Economics

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
Arabic translation.

Jonathan Morduch, Daryl Collins, Stuart Rutherford, & Orlanda Ruthven
05/24/2016

Portfolios of the Poor: How the World's Poor Live on $2 a Day (Princeton University Press, 2009) tackles the fundamental question of how the poor make ends meet. Over 250 families in Bangladesh, India, and South Africa participated in this unprecedented study of the financial practices of the world's poor.

These households were interviewed every two weeks over the course of a year, reporting on their most minute financial transactions. This book shows that many poor people have surprisingly sophisticated financial lives, saving and borrowing with an eye to the future and creating complex "financial portfolios" of formal and informal tools.

Indispensable for those in development studies, economics, and microfinance, Portfolios of the Poor will appeal to anyone interested in knowing more about poverty and what can be done about it.

Failure vs. Displacement: Why an Innovative Anti-Poverty Program Showed no Net Impact in South India

Failure vs. Displacement: Why an Innovative Anti-Poverty Program Showed no Net Impact in South India
September 2015. Journal of Development Economics 116: 1-16.

Jonathan Morduch, Jonathan Bauchet, & Shamika Ravi
05/24/2016

We analyze a randomized trial of an innovative anti-poverty program in South India, part of a series of pilot programs that provide “ultra-poor” households with inputs to create new, sustainable livelihoods (often tending livestock). In contrast with results from other pilots, we find no lasting net impact on income or asset accumulation in South India. We explore concerns with program implementation, data errors, and the existence of compelling employment alternatives. The baseline consumption data contain systematic errors, and income and consumption contain large outliers. Steps to address the problems leave the central findings largely intact: Wages for unskilled labor rose sharply in the area while the study was implemented, blunting the net impact of the intervention and highlighting one way that treatment effects depend on factors external to the intervention itself, such as broader employment opportunities.

Wholesale Prices, Retail Prices and the Lumpy Pass-Through of Alcohol Taxes

Wholesale Prices, Retail Prices and the Lumpy Pass-Through of Alcohol Taxes

Rao, Nirupama S. (with Chris Conlon)
11/11/2015

This paper examines the pass-through of taxation in the market for distilled spirits. By using detailed UPC level data from Nielsen Homescan, as well as state specific wholesale prices from the regulator in Connecticut we are able to measure the pass-through rate of taxation at both the wholesale and the retail level. We find that pass-through of taxes to wholesale prices is incomplete and approximately 70% while pass-through of taxation to retail prices is often excess of 100 and as high as 160%, consistent with other results on the pass-through of excise taxes for spirits. This over-shifting of the tax burden onto consumers is difficult to rationalize with profit maximizing firm behavior and log-concave demand (such as Linear Demand, Logit, or Probit). We offer an alternative explanation which incorporates dynamics in price adjustment, and shows that large pass-through rates are an artifact of small tax increases and lumpy price adjustment via $1.00 increments. When firms follow an (s, S) rule, this has implications for a policy where tax-increases minimize over-shifting behavior that generates additional deadweight loss per unit of government revenue.

Credit is Not a Right

Credit is Not a Right
in Microfinance, Rights, and Global Justice (edited by Tom Sorell and Luis Cabrera). Cambridge University Press.

Gershman, John and Jonathan Morduch
08/01/2015

Muhammad Yunus, the microcredit pioneer, has proposed that access to credit should be a human right. We approach the question by drawing on fieldwork and empirical scholarship in political science and economics. Evidence shows that access to credit may be powerful for some people some of the time, but it is not powerful for everyone all of the time, and in some cases it can do damage. Yunus’s claim for the power of credit access has yet to be widely verified, and most rigorous studies find microcredit impacts that fall far short of the kinds of empirical assertions on which his proposal rests. We discuss ways that expanding the domain of rights can diminish the power of existing rights, and we argue for a right to non-discrimination in credit access, rather than a right to credit access itself.

 

Corporate Inversions and Economic Performance

Corporate Inversions and Economic Performance
Forthcoming ~ National Tax Journal

Rao, Nirupama.
07/11/2015

This paper assesses the economic factors associated with corporate inversions, including the 48 inversions that have occurred since the analysis of Desai and Hines (2002). The analysis presented here is observational, not causal, as it examines how the business activities of firms that chose to invert changed after expatriation. In addition to statistically assessing the equity market’s reaction to inversion announcements, this paper examines how firms alter their patterns of employment and investment after inversion. In particular, the paper follows how the foreign shares of an inverting firm’s employment and investment change following inversion, relative to comparable non-inverting firms. The behavior of inverting firms following expatriation is assessed going back to 1980 as well as only after the 2004 policy change, which made expatriation through merger with a foreign firm with substantive foreign business activities more attractive. The results suggest that inverting firms have higher shares of the employees and capital expenditures located abroad after inversion relative to changes experienced by similar non-inverting firms. Further, these increases are not attributable to one-time changes due to the inclusion of a new foreign partner’s existing workforce and ongoing investments; foreign shares of employment and investment are higher two and more years after inversion relative to the first year just after inversion when any one-time increases would register.

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