Development Economics

Racism in America

I. Introduction In August of 2014, a police officer shot dead Michael Brown, a black teenager from Ferguson, Missouri, blowing the lid off a debate about racism in America. Protesters filled the streets, yelling “Hands up, don’t shoot.” The hashtag “#blacklivesmatter” began trending on Twitter. A few weeks before, bystanders Read more…

Development Economics

Are Conditional Cash Transfers Really the Answer?

[caption id="" align="alignright" width="300" caption="Genius"][/caption] A while back I wrote about conditional cash transfers, which are the next biggest thing in development, in a post called "Where's My Money, Fool," titled so as an homage to the curler-wearing drug dealer Big Worm in the movie "Friday." The most successful example of a good CCT program is Bolsa Familia, a government program in Brazil which has helped to increase incomes for poor families by 7 times as much as incomes for the rich (albeit, off a lower baseline).  Brazil has seen its poverty level drop faster than Snooki inside a plastic Zorb-like ball in the Jersey Shore on New Years Eve.  Specifically, the number of people living in poverty has dropped from 22% to 7% over the last decade. The theory behind conditional cash transfers is simple.  The government pays poor families for meeting certain requirements.  Attendance in school and maintaining standards of healthcare are rewarded with monthly payments.  As long as the family achieves the targets of the program, they are eligible for a payout.  The outcome is two-fold.  First, the family gets immediate relief in the form of cash payments from the government, which can be put toward food and education.  Second, the underlying conditions that cause the unbreakable cycle of poverty to unbroken - lack of education due to the demands of meeting financial needs for the household - are addressed, as financial incentives eliminate the need to pull kids from school to help their parents earn income for the family.  An explanation from the New York Times:

The program fights poverty in two ways.  One is straightforward:  it gives money to the poor.  This works.  And no, the money tends not to be stolen or diverted to the better-off.   Brazil and Mexico have been very successful at including only the poor.  In both countries it has reduced poverty, especially extreme poverty, and has begun to close the inequality gap. The idea’s other purpose — to give children more education and better health — is longer term and harder to measure.  But measured it is — Oportunidades is probably the most-studied social program on the planet.  The program has an evaluation unit and publishes all data. There have also been hundreds of studies by independent academics. The research indicates that conditional cash transfer programs in Mexico and Brazil do keep people healthier, and keep kids in school.
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Development Economics

The Problem of Rural Education in the Philippines

In this journal, I have discussed the relationship between education, poverty alleviation, and economic development. The link is critical and the three are self-reinforcing.  Education creates greater opportunities for the youth, who go on to work decent jobs in cities like Bacolod, Manila, and Cebu.  The children remit money back to the parents, who spend on home improvements and the tuition fees for the younger siblings.  College-educated individuals are much less likely to end up impoverished (about 1 in 44).  Trade schools also create opportunities, with only one in 10 people with post-secondary degrees living below the poverty line.  Unfortunately, the ratios drop precipitously after that.  One in three high school graduates and half of elementary school grads are impoverished.  Here are the sobering education statistics: (more…)

Development Economics

Who is Poor? Defining Poverty

This was written for the Kiva Fellows blog.  Read the original here. How do you define poverty?   A basic needs index looks at whether (and to what extent) fundamental needs are fulfilled – food, water, shelter, clothing – and whether people have access to critical services – education, information (newspapers, etc.), sanitation facilities, healthcare, financial services.  This is an absolute poverty calculation, which uses a standard threshold that can be compared across countries and continents.  Another method is to use a national poverty line, usually a percentage of median income.  For example, if the median income is $10,000 USD, and the poverty line is 60% of that, any family making below $6,000 is technically below the poverty line.  This is a relative poverty calculation, because it is country-specific.  Using this method, it doesn’t make sense to compare across countries, since the poverty line in wealthier countries with higher median incomes will allow for greater purchasing power than in much poorer countries.  In microfinance (and development in general), you often hear about the percentage of the population that lives on less than $1/day – the definition of extreme poverty – or $2/day, or some other defining statistic of poverty. Statistics are important for microfinance institutions (MFIs).  When you know what you are dealing with, you can more effectively target the population with programs that are proven to work.  It is important for an MFI to understand its clients and where they exist on the spectrum of poverty.  This is actually more difficult to assess than you’d think.  It is not feasible to ask clients how many dollars a day they spend, or even try to determine their income relative to the rest of the population.   Instead, MFIs use social performance metrics – simple tools to help them to define exactly what they are as an organization and whom they are serving.  They are basically proxies, which, when examined in aggregate, give the MFIs a profile of the poverty level of their clients. (more…)