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As mention previously, according to Ravallion the main lessons Africa can learn from China are on the importance of developing economic policies suitable to their sociopolitical and economic context, and of the stability of government institutions. Both of these suggestions have been consistently present in our class conversations and in the literature we have read. I am particularly interested on the institutional aspect and especially on the effects of early institutional establishment during the creation of the state on a country’s current condition. Based on historical accounts, there seems to be a consistent pattern of weak early institutional establishment (influenced by repression, corruption, and subordination) and current economic, social and political challenges for countries such as in Africa and in Latin America. This is somewhat related to the path-dependency theory which suggests that once a country follows an initial path the cost of taking a different path is high. In contrast to developed countries, developing economies have suffered a history of subjection and repression as well as weak institutional processes during state formation. The reversal of these weak institutional establishments, in my opinion, is one of the biggest challenges for Africa and Latin America. Although China has experienced poverty (especially in rural areas), inequality and other economic challenges like Africa, it is not as historically wounded as countries in sub-Saharan Africa. Even if there are similarities between China and Sub-Saharan countries, the fact that they differ in their historical institutional formation, in my opinion, makes less convincing the applicability of Ravallion’s message for Africa based on China’s experience.
Toggle Commented Dec 5, 2013 on China and Africa (Econ 280) at Jolly Green General
This article touches on the disproportionate effects of climate change on the poor. Due to the lack of resources and the conditions in which they live, low-income individuals are less likely to protect themselves from environmental externalities than the rich. Additionally, as highlighted in the article, the impact of climate change will be significantly larger in the tropics, where most poor countries are located, than in other regions. Therefore, the poor in poor countries will face a double burden due to their own situations and due to the specific situations of their countries. They are bearing the highest cost and getting the least benefit from it (compared to people in developed countries), yet they have the least power to do something and implement environmentally sustainable policies. In contrast, developed countries have the resources and capabilities to act and reverse future detrimental effects from climate change, but because they are not bearing as much of the cost from environmental damage as the poor are (at least in the present), they have less incentives to take action. As a result, although environmental efforts have gained some support, they have not received enough of it to truly take larger-scale and effective actions needed to reverse future environmental consequences.
One of the key lessons I have learned from this class is about the importance of understanding the behavior of the poor before making any kind of conclusions about its rationality. It is often the case that in the surface the choices of the poor seem irrational, but if one looks deeper they are quite rational. This article on agroforestry is one of many examples from class that reminds us about the significance of understanding the poor. It provides a hypothesis for why farmers in Mexico have low adoption rates of agroforestry, which is an agricultural technique that has been proved to increase productivity. While at first one might think that a farmer will adopt a more productive technique for the sake of maximizing profits, this is not the case. There is other element such as the degree of certainty that the farmer has on the technique which affects the utility of the farmer (in class we talked farmers as utility maximizers and not profit maximizers). I found really interesting that the article used human capital as a proxy to measure certainty and explore the relationship between it and the adoption of agroforestry. One of the biggest challenges of reducing or eliminating poverty is understating this phenomenon in itself. Articles like the one on “Agroforestry Adoption in Mexico” provide us with the kind of information that is needed before going into policy implementation. Very often policymakers come with a solution for poverty without actually understanding the poor. In my opinion, this lack of understanding is one of the main reasons we continue to struggle with poverty.
Toggle Commented Nov 17, 2013 on ECON 280 Paper for Thursday at Jolly Green General
In the “Child Labor” article, the author highlights that one of the main costs of child labor is related to the “reduction in investment on [a child’s] human capital” because children go to work instead of going to school. The author also mentions that poverty leads families to send their children to work instead of school and therefore these children are more likely to remain poor during adulthood as well. While I think that the author’s statements apply to the U.S. or other developed countries where there are solid school systems, I think that the validity of his statements varies in developing countries especially in rural places where the school system is weak. For example, in poor villages in Africa there are schools (infrastructure) but teachers’ attendance is low as well as the quality of education. So I question: In such circumstances, would a child’s human capital really increase if he or she attends school? Would going to such low-quality schools really decrease a child’s vulnerability to face poverty during adulthood? I would argue that the answer to both questions is no. Although the child might benefit emotionally from interacting with other children, if we look only his or her ability to increase earnings in the future, I would argue that by attending low-quality schools the child would be losing time and reducing his/her opportunity to get higher earnings in the future. However, if the child works for example in his or her family’s farm or business- which it is often the case according to the author –he or she would acquire practical labor skills which would make him or her a more attractive laborer and therefore increase his or her earnings potential in the future. Therefore, one could argue that under these circumstances child labor is better than children going to school. Am I then saying that we should encourage child labor? Of course not, I am against child labor. But the reason I raise the questions above it is because even if child labor is successfully banned or if parents have enough incentives to send their children to school, this would not reduce or eliminate the main cost related to child labor. Even if children go to school instead of going to work, if their schools are of low quality (which is usually the case in rural areas where child labor is more predominant), children will continue to bear the cost associated with child labor as their human capital will not increase—their human capital can even decrease since children would stop learning practical labor skills from working.
Toggle Commented Nov 7, 2013 on Corel Office Document at Jolly Green General
As echoed by previous posts, the article by Sachs and Malaney highlights many of the themes that we have touched in class such as women's empowerment; the relation of high-mortality rates and increasing fertility rates; the effects of human capital on economic development; human capital as a function of education, health, and nutrition; among others. Although, I thought about Malaria as a detrimental phenomenon for society, this article highlighted the worrisome compounding negative effects that this disease has on society. For example, in countries where Malaria is prevalent people have incentives to have more children due to the high mortality rates (especially among young population).Simultaneously, high fertility rates not only decrease incentives for parents to invest in their daughters’ education , but as parents have more children, the investment on education allocated to each child declines as well . Even if parents provide good quality education to their children, if the latter have Malaria they might benefit less from access to education. As mentioned in the article, Malaria has been associated with reductions in children’s cognitive abilities. Just by looking at the effects of Malaria on education, one can see that the negative effects of different factors add together and therefore exert an even greater negative impact on education. Reading this article increased my understanding of the huge effects that Malaria has on society, besides those related to health.
According to the Microfinance article, evidence shows that while microfinance does not take many people out of poverty as the public initially thought, it seems to have a modest effect at least on some people. The initial view about microfinance as a vehicle to take people out of poverty seems overly optimistic. As Amartya Sen has pointed out in his literature, poverty involves more than just a lack of income. He defines poverty as a lack of capabilities or a lack of freedom to choose what a person can do or be. According to this definition, one can see that while Microfinance provides access to credit to the poor, it is far from providing the capabilities to take people out of poverty The multidimensional nature of poverty makes this phenomena difficult to not only combat but to simply understand. It is therefore expected that the effect of microfinance on reducing poverty would be quite modest and only applicable to certain groups of people. Other interesting points that we discussed in class were on the kind of questions that motivate researchers and their methodology to test the hypotheses. It seems that for a long time economists have been focusing on big questions such as on the determinants of poverty, factors that reduce poverty, on the effects of trade on inequality, among others. Although, economic research has provided some understanding about these issues, research alone has not been as successful in providing tangent results that lead to effective policy implementation. This is in great part due to the complexity of these issues. However, through works from people like Esther Duflo, economists are asking more focused questions for example about the effects of deworming children on educational outcomes, or the effects of distributing mosquito nets (for free or at a certain cost) on eliminating malaria, among others. These targeted questions allow not only a more nuanced research approach but they also open the possibility to find their answers through randomized studies. The results of these empirical studies seem to provide tangent conclusions for immediate policy implementation. In class we mentioned that one of the major obstacles of these randomized studies is the cost. However, as people find the value of these studies in policy implementation, the benefits might surpass the cost. I am curious to see whether the field of economics, and specifically the field of developmental economies, will move more towards this more focused and experimental approach.
Toggle Commented Oct 24, 2013 on Microfinance (econ 280) at Jolly Green General
I totally agree with Shelby’s exemplification of the failure of the “Washington Consensus” in Latin America, particularly in the Argentinian case as she points out. As the authors’ highlight, the main tenets of the Washington Consensus which are property rights, market oriented incentives, and macroeconomic stability are necessary for economic growth. However, there is not a specific way to achieve these goals. The IMF, the World Bank, and developing countries themselves have failed to realize that what has worked for the U.S. does not work to ignite growth in developing countries. Even what has worked for China will unlikely work in Latin America because they have different institutional structures specific to their socioeconomic and political context. For example, China’s Household Responsibility System is unlikely to work in Latin America due to the rampant corruption, and to the fact that the few land owners owning most of the lands are usually in government positions. Latin America needs another set of approaches that still need to be discovered. Unfortunately, current policy implementation in Latin America is mostly based on theories and approaches developed by Americans and Europeans economists and not by Latin American Economist who should be more familiar with the countries’ socioeconomic and political situation. After reading this paper I am surprised that the IMF and the World Bank continue to enforce the standard recipe to “stabilize” the economies of developing countries in spite of knowing that its implementation might be more detrimental than beneficial to the targeted countries. This makes me doubt about the true function of these institutions in the world stage.
Toggle Commented Sep 26, 2013 on Growth Strategies - Econ 280 at Jolly Green General
As it has been already pointed out it is surprising to see that poor people who earn less than $1 per day are spending a considerable amount of their budget in alcohol and tobacco (ranging from 2.1% in Papua New Guinea to 8.1% in Mexico ) and in festivals. One could argue that they could use this money for food, education, or even they could put the funds in a savings account in case of a future emergency. Why don't they do so? One possible answer could be related to the importance of maintaining strong ties with family and friends. Poor people due to their economic and social situation lack access to many basic needs and are vulnerable to many aspects of society that they cannot control. Nonetheless, one thing that they have for sure is their family and friends which they see as important support systems that help them deal with many daily challenges. Therefore, festivals and family reunions become important in maintaining and building these strong relationships. As one would expect these gathering often involve alcohol and tobacco. Looking just at the surface , one might tend to judge the choices of the poor to spend their money in “luxuries” per say, but digging deeper one might find that festivals are as in important as food for poor people because while the latter ensures their physical survival the former ensures their emotional survival.
Toggle Commented Sep 12, 2013 on Economic Lives of the Poor at Jolly Green General
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