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.
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.
Portfolios of the Poor: How the World's Poor Live on $2 a Day
Princeton University Press. May South African edition, University of Capt Town Press.
Morduch, J., Collins, D., 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."
Household Income Volatility and Tax Policy: Helping More and Hurting Less
Testimony before the Joint Economic Committee Feb. 28
Reform Options for the Estate Tax System: Targeting Unearned Income
Testimony before the United States Committee on Finance March 12
Power Reduces the Press of the Situation: Implications for Creativity, Conformity, and Dissonance
Journal of Personality and Social Psychology, 95, 1450-1466/
Galinsky, A.D., Magee, J.C., Gruenfeld, D.H., Whitson, J. & Liljenquist, K.
Although power is often conceptualized as the capacity to influence others, the current research explores whether power psychologically protects people from influence. In contrast to classic social psychological research demonstrating the strength of the situation in directing attitudes, expressions, and intentions, five experiments (using experiential primes, semantic primes, and role manipulations of power) demonstrate that the powerful (a) generate creative ideas that are less influenced by salient examples, (b) express attitudes that conform less to the expressed opinions of others, (c) are more influenced by their own social value orientation relative to the reputation of a negotiating partner, and (d) perceive greater choice in making counterattitudinal statements. This last experiment illustrates that power is not always psychologically liberating; it can create internal conflict, arousing dissonance, and thereby lead to attitude change. Across the experiments, high-power participants were immune to the typical press of situations, with intrapsychic processes having greater sway than situational or interpersonal ones on their creative and attitudinal expressions.
Reversal of Fortunes: Low Income Neighborhoods in the 1990s
Urban Studies, 45: 845-869.
O'Regan, K. & Ellen, I.G.
This paper offers new empirical evidence about the prospects of lower-income, US urban neighbourhoods during the 1990s. Using the Neighborhood Change Database, which offers a balanced panel of census tracts with consistent boundaries from 1970 to 2000 for all metropolitan areas in the US, evidence is found of a significant shift in the fortunes of lower-income, urban neighbourhoods during the 1990s. There was a notable increase in the 1990s in the proportion of lower-income and poor neighbourhoods experiencing a gain in economic status. Secondly, in terms of geographical patterns, it is found that this upgrading occurred throughout the country, not just in selected regions or cities. Finally, it is found that the determinants of changes in lower-income, urban neighbourhoods shifted during the 1990s. In contrast to earlier decades, both the share of Blacks and the poverty rate were positively related to subsequent economic gain in these neighbourhoods during the 1990s.
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.
The Armonk Agenda: Next Steps for Fiscal Reform in New York State
Citizens Budget Commission, October
Harvey, D., Lynam, E. & Brecher, C.
On April 7-8, 2006, the Citizens Budget Commission (CBC) convened a conference in Armonk, New York with the goal of identifying widely supported, high-priority measures for fiscal reform in New York State. This document highlights those measures in order to raise awareness and promote discussion of them in the coming year.
Options for Budget Reform in New York State
Citizens Budget Commission, October
Brecher, C. & CBC Staff.
This background paper focuses on the greater accountability and transparency in fiscal decision making. It has been prepared to inform discussion among the participants at the first CBC agenda setting conference, scheduled for September 20, 2007. The paper is organized into three sections. The first is a definition of the problem; it defines in some detail the limited accountability and transparency that have characterized the New York State budget process in past years. The second section describes the progress made in addressing these problems during recent legislative sessions, focusing particularly on the 2007 session. The last section describes options that can be pursed in 2008 and subsequently to make even more substantial progress. The options are not all mutually exclusive, but they are relatively numerous. Conference participants are asked to review these options for discussion in the forum on September 20. The views expressed by experts attending the forum will be considered in the preparation of a final document that will summarize recommended actions for State leaders.
Professional Business Services in the New York City Economy
Citizens Budget Commission, August .
Brecher, C., Roistacher, E. & Spiezio, S.
This report is the first in a series of studies that will examine the growth prospects of the New York City economy. This first study analyzes the financial services, legal services, and accounting and management consulting sectors, and combines original data obtained through detailed interviews with 25 firms in these industries with existing data from previously published analyses and surveys. The study concludes that while New York will continue to be a global center for these industries, the shape of these industries within the city will change, and the industries are unlikely to be the significant source of employment growth in the future that they have been in the past. The report includes 36 tables with longitudinal data examining employment and business activity in these sectors of the New York City economy, as well as the relationship between these sectors and the larger domestic and international markets.
Budget 2000 Project (7 volumes)
Citizens Budget Commission, December .
Brecher, C. et al.
The Budget 2000 Project recommends actions that will reduce the cost of government in New York by between $12.8 and $19.7 billion, amounts large enough not only to balance the budgets of the Two New Yorks, shift the local government costs of public assistance and Medicaid to the State, and fund salary increases for workers who assist in the restructuring, but still leave at least $9.3 billion to improve New York's competitiveness by investing in the infrastructure, enhancing services and cutting taxes.
Financing Medical Care for the Uninsured in New York State
Citizens Budget Commission, March .
Brecher, C. & Spiezio, S.
Approximately 3.1 million State residents (one of every six New Yorkers) have no health insurance. This report describes the uninsured population in New York State and the public programs that currently finance medical care for the uninsured. It also identifies the inadequacies of these programs and makes recommendations for reform.
Making More Effective Use of New York State's Prisons
Citizens Budget Commission, May,
Brecher, C. & Lynam, E.
This report focuses on the cost-effectiveness of the policies of the New York State Department of Correctional Services, and makes four recommendations for achieving operational savings without diminishing public safety. These recommendations are: (1) to extend the reach and effectiveness of tested alternatives, such as boot camp and the CASAT program; (2) to develop new alternatives for additional inmate groups; (3) to reengineer the parole system; (4) to create an enhanced research and development unit.
An Affordable Debt Policy for New York State and New York City
Citizens Budget Commission, October,
Richwerger, K. & Brecher, C.
Do New York State and New York City have too much debt? This report addresses the question by presenting criteria for deciding how much state and local debt is affordable, and recommending how those criteria should be applied to decisions by New York State and New York City. This report provides a measure that can be used by states and cities throughout the nation to judge the impact that their debt will have on their ability to compete with other jurisdictions effectively.
New York State's Competitiveness: A Scorecard for 12 States
Citizens Budget Commission, February,
Brecher, C., Searcy, C. & Richwerger, K.
This comparative scorecard for New York State examines 34 indicators covering nine categories of economic and social well-being for nine of the ten largest states in the nation in terms of population, and two of New York's geographic neighbors, Massachusetts and Connecticut. In each case, the data address two questions: How does New York State's current condition compare to that of other large or neighboring states, and how does New York's change in the last five years compare to that of these similar states?
A Review of the January 2001 Financial Plan for the City of New York
Citizens Budget Commission, March,
Brecher, C., Offerman, D. & Lynam, E.
This report analyzes Mayor Rudolph W. Giuliani's Preliminary Financial Plan for the City of New York for fiscal years 2002 to 2005.
New York's Competitiveness: A Scorecard for 13 U.S. Metropolitan Areas
Citizens Budget Commission, July,
Brecher, C. et al.
This comparative scorecard for the New York Metropolitan region - an area which stretches from Waterbury, CT to Trenton, NJ - presents 36 indicators covering eight categories of economic and social well-being. How does New York's current condition compare to that of other large metropolitan areas, and how does New York's performance in the last five years compare to that of these other areas? The 12 metropolitan areas to which New York is compared are: Boston, Chicago, Dallas, Detroit, Houston, Los Angeles, Philadelphia, Phoenix, San Antonio, San Diego, San Francisco, and Washington, DC.
Can New York Get an “A” in School Finance Reform?
Citizens Budget Commission, November
The State of New York faces a major challenge stemming from a 2003 ruling by the Court of Appeals, the State's highest court. It found that the more than one million children in New York City's public schools were not provided with the sound basic education guaranteed to them by the State Constitution. In the subsequent months, the plaintiffs and the State's political leaders have not agreed on a suitable remedy for students in New York City, and by extension to hundreds of thousands of additional students in other school districts around the state who also have been denied their constitutional right. One important issue to be resolved is: How much additional funding is needed?
The Citizens Budget Commission (CBC) has prepared this report to address two questions fundamental to designing a remedy:
- Where should the money come from?
- What changes other than more money are essential to improving educational
New York’s Endangered Future: Debt Beyond Our Means
Citizens Budget Commission, September
Brecher, C. & Lynam, E.
New York State has too much debt. Its obligations will require current and future taxpayers to bear a burden that creates a competitive disadvantage with the other states. Not only is the absolute amount of New York's debt high, but the burden is excessive even after the State's relatively large tax base and other relevant factors are taken into account.
The core issue is that New York has no effective legal limits on the amount of debt it can assume. Constitutional provisions intended to limit debt are outdated and are circumvented regularly. Statutory limits - passed in 2000 - are also being circumvented. Simply put, it has become too easy for State leaders to borrow. In addition, they have misused debt, which should be restricted to paying for long-term capital projects, by financing annual operating expenses.
Short-run and long-run measures are needed. In the near term, voters should reject bond referendums such as the Transportation Bond Act of 2005 until debt is brought under control. That act would authorize only $2.9 billion of an additional $13 billion in planned State borrowing, but it is the only opportunity that voters have to express their opposition to excessive borrowing. In the long-run the State must strike a balance between adequate infrastructure investment and a competitive debt burden. The State needs a new constitutional limit that does not require voter approval for every debt issuance, but does impose a binding limit that is linked to ability to pay.