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Julia Foxen
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One aspect of this paper that immediately stood out to me is its use of the Multidimensional Poverty Index (MPI) to answer their research question of whether aid reduces poverty. By using the MPI, Milovich acknowledges the fact that the level of poverty is not simply a measure of income. Rather, it also has to do largely with social factors and how these factors, such as education and health, impact people’s well-being. Using the MPI as an alternative measure of poverty also allows for a greater understanding of the relationship between aid and poverty alleviation, other than through the traditional lens of economic growth that has been primarily used in previous studies. Interestingly, while the results did not show a significant relationship between aid and poverty alleviation when measured from an income perspective, there was a significant relationship between higher amounts of aid received during 1946–1999 and lower MPI between 2000 and 2014. However, while Milovich notes these results, he also acknowledges the controversy of the topic and the “endogeneity bias” that exists between aid and poverty alleviation that weaken causal links. While this paper focuses mostly on foreign aid through the lens of major governmental organizations such as UNICEF and the World Bank, I am left wondering how the impact of foreign aid on poverty alleviation may look different if Milovich looked solely at NGOs and other private agencies. Last year, as part of a foreign aid colloquium, I read A White Man’s Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good by William Easterly. In this account, Easterly scorns governmental aid for actually inflicting more harm than good in developing countries, and maintains that private agents are the solution to this problem. He argues that private agencies work on a far more individualized level in communities. I was reminded of this argument when reading Milovich’s paper and wondered what his response would be to Easterly’s account.
Toggle Commented Nov 13, 2020 on Last Post of the Year at Jolly Green General
This paper was honestly very confusing to read through and used a lot of economic terminology that I do not completely understand. My main takeaway was that this paper seeks to rectify the long-standing account that maintains that the state of global financial markets act as a “determinant of capital flows to emerging markets and the pricing of external debt” (23), as proxied by interest rates in advanced industrial nations. While the authors’ analysis confirms that global credit conditions have had a significant impact on the market for developing-country debt, “this effect is evident only upon controlling for the impact of U.S. interest rates on the decision of developing-country borrowers to issue debt” (23). This finding indicates that when interest rates are at play (i.e. fixed and floating rate issues), they have an important impact on supply and demand responses in various regions. While I feel like I have grasped some key takeaways of the paper, I look forward to discussing these concepts more in class tomorrow. Further, I hope to discuss the paper’s focus on the market for international bonds and how this focus affects their research approach.
Toggle Commented Nov 5, 2020 on For Friday's Discussion at Jolly Green General
This study illustrates the highly significant role that conditional cash transfers play in increasing educational attainment for young people in Mexico. Childhood exposure to Progresa raised the probability of completing high school by 10-15 percentage points for both sexes. Further, “the secondary and high school impacts range from 40 to 70 percent of baseline rates” (21). When turning to the long-run impacts of Progresa, the study indicated that increases in education may translate to improved outcomes in the labor market, but noted the endogeneity of such results (21). In my opinion, the most interesting aspect of these results was how it related to advancements specifically for women. In both areas, Progresa has led to “striking growth” for young adult women. While male education has increased by similar amounts, Progresa’s impact on male labor supply and sectoral affiliation has been more modest compared to its impact on women. Further, “estimated effects on labor income are positive for both sexes but statistically significant only for women” (23). These findings relate directly back to our class discussion in previous weeks on the significantly influential impacts of increased educational attainment for women. They indicate that women empowerment in a developing economy has greater returns of investment than males. This leads not only to improvements in the economy, but also to intrinsic benefits for women that live in systemically inferior positions. All in all, while this study expands the conversation of conditional cash transfers by bringing in the facet of intergenerational benefits, I am left wondering what effects programs like Progresa have in other countries around the world. Progresa has taken off since the late 1990s, and currently covers one quarter of all families in Mexico. About two thirds of these families derive from rural communities. In countries with a larger urban poor, how do the impacts of conditional cash transfers differ there? Are the effects more or less significant? Further, what are their effects where they are used in countries that are already much more developed, like the US? Therefore, while this study is an effective case study that broadens the timeline of the conversation, I would be interested to hear more on the geographically diverse impacts of conditional cash transfers.
Toggle Commented Oct 29, 2020 on For Friday's Discussion at Jolly Green General
I found this paper’s distinction between the human capital (productivity) and screening hypotheses particularly interesting. The human capital hypothesis maintains that schooling imparts skills that enhance productivity, thus an increase in earnings is due to increased productivity brought about by investments in education. The screening hypothesis states that “employers select workers with higher qualifications to reduce their risk of hiring someone with a lower capacity to learn”, thus higher earnings may not be due to productivity alone (4). The screening hypothesis reminds me greatly of the concept of signalling discussed in Economics 100 in which an individual is viewed as more credible than another simply because of some piece of information they have that the other lacks, such as a diploma. Because I remember discussing this theory in class, before reading this article, I would have thought it to be highly relevant in helping to increase rates of returns in education. However, the two studies explained in the analysis of these hypotheses found little to no evidence for the screening hypothesis, indicating that higher earnings are more due to productivity than to screening (4). While this analysis is intriguing, I am left wondering if the two hypotheses are more intertwined than the author lets on, and if there is more endogeneity present than the studies revealed. The author’s discussion of women also reminded me of the piece we read by Esther Duflo earlier in the term. The author finds that female education exceeds that of males by about two percentage points in regard to their private return to education (10). This finding again emphasizes that educating women should be a development priority. It is both intrinsically good for the wellbeing of women, especially in developing countries where there are more biases and societal confines working against them, and also good for the broader economy since investments in women’s education provides greater returns than men.
Toggle Commented Oct 22, 2020 on For Friday's Discussion at Jolly Green General
I agree with Duflo’s thesis that while improving women’s role in society may lead to greater economic development, and while development may drive down inequality between women and men, the ultimate key to female empowerment will be to take policy actions that “favor women at the expense of men” (1076). When a certain group of people have been systematically oppressed throughout history, it is the role of policymakers to reverse such injustice even if this makes certain groups uncomfortable or at temporary disadvantage. Duflo states that this is a measure of realism that must occur at either end of the empowerment and development debate. Interestingly, Duflo’s thesis greatly reminds me of the argument for affirmative action in the US. The argument states that due to our nation’s systemically racist history, policymakers today have an obligation to uplift Black Americans. The act of uplifting one group, even if it comes at the expense of another, seeks to create equity in society where there was none before. Furthermore, I also completely agree with Duflo’s argument that women empowerment is intrinsically good and does not have to be coupled with any economic development for it to be desirable. However, I wonder how this belief can be advanced without the economic lens in societies that still largely lack many of the fundamental cornerstones that reap respect for women. How powerful can this moral argument be in regions that are already so ingrained in their ways?
Toggle Commented Oct 8, 2020 on Duflo for Friday at Jolly Green General
I agree with John Quiggin’s thesis in his article entitled "We can end world poverty without destroying the planet" in that it is not a question of can society increase living standards greatly around the world, but if society is willing to make the cultural shifts necessary to make such improvements possible. He argues that there is currently no technological obstacle to reducing carbon emissions by 80 to 90 percent over the next few decades. We have the sources of energy available and simply have chosen to rely more heavily on older models. For example, in the case of cars, Quiggin states that if we were just to use the fuel efficient technology that we already have, there would be a 90 percent reduction in car fuel used. However, the harder part of the equation is not the change in energy systems themselves, but the shift in our cultural mindset necessary to put the new system in place. Quiggin emphasizes the importance of societal values in transforming or halting the development of economies. Especially in the case of the US, where a large portion of the political right still rejects the existence of climate change, the clash in our society’s belief systems has drastically slowed transitions to more renewable forms of energy. Quiggin states, “The ultimate barriers to achieving a good life for all, free of the lash of financial necessity, are neither technological nor environmental. They are in our beliefs, values and social institutions.” Thankfully, Quiggin is an optimist in this regard and believes that there are already improvements being made around the world, notably with the defeat of Repebulican Mitt Romney at the time he was writing the article in 2013. However, under the current administration of President Trump, I wonder if he would think his article was too optimistic in retrospect. Furthermore, although he excitedly notes the lack of technological and environmental barriers to a rise in living standards, the cultural barriers he notes are just as great if not greater than any other kind of limitation. Shifting the mindset of an entire culture is no easy task, and rather than giving recommendations for transforming sociopolitical mindsets, Quiggin simply states the ways to more practically use renewable energy sources. Therefore, after reading this article, I am left wondering what his recommendations would be today in the wake of political polarization and uproar.
Toggle Commented Sep 24, 2020 on Readings for Friday at Jolly Green General
I thought it was very interesting to look at South Korea as a case study for economic development, especially in reading how the economic takeoff began. South Korea’s “‘economic miracle’” began under a military regime after a coup takeover and President Park Chung Hee ruled as a dictator. After reading sections of Sen’s Development as Freedom, I previously thought of development only as being fully possible under a more politically free state, especially of a democracy. However, Park was able to use his unwavering control to finally create real economic improvements. Incentivized by economic nationalism and a desire to achieve autonomy over his country, Park initiated the First Five Year Development Plan by focusing on light industries for export. Under the Second Five Year Development Plan, he gave greater emphasis to attracting foreign investment and improving basic infrastructure (5). Thus, through both state planning and private entrepreneurship, South Korea was able to make rapid economic improvements under Park. Ultimately, even with very few natural resources available and the presence of a military regime in government, South Korea was able to finally restructure their entire economy and raise living standards. After reading this piece, I am curious as to whether something of the sort can occur in other under-developed countries around the world that also lack natural resources and a democratic form of government. Could they use similar techniques as South Korea did at the start of their economic takeoff? Or was South Korea’s development unique to their geographic location and close proximity to other strong economies, like Japan? In this case, it would be much harder for certain countries in Africa or Latin America, that are more directly surrounded by poor neighbors, to break out of their current cycle of economic hardship.
Toggle Commented Sep 17, 2020 on Miracle on the Han for Friday at Jolly Green General
Krugman’s explanation of the high development theory and its evolution since the mid 1900s clarified much of my confusion regarding the connection between the traditional and modern sectors. According to the high development theory, the modern sector is more productive than the traditional sector and pays higher wages than the traditional sector as long as the market is large enough and enough labor is available. However, without modernization on a sufficiently large scale, the modern sector will not take off and will not be self-sustaining, thus prolonging a poverty trap. This theory advocates for a Big Push and makes a powerful case for government activism in order to allow the modern sector, and its heightened productivity, to take off. Although his explanation was clear, I would be interested to hear more about Krugman’s opinion of the theory. Would he agree with the theory’s call for government activism? If so, what forms of government activism are most effective to successfully introduce the Big Push? I would also be interested to hear more about the history behind the high development theory by hearing which countries successfully align with the theory. This depiction would further illustrate the story of high development, rather than leaving it in the abstract through models and analogies.
Toggle Commented Sep 10, 2020 on Krugman for Friday at Jolly Green General
Wang’s piece about the significant impact institutional barriers play in economic growth speaks to the extent to which politics and economics are inextricably intertwined. This entanglement became especially clear to me when Wang began discussing the countries that are development laggards in section 4.2. Each of the countries - Comoros, Côte d’Ivoire, Ghana, Kenya, Uganda, Argentina, Brazil, Chile, Greece, and the Philippines - have experienced major recent political upheaval, often involving a complete change in government type and leadership. Further, it was noted that many of these countries did not even receive their independence until late into the 20th century. This lack of political stability and good governance leads directly to harmful institutional barriers in these countries. Wang finds that “unnecessary protectionism, government misallocation, corruption, and financial instability have caused the trapped and the lag-behind countries to be unable to develop along a sustainable growth path” and have created barriers to capital markets, trade, and industrialization. On the other hand, the fastest growing economies are found to be driven by “export-led open policy, FDI incentives, solid infrastructure for business, and promotion of high-tech industries” alongside pro-market reforms in governance. In finding that the economic cannot be separated from the political when it comes to a country’s development goals, I am reminded of the Sen reading from earlier this week. Sen notes the advantages of democratic pluralism in creating incentives for good and fair governance, while also noting that it is “not surprising” that no famine has ever taken place in a country with a functioning democracy (16). Both Wang and Sen’s pieces convey the momentous role politics plays in economic development.
Toggle Commented Sep 3, 2020 on Reading for next Friday at Jolly Green General
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Sep 3, 2020