David McKenzie's blog
- In the Harvard Business Review, Nick Bloom discusses how a lot of inequality is getting driven by differences between firms: “companies are paying more to get more: boosting salaries to recruit top talent or to add workers with sought-after skills. The result is that highly skilled and well-educated workers flock to companies that can afford to offer generous salaries, benefits, and perks — and further fuel their companies’ momentum. Employees in less-successful companies continue to be poorly paid and their companies fall further behind”
- Vox EU piece by Brown, van de Walle and Ravallion summarizing their work in two recent papers on the difficulties in targeting the poor “about three-quarters of underweight women and undernourished children are not found in the poorest 20% of households. This is consistent with evidence of considerable intra-household inequality”
- In news that delighted me and my cohort this week, apparently people in their 40s are the key to a nation’s productivity, embodying “a good balance of experience and creativity”, and “The higher the ratio of people aged 40-49, the faster the economy tended to increase its output per hour of work”. You’re welcome.
- Duncan Green on what aid agencies need to do to get serious about changing social norms
I have just finished writing up and expanding my recent policy talk on active labor market policies (ALMPs) into a research paper (ungated version) which provides a critical overview of impact evaluations on this topic. While my talk focused more on summarizing a lot of my own work on this topic, for this review paper I looked a lot more into the growing number of randomized experiments evaluating these policies in developing countries. Much of this literature is very new: out of the 24 RCTs I summarize results from in several tables, 16 were published in 2015 or later, and only one before 2011.
I focus on three main types of ALMPs: vocational training programs, wage subsidies, and job search assistance services like screening and matching. I’ll summarize a few findings and implications for evaluations that might be of most interest to our blog readers – the paper then, of course, provides a lot more detail and discusses more some of the implications for policy and for other types of ALMPs.
Happy St Patrick’s Day. In honor of this day:
- Forthcoming in the WBER, Catia Batista and Gaia Narcisco conducted an experiment with immigrants in Ireland to see whether making it easier to communicate with their families changed remitting behavior – they find migrants send more money as a result.
- Thank Guinness: as you sip your pints today, remember that your t-ratios and some of the first blocked small sample experiments were invented by W.S. Gosset (aka Student), who served as Guinness’ Brewer-in-Charge of the Experimental Brewery
- Andrew Gelman argues that it can make sense to do design analysis/power calculations after the data have been collected – but he also makes clear how NOT to do this (e.g. if a study with a small sample and noisy measurement finds a statistically significant increase of 40% in profits, don’t then see whether it has power to detect a 40% increase – instead you should be looking for the probability the treatment effect is of the wrong sign, or that the magnitude is overestimated, and should be basing the effect size you examine power for on external information). They have an R function retrodesign() to do these calculations.
- Annie Lowrey interviews Angus Deaton in the Atlantic, and discusses whether it is better to be poor in the Mississippi Delta or in Bangladesh, opioid addiction, and the class of President Obama.
There are a multitude of government programs that directly try to help particular firms to grow. Business training is one of the most common forms of such support. A key concern when thinking about the impacts of such programs is whether any gains to participating firms come at the expense of their market competitors. E.g. perhaps you train some businesses to market their products slightly better, causing customers to abandon their competitors and simply reallocate which businesses sell the product. This reallocation can still be economically beneficial if it improves allocative efficiency, but failure to account for the losses to untrained firms would cause you to overestimate the overall program impact. This is a problem for most impact evaluations, which randomize at the individual level which firms get to participate in a program.
In a new working paper, I report on a business training experiment I ran with the ILO in Kenya, which was designed to measure these spillovers. We find over a three-year period that trained firms are able to sell more, without their competitors selling less – by diversifying the set of products they produce and building underdeveloped markets.
- IPA has a nice brief on financial literacy training, discussing the problems of traditional training courses and more promising new approaches
- Devex summarizes the public vs private school debate held at the World Bank last week.
- Jeff Bloem on the cardinal treatment of ordinal variables – and implications for happiness research.
- Duncan Green on how introducing electronic voting in Brazil saved lives and increased health spending
- Noah Smith on why it is time to move past the structural vs reduced form econometrics debates
- Job opportunities: DIME is recruiting several RAs
- On the 74 million blog, interview with Kirabo Jackson about the importance of school spending and other education-related discussion: “In casual conversation with most economists, they would say, “Yeah, yeah, we know that school spending doesn’t matter.” I sort of started from that standpoint and thought, Let me look at the literature and see what the evidence base is for that statement. As I kept on looking through, it became pretty clear that the evidence supporting that idea was pretty weak.” Also discussion on the need to measure things beyond test scores.
- IPA has a nice little booklet on nudges for financial health – a quick summary of the evidence for commitment devices, opt-out defaults, and reminders.