Economic Development

Mission Matters: The Cost of Small High Schools Revisited

Mission Matters: The Cost of Small High Schools Revisited
Economics of Education Review,

Stiefel, L., Schwartz, A.E., Iatarola, P. & Chellman, C.

With the financial support of several large foundations and the federal government, creating small schools has become a prominent high school reform strategy in many large American cities. While some research supports this strategy, little research assesses the relative costs of these smaller schools. We use data on over 200 New York City high schools, from 1996 through 2003, to estimate school cost functions relating per pupil expenditures to school size, controlling for school output and quality, student characteristics, and school organization. We find that the structure of costs differs across schools depending upon mission-comprehensive or themed. At their current levels of outputs, themed schools minimize per pupil costs at smaller enrollments than comprehensive schools, but these optimally sized themed schools also cost more per pupil than optimally sized comprehensive schools. We also find that both themed and comprehensive high schools at actual sizes are smaller than their optimal sizes.

Portfolios of the Poor: How the World's Poor Live on $2 a Day

Portfolios of the Poor: How the World's Poor Live on $2 a Day
Princeton, NJ: Princeton University Press. May 2009

Collins, D., Morduch, J., Rutherford, S. & Ruthven, O.

About forty percent of the world's people live on incomes of two dollars a day or less. If you've never had to survive on an income so small, it is hard to imagine. How would you put food on the table, afford a home, and educate your children? How would you handle emergencies and old age? Every day, more than a billion people around the world must answer these questions. Portfolios of the Poor is the first book to explain systematically how the poor find solutions.

The authors report on the yearlong "financial diaries" of villagers and slum dwellers in Bangladesh, India, and South Africa--records that track penny by penny how specific households manage their money. The stories of these families are often surprising and inspiring. Most poor households do not live hand to mouth, spending what they earn in a desperate bid to keep afloat. Instead, they employ financial tools, many linked to informal networks and family ties. They push money into savings for reserves, squeeze money out of creditors whenever possible, run sophisticated savings clubs, and use microfinancing wherever available. Their experiences reveal new methods to fight poverty and ways to envision the next generation of banks for the "bottom billion."

Microfinance Meets the Market

Microfinance Meets the Market
February Journal of Economic Perspectives 23(1), Winter:  167-192.

Morduch, J., Cull, R. & Demirguc-Kunt, A.

In this paper, we examine the economic logic behind microfinance institutions and consider the movement from socially oriented nonprofit microfinance institutions to for-profit microfinance. Drawing on a large dataset that includes most of the world's leading microfinance institutions, we explore eight questions about the microfinance "industry": Who are the lenders? How widespread is profitability? Are loans in fact repaid at the high rates advertised? Who are the customers? Why are interest rates so high? Are profits high enough to attract profit-maximizing investors? How important are subsidies? The evidence suggests that investors seeking pure profits would have little interest in most of the institutions we see that are now serving poorer customers. We will suggest that the future of microfinance is unlikely to follow a single path. The recent clash between supporters of profit-driven Banco Compartamos and of the Grameen Bank with its "social business" model offers us a false choice. Commercial investment is necessary to fund the continued expansion of microfinance, but institutions with strong social missions, many taking advantage of subsidies, remain best placed to reach and serve the poorest customers, and some are doing so at a massive scale. The market is a powerful force, but it cannot fill all gaps.

The Unbanked: Evidence from Indonesia

The Unbanked: Evidence from Indonesia
October   World Bank Economic Review 22(3): 517-537

Morduch, J. & Jonston Jr., D.

To analyze the prospects for expanding financial access to the poor, bank professionals assessed 1,438 households in six provinces in Indonesia to judge their creditworthiness. About 40 percent of poor households were judged creditworthy according to the criteria of Indonesia's largest microfinance bank, but fewer than 10 percent had recently borrowed from a microbank or formal lender. Possessing collateral appeared as a minor determinant of creditworthiness, in keeping with microfinance innovations. Although these households were judged able to service loans reliably, most desired small loans. Calculations show that the bank, given its current fee structure and banking practices, would lose money when lending at the scales desired. So, while innovations have helped to extend financial access, it remains difficult to lend in small amounts and cover costs.

Equity and Accountability: The Impact of State Accountability Systems on School Finance

Equity and Accountability: The Impact of State Accountability Systems on School Finance
Journal of Public Budgeting & Finance, 28 (3): 1-22

Rubenstein, R. & Ballal, S., Stiefel, L., Schwartz, A.E.

Using an 11-year panel data set containing information on revenues, expenditures, and demographics for every school district in the United States, we examine the effects of state-adopted school accountability systems on the adequacy and equity of school resources. We find little relationship between state implementation of accountability systems and changes in school finance equity, though we do find evidence that states in which courts overturned the school finance system during the decade exhibited significant equity improvements. Additionally, while implementation of accountability per se does not appear linked to changes in resource adequacy, states that implemented strong accountability systems did experience improvements.


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