economic development provides the necessary infrastructure for the empowerment of women, the empowerment of women can also facilitate development. However, this cyclical process can not create sustained development. Duflo argues that economic development and a reduction in poverty benefits women the most, given their relative position to men. While this process will lead women to gain power and be more equal to men, mere economic development is not enough to achieve complete equality. Rather, additional policy that specifically targets women is needed to achieve this goal. Another interesting point that Duflo makes is that the positive impact of empowering women in regard to decision-making may be overstated. For example, while empowered women may improve things like health and nutrition, the author found that they do so at the expense of education. I could personally relate to the author's discussion of gender dynamics in South Africa. After my sophomore year, I spent the summer working in an impoverished township outside of Cape Town, where I consulted with struggling businesses and helped them to formalize themselves and grow. There, I saw how women were often forced into the position as head of the household, as drug and alcohol addiction plagued the male population in the township. Frequently, I would hear stories about how the men would take what little money the family had to spend on alcohol and drugs. Such an occurrence forced the women to not only take care of the children, but also find their own means of income and be financially responsible. This relates to Duflo's point related to the male tendency to spend on alcohol.
Toggle Commented Oct 9, 2020 on Duflo for Friday at Jolly Green General
Given my limited familiarity with the Morrill Land Grant Act, I found this article to be particularly enlightening. Moreover, I appreciated the discussion of the topic within the context of economics and the efficient allocation of resources. Overall, I found the author's argument rather compelling; it is clear that public investment in education is a necessity, as the costs incurred by intervening in the field of education are insignificant when compared to the greater social benefits from doing so. Ultimately, as Epplin puts it, more accessible and publicly financed education is necessary to achieve economic efficiency and the "largest sized pie." This topic is especially notable when thinking about development economics. While Epplin says that more investment in domestic education is needed, I also have thought about it within the context of the developing world. Specifically, I believe that foreign aid should be strongly geared towards building a stronger educational infrastructure within third-world countries. By doing so, the developed world would help to establish the necessary infrastructure to sustain - rather than just merely initiate - growth in these places. I also believe that education will serve as an effective remedy for other ills that lead to the misallocation of resources. For example, corruption will lead to this inefficient outcome. However, by creating an educated public, one would have a general populace that has the competence and knowledge to demand transparency and hold officials accountable for their actions. Such a reduction in corruption would be instrumental in the efficient allocation of resources.
Toggle Commented Oct 1, 2020 on For Friday's Discussion at Jolly Green General
In John Quiggin's essay, he argues that the developed world's consumption levels are not maintainable and that they are responsible for the inequalities between the developed and developing worlds. Eventually, Quiggin asserts, our tendency to hyper consumer will lead us to the "limits of sustainability." This dystopian future, however, is preventable. If we adjust our lifestyle to use less energy and include more leisure, we can dramatically reduce emissions. Additionally, contrary to popular belief, we possess the technology to end human suffering and environmental decay. Although it will be difficult, developed countries can implement said technology to make the world a better place. This article complements our other readings related to the interplay between economic development and sustainability. One section that I found particularly interesting was that related to the concept of "the advantages of backwardness," or the phenomenon where developing countries are able to leapfrog years of gradual technological advancement and go straight to modern technology. I have never heard of this concept before and am curious about its presence in the real world. I would love to read a case study of a certain country in which this effect took place. Also, does this happen for all types of technology? I feel that the author may be generalizing "technology" too much here. This article is slightly dated, as it is from 2013. I would love to hear what the author thinks of the global situation today. Moreover, he thoroughly discusses the place of government in promoting sustainability. Given his remark that Romney's loss in the 2012 election was a "hopeful sign" that real change would be made, I cannot imagine he is super enthusiastic about Trump being in office.
Toggle Commented Sep 24, 2020 on Readings for Friday at Jolly Green General
I found this article to be particularly interesting, as I have always heard about the "economic miracle" of South Korea but never really explored how it happened. In this piece, Seth emphasizes how important the educational and land reforms of the 1950s were to the later economic success during the second half of the century. Once the country shifted from an import substitution policy to one that is export oriented, these investments in the work force paid off tremendously, as they had to rely on an educated and disciplined workforce in the absence of natural resources. As the economy began to grow, they reinvested profits into capital intensive industries and worked closely with Korean business leaders, paving the way for an industrialized economy. One piece of the article that I found interesting was Seth's discussion of the "unique set of historical circumstances" that led to South Korea's economic success. When Seth lists the specific circumstances out, this notion seems very convincing. For example, South Korea became an export-oriented economy at a time when there were few of those, minimizing its competition. Additionally, it benefitted from its proximity to Japan, which was at the time looking to move production to a low wage country like South Korea. With all of these seemingly coincidental conditions that South Korea benefited from, maybe the "economic miracle" actually was just that: a miracle, or something that is so phenomenal and specific that it would be hard to replicate. Another part of the article that grabbed my interest was the section related to the "Confucian Ethos." This component of South Korean culture emphasized hard work, discipline, frugality, and education among other things. As the Confucian Ethos is present among all of the "four tigers" (South Korea, Taiwan, Hong Kong, and Singapore), this makes me believe that a country's culture plays a crucial part in its growth. What other values would be considered beneficial to economic growth? What would the American cultural values be?
Toggle Commented Sep 17, 2020 on Miracle on the Han for Friday at Jolly Green General
This reading did not only help me better understand the high development theory, but also gave me a stronger insight into the history of development economics and economics as a whole. Previously, I had not delved into the history of the field nor its evolution over time. To hear that modeling - which I had always believed to be the cornerstone of economics - only became a significant component of the field as recently as the 1950s is fascinating to me. In my introductory economics class, I remember questioning how a model could explain such a complex situation in such simple terms. How could something so simple be accurate? Surely, there are more factors involved? How can one tell which situations this model applies to? After reading this article, I can look back on my previous curiosity and answer these questions for my past self. Even though such simplifications are unrealistic, simplifying a complex phenomenon allows economists to analyze it at a level that they can handle. From here, they can generate a model that might explain the phenomenon, giving us a better understanding of something so complex. I found the African map comparison to be particularly interesting. This really helped me understand what exactly happened with high development economics in the 1950s. When the field of economics shifted towards a focus on modeling, high development economics got temporarily left behind; unable to model economies of scale, they simply could not keep up with mainstream economics.
Toggle Commented Sep 10, 2020 on Krugman for Friday at Jolly Green General
Last Winter Semester, I had the chance to take Professor Grajzl's Institutional Economics class, where we discussed much of the material mentioned in the article. Accordingly, I am familiar with the argument that poor institutional quality hinders economic growth. As mentioned in the article, unnecessary protectionism, government misallocation, corruption, and instability can explain why some countries have fallen into the poverty trap or lagged behind others in terms of economic growth. What was specifically interesting to me was what institutional features were most common among high-growth countries: export-led open policy, foreign direct investment incentives, solid infrastructure for businesses, promotion of high-tech industries, and pro-market reforms in labor and financial markets. I have explored this issue myself in my econometrics class, where I researched what factors could explain differences in growth between African countries. I found that strong judicial institutions (efficient courts) and social institutions (lack of "disorder events"...terrorist acts, protests, riots) were strongly correlated with economic growth. If I had to change one thing about this paper, I would recommend that the author includes more countries in their analysis. They only study 20 here, and I think the paper could be bolstered by adding additional ones.
Toggle Commented Sep 3, 2020 on Reading for next Friday at Jolly Green General
From someone who has little familiarity with the field of development economics, I found this article on Millennium Development Goals and Sustainable Development Goals to be very thought-provoking and informative. While MDGs did many things right (they were simple and easy to state, a set of moral commitments rather than a legal document, and able to be pursued in practical and specific measures), they also had their shortcomings (no milestones, outdated data, and lack of private sector investment and worldwide commitment). By drawing on what the MDGs did right and what they did wrong, the SDGs can effectively address poverty and environmental decay. With a focus on economic development, environmental sustainability, social inclusion, and good governance on all levels, the SDGs will facilitate much needed change in the world. I found the emphasis on environmental sustainability to be particularly important, given the dangerous emission of greenhouse gases, widespread pollution, and destruction of ecosystems. All of these are urgent problems that require the utmost attention. One part of the article that surprised me was that over half of the 1 Billion people with a low income live in middle-income countries. I expected those living in poverty to be highly concentrated in low-income countries.
Ben Graham is now following Caseyj
Aug 27, 2020
Ben Graham is now following The Typepad Team
Aug 27, 2020