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sosc 1420 final (12-1 fighting poverty finance: credit, saving and…

- - - - “smooth consumption, eg, buy house
    - - income growth/ raise productivity e.g invest
  - - - revolution: Grameen Bank
        (pioneer of micro finance)
        (small loans to poor) but high interested rate
        
        help ppl who are poor and not bankable,
        -> high repayment probability and low default rate
        
        Group & Regular meetings: Social Capital
        
        achieve better outcomes through mutual cooperation, more interactions,
        
        know group member much more -> more likely to pay back
        
        weekly repayment: discipline, enough money to pay back, save small amount, but time consuming
        -> not really work
        
        group liability
        
        screening effect
        (women only wanna join reliable women)
        
        monitoring effect
        
        drawback: excessive presure
        
        so no anymore, but group lending with individual liability
      - impact
        
        when lend money to the poor, should benefit > cost
        
        good for poor? may debt traps
        
        more likely to start a business
        
        more expenditure to durable things
        
        less spend on temptation goods
        
        not different when lending women, do not improve their empowerment to child welfare
- - - - increase edu rate in primary schools
      - more years of schooling, higher output (higher productivity and wages), US as the benchmark
      - Easterly Critique: edu related to GDP?
        
        no, it depends diff countries, human capital no related to growth rate
        
        good view?
        
        no,
        
        does not take quality into account
        
        quantity grow faster than quality
        
        if grow very fast-> real bps arise(civil war)
    - - difficulty: only cross-country data-> each countries experience is different
        better to look individual benefit of edu
      - e.g US
        more years of edu -> higher wages
        but it is not causal effect, e.g intelligence, families
        so look at the educational expansion
  - - - children who less be low birth weight and die, save children life
- - - - welfare programs for those with no/little income
        unemployment insurance
        disability insurance
        housing and families subsidies
      - government transfers in disposable incomes
        
        richer receive less social benefits
      - Anti-poverty effect of welfare program
        
        social security for income maintenance,
        reduce poverty, economic stability
        
        market income:without any insurance and help
        
        Equity-efficiency trade-off
        e.g France: 75% tax rate
        
        Redistributive money from the rich to the poor
        
        economic inefficiency, both rich and poor decrease working intensity, rich shift out in countries with high tax rate
        
        reduce labor supply or savings incentives in non poor
        reduce labor supply incentives among poor
        
        increase tax tax, working hours decrease dramactically
        
        Cash versus In-Kind Transfers
        
        cash transfer, make gover less control
        
        in-kind: towards need better
        
        optimal program
        
        solve poverty
        
        more incentive to leave this program,
        
        politically sustainable(not excessive burden the tax payers)
        
        -> these three can not be simultaneously met
        
        US: reduce support for non working ppl
        increase support for working ppl
        
        inorder to increase working incentive of the poor
        
        avoid “welfare dependent''
        
        Changes in cash assistance
        -> change assistance program for single mother
        
        PRWORA change
        
        abolish AFDC program that give cash to single mother
        -> TANF block grant
        
        cash support are temporary (60-month time limits)
        
        strengthened work requirements
        
        change in tax program
        
        increase min wage
        
        no work no EITC( a refundable tax credit)
        
        increase work incentive due to EITC and min wage changes, decrease their utilization of assistance program
        
        Poverty fell among families headed by single women
  - - - Economic growth stimulate job creation
    - - increasing labor supply
  - - - indicator targeting-> observe income:
        
        Geographical location (living in a poor area),
        
         age (children, elderly),
        
         landlessness in rural areas
        
        pbs: non poor may benefit while many poor exclude
        
        new transfer programs combine with indicator targeting: using community group to enhance poor capital
        
        FFE, especially female benefit propotionally (missing women)
        
        balance a current poverty-reduction against an
        objective of reducing future poverty, more benefit to children
      - Self-Targeting
        
        target the poor, encourage the poor parti and reduce dependency on the program, when impose a cost that only poor are willing to incur
        
        e.g EGS employment guarantee scheme (finance by tax), assure income support in rural areas by providing unskilled labor
        
        fixed rate, work 7 hrs per day can earn min wage
        （provides an income stabilizing role/ income smoothing e.g prevent making costly adjustment from slack months)
        
        decreases the variability of labor earnings
- - - - merit award in Kenya (for girl)
        
        subsidize to next level or this level is free
      - bg: girls have high drop out rate
        when edu cost is not high
        
        GSP-Girls’ Scholarship Program:
        Busia and Teso
        (in Kenya districts)
        1/2 given GSP, 1/2 not
        grant for family and school fee, public recognition depend on high test scores
        
        outcome: raise girls test score
        positive program externalities:
        (peer effect) lower score girls and boys also benefits
        attendance increased
    - - bg: high absent rate (low incentive)
        (Teacher salaries) - older ts want higher salaries
        (Better working conditions) - worse envir less incentive
        (Monitoring) - social network-> higher teaching motivations
      - no incentive to present:
        low risk fired for no absence & Political power
        so only 1/3 teaching
      - experiment: work more learn more(monetary incentive) in india
        camera: monitor teacher's attendance
        
        teachers present more, attendance increase,
        -> ss learning outcome was improved
        
        ts absence rate decrease dramatically
        
        monitoring increase incentive
- - - - nature of reversal: Industrialization, especially US has high industrial production per capita
      - revers reason
        
        colonizer
        
        densely populated (exploit the population-> labor)
        
        sparsely settled
        
        tropical diseases (high motality)
        
        better health environment (extractive institution)
        
        British colonies, large population-> high GDP
        
        institutional reversal
        
        Initially richer societies ->worse institutions due to exploited them
        poor/ sparsely settle-> better institution
        
        extractive institutions
        =
        places where Europeans did not settle
        -> dun care much about aggregate output or
        welfare
        places with large populations
        -> coerced and employed, taxed
        those colonies: no constraints on elites and less right in major population
        
        slavery, forced labor and tribute
        
        e.g Colonies in the Caribbean and South America (Brazil)
        produced by low cost on large slave plantation, small elite+ 85% slave
        -> power based on rulers not large number of settlers
        
        sparsely settled and non-urbanized
        areas: large numbers of European migrants developed the laws and institutions to protect themselves
        ->more conducive to investment and economic growth.
        
        US/Canada:
        pro-market institutions:
        
        few american to establish colonies
        
        favor mixed farming -> limited economies of scale in production
        
        not much ppl to have big labor, not so much to extract
        -> development based on european descent who have high /similar human capital
        
        school institution: higher,
        larger population have household, but low in mexico
        
        evolution: greater inequality-> elite were able to set up rule that disproportionate shares of political power, advantaged members
        -> persistence
        
        but if start with greater homogeneity
        -> more democratic
        -> invest in public more
        -> broad access to property right and econ opportunities
        
        not related to european culture
        
        high population density of european descent -> low GDP
        
        institution
        
        Contracting institutions
        
        Affect the enforcement of contracts
        
        Property rights institutions/ political
        
        distribution of political power
        
        if elite power is no constraint
        
        may block new technology
        
        weak property right of others
        
        measure
        
        Risk of expropriation徵收 by government／ elite
        
        low constraints in countries with extractive institution
        
        legal cost of private contract
        
        in colonizer, not all countries receive same institution, US better
        european better institution-> settle the place and become large proportion in population
        
        Europeans more likely to set up
         better institutions in places they settled.
         Better institutions in areas with disease environment
        favorable to Europeans.
        
        most European deaths from malaria and yellow.
        
        mortality vs institution
        
        high capture 俘獲 mortality low expropriate risk
        
        happen in 19th century
        
        new world societies enjoy high level of products
        european dominated the major productive
        opportunities before 19 th, but after 19th new
        opportunities arisen in industry and commerce
        -> industrialize->democratic institutions allow free-entry by new entrepreneurs
    - - the institution pattern will persistence
      - affect income
    - - in piety, in commerce, and in freedom
  - - - poverty is structural forces or social policies
      - cause of poverty
        
        Political forces
        
        wrong welfare policies
        
        Economic forces
        
        Discrimination in employment, wage
    - - the characteristics or behavior of
        poor people
      - cause
        
        family(upbringing), individual (behavior), communities(common patterns of life,)
    - - Economic transformation (restructuring)
        
        from a manufacturing economy to a service economy
        demand of manufacture worker become low
      - housing
        
        high housing prices(restrictions on land supply)
        
        HK is the most unaffordable housing price in the world
        
        government main from land receipt收入 -> deliberately slow-paced program of selling land lease rights
        
        property market oligopolies: Cheung Kong; Sun Hung Kai Properties; Henderson Land Development ; New World Development Company
        
        economy dominated by the property developers
        
        HKSAR deside land supply
        
        before 1999, annual Land Sale Program
        in 1999, an Application List system
        
        only 24*29 % as residential land
        
        Tung Administration: 1997: “85,000 policy”, increase flat supply but Asian financial crisis hit property prices, negative equity of flat owners, so stop this policy
        
        Tsang Administration:refuses to resume regular land auctions
        ->causes housing shortage
        
        Leung Administration: abolish application list system-> gover have better control land supply
      - discrimination
      - poverty culture: ppl grow up in poor may not have strong wished to break up poverty cycles
      - welfare dependency
        
        reduce pp.'s motivation to work for finance independency
- - - - health situation improve after treatment
        have better outcomes
      - Highly Infected Areas Saw
        
        Greater Declines in Hookworm
        
        greater increases in ss attendance
        
        faster income growth
    - - solutions
        
        donors help to buy the vaccine
        
        beauty commitment
        
        if no develop vaccine, no sponsor
        
        policy makers address market forces that R&D of vaccine
        
        govern buy vaccine to provide incentives & ensure vaccine can help ppl in need
        
        Advance Market Commitments - AMCs
        (public health funding):
        stimulate the development and manufacture of vaccines
        
        helps sustained use of the vaccines
        / guarantees a long-term price
        
        support (GSK) and Pfizer to develop vaccines
        
        Innovative funding
        (International Finance Facility for Immunisation) IFFIms
        
        raise funds to buy vaccines for developing countries
- - - - lower skills, labor intensity in developing countries
    - - culture (beliefs, attitudes and preferences)
        
        pitfall of correlations: natural experiment of history
        
        Chinese experience
        
        similar culture to HK,taiwan,singapore,
        but Chinese is communism, others are capitalism (prospered),
        
        China stagnated but change after 1978, protection of agriculture, enterprises, foreign investment,
        -> China increase economic incentives
        
        South versus North Korea
        
        North are more industrialized in past, South now
        higher GDP in South now
        
        different political and economic institutions
        
        North: Communism
        South: Capitalism
        
        huge diff in econ developments,
        but North and South were culturally homogeneous
      - institution
        
        People need incentives to invest and prosper,
        institution give incentive when offering opportunity to achieve
        
        institutions hypothesis: man-made influence
        
        types of institutions
        
        econ
        
        property rights, contract enforcement
        
        higher protection, higher GDP
        
        high control of corruption-> high GDP
        
        high constraint in politician -> high GDP
        
        political
        
        form of government, constraints on politicians and
        elites, separation of powers,
      - geography (envir,locations)
        
        French philosopher Montesquieu: too hot, ppl are passive, lazy, no curious, vigorous(in cold places)-> democracies; lazy(in hot places)-> despot
        
        Jeffrey Sachs:
        some places are geographically favor,
        tropical eco-zone-> poor
        temperate-> rich
        
        Jeffrey Sachs:
        geo favor: natural resources , coastline/sea,
        good to agricultural, human health
        
        in tropical: reduce productivity of crops, higher rate of burden infestious disease
        
        colder countries, countries away from equator are richer
        higher latitude, higher GDP
        
        geography hypothesis: nature force is primary factor in poor countries