Results for “banerjee”

68 found

Banerjee and Mullainathan offer a different
explanation, one which shows how temptation might interact in a unique
way with poverty. Suppose, they argue, that there are certain goods
that people are tempted by, such as candy, or coffee, or cigarettes.
Then suppose that as people get richer, they spend a decreasing
proportion of their income on these goods; not a smaller absolute amount, but a smaller proportion.
(There’s only so much money you’re likely to spend on cigarettes, no
matter how rich you get.) Finally, suppose you’re realistic enough to
know that you’ll be just as tempted in the future by these items as you
are today.

In sum, your “long term self” knows that you will
spend money on temptation goods in the future, but places no value on
that spending. (Your long term self doesn’t like the fact
that you’ll spend money on cigarettes, even though your today self
wants it.) Knowing that you will spend this money amounts to a
“temptation tax” on future wealth. This is a disincentive to save for
the future. Why save today? After all, your future self will just
squander the money on cigarettes!

But as you get wealthier, the effective “tax rate”
is lower, because temptation goods are a smaller proportion of your
income. With a lower tax rate, your disincentive to save shrinks.
Perversely, if you expect to be wealthier in the future, you have a
greater incentive to save and invest! Banerjee and Mullainathan show
that this can create a poverty trap. When you expect to be poor in the
future, you are less likely to save and invest, which keeps you in
poverty. When you expect to be wealthy in the future, you are more
likely to save and invest, which makes you wealthier still.

Here is the core article.  For the pointer I thank Rachel Strohm, who tweets about Africa and economic development.

Lin is chief economist at the World Bank.  You will find the forum here and it includes responses by Antoinette Schoer, Ross Levine, Abhijit Banerjee, Luigi Zingales, Mark Thoma, and others.  My comment is here.  Excerpt:

I can't decide whether I agree with everything in this essay or disagree with everything in this essay. 

I
see Mr Lin using the words “should”, “need to”, and phrases like “what
matter most” or “not the way to go”. But who or what is the active
agent here? The country’s home government? The World Bank? When it
comes to all these banking systems, are we simply rooting for
particular paths and outcomes–such as small and simple banks–or is Mr
Lin making policy recommendations about how to get there? We never
know.

Meanwhile, via Kottke, here is the World Cup Stacking Record (recommended).

Justin Lahart reports:

Friday, the American Economic Association will present the John Bates Clark medal, awarded to the nation’s most promising economist under the age of 40.

The Clark is often a harbinger of things to come. Of the 30 economists who have won it, 12 have gone on to win the Nobel, including last year’s Nobel winner, Paul Krugman. Other past winners include White House National Economic Council director Lawrence Summers and Steve Levitt, of Freakonomics fame. Since it was first awarded in 1947, the Clark has been given out every two years, but beginning next year it will be given out annually.

With a deep pool of young talent to draw from, there’s no sure winner. But among economists, the clear favorite is Esther Duflo, 36, who leads the Massachusetts Institute of Technology‘s Jameel Poverty Action Lab with MIT colleague Abhijit Banerjee.

Ms. Duflo has been at the forefront of the use of randomized experiments to analyze the effectiveness of development programs. If teacher attendance is a problem in rural India, for example, what happens if teachers are given cameras with date and time stamps and told to take a picture of themselves and their students each morning and afternoon? Ms. Duflo and economist Rema Hanna tried it out and found that in the “camera schools,” teacher absences fell sharply and student test scores improved. Does giving poor mothers 60 cents worth of dried beans as an incentive to immunize their children work? It works astoundingly well. By answering these kinds of problems, Ms. Duflo, her colleagues, and the many economists around the world she has helped inspire, are uncovering ways to make sure that money spent on helping poor people in developing countries is used effectively.

Harvard University‘s Sendhil Mullainathan, who founded the Poverty Action Lab with Ms. Duflo and Mr. Banerjee, is also likely on the Clark short list. He’s a leading light in the fast-growing field of behavioral economics, studying ways that psychology influences economic decisions. For one paper, he and frequent co-author Marianne Bertrand sent out fictitious resumes in response to want ads, randomly assigning each resume with very African American sounding or very white sounding names. The resumes with the very white names got far more call backs. Mr. Mullainathan, 36, is also applying behavioral economics insights to development problems. One insight: The behavioral weaknesses of the very poor are no different than the weaknesses of people in all walks of life, but because the poor have less margin for error, their behavioral weaknesses can be much more costly.

Emanuel Saez at the University of Calif.-Berkeley, another Clark candidate, has been tenaciously researching the causes of wealth and income inequality around the world, with a focus on the what’s happening at the very tip of the wealth pyramid. But because there is very little data on the very rich, Mr. Saez, 36, and his frequent co-author Thomas Piketty have combed through income tax figures to come up with historic estimates. Among their findings: That before the onset of the financial crisis, the income share of the top 1% of families by income accounted for nearly a quarter of U.S. income – the largest share since the late 1920s.

No:

The overall picture of economic development that emerges from this analysis is in some ways very similar to the traditional pre†growth†theory development economics, although it is related to the modern reformulations of economic growth through the lens of development economics (Banerjee and Dulfo 2005). The recipe for productivity growth is the formation of official firms, the larger and the more productive, the better. Such formation must perhaps be promoted through tax, human capital, infrastructure, and capital markets policies, very much along the lines of traditional dual economy theories. From the perspective of economic growth, we should not expect much from the unofficial economy, and its millions of entrepreneurs, except to hope that it disappears over time. This “Walmart” theory of economic development receives quite a bit of support from firm level data.

That’s from a recent La Porta and Shleifer paper, just presented at Brookings.  I find this very convincing.  The pointer comes from Greg Mankiw.