Economics

Behavioral Foundations of Microcredit: Experimental and Survey Evidence from Rural India

Behavioral Foundations of Microcredit: Experimental and Survey Evidence from Rural India
American Economic Review 102 (2), April 2012: 1118-1139.

Bauer, Michal; Julie Chytilová; and Jonathan Morduch
04/01/2012

We use experimental measures of time discounting and risk aversion for villagers in south India to highlight behavioral features of microcredit, a financial tool designed to reduce poverty and fix credit market imperfections. The evidence suggests that microcredit contracts may do more than reduce moral hazard and adverse selection by imposing new forms of discipline on borrowers. We find that, conditional on borrowing from any source, women with present-biased preferences are more likely than others to borrow through microcredit institutions. Another particular contribution of microcredit may thus be to provide helpful structure for borrowers seeking self-discipline.

The Fiscal Challenge of an Aging Population in the U.S.

The Fiscal Challenge of an Aging Population in the U.S.
In The Oxford Handbook of Work and Aging, edited by Jerry W. Hedge and Walter C. Borman. Oxford University Press, 2012.

Sewin Chan
03/01/2012

This chapter examines the fiscal challenge posed by the aging of the U.S. population. We summarize the likely future of U.S. demographics, focusing on the evolution of the dependency ratio. We describe the main U.S. government programs related to aging and assess their fiscal positions. Forecasts for the unfunded liabilities in these programs exceed $40 trillion. We provide a review of economic theory useful for understanding the likely economic impact of budget deficits. We evaluate the fiscal adjustment that is likely to be needed given the 2009 status of the U.S. fiscal position and predicted demographic changes: it is likely to be approximately 8% of GDP, which, while large, is an adjustment that has been managed by many countries in the past. Finally, we provide a brief survey of potential policies to address the fiscal challenge of aging, and of economic research evaluating such policies.

Do interest rates matter? Credit demand in the Dhaka Slums

Do interest rates matter? Credit demand in the Dhaka Slums
Journal of Development Economics, 97(2): 437-449

Dehejia, Rajeev; Heather Montgomery and Jonathan Morduch
03/01/2012

“Best practice” in microfinance holds that interest rates should be set at profit-making levels, based on the belief that even poor customers favor access to finance over low fees.  Despite this core belief, little direct evidence exists on the price elasticity of credit demand in poor communities.  We examine increases in the interest rate on microfinance loans in the slums of Dhaka, Bangladesh.  Using unanticipated between-branch variation in prices, we estimate interest elasticities from -0.73 to -1.04, with our preferred estimate being at the upper end of this range. Interest income earned from most borrowers fell, but interest income earned from the largest customers increased, generating overall profitability at the branch level. 

Budget Slack, Institutions, and Transparency.

Budget Slack, Institutions, and Transparency.
Public Administration Review 72(2): 187-95

Rose, Shanna and Daniel L. Smith.
03/01/2012

Economic theory suggests that it is optimal for governments to use precautionary saving as a countercyclical tool. However, the availability of surplus funds often triggers political pressure for tax cuts and spending increases. Mechanisms for alleviating that pressure include limiting the transparency of slack resources and limiting politicians' discretion to use slack resources for purposes other than stabilization. This article investigates the extent to which these two mechanisms are substitutes. In particular, the authors examine whether the widespread adoption of budget stabilization funds (BSFs) in the U.S. states over the past several decades has been accompanied by a decline in conservative revenue forecast bias. Using panel data from 47 states over a 22-year period, they find that the adoption of a BSF reduces revenue underestimation by approximately two-thirds; however, the size of the effect depends in part on how much a state saves in the BSF and the rules governing BSF deposits and withdrawals. The results suggest that BSFs have the unintended effect of increasing fiscal transparency.

Valuing Improvement in Value Based Purchasing

Valuing Improvement in Value Based Purchasing
Circulation:  Cardiovascular Quality and Outcomes.  5:163-170  

Borden, William and Jan Blustein.
03/01/2012

Background

Medicare will soon implement hospital value-based purchasing (VBP), using a scoring system that rewards both achievement (absolute performance) and improvement (performance increase over time).  However, improvement is defined so as to give less credit to initial low performers than initial high performers.  Since initial low performers are disproportionately hospitals in socioeconomically disadvantaged areas, these institutions stand to lose under Medicare’s VBP proposal. 

 

Methods

We developed an alternative improvement scale, and applied it to hospital performance throughout the US.   Using 2005-2008 Medicare process measures for acute myocardial infarction (AMI) and heart failure (HF), we calculated hospital scores using Medicare’s proposal and our alternative.  Hospital performance scores were compared across 5 locational dimensions of socioeconomic disadvantage: poverty, unemployment, physician shortage, high school and college graduation rates.

 

Results

Medicare’s proposed scoring system yielded higher overall scores for the most locationally advantaged hospitals for 4 out of 5 dimensions in AMI and 2 out of 5 for HF.  Using our alternative, differences in overall scores between hospitals in the most and least advantaged areas were attenuated, with locationally advantaged hospitals having higher overall scores for 3 out of 5 dimensions in AMI and 1 out of 5 dimensions for HF. 

 

Conclusions

Using an alternative VBP formula that reflects the principle of “equal credit for equal improvement,” resulted in a more equitable distribution of overall payment scores, which could allow hospitals in both socioeconomically advantaged and disadvantaged areas to succeed under VBP.

 

 

Above Board: Raising the Standards for Passenger Service Workers at the Nation's Busiest Airports

Above Board: Raising the Standards for Passenger Service Workers at the Nation's Busiest Airports

Mason, C. Nicole & Garcia, Lisette
02/01/2012

I n the fall of 2011, the Women of Color Policy Network at New York University's Robert F. Wagner Graduate School of Public Service conducted a survey of over 300 passenger service workers at the region's three major airports: LaGuardia, Kennedy International and Newark Liberty International.
Only workers contracted by the airlines were surveyed. This report focuses on the impact of the low-bid
contracting system on passenger service workers at the airports. It also proposes ways forward and concrete recommendations to raise job quality and performance standards for companies contracted directly with airlines.

The economic burden placed on healthcare systems by childhood obesity

The economic burden placed on healthcare systems by childhood obesity
Expert Rev Pharmacoecon Outcomes Res. 2012 Feb;12(1):39-45.

Trasande L and Brian Elbel.
02/01/2012

The obesity epidemic has transformed children's healthcare, such that diabetes, hypertension and the metabolic syndrome are phrases more commonly used by child health providers than ever before. This article reviews the economic consequences of this epidemic for healthcare delivery systems, both in the short term when obesity has been associated with increased utilization, and in the long term where increased likelihood of adult obesity and cardiovascular disease is well documented. Large investments through research and prevention are needed and are likely to provide strong returns in cost savings, and would optimally emerge through a cooperative effort between private and government payers alike. 

An Alternative Approach to Addressing Selection into and out of Social Settings: Neighborhood Change and African American Children’s Economic Outcomes

An Alternative Approach to Addressing Selection into and out of Social Settings: Neighborhood Change and African American Children’s Economic Outcomes
Sociological Methods & Research

Sharkey, Patrick.
01/01/2012

Higher Fees Paid to US Physicians Drive Higher Spending for Physician Services Compared to Other Countries

Higher Fees Paid to US Physicians Drive Higher Spending for Physician Services Compared to Other Countries
Health Affairs, 2011. Volume 30 / Issue 09 / September 2011, pp 1647-1656, Published online

Sherry Glied and Miriam Laugesen
09/08/2011

Higher health care prices in the United States are a key reason that the nation’s health spending is so much higher than that of other countries. Our study compared physicians’ fees paid by public and private payers for primary care office visits and hip replacements in Australia, Canada, France, Germany, the United Kingdom, and the United States. We also compared physicians’ incomes net of practice expenses, differences in financing the cost of medical education, and the relative contribution of payments per physician and of physician supply in the countries’ national spending on physician services. Public and private payers paid somewhat higher fees to US primary care physicians for office visits (27 percent more for public, 70 percent more for private) and much higher fees to orthopedic physicians for hip replacements (70 percent more for public, 120 percent more for private) than public and private payers paid these physicians’ counterparts in other countries. US primary care and orthopedic physicians also earned higher incomes ($186,582 and $442,450, respectively) than their foreign counterparts. We conclude that the higher fees, rather than factors such as higher practice costs, volume of services, or tuition expenses, were the main drivers of higher US spending, particularly in orthopedics.

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