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The more development papers I read, the more fascinated I am with how differing empirical strategies can convey very different results. In the paper, Milovich attempts to address two gaps in existing literature regarding the important link between aid and poverty alleviation. The first includes, measuring poverty from a multidimensional view and the second is understanding the endogenous relationship between aid and poverty. I am more interested in the strategy she uses to address the first gap. Although her results demonstrate no statistical significance when poverty is measured from an income perspective, results are positive when taking a multidimensional view of poverty, which considers indicators related to health, education, living standards. I found her estimation strategy appropriate considering the importance of human capital on economic growth. It also reflects Sen’s capabilities framework, since poverty alleviation is measured by the ultimate well-being of the individual. I’m amazed at how economists are able to creatively provide solutions or amendments to existing empirical work, and produce results that are astoundingly different. This is especially important to note, as she emphasizes in the concluding remarks section, that understanding the impact of aid is crucial to attaining the SDG that aspire to reduce poverty to 0% by 2030. Additionally, it is also important to come to a clear consensus on how to define and measure poverty, so that aid is targeted efficiently and accurately.
Toggle Commented Nov 10, 2020 on Last Post of the Year at Jolly Green General
This paper was very difficult to grasp and it required a lot of thought experiments and discussions with friends for some clarity. My understanding is that many studies fail to control for the decision to issue bonds in emerging countries in response to high interest rates in industrial countries. It seems like the paper first illustrates the relationship between interest rates in industrial markets and the demand of bonds in emerging markets. Since returns on US bonds will be greater with a higher interest rate, demand for bonds in Latin America will go down, bringing the price down as well. However, this relationship is not maintained unless the decision to issue a particular number of bonds is controlled for. Specifically, once an emerging country sees that US interest rates are high, they will issue less bonds in order to bring the price of bonds up. Therefore, if you don't control for this underlying behavior, we will expect interest rates to increase in emerging countries. However, since this mechanism is in place, interest rates are not increasing in emerging countries as much as we expect it to or are decreasing altogether, and therefore, capital flows remain mostly directed towards industrial countries. Because emerging countries are unable to attract capital inflows, their growth is stunted and they remain dependent on industrial country interest rates for growth and are more susceptible to capital flight.
Toggle Commented Nov 6, 2020 on For Friday's Discussion at Jolly Green General
Parker & Vogls' paper on the long-term impact of Mexico's conditional cash transfer program reminds me of my own experience with need-based financial aid. Although, the severity of poverty experienced between me and the observations in the study are different and my financial aid is not conditional, the idea of human capital investment remains consistent. In the absence of aid, I would not have obtained the education I did at W&L and would have probably been enrolled in a community college. Although I would have still had access to some higher education, my returns in the future would probably not have been as high without a W&L education. I would have probably remained at the same social and economic status as my parents and pass down the same structural obstacles I faced as a low-income student onto my children. In the case of Progresa, the paper shows evidence that children whose families were receiving these conditional cash transfers experienced long-term economic and social mobility. This finding suggests that in the absence of the program, they would not have experienced the positive effects that equated or superseded poverty effects on their economic and social development. Just as the government is providing a human capital investment on me to increase my future productivity, Progresa seeks to invest in a poor cohort whose potential productivity may be suppressed by poverty effects. Therefore, Progresa does not only care about present poverty, but it also cares about maximizing future returns by investing in untapped production. This makes me wonder how much intellectual and financial output we have lost due to our reluctance to enhance the economic and social well-being of those in poverty.
Toggle Commented Oct 30, 2020 on For Friday's Discussion at Jolly Green General
Although the paper dismisses the idea of a screening hypothesis when it comes to the increased employability due to education, it introduced some of the reigning arguments against public investment in education. My immediate response to this hypothesis was that the author failed to consider externalities or at least failed to place substantial weight on the social benefits to education. Much of the discussion of education investment in contemporary politics is concerned with the social returns of education. The article addressed that because considering the social costs of education is easier to quantify than the social benefits, the social returns are often lower than the private returns. However, if we were able to construe the social benefits that will most likely disproportionately advantage the poor, we may see that the returns to education are significant. Maybe this inability to recognize these positive externalities by rich politicians stems from their experienced returns from education at the private level. Or it may be their constrained view of economic advancement in which only investments with clear monetary returns are salient. I am disappointed to see politicians continue to threaten the future of public education at the expense of the lower class’s most important mechanism for social mobility. In addition, we have a significant portion of untapped talent sitting through an inefficient public education. If we don’t begin to realize the social benefits of subsidizing education for a disadvantaged population that may host a pool of unfulfilled talent, we may not ever keep up with technological progress that is imperative to society’s well-being and future existence.
Toggle Commented Oct 21, 2020 on For Friday's Discussion at Jolly Green General
Duflo's paper seemed to encompass Amartya Sen's idea of freedom as a means to development. By providing more agency to women, many development indicators such as fertility, infant mortality, and nutrition increase on many accounts. I was especially drawn to the argument that because women have different preferences for priorities than men, they will also have different preferences for policymaking. Despite many stereotypes that frame women as less effective in leadership, women policymakers have demonstrated significant improvements in the well being of women. Even if they do not enforce policies that are specific to women empowerment, the existence of a women in power, influences parents' decisions in educating their children and their investment in their daughters. One important caveat of this vehicle of empowerment, however, determines it imperative to provide quotas and reservations for women so that the implicit bias against women, does not prevent women from being elected in the first place. For a long time, I have been cautious to support affirmative actions as a minority, simply because I felt that people should be elected into a role based on their merit. Yet, if there are systemic barriers preventing minorities, like women from acting on their capabilities, such as having the freedom to participate politically, then it becomes absolutely necessary for positions of power to be elected. After all, if a government is designed to represent the voices of its constituents, that include women, its leadership should have some female representation. Ultimately, providing agency to women is about development, and to elevate the well-being of everyone, women need to have a voice in politics. Just like economics needs more diversity in order to shed like on issues that would otherwise go ignored, women need to be elevated in order to address issues like productive resource allocation, nutrition and child mortality, and education that are pertinent to everyone's well-being. -Stephanie Sezen
Toggle Commented Oct 9, 2020 on Duflo for Friday at Jolly Green General
I did not know what to expect when I read Epplin's paper. I didn't know much about Land Grant Universities, and I especially didn't understand its importance in expanding education. What interested me the most was how Epplin provided a link between agriculture economics and education. Ultimately, the goal of economics is to understand market failures and Land Grant Universities acted as a solution to barriers to education through government allocation of land to education. One remark by Eggin that stuck to me the most, and probably the most relevant to today’s economic issues was his incredulity at contemporary government’s neglect of education. With the founding father’s of the country adamant about extending education across class, it’s hard to believe that a cohort of politicians that are so adamant about preserving constitutional values have underscored the value of education. It seems that education is an afterthought, rather than a priority to diminish economic difference in the US. A government that is more keen on removing taxes even if it means constraining educational spending appears to behaving contrary to the Founding Father’s vision of equity. Although it’s obvious that the Founding Father’s were not exactly inclusive in their pursuit of education for “all,” their ideas were still salient enough to improve the lives of many individuals who would have continued to squander in poverty had the Morrill Land Grant Act not been passed.
Toggle Commented Oct 2, 2020 on For Friday's Discussion at Jolly Green General
Stephanie Sezen: Quiggin’s argues that “our use of coal, gas and oil could be reduced by 90 per cent, even while living standards increase greatly.” This reminds me of our discussion on Wednesday that if you consider the marginal social costs of coal, the use of coal is actually much more expensive than other alternatives. Moreover, as technology advances, sustainability is no longer an expensive luxury; Electric cars for example are becoming an increasingly popular alternative to high-carbon emission automobiles. The market is already beginning to respond to the demand for sustainable alternatives. Recently, Elon Musk promised to deliver a $25,000 electric car, potentially making sustainability affordable for more people. Furthermore, as Solow explained, the government is going to need to provide proper regulation on the environment as well as provide the appropriate incentives for the private sector to begin to develop sustainable products. In the U.S. there is already a tax credit of $7,500 for cars using battery power alone. If electric cars will be potentially cheaper and there are already government incentives to drive more sustainability, then certainly a transition to sustainability is not infeasible. We certainly have the technological capacity to make sustainability accessible to all, including low-income individuals. Therefore, it’s not a question of “Can we get there?” but “Do we want to?” like many of the readings we’ve discussed have asserted.
Toggle Commented Sep 24, 2020 on Readings for Friday at Jolly Green General
Throughout the reading I was inclined to associate South Korea's ability to transition from an agricultural society to a high-tech industrial economy to their values and traditions. In the paper, the author attributed its economic success to South Korean values for "hard work, disciple, respect for learning, frugality, the importance of family, the emphasis on education, the high esteem in which civil servants were held that attracted talented technocrats to serve the state, and even the willingness to delay gratification that resulted in the high savings rate that characterized the period of rapid economic growth." Moreover, the quality of South Koreans made me think of T.W. Schultz's Quality of People theory, in which the characteristics of the individuals representative of a society is what drives economic growth. Since South Koreans were the ones providing labor to their country, for the centralized government (pre 1996), it was important to cultivate talent. This meant providing incentives to its citizens to pursue higher education domestically or abroad. Many South Koreans would send their children to cities to obtain a better education. I argue. that South Korea's cultural value for education and the country's determination to perform well is a driving factor for its economic success. Of course it's important to note that the operationalization of labor by an extremely heavy-handed government provided a vehicle for the manifestation of talent and enterprise in South Korea.
Toggle Commented Sep 16, 2020 on Miracle on the Han for Friday at Jolly Green General
I thought this article was incredibly insightful in regard to the growing quantification of economics. I have had many people tell me that economics is evolving into a science, based on simplifications and/or assumptions that may not be true. As an observer and student of economics, it seems to me that in order to defend the legitimacy of their ideas, economists have turned to number-crunching and complex formulations to motivate their research. However, like Krugman points out in Hirschman’s “Big Push” model, high development economics could have transformed at a more rapid rate and may have had a substantially greater impact on low-income countries had the criteria for legitimacy been lower. Through Murphy et al.’s publication and model, Hirschman’s ideas soon reigned comprehensible and spawned thousands of papers extending his ideas. This goes to show that although the formulation of social science is helpful to reproduce results, the subjective and convenient importance placed on assumptions like perfect competition prevent the entire picture from being understood. Personally, this paper and its implied criticism of over-formulation of economics reminded me of my own frustrations with classical models in Econ 100. To me perfect competition is nonsense, and yet this principle is treated as a law from physics and for a long time indisputable. Overall, the paper was extremely fascinating and made me wonder where we could be as a society had economists diverged from convention.
Toggle Commented Sep 10, 2020 on Krugman for Friday at Jolly Green General
Stephanie Sezen: Although I appreciated the clarity of the paper and its distinction between the 10 fast-growing countries and the 10 lagging countries based on institutional differences, I thought that its criteria for economic growth was narrow. The article emphasizes the gaps between the 2 groups of countries by focusing on GDP yet overlook the economic disparities within each country. I think it would have been interesting to see how through economic growth/in spite of economic growth, how have these countries attained socioeconomic growth. For example, despite stalled economic growth, through the Bolsa Familia program, Brazil managed to shrink the wealth gap between upper and lower income groups. Brazil also prioritized education and welfare programs to lower income groups. However, it should be noted that although Brazil did manage to raise the lower-class, its efforts either were not adequate or were not sustained. Hence, judging economic growth based on GDP alone is not enough; even the top 10 growing countries continue to endure inequalities that are contrary to socioeconomic growth. Overall, I thought the paper provided a great summary on the economic institutions that impact individual country's capacity to grow.
Toggle Commented Sep 3, 2020 on Reading for next Friday at Jolly Green General
Stephanie Sezen: In From Millennium Development Goals to Sustainable Development Goals, Sachs moves away from conventional focuses for economic development, and introduces concerns for sustainable development that is environmentally conscious and socially inclusive. Personally, I believe that social inclusion is contingent upon economic development and environmental sustainability, and therefore must be central to humankind’s effort to combat global poverty. While countries have dedicated themselves to improve quality of life in their countries and expand their riches, they have neglected to foster economic development in low-income areas. Cities, for example, despite functioning as technological reservoirs for innovation and home to entrepreneurial spirits, are also incubators of inequality. Market restrictions and poor infrastructure have made systemic poverty impossible to escape. Cities' exclusiveness have forced poor individuals to the periphery, pressing their hands against an invisible wall that separates themselves from a thriving interior. Moreover, where poverty lies is oftentimes where human-induced climate change has done its worst damage. Low-income areas not only not have the infrastructure necessary to protect themselves from climate change, but are oftentimes concentrated near coasts where rising sea levels may threaten their livelihoods. In the examples that I have mentioned, negligence of disadvantaged communities has permitted the oppression of the poor in highly economically developed cities and potential extinction of poor communities fighting against climate change. Hence, in order to truly ensure sustainable development we must ensure that this development is inclusive and accessible.
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Aug 26, 2020