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savings

Weekly links December 19: Savings, basic incomes, skill gaps & M&Ms, and more…

David McKenzie's picture
  • On the FAI blog Tim Ogden discusses what we mean by savings when we talk about it as an outcome.
  • A snapshot of the job market this year from 538 – what the next generation of economists is working on? Development is pretty popular, corporate finance and international economics not so much.
  • Testing basic incomes: the Guardian reports on an experiment in India, where Unicef funded an unconditional basic income scheme. A “modified randomized control trial” (whatever that is) assigned everyone in 8 treatment villages to receive a monthly income for 18 months, with 12 control villages: “the basic incomes resulted in more economic activity and work. Conventional labour statistics would have picked that up inadequately. There was a big increase in secondary economic activities, as well as a shift from casual wage labour to own-account farming and small-scale business” Haven’t come across an academic paper with the results or more details.

Long-term effects of a short-term boost to savings – are mental accounts the key to why more small businesses don’t take advantage of high returns?

David McKenzie's picture
Standard economic theory would suggest that a one-time infusion of cash should have at most a temporary effect on business profitability – over time, individuals facing high returns should be able to re-invest business profits and bit-by-bit bootstrap themselves up to the steady-state size. Yet in an experiment I did with Suresh de Mel and Chris Woodruff in Sri Lanka, we find a one-time grant has sustained impacts five years later on male microenterprise owners.