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Brad Stephenson
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I am very interested to see how the strategies for making accessible credit for smaller, less profitable companies in developing countries changed between 2011 and the present as they showed small returns in this paper. I believe that a major point of microfinance is to make available credit to the poorest households and companies to generate increased returns in the long-term. While this paper says that these companies and households gained the least relative gains from increased capital, I wonder if any strategies regarding the selection of candidates, the payment methods for these loans, and amounts of funds evolved to become more effective for these groups. I feel that this paper highlights an opportunity for future innovation in microfinance for less profitable businesses in developing countries and would love to learn more about the progression of this section of microfinance. The paper highlights that the issue may also be that these small companies operate in less profitable industries, meaning that increases in available credit may not make a large difference no matter the strategy. It would be interesting to see if any microfinance initiatives successfully aided smaller, less profitable businesses.
One of the main points of the article relates to credit ratings and their importance in global financial markets. For example, when interest rates in lending countries increase, countries with the worst credit rating stop participating in global financial markets. This is a problem as the countries with the worst credit rating are the economies that need foreign investment the most. Lowering the interest rate, however, does not necessarily fix this issue due to differing behaviors of developing economies. Lowered rates encourage foreign investment but does not necessarily guarantee the reintroduction of borrowing countries in the global financial market. This creates a complicated situation that seems difficult to improve without major interventions by lending powers. This paper successfully represents both the lending and debtor parties by presenting the difficulties of both sides. Sadly, I may be completely off base here as this article is difficult to understand since I do not have much knowledge about global financial markets, bonds, or interest rates.
Toggle Commented Nov 18, 2021 on ... at Jolly Green General
It is interesting to see the high rates of return of education in developing countries. While it makes sense that, due to the low level of human capital in these countries, there would be higher rates of return, one may also argue that there are not the positions or institutions available in these countries to fully take advantage of increases in education. While this assumption makes intuitive sense, this article clearly shows that this is not the case. I interpret this study to show that developing countries have the capabilities to utilize an educated workforce, meaning that a lack of human capital is slowing the development of developing economies. This insight should guide policymaking efforts and change the way societies in developed countries think about the situation of developed economies. Additionally, the widespread understanding of the need for education in developing countries would change much of the negative beliefs regarding poorer countries. Many people in the United States and other developed countries view poor countries and their populations as corrupt, ignorant, and lazy. While some know that this assumption of these populations is false, sharing information regarding the actual struggles that these developing economies face will generate more understanding and sympathy for their situation. A push for more education and the eradication of the belief that education is not useful in developing countries due to a lack of development and institutions would greatly contribute to the growth of developing economies.
Toggle Commented Nov 11, 2021 on For Friday's Discussion at Jolly Green General
The connection between disparate spending on male and female children and opportunities in education is an interesting one since it shows a certain society’s motivation to develop the female individuals in their communities. The article studies the possible reduced spending of parents on adult goods depending on whether they have a male or female child. The findings were inconclusive with no differences in spending patterns among parents depending on the gender of the child. This is interesting because education enrollment rates are still quite drastic between male and female students in developing countries. I would assume that the lack of enrollment of girls in primary and secondary schools in developing countries would be related to the cost of education, which begs the question “why is spending on education different than food or healthcare?” I believe that parents may see spending on education as optional, meaning when the family faces economic hardship, female children are taken out of school first. This point is supported by the paper’s finding that disparities in spending in households come, most of the time, from economic hardship. This means that the poverty within the country greatly contributes to the lack of education among women and that the family unit cares and pays for both male and female children similarly. It might be cultural or historical narratives instead that explain the low female enrollment rates in developing country schools. Because of historical patterns of focusing on educating men, women are the first to be taken out of schools. To close this gap, economic development and the alleviation of poverty must take place, or else women will be stuck in a poverty trap where they are unable to get educated.
Toggle Commented Oct 28, 2021 on For Friday's Discussion at Jolly Green General
The connection between farming and global warming is interesting. The agricultural economy seems to be stuck in a global warming loop where increased temperatures decrease farm productivity, which forces farmers to use new technologies that also contribute to global warming to maintain production. For example, to increase productivity many farmers use fertilizers. This fertilizer runs off into bodies of water and then emits gasses into the air, contributing to climate change and making the situation worse for the farmers in the long run. We also recently talked about slash and burn strategies in tropical rainforests. These techniques release large quantities of carbon into the atmosphere due to the cutting down of trees. If tropical farmers were to abandon these practices, however, they would need fertilizer to ensure the correct amount of nutrients are present in the soil. This would also contribute to global warming, decreasing the productivity of the farmer. This paradox for agriculture poses an interesting issue of whether we can not only produce enough food for the world population if the global temperature increases, but whether the global community can develop techniques and technologies that increase the productivity of farms while avoiding contributing to climate change. I believe that we can overcome this obstacle in agricultural production but may fail to do so in time to avoid the possibly detrimental outcomes to subsistence farmers in developing nations. Here is a link to the effects of fertilizer on the air in California: https://www.ehn.org/california-fertilizer-nitrogen-air-pollution-2530258544.html
Toggle Commented Oct 21, 2021 on For Friday's Discussion at Jolly Green General
I found the similarities of labor conditions and the size of companies between South Korea’s and The United States’ development interesting. During the late 1800s and into the early 1900s, The United States was known for its dangerous working conditions, low wages, and long workdays. These conditions are similar to South Korea’s economic development as the country had the longest workweek of any country in the world during the 1980s. Additionally, the large conglomerates in South Korea during its economic development remind me of the “Robber Barons” that controlled the American economy during the late 1800s. These similarities are interesting because I wonder whether these outcomes are necessary to achieve rapid economic development. Cutting costs and improving efficiency is key for any industrial economy as these countries need to be competitive on the world market to increase revenue. To stay competitive, firms provide negative working conditions for their employees. Can developing countries focus both on labor conditions and rapid economic development? Can these conditions be avoided while remaining competitive in global markets? Does a focus on efficiency lead to monopolies and hinder competition?
The connection between foreign intervention in economic markets and development is an interesting relationship. South Korea and Taiwan both received significant help from Japan and the United States, financially and technologically. While investments from these two countries did aid in South Korea and Taiwan’s development, both countries already established efficient financial institutions with a concrete plan for growth. This leads to the question of whether financial and technological investments in developing countries can contribute to GDP growth in countries lacking efficient financial institutions. Wouldn’t inefficient, corrupted institutions misuse the investment and fall back into a development trap? I feel that this may be a distinct possibility, with the leaders in charge of the country reaping most of the benefits from the investment. So, what is the responsibility of economic superpowers? Should these countries invest in reforming these institutions and sending agents of change over to these trapped countries? Can superpowers create institutional change in countries that may not want intervention or the proposed reforms?
Toggle Commented Sep 30, 2021 on For Friday's Discussion at Jolly Green General
In “The Fall and Rise of Development Economics,” the author dives into the confusion caused by “purely verbal exposition” compared to formal models. While I do feel that formal models do, on the whole, communicate their assumptions effectively, I believe that they also mislead individuals. Because the model is formalized and accepted by the economic community, someone may be more carried away by its findings than “verbal exposition.” As the author states in the reading, many intellectuals bypass important economic ideas because they are not formally modeled. This shows that “verbal exposition” is often ignored as it is seen as inferior to formal modeling. I would argue that formal models, even though they state their assumptions, can be equally if not more misleading than “verbal exposition” because models largely have a reputation for being more reliable.
Toggle Commented Sep 23, 2021 on Krugman for Friday at Jolly Green General
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Sep 23, 2021