NPR recently featured a segment on tipping, positing that while many people believe they tip to reward good service, they actually tip out of guilt for being served by another.  The segment points out that people tend to tip at fairly constant rates, regardless of how good the service is, and more interestingly, the services that conventionally require tips in the United States are those where the person receiving the service is having a lot more fun than the server.  People at restaurants and hotels tip; people at the dentist do not.

Guilt seems to make up a large share of my (admittedly under-average) emotional spectrum, so I find this very compelling.  The segment points out a downside to this: tipping out of guilt may not be efficient.  Tippers may give an amount larger than the value of the service to them, and tips that don’t vary with service quality don’t provide incentives for better service.

Tipping norms in Ghana are quite different from those in the United States: tips are not necessarily expected for restaurant service, but for help with directions, with making a large purchase, or with loading bags onto a bus, a tip, or “dash” is expected.  (“Dash” functions as both a noun and a verb.) Often, the services you are expected to dash for are services you don’t even want, and the tipper may even give money just to get someone to go away.  The role of guilt in tipping is compounded in these situations by the uncertainty foreigners may have regarding tipping norms and by the income disparity between the average foreigner and the people who do these types of jobs in Ghana.  

The trouble with this is that the efficiency of the tip is further diminished.  While guilt may make me a generally good tipper, as an economist, I also feel guilty when I tip for poor service or services I don’t want, thus providing poor incentives.  Here is my advice on tipping in Ghana to maximize good incentives:

Restaurants: Tipping is not mandatory for food service, though it becomes more expected the more upscale the venue.  I highly recommend giving small tips/dashes that are very sensitive to the quality of service.  At a local eating spot, 1 GHS is a good tip for basic service, and will likely get you a little extra attention next time you visit.  At a nice restaurant in Accra, a 10% tip for good service seems to be well-received.  The rarity of tipping in Ghanaian restaurants presents an opportunity to tie tipping to good service, so I would urge varying tips accordingly, giving nothing for poor service, and large tips for good service.

 Bags: If someone helps you carry your bag, it is very much expected you will give a dash. If you don’t want to, then be firm about carrying your own bags. 

Bus baggage: Small dashes are often expected for loading your bags under a bus.  It is hard to avoid using this service.  This is the context where I have found demands for dashes to be most outrageous.  A dash should not be mandatory for this—I have seen supervisors yell at men who demanded a dash before loading bags. I would recommend resisting anyone who demands one before helping you.  The dash should also not be large.  I once encountered a man who refused my 1 GHS dash and demanded 2 GHS.  I gave him nothing.  I would not give more than 1 GHS unless your bags are many, or you receive some special assistance with them.  Note that a dash for loading should not be confused with an actual fee for baggage.

Directions: You should not have to pay a dash for directions.  If someone walks a long way with you to show you where something is, a dash may or may not be demanded.  If you don’t want to give one, don’t accept the escort.

Assistance with purchases: If someone helps you locate, select, bargain for, and complete a substantial purchase, a dash may be in order.  Things to consider: how much help you received, how much time and money you saved as a result of the help, and whether the person got any financial gain from your purchase.  Generally, anyone who approaches YOU about buying something doesn’t need a dash.

Household errands: If you have a guard or groundskeeper, the person will often run errands for you. You should dash to compensate for their travel costs and efforts.

Professional services: Professional services outside a person’s normal job may require a dash, depending on the job and the organization a person works with.  As an example, I had a document notarized by a judge in Tamale, and I paid a 5 GHS dash for his time and trouble.

Stealth window washing: One of the strangest things about Accra are stealth window washers, who swoop in on a car waiting at an intersection, squeegee the front windshield despite the driver’s protests, and then demand a dash after.  No matter how guilty you feel, please, please do not dash for this or other unwanted services that are forced on you; you will only encourage the practice. 

Further advice on tipping in Ghana (or anywhere else)? Please contribute in the comments!

This weekend, after a delicious dinner, some friends and I visited a rooftop drinking spot in Osu. As I slowly drove my motocycle into the crowded parking lot, a man reached out, put his hand on my leg, and slid his hand up my skirt as I went by on the moto.  It took me a moment to register what had happened, and by that time, I had passed the group of men, and wasn’t even sure who had done it.  After fuming for several minutes, I joined my friends, had a double whiskey, and did my best to forget about the incident and enjoy the rest of the night.

As I write this, several days later, I am still furious—furious with the man, but more furious with myself for failing to give the man any disincentive to repeat his actions.  The options were many: yell at the man; report him to the police; hit him; run over his foot with my moto; or in my most vengeful fantasy, castrate him with my moto keys.  Why didn’t I do any of these things?  It wasn’t that I am incapable of standing up for myself.  For the most part, it was simply because I wasn’t quick enough to react, but riding away had its advantages:  I wasn’t physically hurt, I got out of a potentially harmful situation quickly, none of my friends had to be involved in a mess, and I was able to move on and continue my night.  It’s hard to imagine a better outcome had I chosen to confront the man—but at what cost did this efficient short-term result come? What does it take to prevent this type of behavior?

Minor physical assault and sexual harassment is not uncommon in Accra.  My recent experiences include:

·         A man grabbing me around the waste and pull me away from my friends to try to get him to dance with me at an outdoor dance spot.  I peeled him off of me and started yelling at him; another Ghanaian intervened and convinced him to leave us alone.

·         A man repeatedly came up to my friends and me in a dance club and rubbed against us, even though we were not dancing.  After asking him three times to stop, I told him to “F-k off” and shoved him.  He drunkenly fell on the ground and then went away.

·         A man on the street grabbed my hand as I was walking by him one evening and would not let go.  I dug my keys into his wrist as I twisted my hand free.  He let me go on my way.

Let’s be frank—women face these types of encounters everywhere.  I have a close friend in New York for whom catcalls are a humiliating but regular part of her daily commute.  She has experimented with every type of reaction I can think of: anger, humor, honest conversation, and simply ignoring it.  Nothing seems to make a difference.  Is a man with a key gouge on his wrist less likely to try to grab a woman’s arm than one who got away unscathed?  

The truth is, I don’t think any reaction from a victim of harassment is enough disincentive to put a stop to this behavior.  To be an effective deterrent, punishment must come from broad society.  Men who sit on steps and catcall in New York City should face the disapproval of the grandmother next door and the scorn of the respectful men who pass by and see them as the boys they are.  Men who assault women in Accra bars and clubs should be unwelcome in those spots, and those who grab women on the streets should be ostracized by other vendors there, who face lost business when women avoid those spots.  In some cases, this happens.  Too often, it doesn't. As long society fails to punish men for this behavior, a they will continue to bet that victims won't punish them either.

I have no quantitative evidence to support this, but I get the impression that prices are stickier in Ghana than in the United States.  My theory is that this is, ironically, because Ghana lacks sticker prices. 

Most people buy things in the market, and they just "know" the price.  If someone tries to charge them higher, they won't buy. My guess is that changing common knowledge of a price is actually a lot harder than just changing a sticker price. 

Could somebody do a study on this please? I recommend an RCT in isolated markets where you select half of the markets to go to sticker prices, where you provide the stickers.  Those markets operate with the stickers for a few months, where the control markets continue to operate without marked prices.  Then you introduce a price shock for, say, tomatoes, send out mystery shoppers, and see where prices change more quickly.  I would do it myself but I am busy. 

I am now writing to you from beautiful Brong Ahafo, where the cars are strong, the chameleons are good looking, and all the roads are above average.

Sadly, though the cars are strong, there is a shortage of shared taxis here unlike any I have encountered anywhere in Ghana. (Shared taxis run routes, and pick up anyone who wants to go on that route. Most of the time, they are a convenient and inexpensive means of transport.) Getting a shared taxi in Sunyani involves standing at a corner and yelling where you want to go as taxis go by, and then when one stops, rushing to beat the hoards all going for that taxi. The first time I was there, I got a taxi because a driver felt sorry for the poor clueless white girl and made it a point to get me in his car.  The next time, I got a taxi based on my rushing merit, which was infinitely more satisfying.

Why don't more people run taxis here? Why don't they raise the price of taxis? I later discovered that the taxi shortage was being caused by a diesel shortage.  Many of the taxis converted to run on diesel were not running. Yet again, things that appear to make no sense to an American economist have a logical explanation. The diesel shortage was temporary; sticky prices and fixed capital costs prevented the market from clearing.

Given the shortage, what is the appropriate way to allocate taxis? Free marketers might suggest they be allocated to those willing to pay the most. However, if your concern is allocating them to those who have the most need for them, and you think the welfare created by this outweighs the extra supplier surplus that would go to the taxi drivers, there are other ways of allocating them, which might be more efficient in a context of high income inequality. One, the use of lines, would allocate taxis to the people most willing to spend their time waiting for the taxi. Another, the one actually in use, is to make people spend effort.  Those most willing to run, fight, and look foolish must be the ones who value the taxi service the most.

When I am in Tamale, I often share my lunch with the office monkey, George. It seems to me that when I share my food with George, my eating habits improve.

There are two reasons for this. The first is simply related to quantity. I don't like to waste food, so normally I clean my plate even if I am no longer hungry.  When George is around, I give him my leftovers when I get full.

The second reason has to do with externalities. When I buy food for myself, I often get lazy and buy fried street food that is available nearby.  If I share food like this with George, I feel bad for feeding him rubbish.  I used to buy egg pies and give George the egg yolk, which I don't like anyway, before I decided that monkeys should probably watch their cholesterol too. As a result, if I know I will be sharing with George, I am more likely to travel farther to get healthy food I will feel good about sharing with the monkey.

I don't know a lot about the field of behavioral economics, but it seems to me that humans, as social animals, may be psychologically wired to internalize externalities through the feelings of guilt and warmfuzzies/self-righteousness.

Chris Blattman’s blog recently critiqued an article by Dan Pallotta arguing that earmarking funds for programs with proven impact is actually less impactful than using the money for further fund-raising efforts.  Pallotta makes an argument that spending on fund-raising allows you to, in essence, leverage your funds and get a much higher return on investment than you would if you’d spent that money directly on programs.

Blattman makes two counter points:

1.        The effectiveness of the programs you are funding feeds back into your ability to use your money to raise more funds.

2.       It’s not clear that lack of funds is the binding constraint in aid.

I’m  a bit skeptical of Blattman’s second point—I thought I was out here getting malaria to make sure that scarce development resources were spent on programs with the highest impact.  I think it is more correct to think of funds and good practice as being similar to labor and capital—in most circumstances you can add more of one or the other and improve outcomes, but are most effective when increased together.

I think Blattman’s first point is completely correct. Pallotta is right that fund-raising can increase impact, but program impact is fundamental to fund-raising effectiveness and meaning.  Donors should be attracted by good programs.  In a rational world with perfect information, donors would know exactly how much money they wanted to spend, and they would choose the program with the highest impact-per-dollar.  This is how these institutional funders Pallotta is complaining about behave.   However, in the real world, human behavior is less rational and more suggestible.  If fund-raising can actually increase the number of dollars out there to be used on development, it can indeed be highly impactful.  Note that fund-raising that just diverts funding from one project to another from a fixed pool of resources doesn’t get to claim this—unless the program it diverts money to is more impactful that the program it diverts money from.

Which brings us to the next point-- if your programs don’t have impact, it doesn’t matter how much you leverage your dollars- you are just using more money badly.  Palotta’s proposal to use seed money to fundraise is similar to the concept of hedge funds.  Hedge funds can’t make huge returns without leveraging their initial funds with loans, but if they don’t put the leveraged funds in investments with good returns, they are just wasting everyone’s money.  

Palotta also argues that you often can’t know what is going to be impactful ex ante.  That may be true, but that doesn’t mean you should throw in the towel and give up on trying to target impactful programs.   Market investors often can’t know which stocks will take off, but no investor would throw money at one without trying to make an educated assessment of its future value.   If funding truly is a scarce resource, you have to have some standard for choosing which programs to fund and which not to. 

Polatta may be right to encourage donors to allow their funds to be used for further fundraising, but this only makes sense in concert with an emphasis on evaluation.  After all, what is the point of all that fundraising if you aren’t going to do anything good with it?  And for fundraising to matter, Blattman must be wrong about money not being a binding constraint.  If money is a binding constraint, then you can’t fund everything, and it becomes all the more crucial to have some way of assessing the best programs.

If you are like me, you know at least one person who loves to get bumped on flights.  That traveler connives to travel on busy days, when airplanes are most likely to get over-booked, so that he or she can receive a sizeable travel voucher or free ticket in exchange for taking the next flight.

Recognizing that market exists, Delta is planning to start allowing travelers to bid for bumps. On overbooked flights, passengers would be allowed to submit the price they would be willing to accept in exchange for taking a later flight. Passengers with the lowest bids would be selected to be bumped first.

I am curious to see (and the article doesn't clarify) whether Delta will pay each passenger the voucher amount that he or she bid, or whether Delta will pay each passenger the voucher amount bid by the last passenger to be bumped. I am also curious to see how quickly information about winning bid prices gets out, and how the information affects bidding strategies of passengers.

I am also curious to see how long it will take before a flight of passengers successfully games the auction...

Sounds like a good research project for an auction theorist!

Donald Marron recently bloggedabout a new economics paper on gender arbitrage by multinationals in South Korea. The idea behind gender arbitrage is that discrimination in hiring against a particular group, like women or minorities, creates opportunities for non-discriminating employers to hire talented people for a lower wage. When non-discriminating employers take advantage of this, it should eventually erase the gap in wages between the disadvantaged group and the rest of the labor market. This paper found that multinational corporations have been able to benefit from discrimination against women in the labor market that drives down wages for educated women.  In Korea, working women earn only 63% of what working men do. (Not all of this is due to discrimination.) The paper found that among multinationals, a 10 percentage point increase in the number of women in local management positions led to a 1 percentage point increase in return on assets.  Marron points out that the fact that companies that hire more women have a hire profit margin means that there is still room for more arbitrage-- implying that discrimination is still resulting in lower wages for women compared with men who have the same skills and abilities.

As unfortunate as it is that women in Korea are being paid less than they are worth, from the perspective of both women and employers in northern Ghana, this is an enviable problem.  In Ghana as a whole, about 20% of adult males have secondary education or higher; only about 10% of adult females have that level of educational attainment (source: GLSS 5), and the gender gap is most pronounced in the Northern Region.  Traditional views of gender roles still prevent girls from having access to education at the same rate as boys.  (Girls may also have a higher opportunity cost of education: girls are often more economically valuable than boys, because they can assist with child-rearing and food processing, or work as maids, at an age where boys are still too young to be much help with farm work.)  The result of this is that it is difficult to find qualified female candidates for jobs requiring a high level of education.

This is especially apparent to employers like me, who actually have a bias in favor of female employees.  Since the majority of the respondents in my survey were female, I wanted to hire female surveyors because they are more likely to put female respondents at ease.  Despite actively recruiting female candidates, posting notices encouraging women to apply, and asking the field managers to try to achieve a balance in the number of male and female surveyors we hired, we received few applications from female candidates, and less than a quarter of the surveyors we hired ended up being female.