AlJazeera is well know by their great news coverage, especially of middle-eastern issues and most notably of the unrest across the Arab world in the past few months.
But, as I have recently discovered, they are also really good at producing long features that shed light into issues that don't receive much attention from news outfits.
Here are two examples of really interesting health issues:
The first one aired last December on their "101 East" program. By focusing on the disparities between top private hospitals and resource constrained public hospitals, it not only uncovers some of the inequities embedded in Thailand's health system -common to many middle income countries- but it also reveals some of the risks to developing countries of pursuing medical tourism as an economic strategy. I am not trying to advocate against medical tourism, just pointing to useful lessons that other countries could learn from Thailand and adopt mitigating measures as part of their policies. One such measure might be having a policy and regulatory framework that explicitly integrates the private sector to the health system and a health financing mechanism that allows low and middle income patients the choice to be treated at both private and public and private health facilities.
Enjoy:
The second one is a series of three aired last March in their "Witness" program. I really liked the way it takes the time to cover both the clinical but also the social implications of obstetric fistula in Ethiopia. It also shows that well run public health facilities can make a big difference in people's lives. If you watch with a critical eye, you may also find that the way public health systems have been built in most developing countries, top specialized facilities in the capital can only be accessed by people in rural and remote locations if there is a deliberate intervention to reach out to them form the center.
Enjoy:
Labor Markets as Complex Networks part 2
If you were wondering what happened after the last post, the short answer is we did complete the class project but graduation, searching for a job, finally finding one and moving to Africa had kept me from reporting about it (excuses, excuses).
Our (me, Guillaume Liegey and Grant Lovellette)original motivation was to draw policy implications at the individual level (i.e what can be done to upgrade skills so that prospects for higher productivity and salaries are improved). However, due to time and data limitations we ended up linking occupation codes to industry categories instead of our original idea which was linking career codes (a categorization of the skill-set an individual has)with occupations. As a result our conclusions were at the industry rather than the individual level.
As mentioned in the previous post we borrowed the conceptual framework and methodology from the "Product Space" (see previous post for reference). The Product Space is a view of the world where both countries and products can be represented as vectors of capabilities so a product exported with revealed comparative advantage is the result of the intersection of capability vectors. This means that products connected in the Product Space require the same capabilities. Our Job Space is a view of the world where both jobs and industries are vectors of skills. But in the Job Space an industry results of the union of the skill vectors for the jobs employed in that industry. Therefore the fact that two jobs are connected doesn't mean that they require the same skills but that they are complementary.
I was a bit disappointed with this because the parallel became less straightforward. The Product Space helps think of what capabilities a country has and how upgrading these capabilities results in the country being able to produce more and more sophisticated products ultimately accelerating economic growth and helping countries move up the income ladder. We had hoped to draw a parallel where the Job Space helped think of what skills a worker has and how upgrading those skills could help the worker hold more sophisticated jobs ultimately moving up the income ladder. However, my disappointment vanished when Grant found this article on the New York Times that reports on “Immigration, Offshoring and American Jobs".
According to the Times, this paper proposes that:
The idea that an industry arises when different complementary jobs are joined is very much in line with what we found. As mentioned above, we started with the idea that skills connect occupations with industries:
However, we don't directly observe skills in the data. What we observe is workers that are employed in a particular job in a particular industry. Using the method of reflections (see Product Space paper) we transformed the bipartite network formed by jobs (occupation codes) and industries (North American Industry Classification Codes) into a one mode projection where jobs are connected to other jobs if they are found in the same industry. What emerged was something that looks like this:
In terms terms of network analysis, our most relevant findings were:
Our (me, Guillaume Liegey and Grant Lovellette)original motivation was to draw policy implications at the individual level (i.e what can be done to upgrade skills so that prospects for higher productivity and salaries are improved). However, due to time and data limitations we ended up linking occupation codes to industry categories instead of our original idea which was linking career codes (a categorization of the skill-set an individual has)with occupations. As a result our conclusions were at the industry rather than the individual level.
As mentioned in the previous post we borrowed the conceptual framework and methodology from the "Product Space" (see previous post for reference). The Product Space is a view of the world where both countries and products can be represented as vectors of capabilities so a product exported with revealed comparative advantage is the result of the intersection of capability vectors. This means that products connected in the Product Space require the same capabilities. Our Job Space is a view of the world where both jobs and industries are vectors of skills. But in the Job Space an industry results of the union of the skill vectors for the jobs employed in that industry. Therefore the fact that two jobs are connected doesn't mean that they require the same skills but that they are complementary.
I was a bit disappointed with this because the parallel became less straightforward. The Product Space helps think of what capabilities a country has and how upgrading these capabilities results in the country being able to produce more and more sophisticated products ultimately accelerating economic growth and helping countries move up the income ladder. We had hoped to draw a parallel where the Job Space helped think of what skills a worker has and how upgrading those skills could help the worker hold more sophisticated jobs ultimately moving up the income ladder. However, my disappointment vanished when Grant found this article on the New York Times that reports on “Immigration, Offshoring and American Jobs".
According to the Times, this paper proposes that:
We see the job-creating benefits of trade and immigration every day, even if we don’t always recognize them. As other papers by Professor Peri have shown, low-skilled immigrants usually fill gaps in American labor markets and generally enhance domestic business prospects rather than destroy jobs; this occurs because of an important phenomenon, the presence of what are known as “complementary” workers, namely those who add value to the work of others.
The idea that an industry arises when different complementary jobs are joined is very much in line with what we found. As mentioned above, we started with the idea that skills connect occupations with industries:
However, we don't directly observe skills in the data. What we observe is workers that are employed in a particular job in a particular industry. Using the method of reflections (see Product Space paper) we transformed the bipartite network formed by jobs (occupation codes) and industries (North American Industry Classification Codes) into a one mode projection where jobs are connected to other jobs if they are found in the same industry. What emerged was something that looks like this:
In terms terms of network analysis, our most relevant findings were:
- The Job Space is not a random network
- Jobs form industry clusters that that cut across wage and education level
- Jobs strongly connected within clusters, weakly connected across clusters
- Very decentralized, no “core”
- A few very central jobs are key to the connectivity of the network: removing them results in quick disintegration of the network
- The highest paying jobs do not appear to be strongly connected to the network, except for certain types of jobs (e.g. directors, managers and engineers)
- The lowest paying jobs tend to be strongly connected to each other and within certain industry clusters (e.g. agriculture, domestic services, textile, food processing)
Labor Markets as Complex Networks
I am attempting, with classmates Grant Lovellette and Guillaume Liegey, to characterize labor markets as complex networks where nodes are different occupations and links are the sets of skills and characteristics required to be employed in each of them. The idea is a parallel to the work of Hausmann, Hidalgo and Klinger in developing the "Product Space", where they develop a "bipartite network in which countries are connected to the products they export". In this case, we are building a bipartite network that connects workers or categories of workers to the occupations they are employed in.
Applications
Characterizing the labor market as a network could allow for a better understanding of the skills and competencies a certain workforce possesses and how those skills and competencies match those demanded by employers in the market. Conceptually, this idea could be applied to different categorizations of workforce, from the graduates of a particular school to the economically active population of an entire country. Imagine, for example if the Dean of the Harvard Kennedy School asked himself whether the curriculum being offered by the MPP program is equipping its graduates to compete for the jobs that the labor market has to offer. A representation of the labor market as a network could help him understand what regions of the "Job Space" his graduates are occupying and what skills they would need to be equipped with in order to populate better connected or more central regions of the network. On the other hand, a World Bank team advising a national government could use the characterization of the labor market as a network to better understand whether the education system or a job training program is providing the labor force with the skills that will allow them to insert themselves in the formal labor market. Furthermore, an analyst could derive important lessons from the evolution of the job space over time, such as the effect of trade or financial policy changes on informality or the types of employment trajectories that different groups of people follow over their lives.
Scope and Data
The scope of the project described above is big enough to occupy an entire research agenda for several years, but our aim is to begin preliminary work on the topic. Our data comes from quarterly employment surveys conducted by the Mexican National Statistics Office. In the most basic form of the Job Space, we will create a bipartite network connecting the occupations codes with the career codes reported for each worker in the survey. We will then project this bipartite network to the space of occupations and therefore each occupation code in the Mexican catalog of occupations (CMO) will become a node in the Job Space. Occupations will be then connected to each other if the people who reported being employed in them share the same career code. A further iteration will be to use the North American Classification of Industries, also reported in the survey to explore what region of the North American Job Space Mexican workers occupy. In the future, researchers interested in exploring this further could create web crawlers to mine data from sites such as Monster.com or Devex.com to create more disaggregated versions of the Job Space.
Financial Crisis, Urban Poverty and the World Bank in Latin America
I wrote this policy brief last summer while working for the World Bank. Substantial work had been done by then looking at how the Bank was supporting governments around the world to protect the human capital of poor people by strengthening social protection systems, so I wanted to look at how the Bank could also support local urban governments cope (this reflects my personal opinion and not that of the Bank, all information presented is publicly available):
Impact of the Global Financial Crisis in Latin America
Despite being originated in the developed world, the global financial crisis is having a profound impact on developing countries and Latin America is not the exception. While improvement in macroeconomic and financial management and institutions means that the region is avoiding harmful elements of past crises –such as inflation spikes and currency devaluations- the impacts of the global economic downturn will be harsh and threaten to reverse important social gains. The crisis is affecting Latin America through the contractions in external financing, demand for exports, commodity prices and remittances. The main impacts of these contractions are recession –only Peru and Panama are expected to report positive economic growth in 2009-, as well as a rise on unemployment and overall poverty (the World Bank estimates the crisis will put 8 million more Latin Americans in poverty. Behind the regional averages lie significant heterogeneities across countries, both in the magnitude of the shock and on the ability to respond to the crisis. Since the crisis has its origin in the center of the world economy, countries that have economies closely tied to U.S. economy -including Mexico and the small open economies of Central America and the Caribbean- are feeling more direct and stronger initial impact. On the other hand, the ability of countries to react will depend on their macroeconomic stance, with those countries that have robust inflation targeting schemes, flexible exchange rates and high international reserves better positioned to use monetary policies to cope. Similarly, those countries that accumulated savings during the recent upturn, have less rigid public spending structures, a manageable debt level and relatively deep financial systems will be more able to stimulate their economies through fiscal policy, or at least protect their level of spending on critical infrastructure and social programs.
How is the crisis affecting urban areas?
Evidence from past financial crises shows that the effects of economic shocks are usually disproportionately felt by urban households. For example, during the Mexican Peso crisis of 1994-1995, the main determinants of how severely a particular household was affected were its rural/urban location and the level of education of the household head with more highly educated, urban households suffering the greatest income declines .This might be due to the fact that urban households are much more integrated into the market economy than their rural counterparts. Greater integration in the market economy also implies a higher monetization of food consumption, hence a greater sensitivity of food consumption to income and price fluctuations . As a recent World Bank report puts it, “the crisis is expected to be unusually harsh on the region’s middle class—mostly because of the fall in the demand for nontraditional exports that employ formal, urban, technologically‐more‐advanced workers” . These implies that the urban poor are particularly vulnerable during the current crisis and that urban households that otherwise could get by, will find themselves plunged into poverty. The main transmission mechanism between the financial crisis and urban poverty is likely to be the labor market through both job losses and decline in real wages. However, urban poverty might also be affected indirectly through the fall in remittances and the reduced ability of national, sub-national and municipal governments to cope with development needs such as infrastructure investments.
Increase in Unemployment and Reduction in Wages
Labor markets adjust to negative economic shocks through both destruction of jobs and falls on real wages. During past crises, most of the adjustment happened through real wage decline. In Mexico, for example, average wages dropped 40% during the Peso crisis. These can be explained by the presence of high inflation and currency devaluation during previous economic downturns. Crises tend to hit first in sector that employ urban, formal salaried workers, many of whom are forced to move to informal jobs. In Peru, for example, employment in microenterprises jumped from 49% in 1995 to 63% four years later. In Mexico, the share of informal employment grew rapidly from 30% in 1994 to 40% a year later. In Paraguay, three years after the 1995 banking crisis, informal employment jumped from 47% to 52% . Decreases in average wages come in part as a result of depressed returns to labor in the low productivity sectors to which workers relocate. It will take some time before the full impact of the financial crisis on urban labor markets is known, but early analysis seem to indicate that the effects will be heterogeneous and that the share of the adjustment between employment and wages will vary not only across countries, but also across sectors within each country. In a recent World Bank policy notes, all countries with timely data show an increase in unemployment rates, but differ on the main force that explains this fall in net employment creation. On one hand, Brazil, Chile and Mexico, register a deep fall in salaried net job creation since mid 2008. In Colombia, on the other hand, it is net job creation of non‐salaried jobs (i.e. employers, self employed and unpaid workers) what is driving the fall in total employment. All countries show a net destruction of non‐salaried jobs towards the end of 2008 or the beginning of 2009, although the Mexican is the largest fall in both relative and absolute terms. In general, non‐salaried workers represent a large portion of total informal employment. Hence, it can be argued that the crisis is having a more noticeable negative effect on the formal sector in Brazil and Chile whereas in Colombia the informal sector has been the most affected. Mexico shows both sectors been seriously hit by the recession.
Reduction in the Flow of Remittances
Remittances are an important source of financing in Latin American 2008; the 20 million Latin‐Americans living abroad sent home $64 billion. In 2007, remittances represented more than 10 percent of GDP in seven Latin American Countries, reaching around 21 and 26 percent in Honduras and Guyana respectively . Poor households that receive remittances are dependent on them for consumption, , in Guatemala and El Salvador, remittances represent 63 and 55 percent of income in households located in the first income quintile. Moreover, in poor households, particularly in urban areas remittances can have the effect of relaxing budget constraints that limit the housing and human capital investments of poorer families . Remittances flows to Latin America started slowing down during the last quarter of 2008 resulting in average growth of only 2 percent in 2007-2008 –a decline of 4 percent in Mexico-. During the first semester of 2009, remittances fell 17 percent in Jamaica, 11 percent in Mexico, and 10 percent in Guatemala and El Salvador. Overall, flows are expected to decline 7% on average for the Region during 2009 . While some concerns have been raised about an additional impact through return migration and there are reports that new migration from Latin America is slowing, there is little evidence of large-scale return migration. Instead, new data show that existing migrants are unwilling to return as the employment situation back home is not very good and re-entering the US, in case they return, has become more difficult with tighter border controls.
Reduction in Tax Collection and Infrastructure Investment
As a result of the economic downturn and the fall in commodity prices, governments across the region are experiencing a substantial shortfall in fiscal revenues. This will compromise the ability of national, sub national and municipal governments to invest in infrastructure that cities need to address developmental gaps and protect the poor from irreversible losses in human capital during the crisis. Reports from across the Region already offer signs of the fiscal constraints that cities are facing. In Mexico City, a six-month delay in the transfer of funds from the federal budget to finance a new subway line has put the municipal government in “a critical financial situation” . During a meeting of Latin American Majors last June in Miami, the mayor of San Salvador announced that the city is facing a decline of 25 percent in tax collection . An additional effect of the global financial crisis is the tightening of credit markets that threatens to reverse progress made in several countries of the region towards increasing access to housing finance to low income households of urban areas. Beyond infrastructure, fiscal constraints faced by cities are likely to have an impact on the ability of local governments to fight crime and violence, a second round effect that is already being felt in US cities as police departments cope with budget cuts. In a survey of 180 police chiefs released last October by the Police Executive Research Forum, 45% said the economy had affected their agency's "ability to reduce crime".
Government Responses
In light of the effect the financial crisis is having in the urban poor, government responses should be aimed at helping sustain long-term investments upon which recovery and long-term development can be built. These include productive investments in infrastructure, health and education, and in social safety nets for the most vulnerable. While the issues and options for governments to strengthen social safety nets and protect human capital investments during the crises have been documented , issues and options to protect investments in infrastructure have received less attention. Among other alternatives, fiscal stimulus that relies on infrastructure investment, slum upgrading programs and housing finance interventions can play a critical role in helping the urban poor cope with the immediate effects of the financial crisis, as well as avoiding setbacks to their long term social standing.
World Bank Support
The World Bank Group devoted significant energy and resources in FY09 responding to the needs of countries hit by the global financial crisis, with a strong focus on initiatives to protect the most vulnerable in the poorest countries; maintain long-term infrastructure investment programs; and sustain the potential for private sector-led economic growth and employment creation. In LAC, commitments from the International Bank for Reconstruction and Development (IBRD), which provides financing, risk management products, and other financial services to countries, and the International Development Association (IDA), which provides interest-free loans and grants to the world’s poorest countries, more than tripled in FY09 to $14 billion for 64 operations, up from $4.7 billion the previous year. Support to LAC during FY09 represents almost a third of total Bank IBRD/IDA lending (30%), and 42 percent of total IBRD lending. Furthermore, IBRD and IDA committed $2.2 billion for projects specifically directed to sustaining investments in urban areas, almost doubling the amount committed in FY08. Lending for urban areas includes projects in water and sanitation, housing finance, transportation, municipal management, basic infrastructure and community development that are likely to have an impact on the ability of cities to recover from the crisis and achieve their long term developmental needs.
Examples of projects in the urban portfolio include:
• The Ceara Regional Economic Development Project, aimed at promoting economic development and improving metropolitan management for public services in nine small cities of the northeastern state of Ceara in Brazil.
• The Bogota Urban Services project The objectives of the Projects are: (i)to improve quality of life of low income families by increasing access, coverage, quality, reliability, and inter-agency coordination in the provision of water, sanitation, transport and related basic services; (ii) to improve city's mobility by providing better access to the public transport system, and improving road safety, traffic management and transport planning; and (iii) to strengthen the institutional and administrative framework for an efficient and sustainable delivery of urban services throughout the city.
• The Private Housing Finance Markets Strengthening Project for Mexico is contributing to : (a) to strengthen the financial capacity of Federal Mortgage Corporation (SHF) to develop and consolidate markets for housing finance and to expand access to lower income groups over the medium-term; and (b) to improve SHF's technical capacity to expand access to lower income groups over the medium-term.
• The Greater Managua Water and Sanitation (PRASMA) is supporting the Government of Nicaragua improve access to reliable water and sanitation services to the population of the greater Managua region.
• The Matanza-Riachuelo Basin (MRB) Sustainable Development Adaptable Lending Program is financing activities directed for improving sanitary conditions along the banks of La Plata River and providing a long-term and cost-effective solution for safe disposal of wastewater from the Buenos Aires Metropolitan Area.
Impact of the Global Financial Crisis in Latin America
Despite being originated in the developed world, the global financial crisis is having a profound impact on developing countries and Latin America is not the exception. While improvement in macroeconomic and financial management and institutions means that the region is avoiding harmful elements of past crises –such as inflation spikes and currency devaluations- the impacts of the global economic downturn will be harsh and threaten to reverse important social gains. The crisis is affecting Latin America through the contractions in external financing, demand for exports, commodity prices and remittances. The main impacts of these contractions are recession –only Peru and Panama are expected to report positive economic growth in 2009-, as well as a rise on unemployment and overall poverty (the World Bank estimates the crisis will put 8 million more Latin Americans in poverty. Behind the regional averages lie significant heterogeneities across countries, both in the magnitude of the shock and on the ability to respond to the crisis. Since the crisis has its origin in the center of the world economy, countries that have economies closely tied to U.S. economy -including Mexico and the small open economies of Central America and the Caribbean- are feeling more direct and stronger initial impact. On the other hand, the ability of countries to react will depend on their macroeconomic stance, with those countries that have robust inflation targeting schemes, flexible exchange rates and high international reserves better positioned to use monetary policies to cope. Similarly, those countries that accumulated savings during the recent upturn, have less rigid public spending structures, a manageable debt level and relatively deep financial systems will be more able to stimulate their economies through fiscal policy, or at least protect their level of spending on critical infrastructure and social programs.
How is the crisis affecting urban areas?
Evidence from past financial crises shows that the effects of economic shocks are usually disproportionately felt by urban households. For example, during the Mexican Peso crisis of 1994-1995, the main determinants of how severely a particular household was affected were its rural/urban location and the level of education of the household head with more highly educated, urban households suffering the greatest income declines .This might be due to the fact that urban households are much more integrated into the market economy than their rural counterparts. Greater integration in the market economy also implies a higher monetization of food consumption, hence a greater sensitivity of food consumption to income and price fluctuations . As a recent World Bank report puts it, “the crisis is expected to be unusually harsh on the region’s middle class—mostly because of the fall in the demand for nontraditional exports that employ formal, urban, technologically‐more‐advanced workers” . These implies that the urban poor are particularly vulnerable during the current crisis and that urban households that otherwise could get by, will find themselves plunged into poverty. The main transmission mechanism between the financial crisis and urban poverty is likely to be the labor market through both job losses and decline in real wages. However, urban poverty might also be affected indirectly through the fall in remittances and the reduced ability of national, sub-national and municipal governments to cope with development needs such as infrastructure investments.
Increase in Unemployment and Reduction in Wages
Labor markets adjust to negative economic shocks through both destruction of jobs and falls on real wages. During past crises, most of the adjustment happened through real wage decline. In Mexico, for example, average wages dropped 40% during the Peso crisis. These can be explained by the presence of high inflation and currency devaluation during previous economic downturns. Crises tend to hit first in sector that employ urban, formal salaried workers, many of whom are forced to move to informal jobs. In Peru, for example, employment in microenterprises jumped from 49% in 1995 to 63% four years later. In Mexico, the share of informal employment grew rapidly from 30% in 1994 to 40% a year later. In Paraguay, three years after the 1995 banking crisis, informal employment jumped from 47% to 52% . Decreases in average wages come in part as a result of depressed returns to labor in the low productivity sectors to which workers relocate. It will take some time before the full impact of the financial crisis on urban labor markets is known, but early analysis seem to indicate that the effects will be heterogeneous and that the share of the adjustment between employment and wages will vary not only across countries, but also across sectors within each country. In a recent World Bank policy notes, all countries with timely data show an increase in unemployment rates, but differ on the main force that explains this fall in net employment creation. On one hand, Brazil, Chile and Mexico, register a deep fall in salaried net job creation since mid 2008. In Colombia, on the other hand, it is net job creation of non‐salaried jobs (i.e. employers, self employed and unpaid workers) what is driving the fall in total employment. All countries show a net destruction of non‐salaried jobs towards the end of 2008 or the beginning of 2009, although the Mexican is the largest fall in both relative and absolute terms. In general, non‐salaried workers represent a large portion of total informal employment. Hence, it can be argued that the crisis is having a more noticeable negative effect on the formal sector in Brazil and Chile whereas in Colombia the informal sector has been the most affected. Mexico shows both sectors been seriously hit by the recession.
Reduction in the Flow of Remittances
Remittances are an important source of financing in Latin American 2008; the 20 million Latin‐Americans living abroad sent home $64 billion. In 2007, remittances represented more than 10 percent of GDP in seven Latin American Countries, reaching around 21 and 26 percent in Honduras and Guyana respectively . Poor households that receive remittances are dependent on them for consumption, , in Guatemala and El Salvador, remittances represent 63 and 55 percent of income in households located in the first income quintile. Moreover, in poor households, particularly in urban areas remittances can have the effect of relaxing budget constraints that limit the housing and human capital investments of poorer families . Remittances flows to Latin America started slowing down during the last quarter of 2008 resulting in average growth of only 2 percent in 2007-2008 –a decline of 4 percent in Mexico-. During the first semester of 2009, remittances fell 17 percent in Jamaica, 11 percent in Mexico, and 10 percent in Guatemala and El Salvador. Overall, flows are expected to decline 7% on average for the Region during 2009 . While some concerns have been raised about an additional impact through return migration and there are reports that new migration from Latin America is slowing, there is little evidence of large-scale return migration. Instead, new data show that existing migrants are unwilling to return as the employment situation back home is not very good and re-entering the US, in case they return, has become more difficult with tighter border controls.
Reduction in Tax Collection and Infrastructure Investment
As a result of the economic downturn and the fall in commodity prices, governments across the region are experiencing a substantial shortfall in fiscal revenues. This will compromise the ability of national, sub national and municipal governments to invest in infrastructure that cities need to address developmental gaps and protect the poor from irreversible losses in human capital during the crisis. Reports from across the Region already offer signs of the fiscal constraints that cities are facing. In Mexico City, a six-month delay in the transfer of funds from the federal budget to finance a new subway line has put the municipal government in “a critical financial situation” . During a meeting of Latin American Majors last June in Miami, the mayor of San Salvador announced that the city is facing a decline of 25 percent in tax collection . An additional effect of the global financial crisis is the tightening of credit markets that threatens to reverse progress made in several countries of the region towards increasing access to housing finance to low income households of urban areas. Beyond infrastructure, fiscal constraints faced by cities are likely to have an impact on the ability of local governments to fight crime and violence, a second round effect that is already being felt in US cities as police departments cope with budget cuts. In a survey of 180 police chiefs released last October by the Police Executive Research Forum, 45% said the economy had affected their agency's "ability to reduce crime".
Government Responses
In light of the effect the financial crisis is having in the urban poor, government responses should be aimed at helping sustain long-term investments upon which recovery and long-term development can be built. These include productive investments in infrastructure, health and education, and in social safety nets for the most vulnerable. While the issues and options for governments to strengthen social safety nets and protect human capital investments during the crises have been documented , issues and options to protect investments in infrastructure have received less attention. Among other alternatives, fiscal stimulus that relies on infrastructure investment, slum upgrading programs and housing finance interventions can play a critical role in helping the urban poor cope with the immediate effects of the financial crisis, as well as avoiding setbacks to their long term social standing.
World Bank Support
The World Bank Group devoted significant energy and resources in FY09 responding to the needs of countries hit by the global financial crisis, with a strong focus on initiatives to protect the most vulnerable in the poorest countries; maintain long-term infrastructure investment programs; and sustain the potential for private sector-led economic growth and employment creation. In LAC, commitments from the International Bank for Reconstruction and Development (IBRD), which provides financing, risk management products, and other financial services to countries, and the International Development Association (IDA), which provides interest-free loans and grants to the world’s poorest countries, more than tripled in FY09 to $14 billion for 64 operations, up from $4.7 billion the previous year. Support to LAC during FY09 represents almost a third of total Bank IBRD/IDA lending (30%), and 42 percent of total IBRD lending. Furthermore, IBRD and IDA committed $2.2 billion for projects specifically directed to sustaining investments in urban areas, almost doubling the amount committed in FY08. Lending for urban areas includes projects in water and sanitation, housing finance, transportation, municipal management, basic infrastructure and community development that are likely to have an impact on the ability of cities to recover from the crisis and achieve their long term developmental needs.
Examples of projects in the urban portfolio include:
• The Ceara Regional Economic Development Project, aimed at promoting economic development and improving metropolitan management for public services in nine small cities of the northeastern state of Ceara in Brazil.
• The Bogota Urban Services project The objectives of the Projects are: (i)to improve quality of life of low income families by increasing access, coverage, quality, reliability, and inter-agency coordination in the provision of water, sanitation, transport and related basic services; (ii) to improve city's mobility by providing better access to the public transport system, and improving road safety, traffic management and transport planning; and (iii) to strengthen the institutional and administrative framework for an efficient and sustainable delivery of urban services throughout the city.
• The Private Housing Finance Markets Strengthening Project for Mexico is contributing to : (a) to strengthen the financial capacity of Federal Mortgage Corporation (SHF) to develop and consolidate markets for housing finance and to expand access to lower income groups over the medium-term; and (b) to improve SHF's technical capacity to expand access to lower income groups over the medium-term.
• The Greater Managua Water and Sanitation (PRASMA) is supporting the Government of Nicaragua improve access to reliable water and sanitation services to the population of the greater Managua region.
• The Matanza-Riachuelo Basin (MRB) Sustainable Development Adaptable Lending Program is financing activities directed for improving sanitary conditions along the banks of La Plata River and providing a long-term and cost-effective solution for safe disposal of wastewater from the Buenos Aires Metropolitan Area.
Portfolios of the Poor: the power of qualitative data
The power of the portfolios of the poor research is that it yields high frequency, detailed data. While some might argue that this comes at the expense of learning broad lessons of the type "This is just a few people in a few locations", I don’t think this would be a valid criticism. There is a continuum of data sources from anthropological studies and market surveys to high frequency rich data such as financial diaries to nationally representative household surveys; and each of these data sources complements, rather than supplements the other. The criticism would be valid if the authors claimed that their results were representative of the poor globally or of Bangladesh, India or South Africa as a whole, but they are very straightforward about the limitations of their data. One way to illustrate this complementarity is by comparing portfolios to “The Economic Lives of the Poor” by Banerjee and Duflo. Through survey data, Banerjee and Duflo are able to paint broad strokes of what it means to be poor on a daily basis. Portfolios paints a more nuanced picture of the lives of the poor that can help to shed light on some of Duflo’s findings and thus pose further questions that could be included in future survey rounds. For example, Duflo and Banerjee seem puzzled by the proportion of income spent by the poor on festivals, while portfolios might allow us to hypothesize that participation in festivals allows households to be full members in the community, which in turn gives them access to financial instruments such as lending and borrowing among neighbors. Another example of complementarity between sources of data is the use of ethnographic studies to explain the results of impact evaluations. An impact evaluation of a nutritional supplement distribution program might find that the supplement is not reducing the micro-nutrient deficiency at the expected levels, while an in-depth observation study might provide the hypothesis that since the supplement is viewed as food, it is shared among all the members of the family and therefore its impact is diluted. This hypothesis might in turn lead to new product designs that make the supplement be seen more as a medicine and in turn administered only to the undernourished child in the household.
While Portfolios offers great insight into the lives of the poor, It would have been interesting to go a step further and make the connection between financial management and other outcome variables such as health and nutrition status. The book makes a very compelling case for the centrality of financial instruments to the survival of the poor and for the unexpected level of complexity of their portfolios. However, it would also be interesting to know what instruments are more effective in allowing poor households not only to eat, but to be well nourished, not only to pay the pharmacy bills, but to achieve a healthier lifestyle, etc. I think this data was not collected because the aim of the authors was to understand how the poor manage cash. Furthermore, linking financial management to these outcome variables would have increased the cost of the study and required a bigger sample and a more complex study design, both of which would probably only be possible by sacrificing frequency and detail.
While Portfolios offers great insight into the lives of the poor, It would have been interesting to go a step further and make the connection between financial management and other outcome variables such as health and nutrition status. The book makes a very compelling case for the centrality of financial instruments to the survival of the poor and for the unexpected level of complexity of their portfolios. However, it would also be interesting to know what instruments are more effective in allowing poor households not only to eat, but to be well nourished, not only to pay the pharmacy bills, but to achieve a healthier lifestyle, etc. I think this data was not collected because the aim of the authors was to understand how the poor manage cash. Furthermore, linking financial management to these outcome variables would have increased the cost of the study and required a bigger sample and a more complex study design, both of which would probably only be possible by sacrificing frequency and detail.
The role of global poverty headcounts
Angus Deaton's 2010 Presidential Address to the American Economic Society: "Price Indexes, Inequality and the measurement of world poverty" analyzes, among other issues, the pitfalls of calculating a global poverty headcount. I was asked to answer the two following questions for my class discussion of Deaton's lecture:
What is the role of a global poverty headcount?
As Deaton points out, the uses of a global poverty headcount are quite limited given the myriad of conceptual and methodological difficulties that have to be surmounted in order to produce it. I see three roles for a global poverty headcount. First, it can be used as a reference in broad conceptual debates such as the role of globalization in global welfare (e.g Rodrik, Dollar and Kraay). Second, it can be used for advocacy by NGOs and International organizations interested in elevating global poverty in the international agenda. Finally, a global poverty headcount also highlights the limitations of the available data and methodology. Shedding light on those limitations could spur research leading to more and better data and methodologies. For example, if Deaton’s call for improvement in “timeliness, availability, coverage, design, and quality of national household surveys, national consumer price indexes, and national accounts” is heard, then a global headcount would indirectly be driving progress in many areas of development research that can benefit from such innovations.
How can or should such a poverty headcount be used to determine strategy in international organizations?
I don’t think a global poverty headcount should be used to determine strategy in international organizations given the sensitivity to assumptions and methodological strategies. There is a wide range of national and regional data with a higher level of disaggregation that allows unpacking trends in a much more illustrative way. Furthermore, a global poverty headcount represents the symptom of a host of underlying problems and data that sheds light on those underlying problems would provide, in my opinion, much better guidance for determining strategy in international organizations.
For a great review of the issues raised by Deaton, see Developingjen's two part post.
What is the role of a global poverty headcount?
As Deaton points out, the uses of a global poverty headcount are quite limited given the myriad of conceptual and methodological difficulties that have to be surmounted in order to produce it. I see three roles for a global poverty headcount. First, it can be used as a reference in broad conceptual debates such as the role of globalization in global welfare (e.g Rodrik, Dollar and Kraay). Second, it can be used for advocacy by NGOs and International organizations interested in elevating global poverty in the international agenda. Finally, a global poverty headcount also highlights the limitations of the available data and methodology. Shedding light on those limitations could spur research leading to more and better data and methodologies. For example, if Deaton’s call for improvement in “timeliness, availability, coverage, design, and quality of national household surveys, national consumer price indexes, and national accounts” is heard, then a global headcount would indirectly be driving progress in many areas of development research that can benefit from such innovations.
How can or should such a poverty headcount be used to determine strategy in international organizations?
I don’t think a global poverty headcount should be used to determine strategy in international organizations given the sensitivity to assumptions and methodological strategies. There is a wide range of national and regional data with a higher level of disaggregation that allows unpacking trends in a much more illustrative way. Furthermore, a global poverty headcount represents the symptom of a host of underlying problems and data that sheds light on those underlying problems would provide, in my opinion, much better guidance for determining strategy in international organizations.
For a great review of the issues raised by Deaton, see Developingjen's two part post.
Subsidios Condicionados
Mi respuesta al desafio sobre subsidios condicionados de Auntos del Sur se puede leer aqui.
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