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Since the main points of Ravallion’s article have been well summarized by my peers, I’m going to focus my attention on the importance of education to Africa’s growth and prosperity. As Ravallion points out, some of the largest areas of poverty reduction in China occurred in rural, agriculture-based regions. Others have hit on this already so I won’t belabor the point, but this a lot of this rural development was due to more intensive farming practices that increased output and freed up labor for the modern sector. The argument has already been made that economic growth and poverty reduction must begin with the development of rural and agricultural communities because a disproportionate portion of SSAs live here. From my perspective, it seems that while Ravallion harps on the importance of agriculture, the real end goal of countries in SSA seeking to grow GDP is to have well-established manufacturing industries. One of the China’s vast, and undervalued, resources that was already in place ready to be primed for the manufacturing industry was a large population of poor, yet moderately educated people. This is one area in which I feel most SSA countries are lacking. While we often take literacy for granted in the West, being able to read, write, and to basic math is necessary for most “modern” industries. As we’ve talked about in class, Africa is actually disproportionately expanding its secondary and university-level education while growth of primary education remains relatively low. Considering the vast majority of populations in SSA live in poor rural communities, they neither have the access nor the means to take advantage of these higher education opportunities. Just as Ravallion suggests economic development must start with enrichment of the agricultural sector, I also believe that policy goals should focus on investments in educational expansion/improvement in these same communities.
Toggle Commented Dec 5, 2013 on China and Africa (Econ 280) at Jolly Green General
Echoing what others have pointed out, this study illustrates the significance of developing human capital and its effects on economic development. In this case, the study reveals how the level of human capital development in Southeastern Mexico affects farmers’ decisions on whether or not to employ agroforestry as their means of economic production. Agroforestry, a hybridization of forestry and traditional agriculture, is a sustainable (both economically and ecologically) agricultural practice that typically consists of native tree species interspersed amongst annual crops such as soybeans and corn. Trees are the base of the nutrient cycle in tropical ecosystem, and by maintaining them, agroforestry vastly increases the “productivity lifetime” of the soil. These trees also serve to stabilize the soil, reducing erosion and thus benefitting adjacent cropland. Like many of the issues we have talked about in the development of poor communities, the level of development of human capital proved to be the deciding factor in this study as to whether or not the farmer was interested and willing to employ agroforestry on his/her land. Specifically, education, informal (on-the-job) training, and formal training all showed a positive relationship with likelihood of participation in agroforestry. This seems pretty intuitive: the higher one’s education, the better he or she can grasp new concepts; if the farmer can understand how planting a variety of trees and crops can benefit him and his family, he is much more likely to adopt this practice. Moreover, training, both informal and formal, increases the confidence one has in his/her abilities. If the farmer is confident that he or she can successfully grow trees based on past experience, he is certainly more inclined to adopt agroforestry. I agree with Olivia et al. that the best way to successfully promote agroforestry is through programs that enlist farmers who have already established the practice on their farm to A) convince others that it is actually feasible and B) how to successfully use the practice on their farm.
Toggle Commented Nov 14, 2013 on ECON 280 Paper for Thursday at Jolly Green General
In this article, Christopher Udry discusses how high rates of child labor in LICs, relative to HICs, contribute to the underdevelopment of human capital, namely interfering with schooling. Since others have outlined the general messages of the essay, I’ll focus on one issue that I thought was particularly interesting to me: how access to credit affects child labor and education. Child labor is primarily a problem in agricultural regions. Because agriculture is highly vulnerable to stochastic environmental events (e.g. flood, drought, hurricane), the income of poor households that rely on agriculture is highly susceptible to exogenous shocks. Accordingly, when theses households’ incomes take a hit due to stochastic events, parents are force to either reallocate already limited capital within the household to keep the child in school, or pull the child out of school to work. Because the former is often not a viable choice in extremely poor households, many families are forced to put their children to work. The only other ways to keep the child in school, given a decrease in income due to random events, is if the household has access to credit or a means to save. Just as in health care, access to credit allows a family to absorb this exogenous shock without sacrificing the well-being of their children (e.g. education and health). I think that access to credit in agricultural regions would improve investments in education, both directly in times of random events, and indirectly in assuring the security of their investments. That is, (I think) parents would be more likely to invest in education if they have access to credit, even if they never use it, because they will have more confidence in their investment.
Toggle Commented Nov 7, 2013 on Corel Office Document at Jolly Green General
Echoing what other student have said, this essay closely mirrors Duflo and Sen’s papers on women empowerment and economic development in LDC, except in this case the authors discuss the linkages between malaria and economic development. While the prevalence of malaria has been greatly reduced in temperate regions due to lower temperatures, malaria remains a devastating disease in tropical countries, killing over 1 million people per year. Although the causality of malaria and economic development is not very well understood, Sachs and Malaney demonstrate multiple areas of strong correlation between malaria and economic growth. First, there is more of a fivefold difference between countries that have high rates of malaria and those that do not. Similar to women empowerment, malaria affects development beyond direct medical costs and income. Because malaria increases mortality rate, fertility rates are higher in these areas to counterbalance the higher death rate. As a result, households have less money to spend, per capita, on health and education of children. Moreover, female children often receive the short end of the stick when resources are limited; thus, malaria also disproportionately impoverished girls. Another trickle-down effect of malaria due to increased fertility rates is women employment. The more children a mother has, the more time she has to spend and home and less time she has to work, thus reducing household income. Malaria also decreases the demand for tourism and foreign investment due to the aforementioned risks of malaria-infested regions. While malaria remains one of the biggest health problems in LDCs, there are effective mitigation tactics, such as bednets, indoor spraying, and draining of breeding sites. Malaria, like women empowerment, should be treated as an end in and of itself. Even though it has been demonstrated that economic growth generally promotes reduced rates of malaria, policy should seek to prevent the spread of malaria, independent of economic benefits.
In his 1998 article, Eichengreen discusses interest rates and capital flows between developing and developed countries. The first theory he outline suggests that the price and availability of foreign finance is highly dependent on the financial conditions in capital-importing countries. The second theory he discusses hypothesizes that the price and availability of foreign finance is dependent on external financial conditions (e.g. interest rates in U.S.). He argues then argues that linear regression analysis reveals no positive correlation between U.S. treasury rates and demand for emerging-market bonds. His analysis reveals that U.S. interest rates affect investors’ demand for LDC bonds, such that high US interest rates discourage the flow of capital into these markets and low interest rates promote investors to acquire debt in these markets. The key revelation he makes in this study is identifying the importance of fixed and floating rate effects on capital flow, which previous analysis has largely neglected.
Echoing what previous posts have mentioned, Ether Duflo’s article “Women Empowerment and Economic Development” addresses the issue of women’s status in poor countries, and how this affects everything from health, to economic progress, literacy rates, etc. The first question she addresses is a classic “which came first, the chicken or the egg?” dilemma; in this case, the issue is whether policy stimulating development or policy directly aimed at empowering women should be enacted to improve women’s rights. One argument is that policy should be directly aimed at promoting women’s empowerment, and economic development will follow. As Deflo and Sen have illustrated, increased levels of education and employment reduce female infant mortality, increase 0-4 female survival rate, and the resources available to households due to extra income. Another policy choice that Deflo mentions would improve women’s rights is free or subsidized health care. I know this sounds like a silver bullet, but Deflo points out that when health care is free and parents don’t have to choose which children to pay to take to the doctor (e.g. boys), female children are much less vulnerable to unfair gender-bias in terms of health care. Another point that Deflo and Sen made that I found made a lot of sense was that as women’s education and employment levels rise, fertility rates fall. As more and more women are educated and seek job, fertility rates drop because, for one, these women want the independence of having a job (e.g. personal income) and do not want to be “tethered” the raising children when they could be working. Employed women not only have increase economic independence, but also carry more of a “say” in the household decisions, such as how to allocate resources. This again helps women because as Sen points out, when women have a stronger voice in the household, female children are treated more fairly than if the mother did not have a job. Like some of my peers have pointed out (and Deflo), I don’t think we can rely on policy aimed at economic development to promote economic development. That is not to say that women’s rights do not benefit from economic development, for there are many examples of this. However, I believe the development-first policy approach is too weak. First, it relies on the fact that A) this policy will, in fact, promote economic development and B) that the development that occurs will result in the empowerment of women. While there are example of development driving women’s rights, there are plenty of example of economic development resulting in no and negative change in women’s roles. I believe that policy should directly seek to empower women. Although these policies are not failsafe either, I think that direct policy increased the probability of empowering women, if in fact that is the goal.
In this article, Krugman illustrates how an idea on economic development was completely disregarded for years by the mainstream discipline because of an unwillingness to think about development from a non-traditional view (e.g. economies of scale). When I first read this article, I immediately thought of the current global climate situation and people’s views on it. Large contingents of people both don’t understand what’s going on and refuse to attempt to understand the changes in the climate. Another camp thinks they have an idea of what’s going on with the global climate, but lack the necessary empirical data to corroborate their theories. I love Krugman’s line about making clearly untrue simplifications to get something basic enough to understand. This happens all the time in the sciences. However, the lack concrete proof to back up theories on climate change does not prevent us from designing highly complex models that predict climate change. I also think that the unwillingness to acknowledge climate change is in part due to the fact that we really hadn’t looked at weather models on such a macro scale. Just as mainstream economists in the 50s refused to consider a model that used non-traditional assumptions (e.g. economies of scale), research on climate change was slow to take off because we didn’t have the tools to accurately describe it even though it was apparent to us.
As mentioned above, Banjaree and Duflo examine the lives of poor and extremely poor to reveal patterns of their economic choices. The section that grabbed my attention was “How the Poor Earn Their Money” (pg. 10). Specifically, the authors highlight how even in rural areas the poor and extremely poor do not spend the majority or gain the majority of their income from farming their own land. I found this especially interesting because in my mind, if you were poor and lived in a rural area I would assume that subsistence farming would be the predominant source of income (e.g. rural China). However, Benjaree’s study revealed that not only was agriculture was not the main source of income, but also that the majority of poor/extremely poor held multiple occupations, with a median of 2.3 jobs per person in a 3 person home. What exactly am I getting at? Ok so we’ve learned that a) rural poor/extremely poor do not always spend the majority of their time farming, and b) the rural poor/extremely poor almost always split their time between multiple jobs. The authors suggest that the fact that these people oftentimes split their time between multiple jobs leads to an overall lack of specialization among the poor and extremely poor. I think that dividing time between jobs and the lack of specialization of these poor and EP individuals plays a major role in perpetuating what Carson calls the “vicious cycle of the poor”. These people are often multiple working seasonal and daily occupations on an intermittent basis, preventing them from refining their skills in one particular field. As the authors assert, without any specialized skills these individuals are limiting their chances of getting promoted (e.g. earning more money). While I believe education is paramount to the progress of working poor, job specialization would benefit the lives (via increased income) of the poor and extremely poor.
Toggle Commented Sep 12, 2013 on Economic Lives of the Poor at Jolly Green General
This article by Tom Levitt addresses one of the most pressing and widespread threats to biodiversity and ecological integrity: the global-scale overharvesting and depletion of fish species for human consumption. East Asian countries are commonly blamed for these devastating declines in oceanic fish species because fish serve as the primary source of food, due to relatively low costs and (historically) high availability. While it’s easy to point the finger at these countries, they are by no means the only reason for the worldwide fisheries collapse we are currently witnessing. Archaic fishing techniques, such as bottom-trawling and dredging, are also largely do blame for the decline of fish species, not because theses techniques necessarily remove more fish than other techniques, but because the methods they employ cause serious destruction of benthic/coral habitats, regions essential to the ecological integrity of oceans due to primary productivity. Dredging and bottom-trawling are also inefficient fishing techniques because they collect large amount of bycatch, sometime up to 90%. This results in a substantial environmental externality, as “bycatch” fish often die while struggling to escape the net or are so exhausted from the struggle that they are rendered defenseless to prey once they are thrown back into the ocean. Athropogenically-fueled global warming is also to blame for decline in fish species because water acidifies as temperatures rise. This most negatively affects the world’s coral reefs, often viewed as the foundation of ocean ecosystems due to their habitat heterogeneity and biological diversity. One of the most difficult problems facing global fisheries management is the issue of legal control in international/disputed waters. Many fisheries occur in international waters, and are thus difficult to regulate because no one country has the legal right to control fishing regulations. The result is the classic case of the tragedy of the commons. To prevent the global-scale collapse of fisheries, the international community must establish strict, cooperative fishing regulations where stakeholders are incentivized to harvest less fish and punish those who do not follow regulations.
This article discusses the brief history of cap-and-trade systems for emissions in the US, and how political support for such systems has changed. Before reading Richard Schamalensee’s article, I was unaware that the US has had a cap-and-trade system for sulfur dioxide since 1990. Backed by bipartisan supporters in Congress, Republican Presidents Ronald Regan and George H.W. Bush implemented the SO2 emissions cap-and-trade system. However, Republicans in Congress have most recently led the attack against a CO2 cap-and-trade system. Once proponents of market-based cap-and-trade systems, conservatives now vilify them as “cap-and-tax” system that expand government’s role in the free market economy. While these systems undoubtedly increase the government’s role in the market, as compared to no policy at all, cap-and-trade systems are far less intrusive than command and control policies. I find it perplexing that conservatives in Congress (in general) have recognized the need to reduce CO2 emissions, but at the same time stonewall the CO2 cap-and-trade proposal, a systems that has proven to be widely successful in the reduction of S02 emissions. CO2 emissions regulations are on the horizon. It seems extremely shortsighted to try to completely avoid any policy towards them simply because it will raise costs of production. Considering the international movement towards regulation of CO2 emissions and the fact that the cap-and-trade system has already been proven to be vastly successful in the reduction of emissions in the US, it would be in our best economic interests to take a proactive stance towards CO2 emissions policy, instead of delaying the inevitable. If a proactive CO2 emissions policy is not enacted, a command and control policy will be in order to reduce our emissions.
Toggle Commented Mar 8, 2013 on Another Political Football at Jolly Green General
John Whitehead’s short tongue-in-cheek article discusses the Regional Greenhouse Gas Initiative (RGGI) current goals to reduce anthropogenic sources of climate change, primarily carbon dioxide emission associated with energy production. It was postulated in a previous article that the RGGI would actually raise the cap for carbon dioxide emissions, completely undermining the mission statement at RGGI and creating angst amongst environmentalists in the region. These rumors were put to rest however, as the RGGI recently released a report of new goals for tightened restrictions on carbon dioxide emissions, reducing the 2014 CO2 budget by over 40% (from 165→91 mil. tons). Echoing what my peers have said, tightening the 2014 budget not only improves C02 emissions in 2014, but also has far-reaching implications on CO2 emissions through 2020 because emissions caps from are set to decrease by 2.5% each year from 2015-2020 based on the 2014 cap. Let’s say, for example, that the RGGI did NOT reduce the 2014 budget, and kept the emissions cap at 165milllion tons. The total CO2 emission from 2014-2020 would be ~1,072million tons! Now compare that with the total CO2 emissions with the new adjusted budget of 91million tons and the total is ~591million tons of CO2. That’s a difference of over 481 million tons of CO2 emissions from 2014-2020. This recent cap adjustment by the RGGI took really shows their proactive mission towards reducing carbon emissions and took a giant step, a lead that I believe many companies around the country should follow.
Echoing what many of my peers have said, the current cap-and-trade system seems to be effectively reducing CO2 emissions so far. The goal of this system is to reduce greenhouse gas emissions, and an increase in the emission “cap” or ceiling would completely undermine this goal. It seems completely asinine that this is even being considered. It seems almost everyone in the blog is in agreement about this article, so I won’t beat the dead horse: the current cap-and-trade policy has been an effective form of government intervention in reducing greenhouse gas emissions, and increasing this cap would increase greenhouse gas emissions. Opponents of the RGGI argue that “clean” natural gas has eliminated the need for the cap-and-trade system by phasing out dirtier oil and coal. I am very skeptical of this claim: while natural gas may be “cleaner” than coal and oil, in the sense that natural gas production releases less CO2, methane pollution associated with natural gas production is completely unregulated. Pound for pound, methane is 25X MORE harmful to the atmosphere than CO2. That is, methane traps in 25X more heat per unit mass than carbon dioxide. If the goal of the cap-and-trade system is to reduce climate change caused by greenhouse gas emissions, then methane emissions must be regulated. This is especially crucial when you consider the recent boom in natural gas discoveries/production in the Northeast. I believe that RGGI must create a supplemental cap-and-trade market for methane in order to account for this externality. Even if the current “cap” level for CO2 remains, it seems to me that the shift from oil/coal energy production to natural gas is a mere transfer from one externality (CO2) to another (methane). From a market standpoint, this shift appears to be nothing more than a shift from a market where externalities are quantified and producers’ charged to a market where externalities are unquantified and producers are allowed to pollute without paying for the damage to society (MSC≠MSB).
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