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.
The project manager on my project is now assisting with a village savings and loan project, and told me some interesting things about working in Bawku, a region in Ghana where violence has broken out between two tribes, the Mamprusis and the Kussassis.
According to my colleague (a Ghanaian), in the first century, the Kussassis, who were traditionally farmers but not fighters, asked the Mamprusis, who were known as warriors, to come to move to their land. In exchange for protecting the area, so the Kussassis could farm in peace, the Mamprusis were given the chieftaincy in the region. The agreement has held for centuries, and in Ghana’s system of parallel democratic and traditional governments, the Mamprusis still hold the chieftaincy, although they are far outnumbered by the Kussassis. The democratically elected official for the region is Kussassi.
Several years ago, the Kussassis became unhappy with this arrangement, demanding the return of a Kussassi chief. Violence broke out between the tribes. Despite interventions by the central government, including curfews and prosecution of those perpetrating violence, the situation has remained tense. The Mamprusis control Bawku’s city center while the Kussassis control the surrounding land and villages, and members of the two tribes cannot safely visit the other’s territory, although visitors from other tribes or countries are safe.
This situation has posed difficulties for the IPA survey team in the region, as they are trying to collect data in both tribes’ territories. It is crucial that surveyors be hired locally, so they have knowledge of the area, culture, and languages. Since young men on motorcycles have been responsible for much of the violence, the Ghanaian government has recently banned all men in the region from traveling on motorcycles --the chief form of transportation for IPA surveyors.
Enter the ladies. IPA surveyors are overwhelmingly male, as it can be difficult to find women with top educational qualifications and a willingness to take on the physically demanding work. In Bawku, the project manager was successful in finding half a dozen qualified women with motorcycles to fill out the ranks of IPA surveyors in the region. Women are not subject to the ban, and can legally ride motorcycles to visit respondents. The team includes women of both ethnic groups, to enable IPA to work in both territories and with respondents of both tribes. The field manager, who will oversee the survey team in that region, is a women of mixed descent, half Mamprusi and half Kussassi, and can safely work in either tribe’s territory.
I wish the team the best, and hope that they will demonstrate both the ability of women to be exceptional surveyors and the possibility that people of these two tribes can work together toward common goals.
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.
I've spent 36 hours on Ghanaian bus trips in the past month, much of it watching Nigerian ("Nollywood") movies. The Cinderella story is a common theme in many of these movies: a poor village girl, or sweet middle-class modern city girl, meets a young African prince, who buys her lots of stuff, defends her from his disapproving parents, and takes her away to live in a palace.
I had an interesting conversation about women, love and money with several male Ghanaian colleagues the other day. All three of them agreed that women, in general, loved men for their money. One of them said that he was glad he married his wife My male American colleague gallantly came to the defense of my gender, and contended that while this might be true for some, it was untrue for most, and it was impossible to "love" anyone for their money anyway. One coworker suggested that American women were less likely to love a man for his money than Ghanaian women.
With Nigerian Cinderella fresh in my mind, wasn't so quick to dismiss the attraction of money, but instead asked what was wrong with that? What we find attractive is influenced by our needs, and what society admires. Marriage has long been an economic union, and ability to provide economically has been necessary to that union, and socially admirable. And it is no more shallow than many of our other criteria for love-- which is a more accurate reflection of character, the looks a person was born with, or the money they earned? (We will put aside the money a person was born with for the moment.)
The major difference between West African women and American women is that for West African women, economic survival is much less assured-- and hence a greater need. If the Cinderella fantasy still limps through American culture, it should be unsurprising to find it prevalent in West Africa, where many women do not have the luxury of discounting their mate's ability to provide economically. If men want women to marry them for attributes other than money, they should do all they can to empower women to provide for themselves, so they will have that freedom.
Also, they should consider their decisions to have multiple wives and mistresses. When being able to provide for multiple women becomes a mark of status, it only reinforces the link between money and relationships. Treat women like people, not objects, and they will treat you as people, not meal tickets.
Today I spoke with a woman who said she did not have health insurance because she had family members who would pay for her treatment if she got sick, but those same family members would not pay for her insurance premium. Unfortunately for the national insurance scheme, this sounds perfectly rational to me (at least from her perspective; not the family members').
Another unfortunately rational decision: not re-enrolling each year. The way the scheme is implemented now, if you enroll once, but fail to re-enroll the next year, you get coverage immediately at any time by just paying the premiums you have missed. Many people only re-enroll when they are sick, and the treatment cost is more than the missed premiums. This makes perfect sense, so why would anyone do otherwise? As long as people can do this, this poses a problem for the sustainability of the scheme-- if the only people who are enrolling and paying premiums are the people who are getting sick, the scheme will never be able to finance itself.
I am spending this week visiting health care service providers in Tamale, in order to find out more about how Ghana's national health insurance works.
Ghana's national health care scheme is supposed to be open to anyone. The cost is low (although I am still trying to figure out the exact price; I suspect it varies by region), and some groups, including pregnant women and the very poor, get coverage for free.
My first couple of stops were at pharmacies, and what I found out about how they deal with insurance was fascinating. Like Medicaid and Medicare in the United States, Ghana's national health insurance plan does not reimburse service providers at the same rate as private insurance, or the rate that would be charged to those with no insurance. The national health insurance may reimburse pharmacies at perhaps 75% of the market price for many drugs. To make up for this, pharmacies require patients to "top-off"-- to pay the difference between the market price and the insurance price.
Although this difference may only be 25 cents or so, many people cannot afford it; those who are covered for free are usually so poor that they cannot buy food. Another alternative is for the patient to accept a smaller quantity of the drug, while the original quantity is reported in the insurance claim. (I'm not an expert, but I'm pretty sure that would constitute Medicare fraud in the United States.) Finally, in some cases the pharmacist will give the patient the medicine without requiring the top-off, and the pharmacy will take a loss on that transaction.
The National Health Insurance Authority expects pharmacies to behave as health providers in the United States, and accept the prices they are given. However, Ghanaian pharmacies are required to accept insurance, and for many, a large share of their patients use the national health insurance. They could not survive on the prices set by the national insurance.
I have heard that the prices are too low because the price list is not updated frequently. I do not know if this is true. Raising the prices will certainly make the already-struggling insurance scheme more expensive. It may be that a co-pay on drugs could even make sense. However, it will not work for the poorest of the poor, and pharmacies should not be alone in bearing the cost of providing medicines to these people at below market rates.
This paper isn't new, but I recently saw Ricardo Hausman give a presentation on it, and it is quite interesting. The basic premise is that the products that countries produce can be grouped according to the inputs required to produce those products. Knowing how products related to each other could help developing economies figure out what industries to focus on. It is easier to develop industries that share production inputs with products you are already making than it is to develop industries that require a completely new set of production inputs: it is easier for monkeys to swing to a nearby tree than it is for them to swing to a farther tree. The researchers used product categories and job categories to figure out how closely different products were related to each other in terms of inputs. They then looked at several sets of countries, and mapped which products they were producing. The diagrams above show the result of this exercise: the colored dots are products, the lines connect those products that share inputs, and the black squares show what each group of countries is producing. Developed economies produce goods near the center of the cluster. The goods on that part of the map are things like electronics, that require a lot of inputs, but share inputs with a lot of other products. Developing economies are at the periphery of the map, making goods with fewer inputs, and that don't share inputs with many other goods. The point: developing economies are less diversified (no surprise) and less flexible if their main product goes bust.
I've added labels describing important product clusters for each group of countries. Developed economies are clustered around high-value, complex product manufacturing. Latin America and Sub-Saharan Africa both have oil as an important product. Asia has clusters in the areas garments, textiles, and electronics. This point about garments and textiles is interesting. Although it might seem obvious these should go together, they actually don't share many inputs. It's possible that the inputs, though not shared, have similar attributes. Perhaps they require workers with similar levels of education, even if the jobs those workers do are quite different. Or perhaps proximity matters: maybe it is cheaper to make fabric closer to where you sew it. Either way, it suggests targeting industries for development is even more complicated that the charts above suggest.
Today I attended a World Bank training on survey methods in developing economies. (I would just like to say, the World Bank has great food, and where do they get their papaya, because when I buy papaya here it always tastes funny.)
One interesting bit of the training seminar had to do with calibrating surveys to adjust for differences in perceptions or attitudes among respondents. To get a more concrete idea of the problem, imagine asking two people to rank their health from 1 to 10. The first person is a young, Olympic athlete with a cold and sprained ankle, who rates her health as 5. The second is an old, barely mobile man who had a good day and was able to do a lap around his building with his walker. He ranks his health as 8. Is he really more healthy than the athlete? No, but the respondent's relative baseline matters.
An example from actual research: Gary King, Christopher Murray, Joshua Salomon, and Ajay Tandon asked survey respondents in China and Mexico to rate their ability to participate in governance. Chinese respondents, on average, ranked their political efficacy higher than Mexican respondents.
Few people would really believe that citizens have more political efficacy in China than Mexico. More likely, what Chinese citizens considered to be a "high" level of efficacy was different from what Mexican citizens considered to be a "high" level of efficacy. The researchers devised a way to account for differences in the respondents' relative baselines. They used vignettes, or stories illustrating a particular level of political participation, and asked respondents to compare themselves to the hypothetical. Using this method, Chinese respondents ranked their political efficacy lower than Mexican respondents, on average.  From King, et al, 2004. Left are initial responses; right are responses calibrated with vignettes Similar use of hypothetical vignettes can be used in surveys on other topics, including health, access to resources, education, etc., to ensure that respondents interpret questions similarly, and that their responses have the same meaning.
 Country size is expanded or reduced according to average calorie consumption This fascinating map (source here) highlights how much trouble the human species has feeding itself. If you are unfortunate enough to live in Africa or South Asia, you will struggle to consume sufficient calories to survive. If you are unfortunate enough to live in the United States, Canada, Australia, a handful of European countries, or a Gulf state, you will struggle to consume few enough calories. Wouldn't it be great if developed economies could just ship off their excess calories and send them to calorie-deficient countries? Hey, don't eat that second donut-- FedEx it to India. We actually do this with clothing. Clothing that is donated to Goodwill or similar stores, but goes unsold, is baled and sold by weight to developing countries. I purchased some of it when I was in Dakar. It provides local consumers with inexpensive, good quality clothing-- but it also puts local textile workers out of business. Food, of course, is yet more complicated. Hungry people don't need your second donut so much as they need the protein- and vitamin-rich lentil veggie stew you SHOULD be eating. Many people who are calorie or vitamin deficient work in agriculture themselves, and they need not only food but a sustainable way to make a living. However, eating less would have the effect of lowering prices-- which would make food more affordable. And eating less junk food would lower demand for empty-calorie crops like sugar and corn, which might free up land for healthier crops. I think the main lesson from this map, however, is to remind those of us in the developed world how lucky we are to have the problems we have. Health care costs exploding because people are overweight and living longer? At least they aren't starving and dying of malaria as toddlers. So we have to push people to go to the gym? The fact that physical work is optional is a sign that we live luxurious lives. If we can't figure out how to keep our population healthy, what chance is there for developing economies, whose challenges are even more daunting?
This interesting story in the New York Times describes how cell phones are being used in rural Uganda to track banana diseases. Africa has more mobile phones than it does land lines. This is very believable to me, as I saw for myself the proliferation of cell phones in Dakar, Senegal, in 2005. In urban Dakar, the primary draw of the cell phone seemed to be the cool factor, and the ability to talk to friends any time or place. (Senegalese youth really aren't that different from American teenagers, afterall.) At times it seemed bizarre however, to see people talking on cell phones who couldn't afford cars, school, medical care, or even -- in extreme cases -- sufficient food for their children. It is easy to jump to the conclusion that when people without electricity or clean water carry cell phones, this is a serious lack of spending priorities. An article about cell phone use among Washington DC's homeless prompted some similar sentiments among reader comments. However, both of these articles illustrate how cell phones can be a key tool for bringing real improvements to people's lives. The same wealthy Americans who view cell phones as luxuries have access to fast transportation, land lines, television, prolific bank branches, disposable cameras, iPods, and computers with internet. For the poor, both in the United States and in Africa, cell phones have the potential to give people access to news and other information, connect them to friends and relatives who live several days' walk away, allow them use modern banking, and let them enjoy music and entertainment that wealthy Americans take for granted. The newest generation of cell phones have most of the same basic functions as laptops, but cost much less, which could make them valuable in education. Cell phones can be tools at work too. In Dakar, I occasionally saw workers using cell phones to coordinate with their employers and fellow employees, to make the business more productive. Cell phones present a great opportunity to help a large number of low-income people in both developed and developing economies. Programs like the one mentioned in the NYT article, that teach people how to make the best use of cell phones' powerful capabilities, are right on target.
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