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May 2016

What’s New in Measuring Subjective Expectations?

David McKenzie's picture

Last week I attended a workshop on Subjective Expectations at the New York Fed. There were 24 new papers on using subjective probabilities and subjective expectations in both developed and developing country settings. I thought I’d summarize some of the things I learned or that I thought most of interest to me or potentially our readers:

Subjective Expectations don’t provide a substitute for impact evaluation
I presented a new paper I have that is based on the large business plan competition I conducted an impact evaluation of in Nigeria.  Three years after applying for the program, I elicited expectations from the treatment group (competition winners) of what their businesses would be like had they not won, and from the control group of what their businesses would have been like had they won. The key question of interest is whether these individuals can form accurate counterfactuals. If they could, this would allow us a way to measure impacts of programs without control groups (just ask the treated for counterfactuals), and to derive individual-level treatment effects. Unfortunately the results show neither the treatment nor control group can form accurate counterfactuals. Both overestimate how important the program was for businesses: the treatment group thinks they would be doing worse off if they had lost than the control group actually is doing, while the control group thinks they would be doing much better than the treatment group is actually doing. In a dynamic environment, where businesses are changing rapidly, it doesn’t seem that subjective expectations can offer a substitute for impact evaluation counterfactuals.

Middle-class dynamics and the Arab Spring

Elena Ianchovichina's picture
Cairo's Tahrir Square, Egypt - Hang Dinh|Shutterstock.com

What do middle-class dynamics in the 2000s tell us about the Arab Spring events? In modern economies, the middle class not only bolsters demand for private goods and services, but also insists on good governance and public services, such as education, health, and infrastructure. Investments in these areas improve the capacity of the economy to grow not only more rapidly, but also sustainably and inclusively. Therefore, understanding how the middle class fares in the Arab world is of crucial importance.

Is living in African cities expensive?

Shohei Nakamura's picture

A comparison of costs of living across major cities in the world regularly intrigues people. The latest annual report by the Economist Intelligence Unit (EIU), for example, points to Singapore as the most expensive city to live in. The cheapest city in the ranking of 133 cities is Lusaka in Zambia, followed by two Indian cities Bangalore and Mumbai.

Using technology to stay ahead of disaster risk

John Roome's picture
Hurricane Patricia. Photo credit: NASA Earth Observatory

We’re witnessing an unprecedented uptick in record-breaking storms. In October last year, Hurricane Patricia came ashore in Mexico with record breaking 200 miles per hour winds. A few months later on the other side of the world, Cyclone Winston broke records for Pacific basin wind speeds, destroying parts of mainland Fiji with 180 miles per hour winds. More recently, Cyclone Fantala became the most powerful storm in the Indian Ocean ever recorded.
 
Experts agree that its activities by people which are increasing the severity of storms like these. Climate change isn’t just projected to increase the intensity of hurricanes and cyclones, but a whole other range of other natural hazards, like droughts, floods, storms, and heat waves.

Immigrant labor: Can it help Malaysia’s economic development?

Rafael Munoz Moreno's picture


Malaysia has been able to reach remarkable achievements over the past decades, including extreme poverty eradication and promotion of inclusive growth. It aims to reach a high-income nation status by 2020, which goes beyond merely reaching a per capita GDP threshold. As the 11th Malaysia Plan points out, the goal is to achieve a growth path that is sustainable over time, reflects greater productivity, and is inclusive. High-income status can be achieved if we ensure that future generations have access to all the resources, such as education and productive opportunities, necessary to realize their ambitions and if Malaysia’s economy is globally competitive and resource-sustainable.

Over the years, immigrants have played a crucial role in the economic development of Malaysia, with around 2.1 million immigrants registered and over 1 million undocumented as of 2013. Education levels among the Malaysian population have increased remarkably over the last two decades, and immigrant workers have become one of the primary sources of labor for low-skilled occupations, most commonly in labor-intensive sectors such as construction, agriculture and manufacturing. Economic studies show that a 10% net increase in low-skilled foreign workers could raise Malaysia’s GDP by 1.1% and create employment and increase wages for most Malaysians.

'Making the case for trade': Winning voters’ trust by strengthening social safety nets

Christopher Colford's picture

Policy persuasion is most effective when it draws on the evidence base of all the social-science disciplines. Every strand of the social sciences – not just the mathematical precision of economics, but also the nuanced interpretations of history and the subtle trajectories of sociology – has a great deal to contribute as policymakers balance competing priorities.

That multidisciplinary approach – emphasized in such recent works as The History Manifesto, in which Harvard and Brown University historians call for policymakers’ greater reliance on the combined reasoning of all the social sciences – was thoroughly borne out in the recent Development Economics Series lecture by economist David Autor of MIT (who is a scholar at the National Bureau of Economic Research). Presenting a research paper on trade policy, and underscoring the importance of public opinion in shaping policymakers’ approach to it, Autor’s presentation used the logic of political science to highlight the electoral mood swings that help shape countries’ position on international trade.

Using the perspectives of political science – in the paper, “Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure” (co-authored with colleagues from the University of Zurich; the University of California, San Diego; and Lund University) – was a valuable way to help remind Autor's economics-focused World Bank Group audience that policymaking does not occur in an academic vacuum. Even though the Bank’s economics-heavy analyses may try to distill policy options into quantifiable formulae, the policymakers whom the Bank advises get their political mandate from their countries’ volatile voters – who do not always follow homo economicus’ coldly rational approach to decision-making.

Amid the topsy-turvy 2016 electoral cycle in many countries – in which voters’ fears about job losses due to international trade have been inflamed amid an upsurge of populism and protectionism – you don’t have to be a public-opinion pollster to affirm Autor's assertion in his analysis of recent U.S. voting patterns: “We detect an ideological realignment that is centered in trade-exposed local labor markets and that commences prior to the divisive 2016 U.S. presidential election. Exploiting the exogenous component of rising trade with China and classifying legislator ideologies by their congressional voting record, we find strong evidence that congressional districts exposed to larger increases in import competition disproportionately removed moderate representatives from office in the 2000s.”

Translation: If you’re a pro-trade lawmaker in a district that has a high degree of imports from overseas, in a region that has endured what Autor calls “economic scarring,” then you’re likely to pay a heavy price at the ballot box – and, if you’re defeated, your successor just might be a strident protectionist. The Autor analysis shrewdly underscores the adjective “political” in the anodyne textbook phrase, “political economy.”

The World Bank has a new Climate Action Plan. What's in it for cities?

Ede Ijjasz-Vasquez's picture
The World Bank Group’s Climate Action Plan, adopted last month, is designed to help countries meet their COP21 pledges and manage increasing climate impacts.
 
To achieve these goals, working with cities will be essential: with almost 80% of GHG emissions emanating from urban areas, cities are among the biggest contributors to climate change... and must, inevitably, become a big part of the solution.
 
Cities are also particularly vulnerable to climate risk and other forms of natural hazards, with many of them located in disaster-prone areas. Therefore, enhancing disaster resilience in urban settings is another key requirement to build more sustainable cities in the face of climate change.
 
The good news? Many countries are still in the early stages of the urbanization process, meaning they have a unique opportunity to develop sustainable cities right from the beginning - a much more viable option than trying to retrofit them later on.
 
In this video, World Bank Senior Director Ede Ijjasz-Vasquez and Practice Manager Bernice Van Bronkhorst explain how they are working with clients to make climate-smart cities a reality.
 
If you want to learn more about this topic, we invite you to discover our latest Sustainable Communities podcast.

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Telenor: Financial inclusion is a good sustainability initiative and business opportunity

Yahya Khan's picture

 

Easypaisa Pakistan Health Insurance Blog - Family Eating (from a Telenor Pakistan promotional video for Easypaisa)


Telenor believes in empowering societies. Motivated by the prospect of building something that can make a difference for customers with very limited access to traditional financial services, we ventured to leverage our mobile tele-density strength in developing countries to bring about financial inclusion. Telenor has committed to enabling 50% of its customers to use their mobile phones for financial services by 2020, which means 100 million customers will have access to mobile financial services. We joined the UFA2020 initiative eager to learn from other players on shared challenges, drive strength from a common goal, and scale solutions that have demonstrated success in other markets.

We are about to launch in Myanmar and have obtained a banking license in India. We are already working in Bangladesh, Bulgaria, Hungary, Malaysia, Pakistan, Serbia and Thailand. In each country we have adopted different models of financial services catering to the needs of that market. For example, in Serbia fully owned Telenor Banka is the first fully mobile and online bank, consolidating banking needs in a unified digital interface, making it the fastest growing bank and the highest rated banking app in the region. In Pakistan, Telenor’s subsidiary Tameer Micro Finance Bank offers mobile financial services under the globally recognized brand of Easypaisa, serving over 20 million customers for domestic and international remittances, purchase airtime, pay utility bills, receive government social cash transfers, pay taxes, save and borrow money, buy insurance or make online retail purchases. We are picking up speed in delivering straightforward digital banking services in most of our Asian markets. Last year we established the groundwork for business in five out of six Asian countries, and this year we are focusing on expanding our footprint in these markets. When all businesses are up and running, we will be ready to build scale and to reach our 100 million customers target.


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