Links round-up

Posted on April 4, 2016 by

Hi all,

 Even in an Easter-truncated week, the internet continues to astound me. There has been an absolute glut of brilliant economics this week, and a couple of truly glorious April Fools jokes as well – some I can’t share with you all, unfortunately, and some which I suspect may not actually be April Fool’s Jokes, in which case I shall be banging my head against the wall for a few hours.

 1.       Not all migration involves boats and horrific Daily Mail headlines. Justin Wolfers has a great write-up of research that shows that the economic gains to internal migration, especially for those who don’t want to move, can be enormous. This is a really interesting one, which agrees with my priors. ‘Home’ has a lot of value that has nothing to do with how much you earn or what your life-chances are; and sometimes, being forced away from ‘home’ can lead to you becoming, materially, much better off – though your overall welfare is much less clear. David McKenzie discusses this in the developing country context here. This really reinforces two things, for me: first, that productive people are the made from productive places, not vice versa; and secondly that the process of development, which involves so much change, much of it forced upon people, is incredibly distressing, though necessary in the long run.

2.       Speaking of the long run, Tim Harford explains the same insight in a very different context: what happens when all those adjustments economists assume away as ‘short run phenomena’ take a generation or two to work through (never forget Keynes: “In the long run, we’re all dead”)? Well, in the case of trade it means that many people are rationally, very much against it – even if it does make a long run difference to ‘their’ (really their descendants’) standards of living. Oh, yeah – one side effect is you get a nutter running for President, babbling about ‘winning trade’.

3.       A really interesting search-match model that explains both occupational segregation and differential earnings for women compared with men, summarised fairly accessibly on the CSAE website (and by fairly accessibly I mean, find an economist and ask him to translate some of this). I’m not sure I buy this. I think there are simpler explanations of the same phenomena, and in general, I tend to gravitate towards them. But this is interesting, and I probably need to think more deeply about it.

4.       Hmm. I’m a China optimist, but a friend of mine, who does a lot of work with Chinese firms (as in business, he’s not a researcher) sees more trouble on the horizon than I do – not in terms of growth, per se, nor in terms of the risk of total economic collapse as the pessimists keep anticipating, but in the form of widescale labour unrest fundamentally changing the way in which Chinese firms can work. This could be good news for the rest of the world’s poor, if it leads to the ‘great outsourcing’ we keep predicting.

5.       Markus Goldstein brought some of his colleagues to DFID recently to give us some excellent presentations on the most recent findings from the Gender Innovation Lab’s portfolio of research. I strongly recommend everyone who has to come to an organisation of policy makers like ours read his tips on giving a good presentation. They’re excellent. We all find our own interests fascinating. That doesn’t mean everyone else does. It’s not like I impose any of my hobbies on you, do I? By the way, if you only click on one link this week, make this it.

6.       Lee gets angry. Always good.

7.       Finally, a sad link and a happy one. Sad first: an amazing Lithub article about suicide notes. It opens with the last lines Virgina Woolf ever wrote, which are completely heartrending. And since there is no way I’m going to sign off on that link, here’s Taylor Swift, falling off a treadmill.

 Have a great weekend, everyone!

 R

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Links round-up

Posted on March 26, 2016 by

Hi all,

What, you didn’t think a piffling matter like a four-day weekend would cause a break in the economist-geek continuum, did you? No, this week has been chock full of great economics and random geekery, so I couldn’t in good conscience deny you your fix (well, that and I had to log on for work anyway, and this makes it that little bit more bearable – and I’ve just finished my last task of the day, so this is going to be brief and perfunctory, but at least it’s free).

1.       I absolutely loved this extended essay about the obscure economist Nathaniel Leff, his surprisingly prescient analysis of Brazil’s economic history (yes, prescient: he postulated things the data couldn’t tell him, but with modern statistical techniques, we’re finding that many of his postulates were true), and his sudden disappearance from academia. It takes in economics, friendship, religion and discrimination, with a nice excursion into the political economy of research: why do people wind up doing the research they do? There’s a blink-and-you’ll-miss-it cameo from Albert Hirschman, too, about whom one day a movie must be made: the economist who fought in the Spanish Civil War and rescued refugees in occupied France.

2.       Another excellent long read about a very different character: Russ Roberts, the libertarian who lets the left talk, and gave Keynes a fair hearing in a battle rap with Hayek (no, that’s not a joke, it’s awesome). I like Russ. I’m no libertarian, but I share his belief that economics is far too important to be the preserve of a few geeks who can think in abstract mathematics; and I believe that people need to understand things, not just know them. Tony Atkinson makes the same point in his book, Inequality: facts do not change minds if those minds are harbouring a strong theoretical construct that those facts don’t agree with. You have to explain to them why the facts are what they are, and that’s the principle behind almost all of the writing I do.

3.       One of the things about understanding things is that it’s not good for the ego. Getting the framing right usually involves being wrong for most of the time you think about a topic, but becoming less wrong over time. Christie Aschwanden at 538 has been documenting this process for scientific inquiry as a whole, and her latest piece has a great title: Failure is moving science forward.

4.       Of course, geekery is also driving science forward, and Dave Evans applies his very special brand of concision and precision to the CSAE Conference summarising what seems like 120 papers in one sentence each (part 2). A brilliant whirlwind tour of the latest research, but don’t forget to click through on the ones that catch your eye, especially if they disagree with your priors.

5.       Oh, god, it’s a sweet feeling when your priors are not only confirmed, but given a Presidential medal, high-fived by John Lennon on the left hand and Lemmy on the right, and awarded a UN pension in perpetuity (this may be an over-reaction). Cherokee Gothic reports on a potentially very significant methodological flaw in the literature on institutions in year dot and current income levels. What, you mean the number of mosquitos in 1687 isn’t the primary determinant of our incomes three hundred years later? My god, how?!

6.       Speaking of UN pensions, and having once worked for UNDP (though, in my defence, I was deployed as TA to a Government), this is horrifyingly familiar. Senior UN official leaves because of the bureaucratic black hole that sucks in money, dreams and good intentions. My only comment is that he was extremely lucky if he found recruitment as quick as 213 days there.

7.       Yeah, so this is kind of scary: we may already be locked in to the bad-case-scenario for climate change. I should have checked my discount rates 12 years ago.

8.       Risk diversification 101, World Series of Poker edition.

9.       Lastly, because I want to be a happy person and I’m about to have three glorious days off, two links that made me smile hopelessly: the Guardian has picked up LitHub’s wonderful Interview with a Bookstore series, and Hull Libraries tweets about some of the odder jobs reported in the 1881 Census. Is ‘Proprietor of midgets’ basically ‘Owner of the Golden State Warriors’?

 Have a great long weekend, everyone!

R

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Why self-employed women earn less: Building a search-match model with data from Ghana

Posted on March 23, 2016 by

In many African labour markets, women are over-represented in sectors where earnings gaps are largest. For example, in urban Ghana, self-employed women outnumber self-employed men by a ratio of nearly 3:1, but male earnings are double female earnings in that sector (at the median). In wage jobs, by contrast, there are nearly 50 percent more men than women, but their earnings premium is far smaller (around 25 percent at the median). Controlling for worker heterogeneity can only partially account for these patterns.

Figure 1 – Sex Earnings Gaps across Different Sectors of the Economy

Figure1Log of weekly earnings for women and men in different sectors, using pooled data from CSAE’s Ghana Household Urban Panel Survey (2004-2013). Earnings gaps are larger in the least formal sectors of the economy, even though this is where women work most.

In our 2016 CSAE working paper, we build a search-match model, which can help explain these trends. Our model allows workers to choose between wage-employment, where they must match and work with a firm, and self-employment, where they work for themselves. However, there are frictions associated with moving into these jobs, so individuals queue while they wait in a third unemployment sector.

Vitally, we allow for worker heterogeneity along two dimensions. Workers differ in terms of their marginal product in self-employment, determining not only how well they fare as an entrepreneur, but also their bargaining position with firms, and hence their potential wage. However, the labour force is also split into women, who face discrimination, and men, who do not. We introduce discrimination in a very simple way. Although firms are homogeneous ex ante, women’s matches face some extra probability of being immediately destroyed. In effect, this is like each firm having some fixed proportion of its HR team being prejudiced. If a woman’s application ends up with a prejudiced member of the HR team, it is rejected.

Solving and simulating this model by drawing on urban Ghanaian data (collected by CSAE 2004-2013) not only recreates the empirical picture described above, but also produces one particularly striking result: adding wage-sector discrimination into the model produces earnings gaps across all sectors, even if the underlying ability distribution for women and men is identical. This is surprising, because it is not clear a priori where the extra ability ‘goes’. Even if able women are pushed away from wage-employment, surely they must go somewhere else!

To resolve this puzzle, we can think in terms of Roy’s model of occupational choice. Adding discrimination into the model pushes women even further away from the job in which they have comparative advantage. In fact, our model’s equilibrium is characterised by finding ‘cut-off’ or threshold levels of ability, above and below which workers will only accept certain jobs. The most able workers will only ever take self-employment opportunities because, relatively speaking, wage jobs are not worth their time. The inverse is true for the least able workers. Meanwhile, workers in the middle of the ability distribution will be willing to take both types of jobs – since it takes time for either type of job opportunity to come along, it does not make sense for these workers to fully specialise. It turns out that these ability cut-offs are endogenous, so adding discrimination into the model causes them to change.

This has direct implications for the make-up of each sector. Firstly, unemployed women are less able, on average, than unemployed men, because it is the lower ability female workers that find it harder to get a job when firms discriminate. For exactly the same reasons, the self-employment sector becomes flooded by lower ability women – the least able have to consider self-employment, given the extra frictions associated with obtaining wage work. Finally, the average earnings of female wage employees is reduced by discrimination, because it is higher ability wage-employed women who are pushed away from the wage sector first. By adding discrimination into the model, these women are suddenly willing to take both wage- and self-employment job opportunities, even if those self-employment jobs had not been in their interest beforehand.

Why should we care about these results? Overall, they remind us that we need to think about the labour market as a whole, when trying to understand differences between women and men in self-employment. In our model, although the largest earnings gap arises amongst the self-employed, this has nothing to do with the overall ability distribution for women and men, but also nothing to do with extra frictions, such as credit constraints, within the self-employment sector. Instead, the main market failure occurs in the wage sector, where earnings gaps are far smaller. Thus, if the mechanisms in our model match reality, simply targeting training and micro-finance initiatives at the female self-employed may provide only a partial fix to earnings inequality in the informal economy.

Figure 2 – Self-Employment in Urban Ghana

Figure2Caption: Self-employed women and men line the streets around Makola Market, Accra.  

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Links round-up

Posted on March 19, 2016 by

This is the first instalment of a weekly round-up of interesting economics and statistics, development writing and general marginalia produced by Ranil Dissanayake, blogger in absentia at Aid Thoughts and now a senior economist at the Department for International Development. It’s an entirely personal, often sarcastic, and occasionally profoundly grumpy sideways glance at the world. It is most definitively not representative of the organisation for which he works, and has evolved from occasional ranting e-mails sent to colleagues into a mailing list to the great, the good and the crushingly insignificant of the development world. Ranil has agreed to publish his links on the CSAE website, on the condition that no-one takes it too seriously, gets too offended or assumes these views represent anything but his own, rather odd, mind.

 

Hi all,

 This week’s links may be punctuated by a shriek of joy as Joe Root orchestrates the most obscene chase in the history of English limited overs cricket. Oh, DAGUMMIT! As soon as I typed that, he holed out to Kagiso Rabada, but he’s done the hard work. I hope. He has, right? Oh god. This is what it’s like to support the English cricket team – basically a random emotion generator gone haywire. Funnily enough, that’s a pretty good place to start this week’s links…

 [As an aside, this week’s links are also being published, for the first time, on Oxford’s Centre for the Study of African Economies website. I’m not going to self-censor or change my style; and I’m certainly not going to stop sending this out as an e-mail.]

 1.       Reading Tim Harford’s blog this week was a little like watching a very high-functioning and extremely economically literate tantrum unfold piece by piece. It started with Tim in optimistic mood – outlining the opportunity the most recent UK budget had to inject some consistency and sanity into the mish-mash of random nudges and incentives that constitutes the UK’s tax structure. He then got annoyed when the actual budget didn’t live up to its promise by taking exactly the kind of fudge he warned against on the sugar tax (funnily enough – fudge would not be taxed under the actual ‘sugar tax’). And then he took a moment, and exploded into a full-blown tantrum, deciding that we don’t need a budget anyway. He’s correct, of course, but it’s never going to happen. Still, it was great fun to watch. [And England just won! But not before trying to give me a heart attack.]

2.       Duncan Green reports on the tentative re-emergence of industrial policy as an approach to economic development, summarising some rather different thoughts from Ha-Joon Chang and Mushtaq Khan. I’m basically sympathetic to this agenda, but with a big caveat: we know this can work brilliantly, and we know it can fail spectacularly. What we don’t really know is what the right amount/type of support is in places that fall short of the ideal political context for rapid development – or even how we tell how far from ideal they are. I’m willing to be convinced, but I need a bit more than anyone out there is giving. And if anyone mentions malarial zones 200 years ago or settler mortality, I’m going to scream. Sort of related: a new working paper from Karthik Muralidharan, Jishnu Das and colleagues on the fiscal cost of poor governance –looking at teacher absence in India.

3.       On poverty, but in a different context – Tyler Cowen reports on a new paper that suggests that the poor should probably be moving around a bit more to find better prospects for increasing their incomes, concluding: “Ultimately we wish to protect people, not places per se.” I couldn’t agree more, and by the way, would it be awkward if I pointed at the large boat-shaped elephant in the room, filled with poor people looking for exactly that?

4.       Ben Casselman at FiveThirtyEight illustrates one of the points I get very boring about: countries or firms don’t outsource or attract jobs, per se. They attract or outsource production, and this distinction has huge policy relevance. If you care about unemployment intrinsically or for inequality reasons (and I strongly feel you probably should), then doing things that make labour an attractive part of a production function is pretty important. Note – some people think I’m saying we should make capital more expensive. No. Poor countries need way more investment. However the choice of technology we embody through investment can be influenced. [And because Trump-face appears on that blog, here’s a reason to believe].

5.       Speaking of technology, yet another 538 link – a really good discussion of the AlphaGo overreaction here. Here’s the thing: Go is so complex that people aren’t very good at it, compared to any objective scale at which 10 is ‘can solve the game’. That means much of the human competition comes from very human soft-skills – reading the intentions of your opponent from his moves and expressions, psyching them out with aggressive opening gambits, learning about them – sometimes over the course of months. You can’t do any of that with a computer, so all it needs are slightly better heuristics on an objective level than a human to beat them most times. In a way, this is less impressive than Deep Blue beating Kasparov. That said, Andy Haldane is a bit more worried, so maybe I should be too. Can they make a robot that loves cricket and economics?

6.       Brilliant article about Mervyn King and central banking. I worry that finance is so different today than it was when most currently rich countries developed that this is just a fundamentally more difficult world for a firm in a poor country to ever get long term finance.

7.       Finally, I love the RPI updates. People are so gloriously weird: apparently there are people who eat ‘microwave rice’, which has my tastebuds recoiling in horror; and the stack of writeable CDs I found while moving house are now basically useless. Dammit.

Have a great weekend, everyone!

R

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Dust and Death: Evidence from the West African Harmattan

Posted on March 12, 2016 by

Environmental events can have profound health-related, social, and economic impacts. These have the potential to be particularly salient in poorer countries, where individuals have fewer strategies available for coping or adapting to shocks. A new paper by Adhvaryu et al (2016), ‘Dust and Death: Evidence from the West African Harmattan’, finds perilous effects of natural seasonal dust pollution on infant and child survival across West Africa. The study also surfaces new evidence on how parents respond to environmental events, and how the impact of these events has changed over time.

The dry season in West Africa is marked by the harmattan phenomenon, in which strong trade winds pick up vast amounts of fine particulate matter from the Sahara and deposit it across the region. Previous studies in public health have suggested that the occurrence of the harmattan may be linked to meningococcal meningitis outbreaks, but the broader impacts of this environmental phenomenon on child survival and wellbeing have not been studied

Harmattan._Dust._Dakar.SenegalMorning dust obscures the urban view in Dakar, Senegal – By EquipeTKNal (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

Adhvaryu et al. use a methodology that combines geospatial measures of dust exposure for twelve countries in West Africa with detailed birth histories from the nationally representative Demographic and Health Surveys. Their baseline approach compares children from the same village exposed to different levels of dust in utero by virtue of when they were born, while also netting out variation in mortality that might be due to timing of birth, country-level trends in mortality, or varying seasonal patterns in typical mortality across the countries in their sample. Even narrower comparisons of children born to the same mother but exposed to different levels of in utero dust give similar results.

Adhvaryu et al. show that, while there are deleterious consequences of in utero dust exposure, economic adaptation has led to lessening impacts. In particular, they find evidence that parents provide health investments for children exposed to dust after birth that may mitigate the mortality effects of exposure and the morbidity outcomes for survivors. Second, they show that the lethality of dust has diminished over time. This is not because of reductions in the amount of dust to which African children are exposed, since dust exposure shows no trend over time. Rather, the declining impact of dust exposure on child survival is concentrated in countries where economic development has improved and general health conditions have strengthened. While not conclusive, this last piece of evidence implies that economic growth—and in particular, growth in health spending—may render countries more able to mitigate large-scale environmental shocks.

 

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Fetal Origins of Mental Health: Evidence from Africa

Posted on January 19, 2016 by

Authors: Achyuta Adhvaryu, James Fenske, Namrata Kala and Anant Nyshadham

Mental health disorders are estimated to make up 13% of the global disease burden (Collins et al., 2011). Poor countries experience the greatest losses, as the vast majority of mentally ill people in these countries go untreated: 76.3-85.4% of those with serious mental illnesses have not received treatment in the last 12 months (Demyttenaere et al., 2004). Additionally, mental illness tends to begin during the teen years or in early adulthood, affecting the most productive years of a person’s life (Kessler et al., 2007). It is thus important to understand the causes of mental illness, and early life conditions are a natural starting place for this research.

Our 2015 CSAE working paper examines the effects of in utero temperature shocks on mental health outcomes across 19 African countries. The results indicate that exposure to temperatures that exceed local historical means increases the incidence of depression and anxiety in adulthood. Specifically, a 10% increase in heat exposure increases depression indices by .05 to .07 standard deviations in the populations studied. These findings are significant not only because of their implications for health outcomes as global warming continues, but also due to the significant role that mental illnesses play in the global disease burden.

We combine gridded historical weather data from Africa with self-reported mental health data from a collection of nationally representative World Health Organization surveys that provide a record of symptoms of depression and anxiety within each population. These data also include the year of birth and geographic location of each respondent. Using this information, the respondents’ health outcomes are mapped against the geographic grid, and by comparing the year and location of temperature shocks to the location of respondents when they were born, the study tests for a relationship between temperature shocks in utero and depressive mental illnesses in adulthood.

As noted above, a significant relationship exists between higher in utero temperature exposure and increased incidence of mental illness in adulthood. The effects of in utero exposure to temperature shocks are most apparent in the incidence of mild and moderate depression, rather than severe or extreme depression. Troublingly, the increased reports of depressive symptoms do not coincide with increased rates of treatment. Additionally, the effect of temperature shocks is just as strong in recent years as in past years, indicating no evidence of adaptation.

Global warming is expected to lead to more temperature shocks in Africa (IPCC, 2013). As the effects of global warming lead to higher rates of in utero exposure to high temperatures in years to come, our results suggest that that rates of depressive mental illness will continue to rise. It is vital that developing countries in Africa increase mental healthcare options and the accessibility of those options, especially for poor populations. These results are similar to those of other studies that have predicted adverse consequences of global warming for health in poor countries, although these studies have focused primarily on physical rather than mental health.

2530914336_8fffd34a5a_oPregnant woman at UNICEF-supported health center in Sam Ouandja refugee camp- Credits: Pierre Holtz for UNICEF | www.hdptcar.net

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The economy wide impact of HIV/AIDS and the funding dilemma in Africa: Evidence from a dynamic life cycle horizon of Uganda

Posted on January 12, 2016 by

Despite remaining a major killer in Africa, the HIV pandemic has been tamed medically into a chronic disease through advances in treatment drugs – antiretroviral therapies (ARTs). However, the full economic costs, over a lifecycle horizon, of keeping people on treatment and implementing prevention measures, are still not fully quantified and are still unfolding. Indeed, the economic effects of the HIV/AIDS disease, and also the economic effects of various interventions need to be better understood. Sub-Saharan Africa (SSA) disproportionately bears the burden of HIV/AIDS compared to the rest of the word. Over 70% of the people living with HIV (PLHIV) are resident in SSA, of which 82% are adults (UNAIDS, 2010, 2014). The commitment by governments to provide HIV treatment (ART) to those who need it constitutes a long-term financial liability which can be conceptualised as a ‘quasi-debt’ liability – see (Collier, Sterck, & Manning, 2015). On the other hand, it is also evident that development assistance for health (DAH) has significantly shifted away from HIV/AIDS and its sustainability is not certain (Institute for Health Metrics and Evaluation – IHME, 2014).

Kabajulizi and Ncube (2005)’s paper is aimed at assessing the long-term economic impact of HIV/AIDS taking into account various modes of funding HIV/AIDS interventions, using a computable general equilibrium (CGE) model. Taking Uganda as a case study for analysis, this paper specifically aims to: (i) predict the economic impact of AIDS through the human resource impact channel and the source of fiscal space for HIV/AIDS impact channel, and (ii) propose policy options for funding HIV interventions in the long-term. Uganda is purposefully selected as a case study to reflect a country with high prevalence rates of HIV and currently resource-constrained but with prospects of future natural resource exploitation. This study extends the previous CGE methodologies by incorporating updating equations that capture the cost impact channels of HIV/AIDS interventions and the source of fiscal space for HIV. Specifically, given the long term debt liability feature of HIV interventions, we explicitly model the increase in government health spending resulting from additional spending due to HIV/AIDS financed by foreign grants, direct taxes or foreign borrowing. We report the impact on economy-wide wages/rents, sectoral growth rates and GDP shares, the country’s debt burden, in addition to the impact on growth rate in GDP, investment, consumption, exports and imports.

The findings strengthen the case for policy makers to frontload investment in HIV treatment and prevention. There are many benefits for doing so. The results show the negative impact of HIV prevalence in Uganda if government does not implement targeted treatment and prevention strategies. Relative to the base case, the economy experiences an increase in the cost of production from the rising cost of labour, all sectors of the economy shrink and overall GDP growth rates decline while the domestic government debt as a share of GDP rises. On the other hand, if the government intervenes by scaling up treatment and prevention of HIV, the negative impacts are reversed and the economy thrives from a growing labour force supply and resource flows to HIV interventions. Foreign-aid and direct taxation are both potential sources of fiscal space for HIV albeit the differential impacts on sectoral growth and government debt levels. The results demonstrate that there is capacity for Uganda – and other LICs grappling with similar fiscal challenges – to mobilise domestic resources to fund HIV interventions by increasing revenues from direct taxes. Kabajulizi and Ncube also propose that in the short to medium term, aid-for-health be increased in order for government to meet the future HIV/AIDS obligations. The main results are presented in Figure 1 and Table 1.

Figure 1 – Uganda sectoral GDP growth, with and without HIV intervention

blog

Government consumption and investment

The HIV impact on government consumption and investment is varied across scenarios. A notable feature from the results is that the aids-no-treatment scenario compels government to reallocate more resources for recurrent health expenditure as it reduces investment expenditure in health and other government functions. A reduction in capital investment for government functions could be precarious in the long-term, as it may hamper continued provision of quality government services overall.

Government debt: domestic and foreign

The impact on government debt varies accordingly. When government is faced with escalating healthcare costs arising from palliative care for PLHIV, under the aids-no-treatment scenario, government adjusts its spending pattern by reallocating the available resources and borrowing from foreign sources only when there is a shortfall in the budget. This adjustment generates foreign debt as a share of nominal GDP at 8.4% in 2040 (see Table 1). For the same simulation scenario, the domestic debt as share of GDP rises to 21.2% in 2040 under the aids-no-treatment scenario. The result from this paper also shows that additional funding for HIV, whether from aid or from domestic taxation, mitigates the escalation of the debt to GDP ratio. The mitigation in the escalating debt to GDP ratio is made possible by a combination of both lower borrowing rates (and lower interest payments) and the relatively higher growth rates in GDP.

Policy implications

Kabajulizi and Ncube’s research has relevant policy implications. When government undertakes treatment and prevention programmes for HIV, the economy benefits as shown by relatively higher GDP growth rates, when compared to the base. The treatment for PLHIV translates into higher rates of life expectancy of PLHIV as well as increased participation in productive activities for both the infected and affected people. This paper has also demonstrated that the source of fiscal space for HIV has implications for the rate of GDP growth and country’s debt to GDP ratio. Results have shown that the aid-funded and the tax-funded HIV programmes generate similar growth in GDP as well as very similar rates of foreign debt as a share of GDP and the same level of domestic debt as a share of GDP. However, in terms of sectoral impacts by the funding sources, when compared to the base, the aid-funded HIV programmes scenario generates a decline in GDP at factor cost for industry while the tax-funded scenario generates a decline in agriculture. The difference between the sectoral outcomes for each financing scenario is however relatively modest.

Furthermore, Kabajulizi and Ncube’s analysis provides evidence for the case for donors and policy-makers to frontload investment in HIV treatment and prevention, by showing the significant economic benefits from doing so. It has been demonstrated that foreign aid is a valid source of funding HIV in LICs like Uganda. Given the scarcity of resources and the benefits of increasing spending on effective prevention and on treatment as soon as possible, it is desirable that development-aid for health be increased in order to limit the future HIV/AIDS obligations and facilitate the ability of governments to meet these. The paper has also shown that LICs like Uganda have the capacity for domestic resource mobilisation through direct taxation to fund HIV programmes. It is therefore imperative that policy makers – in Uganda and other LICs grappling with similar challenges – devise means to increase revenue for which the most obvious source would appear to be direct taxes particularly tapping into the large informal sector. We recognise that raising taxation is a sensitive political issue. However, taxation that is anchored to quality health service delivery can be attractive to the citizenry. It is therefore crucial that while taxes rates are increased, the quality and quantity of health services should be stepped up.

Table 1 Macro aggregates as share of nominal GDP (%):2009-2040 – Source: (Kabajulizi & Ncube, 2015)

2040
Indicator 2009 base AIDS without additional treatment and prevention (Case 1) AIDS with additional treatment and prevention (Case 2) Foreign aid for government health (Case 3) Direct tax revenue to government health

(Case 4)
Absorption 112.93 98.49 99.41 101.94 106.24 99.58
Consumption – private 79.63 67.69 68.90 67.39 69.20 62.75
Consumption – government 9.72 9.73 10.01 11.81 15.73 15.39
Investment – private 17.76 17.76 17.76 17.76 17.76 17.76
Investment – government 5.52 3.31 2.74 4.98 3.54 3.69
Exports 20.85 29.88 27.77 27.43 20.77 27.09
Imports -33.77 -28.37 -27.17 -29.38 -27.01 -26.67
GDP at market prices 100.00 100.00 100.00 100.00 100.00 100.00
Net indirect taxes 8.19 8.19 8.19 8.19 8.19 8.19
GDP at factor cost 91.81 91.81 91.81 91.81 91.81 91.81
Foreign savings 8.49 6.35 6.14 10.35 6.35 6.35
Gross national savings 15.08 14.72 14.36 12.39 14.95 15.10
Gross domestic savings 10.65 22.58 21.09 20.80 15.06 21.87
Foreign government debt 15.88 14.89 8.40 46.31 13.46 14.01
Foreign private debt 0.03 16.45 17.61 15.24 15.46 15.85
Domestic government debt 17.69 18.34 21.20 16.46 18.02 18.02

 

References

Collier, P., Sterck, O., & Manning, R. (2015). The Moral and Fiscal Implications of Anti-Retroviral Therapies for HIV in Africa. University of Oxford: CSAE Working Paper, Department of Economics, University of Oxford.

Institute for Health Metrics and Evaluation – IHME. (2014). Financing Global Health 2013:Transition in an Age of Austerity. Seatle, WA: IHME.

Kabajulizi, J., & Ncube, M. (2015). The economy wide impact of HIV/AIDS and the funding dilemma in Africa: Evidence from a dynamic life cycle horizon of Uganda: Blavatnik School of Government (BSG) Working Papers, University of Oxford.

UNAIDS. (2010). UNAIDS OULOOK REPORT 2010. Retrieved from Geneva, Switzerland:

UNAIDS. (2014). Fast -Track: ending the AIDS epidemic by 2030. Geneva, Switzerland: UNAIDS.

[1]Research Fellow (RethinkHIV), Blavatnik School of Government, University of Oxford, 10 Merton Street, Oxford OX1 4JJ Email: Judith.Kabajulizi@bsg.ox.ac.uk

[2]Professor of Public Policy, Blavatnik School of Government and Leader of RethinkHIV, University of Oxford, 10 Merton Street, Oxford OX1 4JJ. Email: Mthuli.Ncube@bsg.ox.ac.uk.

 

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Measuring attitudes regarding female genital mutilation through a list experiment

Posted on December 28, 2015 by

Female genital mutilation (FGM) or female genital cut or female circumcision includes all procedures that alter or cause injure to the female genital organs. They are mainly carried out on young girls. FGM is recognized as an extreme form of discrimination and violence against women. Worldwide about 140 million girls and women are living with the consequences of FGM. The WHO estimates that in Africa more than 3 million girls are at risk for FGM annually (WHO, 2012).

Generating knowledge about the causes and consequences of FGM and planning effective policy interventions is a way to eliminate FGM. While there is a vast anthropological and ethnographical literature on the existence of FGM, economists have recently started to study this topic both from a theoretical point of view (Chesnokova and Vaithianathan, 2010; Coyne and Coyne, 2014) and empirically looking in particular at the determinants of FGM (Naguib, 2012; Ouedraogo and Koissy-Kpein, 2012; Molitor, 2014; Bellemare et al., 2015; Wagner, 2015) or at the effect of laws or program interventions against FGM (Camilotti, 2015).

Our recent CSAE working paper attempts to uncover women’s true attitudes towards FGM in Ethiopia, a country where about 74-80% of women are estimated to undergo the painful and unnecessary procedure even though it has been made illegal and is worldwide recognized as an extreme form of discrimination and violence.

The study uses survey data collected on 848 women in the Afar region during 2012 (Figure 1), including some women who had been targeted by a particular NGO intervention, designed to educate people on the harm caused by FGM. The intervention focuses on the dissemination of sexual and reproductive health knowledge and a change in traditional attitudes.

pictureFigure 1: the Afar region in Ethiopia (Author’s photo – contact elisabetta.decao@phc.ox.ac.uk for license)

This research aimed to identify attitudes of women towards FGM. However, eliciting truthful answers when studying sensitive issues, such as attitudes towards FGM, is challenging. If asked directly, individuals may lie or refuse to answer, leading to misleading results. To account for this problem, this paper differs from the existing literature and uses an innovative survey technique called the “list experiment” to measure the attitudes. A list experiment is an indirect way of asking a sensitive question, so that the respondent may reveal a truthful response. The method presents respondents with a list of items and asks to indicate the total number of items with which they agree. The respondents are randomly divided in a control and treatment group. The control group respondents receive a list of non-sensitive items. The treatment group respondents receive the same list of non-sensitive items plus one sensitive item. The difference in the total number of items between control and treatment group identifies the proportion of people in the population that agrees with the sensitive item. In our survey, the control group was presented with the following list of statements:

  1. HIV can be transmitted through witchcraft or other supernatural means
  2. It is acceptable to use contraceptives to avoid pregnancy
  3. In a marriage both partners should decide on how many children they should have

For the treatment group, we added an extra item, concerning female circumcision:

  1. A girl should be circumcised

The contributions of this paper are three. First, it focuses on a new list experiment designed to measure attitudes regarding FGM in one of the areas where FGM prevalence is among the highest. Second, the most recent regression techniques developed to analyse the list experiment and the social desirability bias are used (Imai, 2011). This allows determining the existence and magnitude of systematic reporting measurement error of the true outcome. Third, the list experiment is used to study if respondents targeted by a NGO intervention are more or less likely to misreport their attitudes.

The main results are the following (see Figure 2). Firstly, the list experiment shows that educated women are less in favour of FGM (-41.2%, p-value=0.004) compared to the illiterate women. Secondly, when the results of the list experiment are compared with the results obtained with the direct question to test the social desirability bias, we find that uneducated respondents underreport their attitudes by 16% (p-value=0.013). This indicates that illiterate women seem to be less willing to share publicly their real attitudes concerning FGM support. The educational level may affect incentives in being cut. If being cut increases the chances to get a better husband (Chesnokova and Vaithianathan, 2010), we may argue that uneducated women have more to lose if they do not favour the practice, while educated women have better chances in the job market and depend less on marriage (Ouedraogo and Koissy-Kpein, 2012; Molitor, 2014). This can also be reflected by the never married women who underreport their support towards FGM by 27% (p- value=0.065).

resultsFigure 2: Estimated proportions and difference in proportions between list experiment and direct question by education and by NGO targeted status.

Another interesting result concerns the NGO effect. By comparing the estimates obtained with the direct and indirect questioning, we find that women targeted by the NGO intervention underreport their support towards FGM when the list experiment is used to ask their opinion instead of the standard direct question (the difference is 12%, p-value=0.060). It is possible that the respondents in the NGO targeted areas conform to the expectations of those who provided the program treatment. The NGO campaign aims at changing the local FGM customs and this may increase the social pressure around FGM resulting in a stronger incentive to reveal a biased answer.

Is the NGO effect measured with the list experiment different enough from the one measured with the direct question that we can say with confidence that the NGO intervention may not have actually changed people’s attitudes, but rather how respondents report it (social desirability bias)? In this paper we can only estimate the underreporting due to social desirability bias. We cannot claim that the NGO intervention is not working in changing people’s attitudes and therefore behaviours. Our analysis is not an impact evaluation of the NGO program. To evaluate the intervention we would need to have pre- and post-intervention data on NGO targeted and not-targeted individuals. Then it would be possible to study if the NGO treatment effect is measured with error by comparing the answers to a standard survey question (direct question) with the ones obtained with a ‘validation’ survey question (e.g., list experiment) (Blattman et al., 2015). This would tell us if the conclusions about the impact of the program are affected by how the sensitive outcome is measured. Moreover, it would be even more useful to evaluate the intervention after a long period of time so that actual behaviour (e.g., cutting young girls) can be observed and compared with different measurements of attitudes. We leave this for future research.

Lack of empirical evidence on the support towards FGM, and most importantly lack of understanding of how biased direct questions can be, make our study the further step to a future line of research that aims at focusing more on how to measure sensitive outcomes. We believe this is especially important in the context of policy impact evaluations.

In conclusion, we suggest that both quantitative survey methods, such as list experiments, endorsement experiments or randomized responses, and qualitative survey methods, should be added to surveys, such as the Demographic and Health Survey for example, to measure if respondents misreport their attitudes or behaviours when the outcome of interest is sensitive. They could be applied to other stigmatized health topics, such as, for example, domestic violence or sexually transmitted infections.

The authors:

Elisabetta De Cao: University of Oxford, Centre for Health Service Economics & Organisation University of Oxford, United Kingdom. Corresponding author: elisabetta.decao@phc.ox.ac.uk

Clemens Lutz: University of Groningen Department of Innovation Management & Strategy University of Groningen, The Netherlands.

Funding source: NWO/WOTRO, grantnumber: W07.72.2011.115

References

Bellemare, M.F., Novak, L., Steinmetz, T.L., 2015. All in the family: Explaining the persistence of female genital cutting in West Africa. Journal of Development Economics 116, 252–265.

Blattman, C., Jamison, J.C., Koroknay-Palicz, T., Rodrigues, K., Sheridan, M., 2015. Measuring the measurement error: A method to qualitatively validate survey data. NBER Working Paper No. 21447.

Camilotti, G., 2015. Interventions to stop female genital cutting and the evolution to the custom: Evidence on age at cutting in Senegal. Journal of African Economies, 1–26.

Chesnokova, A.C., Vaithianathan, R., 2010. The economics oc female genital cutting. The B. E. Journal of Economic Analysis & Policy 10, 64.

Coyne, C.J., Coyne, R.L., 2014. The identity economics of female genital mutilation. The Journal of Developing Areas 48, 137–152.

Imai, K., 2011. Multivariate regression analysis for the item count technique. Journal of the American Statistical Association 106, 407–416.

Molitor, V., 2014. Family Economics in Developing Countries. Ph.D. thesis. Universita ̈t Mannheim.

Naguib, K., 2012. The effects of social interactions on female genital mutilation: Evidence from Egypt. Working Paper, Boston University.

Ouedraogo, S., Koissy-Kpein, S.A., 2012. An economic analysis of female genital mutilation: How the marriage market affects the household decision of excision. Unpublished Manuscript.

Wagner, N., 2015. Female genital cutting and long-term health consequences – Nationally representative estimates across 13 countries. Journal of Development Studies 51, 226–246.

WHO, 2012. Female Genital Mutilation, Fact Sheet 241. Technical Report. World Health Organization.

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Natural Resources and Conflict in Africa: Isolating Facts from Fiction

Posted on November 24, 2015 by

The Causality Question
Evolutionary biologists have long argued that competition over scarce natural resources is one of the key drivers of violent conflict within and across species. The competition in Africa appears to be over the revenue generated from scarce natural resources which often leads to violent conflict. Chilling examples of conflict in Angola, Democratic Republic of Congo, Rwanda, Sudan and other resource rich regions of Africa often tempts scholars into arguing that resources cause conflict. Figure 1 somewhat visualises this narrative whereby a rebel in Angola is seen to be guarding a diamond mine. Yet establishing causality has remained elusive largely due to the obvious limitations associated with cross-country studies and the lack of useful data for Africa.

 combat-resources1

Fig 1: A Rebel Guarding an Illegal Diamond Mine in Angola

The sketchy and weak evidence have not prevented scholars from speculating on the potential causes of conflict. Some have argued that armed conflict is often the result of greed rather than grievances. For example, access to an oil rig or a mine could provide lucrative financial opportunities to rebel leaders to build and sustain rebel organisations which would encourage armed conflict. This could override atypical social motives such as inequality, political repression, and ethno-religious division. Even though intuitively appealing, these theories and explanations do little in terms of resolving the issue one way or the other. For that we would require hard evidence which could be interpreted as causal. Our recent CSAE working paper embarks on a project to address precisely that.

The Study
In particular, the paper aims to systematically explore the causal effect of giant and major oil and mineral discoveries on internal armed conflict onset and incidence in Africa at the grid level corresponding to a spatial resolution of 0.5 × 0.5 degree covering the period 1946 to 2008. Using geocoded data on resource (oil and mineral) discoveries and conflict the paper is able to construct a quasi-natural experiment to establish causality. In other words, we are able to test whether giant resource discovery as an exogenous news shock has any bearing over conflict onset and incidence at the local level in Africa. While doing so, the paper uses a novel geocoded dataset of resource discovery at the grid level. In particular, the new dataset is able to distinguish between 11 different minerals[1] and oil discoveries.

The popular discourse both within the academy and the press is that competition over resource wealth in Africa is the root cause of armed conflicts. Yet this is not borne out in our grid level geocoded data. A quick snapshot of the continental map of mining and conflict locations in figure 2 reveal very little correlation between locations of resource discovery and armed conflict onset. In fact contrary to the conventional wisdom of resource riches triggering conflict in Africa, we find oil and mineral discoveries significantly reduce the likelihood of conflict onset up to ten years post resource discovery in a simple pooled cross-section set up with a sample of 47 African countries drawn from the Peace Research Institute Oslo Grid (PRIO-GRID) dataset over the period 1946 to 2008. The effect remains negative but statistically insignificant or weakly significant in most specifications when we control for grid-specific fixed factors and time varying common shocks. We observe little or no heterogeneity in the relationship across resource types (minerals or oil), size of discovery (giant or major), pre and post end of the cold war, and quality of national political institutions measured by Polity2 score. We also analyse the effect of resource discovery on conflict incidence using a panel of 47 countries covering the period 1989 to 2008. Even though the negative effect of resource discovery on conflict incidence remains in a pooled cross-section set up, the trajectory of the coefficient appears to be somewhat different once we control for grid and year fixed effects. The effect stays negative for the first four years post discovery and then it turns positive and peaks at eight years post discovery. This could be due to a decline in the incidence of ongoing conflict up to four years post discovery news shock. Beyond that point production starts in these newly discovered locations which trigger an increase in the conflict incidence. The heterogeneous effects of discovery and production appear to be consistent with the observation that the prospect of future production affects conflict onset and incidence less than the actual past production.

onset_discovery_crop

Figure 2: Oilfield and Mineral Discovery Locations and Armed Conflict Onset

The obvious question here is via what channel resource discovery affects conflict. Natural resource induced higher income at the local and national levels could improve state counter-insurgency capacity and reduce individual incentives to fight. Alternatively, natural resource induced higher state revenue could incentivize capture and trigger conflict. Evidence appears to be favoring the former theory rather than the latter. Our analysis finds that resource discovery (oil and minerals) improves luminosity at the grid level which in turn reduces conflict onset and incidence.

For the technically minded, our identification strategy relies on the exogenous variation in the discovery dates of giant and major mineral deposits and giant oil deposits. Our dataset codes a mineral deposit as giant if it has the capacity to generate at least USD 0.5 billion of annual revenue for 20 years or more accounting for fluctuations in commodity price. Similarly, major mineral deposits are those which could generate an annual revenue stream of at least USD 50 million but not as long life as a giant reserve. A giant oil or/and gas (including condensate) field is defined as a field that contains at least a total of 500 million barrels of ultimate recoverable oil or gas equivalent. Even though it is possible to identify the area where minerals or oil are likely to be found using geological data, it is not possible to accurately predict the timing of giant and major discoveries. Therefore, the discovery dates of giant and major reserves are exogenous. One might argue that politicians and government could manipulate the announcement of the precise timing of discovery. Our data is immune to such possibility as the discovery dates are independently verified and documented using multiple sources.

Lessons
In spite of her colonial and post-colonial history as a supplier of raw materials, a vast majority of African natural wealth remains untapped. These resources are expected to be exploited over the coming two to three decades amid increasing global demand for raw materials. The expected steady depletion of natural resources and the favorable global commodity prices presents Africa with an opportunity to harness this wealth for improving state capacity and living standards. Our research suggests that both of these factors could significantly contribute towards eradication of civil conflict from the African continent.

References
Arezki, R., S. Bhattacharyya, and N. Mamo (2015). “Resource Discovery and Conflict in Africa: What Do the Data Show?” CSAE Working Paper No. 2015-14, University of Oxford.

[1] The minerals are gold, silver, platinum group elements (PGE), copper, nickel, zinc, lead, cobalt, molybdenum, tungsten, uranium oxide.

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Ethics in Development Economics

Posted on November 5, 2015 by

wspus

On 3rd Nov we had a seminar presentation by Johannes Haushofer on a RCT in Kenya. In this experiment, some households  in villages is Western Kenya were given unconditional cash transfers of either USD 404 or USD 1525. The researchers measured psychological wellbeing and found, unsurprisingly, that the lucky ones were happier and that their unlucky neighbours were unhappy. The paper is aptly titled “Your Gain is my Pain”. During the seminar everybody appeared to be trying to understand the identification strategy and thinking of ways to criticise it.

I was just overwhelmed by a sense that this type of research should not be done at all. No matter how clever the identification strategy is. Am I the only one to think that is not ethical dishing out large sums of money in small communities and observing how jealous and unhappy this makes the unlucky members of these tight knit communities? In any case, what do we learn from a study like this? The results indicate that we should not single out households and give them large sums of money. So I hope this puts an end to unethical RCTs like this one.

 

The picture is taken from http://www.wspus.org/2015/07/how-progressive-ideas-protect-inequality/

 

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