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Month: February 2018

February 16, 2018 (links edition #45)

Can cash transfers increase the trust that citizens have in their government… and even help it work a little better? Yes they can, according to a new paper (and accompanying blog) by Evans, Kosec and Holtemeyer. In 2010, Tanzania launched a pilot conditional cash transfer program, with a randomized roll-out in half of a set of 80 villages. After 2.5 years of transfers, beneficiaries – relative to potential beneficiaries in the waitlisted villages – report a stronger belief that their elected village leaders can be trusted in general, but not in appointed bureaucrats. Beneficiaries are more likely to report that local government leaders take citizens’ concerns into account, and that their honesty has improved over time. Notably, this increased trust does not translate into political activity. Beneficiary households are no more likely to vote in Village Council elections, or attend more Village Council meetings. The research even suggests that the program improves record keeping in the government, but only in sectors linked to transfers (education and health) (h/t Dave Evans).

The International Social Security Review journal has a special issue with 6 (ungated) articles on human rights and social protection. I particularly enjoyed the piece by Alfers et al that explores how to reconcile ‘productivist’, as they call it, and rights-based approaches in informal settings. More on productivity: Ufbal et al examine the impact of soft-skills training for microentrepreneurs in Jamaica. In particular, they compare the effect of two training courses, with one focusing on soft skills only (including 10 classes on personal initiative and persistence) and a second course combining 5 classes on soft skills (personal initiative) with 5 classes on traditionally recommended business practices. Results? There is some evidence of increased investments, adoption of business practices and increased profits, but with no difference across treatment arms.

Let’s stay in LAC: it recently occurred to me that as we think of ‘graduation’ programs (aka platform for economic inclusion, CGAP model, etc.), a variant of that asset-based model is housing transfers. This is often connected to the research stream around the role of rising aspirations in development – that is, whether achievements by our neighbors can spur ours. In this regard, a new paper by Galiani et al evaluates a housing program running in a number of informal settlements in El Salvador, Mexico, and Uruguay. Specifically, they examine a program providing basic, pre-fabricated houses (an 18 square meter house made of insulated pinewood panels) for extremely poor families living in slums. The house costs less than $1,000 and beneficiary families pay 10% of that cost under flexible installment schedules. The core finding is that boosting aspirations through the visible gains of neighbors wears off pretty quickly, i.e., a decay rate of 38% per month.

Urbanization is also the subject of a nice article by Frick and Rodriguez-Pose. By analyzing the evolution of urban concentration in 68 countries from 1985 to 2010, they confirm the stylized fact that a range of developing countries are ‘urbanizing without industrializing’. This means that more urbanization in Africa is likely to come with more congestion instead of agglomeration economies, calling for new ways of looking at secondary cities and periurban areas as primary generators of productivity. This seems also the main conclusion of new research on structural transformation by Haile on West Africa and by Christiaensen et al on Tanzania.

Since I earlier mentioned aspirations, do human capital decisions respond to the returns to education? Kuka et al evaluate the effects of the Deferred Action for Childhood Arrivals (DACA) policy on human capital decisions among undocumented youth. They found high school graduation rates increased by 15 percent while teenage births declined by 45 percent. Further, they find that college attendance increased by 25 percent among women, suggesting that DACA raised aspirations for education above and beyond qualifying for legal status.

Some further research on the US, this time on pensions: an NBER paper on pensions by Bronshtein et al assesses the relative strengths of working longer vs. saving more in terms of increasing a household’s standard of living in retirement. The basic result is that, in the US, delaying retirement by 3-6 months has the same impact on retirement welfare as saving an additional 1 percentage point of labor earnings for 30 years (h/t Ruslan Yemtsov).

Moving to Asia, a technical AEJ article (here ungated) by Samphantharak and Townsend shows that poor Thai farmers are engaged in more risky production modes than richer farmers, but are less productive – this is kind of challenges the narrative on low risk-low returns equilibrium, with poverty being a result of the poor’s inability to engage in higher risks activities (e.g., see here). On a different type of risk, a fascinating new WD article by Howe propose a new model to understand the development of famines. Key elements of the model include ‘pressure’, ‘hold’, ‘self-reinforcing dynamics’, ‘famine system’, and ‘rebalancing’. The approach is applied to a range of historical and contemporary crises.

Let’s round up this edition with a global piece: is SOTCs a new name for fragile states? In a new Brookings report, Gertz and Kharas identify the countries least likely to achieve the end of extreme poverty by 2030. They find there are 31 countries that are projected to have poverty headcount ratios of at least 20 percent in 2030 and refer these places as severely off track countries (SOTCs). By 2030, 4 out of 5 people living in extreme poverty will be in these 31 countries. To be clear, 24 out of those 31 are fragile states.