Holiday reading 2019

Last year’s suggested Holiday Reading was a great success, so here it goes again! The same qualifier applies: the selected readings reflect my own personal tastes rather than any specific external metric. The list is drawn from works published or accepted for publication in 2019. Happy holidays and happy reading!

The year of 2019 was the year of popular BOOKS in Economics. If you have time, pick up Abhijit Banerjee and Esther Duflo’s “Good Economics for Hard Times”; or Anne Case and Angus Deaton’s “Deaths of Despair and the Future of Capitalism”;  or Raghu Rajan’s “The Third Pillar: How Markets and the State Leave the Community Behind”. While these writings are focused on advanced economies, they serve as a reminder that higher per capita income while necessary, is by no means sufficient for people’s well-being – a message that many developing and emerging economies may find relevant these days.

Coming to the more traditional medium of discourse in Economics, journal publications, many of you will want to read “Using Randomized Controlled Trials to Estimate Long-Run Impacts in Development Economics”(Annual Review of Economics 11, 2019) by Bouguen, Adrien, Yue Huang, Michael Kremer, and Edward Miguel. 2019. You will come away with a better understanding of why the 2019 Nobel Prize of Economics went to those promoting the use of RCTs in Economics: Banerjee, Duflo, and Kremer (a coauthor of the above study).

In a different line of work, Melissa Dell, Nathan Lane, and Pablo Querubin examine in “The Historical State, Local Collective Action, and Economic Development in Vietnam” (Econometrica 2019) the importance of institutions for long-run development. By exploiting variation in state conditions across villages within Vietnam and using detailed historical data, they show how institutions affected norms, governance, and economic outcomes centuries after the original institutions disappeared. While the paper makes for captivating reading, it leaves one with a rather pessimistic outlook: how can countries escape the curse of bad institutions they inherited from centuries ago?

A series of other papers look into approaches for promoting development – institutional constraints notwithstanding. In “Disrupting Education? Experimental Evidence on Technology-Aided Instruction in India,” (American Economic Review 2019), Karthik Muralidharan, Abhijeet Singh, and Alejandro Ganimian show that technology can be harnessed to improve educational outcomes, especially among academically weaker students.

Another positive message from 2019 is that increased labor mobility contributes to productivity growth. In “The Aggregate Productivity Effects of Internal Migration: Evidence from Indonesia”(Journal of Political Economy, forthcoming),  Gharad Bryan and Melanie Morten show that removing barriers to internal migration in Indonesia generates significant, if highly heterogenous, productivity gains.

The optimistic messages of the previous two papers are counterbalanced by the results of two papers that yield rather negative results. In “Experimental Evidence on the Economics of Rural Electrification” (Journal of Political Economy, forthcoming), Kenneth Lee, Edward Miguel and Catherine Wolfram report results from an experiment that randomized the expansion of electric grid infrastructure in rural Kenya. The results are disappointing: demand for connections is much lower than anticipated and among newly connected households, electricity consumption is very low. Overall, the authors find “no meaningful medium-run impacts on economic and non-economic outcomes.”

Similarly, the paper “Tourism and Economic Development: Evidence from Mexico’s Coastline,” by Benjamin Faber and Cecile Gaubert (American Economic Review 2019) slashes the hope of many developing countries that tourism will be their ticket to long-run growth and development. The authors find that tourism provides a boost to the regions directly affected by it; however, the benefits to local communities are offset in the long-run by reductions in agglomeration economies in the rest of the country, so that in the end, the effect of tourism on the country’s aggregate growth is negligible.

The above papers demonstrate why research is important! We cannot make progress unless we understand what works, and what does not. Papers showing what has not lived up to expectations are as important as those that document success.

While the international community tries to figure out ways to promote development, in the meantime it is imperative to assist the poor. How do we do this effectively? The paper “The Price Effects of Cash Versus In-Kind Transfers” (Review of Economic Studies, 2019), by Jesse Cunha, Giacomo De Giorgi, and Seema Jayachandran speaks to this question. It compares in-kind to cash transfers to the poor and shows that there are advantages to the former as they lead to lower local prices, especially in less developed villages. The paper’s findings are particularly relevant to the World Bank in light of a closely related paper by Deon Filmer, Jed Friedman, Eeshani Kandpal and Junko Onishi on the effects of cash transfers on local prices in remote villages in the Philippines.

To finish on an optimistic note, the paper “Private Outsourcing and Competition: Subsidized Food Distribution in Indonesia” (Journal of Political Economy 2019) by Abhijit Banerjee, Rema Hanna, Jordan Kyle, Benjamin Olken, and Sudarno Sumatro, examines Indonesia’s largest transfer program and finds that outsourcing the last mile of food delivery to the private sector reduces operating costs without sacrificing quality. A small step towards increasing efficiency while curtailing rent extraction.

Enjoy! I wish you a very happy 2020 and look forward to next year’s research.