Category Archives: Economics

Make a reverse Advent calendar for your kids

SOS Children’s Villages Norway have a project for schools that they call a reverse Advent xmascalendar_giftletters2calendar, in which pupils collect funds every day and learn about the organisation’s projects. I think that is a great concept, combining doing some good, letting kids join in the do-gooding, and teaching them something about the world at the same time. I wanted something to implement at home for my 8-year old, however, and when I did not find anything, I decided to make my own.

I felt that to prepare something for all the 24 days before Christmas eve would probably require too much work to do it properly, and would also risk turning the reverse calendar into a chore, so I decided to go for every other day. I wholeheartedly support the thinking behind GiveWell’s strategy of efficient giving, and therefore took as a basis the seven top charities from GiveWell, combining three of those working on deworming to create three groups:

1. Against Malaria Foundation (AMF)
2. Schistosomiasis Control Initiative (SCI)
3. END Fund for work on dewormingSightsavers for work on deworming and Deworm the World Initiative
4. GiveDirectly
5.  Malaria Consortium for work on seasonal malaria chemoprevention

I added four groups from their six Other Standout Charities (GiveWell’s descriptions):

6. Development Media International produces mass media to promote improved health behaviors in developing countries.
7. Food Fortification Initiative and Project Healthy Children work to reduce micronutrient deficiencies through food fortification programs.
8. The Global Alliance for Improved Nutrition (GAIN)’s Universal Salt Iodization program and Iodine Global Network (IGN) aid salt iodization programs in developing countries.
9. Living Goods supports a network of community health promoters in sub-Saharan Africa.

That made 9 charities in total. I also wanted to have represented some well-established charities that my son might have heard of or come across himself, and that I believe do important work but that for various reasons are not able to cut it in the kind of evaluation that GiveWell performs. Thus for the final three I chose:

10. Red Cross
11. Doctors without borders
12. Amnesty International

For each charity, I prepared a one-page document presenting some of the charity’s work xmascalendar_giftlettersin simple language and with some illustrations. (Tip: The organisation Effektiv altruisme, which bases its recommendations on GiveWell, has material available in Norwegian about some of the top charities.) I wanted each donation to be presentable as a round number, and since giving NOK 100 per day had some salience, I settled for an average of NOK 200 (€22) per gift. I ended each document with the words “We give X kroner to cause/charity”.

GiveWell recommends prioritizing the Against Malaria Foundation because they have the most valuable current funding gap, so I decided to allocate 900 NOK to them, 200 to the other four of the top five, and 100 to the rest.

All the envelopes were with Christmas stickers and hung from the curtain pole. The first picture above shows how it looked in the end.

 

“Is there really an empirical turn in economics?”

The recent “empirical” turn in economics should be known as an “applied” one and it is just one in a long series of related developments. Moreover, it is a move towards the historical roots of the discipline. Those are some lessons from Beatrice Cherrier‘s essay “Is there really an empirical turn in economics?“. Based on research conducted together with Roger Backhouse, she takes issue with the idea that there has been a revolution in economic research involving empirics. Some points I liked:

  • Empirical work has been live and well, what has changed is its recent larger role in top journals. Besides, the view of theory as dominating in economics is based on looking only at the last 50 years – pre- and immediate post-war economics used to be a lot more empirical.
  • Much theory has become more applied, often involving data. And John Bates Clark medal citations stress “applied,” often taken consisting of a mix of theory and empirics.
  • Increasing availablity of data is a development that has been ongoing since at least the 1960’s. Hype around and criticism of new, large sources of data were the same in the 1970’s as today.
  • Computerization is overrated, much modern empirical work is computationally and numerically very simple.
  • Oscar Morgenstern (of von Neumann and Morgenstern‘s Theory of Games and Economic Behavior fame) proposed that to become a fellow of the Econometric Society, it should be a requirement to “have done some econometric work in the strictest sense” and be “in actual contact with data they have explored and exploited for which purpose they may have even developed new methods.”

H/t: Erwin Dekker.

Television, Cognitive Ability, and High School Completion

That is the title of a just released working paper by Simen Markussen, Knut Røed, and myself. We show that access to commercial television channels during childhood and adolescence from the 1980’s onwards in Norway reduced cognitive ability scores and high school graduation rates of young men.

In a comment, Pat Sharp apologizes (true story! thanks to @JFiva).

“Can welfare conditionality combat high school dropout?”

I have a new working paper out, joint work with Simen Markussen and Knut Røed. Simen has written provocatively about the paper in the today’s Dagens Næringsliv, which is also running a companion piece. These are only in Norwegian (and behind a paywall), however, so here is a brief summary in English:

We investigate what happens when Norwegian social insurance offices increase their use of conditions would-be welfare recipients need to satisfy in order to receive welfare. Using the staggered introduction of this program and based on double and triple difference models, we find that such conditionality reduces the number of young people that receive welfare, and more importantly, increases the high school graduation rate. For young people from disadvantaged backgrounds, we find substantial and precise effects, whereas we find no effects on youth from more resourceful backgrounds, as expected. A few years later, we find that those who were exposed to new regime have more education, earn more, and are more likely to be employed. Thus even though activating these people may cost something upfront, it pays off in the long run.

The newspaper has an interview with a guy who got on track and gets some work experience through this system. Here is the abstract of the research paper:

Based on administrative data, we analyze empirically the effects of stricter conditionality for social assistance receipt on welfare dependency and high school completion rates among Norwegian youths. Our evaluation strategy exploits a geographically differentiated implementation of conditionality. The causal effects are identified on the basis of larger-thanexpected within-municipality changes in outcomes that not only coincide with the local timing of conditionality implementation, but do so in a way that correlates with individual ex ante predicted probabilities of becoming a social assistance claimant. We find that stricter conditionality significantly reduces welfare claims and increases high school completion rates.

Basic income pilot in Finland, headed by top economist

Via MarginalRevolution’s assorted links and others, a short BBC article about a pilot project in Finland on universal, basic income. Economist Ohto Kanninen, coincidentally a fellow student of mine from graduate school, describes the project:

The prime minister has expressed support for a limited, geographical experiment. Participants would be selected from a variety of residential areas.

Mr Kanninen proposes testing the idea by paying 8,000 people from low income groups four different monthly amounts, perhaps from €400 to €700.

They also have the Prime Minister on board:

Prime Minister Juha Sipila has praised the idea. “For me, a basic income means simplifying the social security system,” he said.

This sounds really exciting, and I cannot wait to see the working paper.

 

The hedonic treadmill exists even for basic necessities

Does people’s life satisfaction adapt to material improvements? In a recent paper (gated), Galiani, Gertler and Undurraga find that it does, even in a case of very poor people receiving a really basic service (housing). In a large-scale experiment, some poor households in El Salvador, Mexico and Uruguay were randomly selected to receive a ready-made small house. Receiving such housing increased the share of households reporting to be “satsfied” or “very satisfied” with the quality of their life by around around 40 %, from 0.53 to 0.73, thus confirming that it was something these households really needed. What about the effect in the long term? Eight months later, more than half of the gain had disappeared, highly consistent with the hedonic treadmill hypothesis.

philosophiae doctor

Thursday May 28 I defended my Ph.D. thesis in economics at the EUI in Florence. As for most people, the defence marked the end of a journey through many ups and downs and unexpected turns. The most significant development for me, and one I was very happy with, was a switch from theory to empirics, in particular from conflict theory to applied (micro)econometrics.

The thesis itself consisted of three chapters – on television and cognitive development, terrorism and work effort, and voting habits in turnout. Three very different papers bound together by using modern empirical methods to discover causal effects.

The defence was a taxing, but also very useful experience. I was lucky to have a committee that had taken their job seriously, and that provided extensive and thorough comments that will lead to large improvements to the papers; papers which I look forward to blog about when I get them out as working papers. Perseus was the proper venue for finishing everything off.