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Development Lunch Fall 2011

Description

The purpose of this weekly lunch was to give students in development economics the opportunity to present work in progress and receive feedback in an informal setting. The lunch was sponsored by the UC Berkeley Department of Economics and the Center for Effective Global Action.

Date and Time

Aug 30, 2011 12:30pm — Nov 29, 2011 1:30pm

Location

608-7 Evans Hall, Tuesdays 12:30-1:30pm
University of California, Berkeley

Agenda

August 30th
Presenter: Leslie Martin
Title: Energy Efficiency Gains from Trade

September 6th
Presenter: Jing Cai
Title: Social Networks and Insurance Take-up: Evidence from a Randomized Experiment in China
Abstract: In this paper, we analyze the role of social networks in influencing the decision to adopt a new insurance product in rural China. Causality is established by using data from a randomized experiment where information about the new product was offered either directly through financial education or accessed indirectly through social networks. Unlike previous studies, the experimental design allows to differentiate the various channels through which social networks operate, including scale effects, personalized imitation, and social learning of insurance benefits. Results show that social networks have a large effect on insurance take-up decisions, and that the magnitude of this effect depends on the structure of the network and the position of the individual in the network. This is evidenced by the fact that households are more likely to buy the product if they have more strongly connected friends who attended a village meeting that explained the insurance product, and if their social networks include village leaders and influential farmers who attended the meeting. Moreover, we show that this effect is mainly driven by social learning of insurance benefits, not by scale effects or personalized imitation. The policy implication is that offering financial education to a subset of households in a village community selected for their strong connections with others, recognized farming skills, and leadership roles, and relying on social networks to extend its effect on more farmers through social learning, is an effective way of improving insurance take-up.
September 13th
Presenter: Juliane Parys
Title: High-Skilled Migration to a Low Income-Dispersion Economy - East Germany after Reunification
Abstract: High income compression characterizes East Germany after reunification. We show that West Germans migrating to the East are highly skilled. This is a novel empirical fact challenging the standard migration model prediction that high-skilled individuals migrate from low to high income-dispersion economies. Migrants even accept income cuts, but instead get higher-skilled positions in East Germany. Our findings are consistent with the view that temporary migration is an investment in human capital. After gathering experience abroad, some migrants remigrate with positive returns to their investment, whereas others settle permanently in the East. We find that the better-performing migrants are returning.
September 20th
Presenter: Gianmarco Leon
Title: Incentives to Vote, Political Preferences and Information: Evidence from a Randomized Experiment in Perú
Abstract: Many democracies around the world encourage participation in elections in the belief that this will ensure that voter's preferences are adequately represented in the elected government. However, mandating people to vote could induce less informed or indifferent voters to participate, potentially distorting the public choice. On the other hand, providing incentives for people to vote could lead to a higher involvement in the political process, through information acquisition. In this paper, I exploit an unusual institutional change in the Peruvian voting laws to identify the effect of lower fines for not voting on turnout. My findings suggest that the elasticity of voting with respect to the cost is about -0.2, which implies that cutting the fines for not voting in half leads to a 10 percentage point reduction in turnout. Consistent with the theoretical model presented, voters in the extremes of the political spectrum, those more interested in politics, and more informed are insensitive to changes in the cost of voting. The decision to acquire political information seems to be independent of the cost of abstention, and voters who are sensitive to changes in the cost of voting don't seem to have different preferences for policies than those who vote regardless of the cost. Additional results suggest that an increase in the opportunity cost of voting increases the amount paid by politicians to buy votes.
September 27th
Presenter: Changcheng Song
Title: The Application of New Financial Products in China
October 4th
Presenter: Sebastian Stumpner
Title: Creditor Rights Reforms, Productivity, and Capital Misallocation
October 11th
Presenter: Liang Bai
Title: Understanding the Demand for Crop Insurance: The Importance of Recent Weather Shocks
Abstract: This research project seeks to better understand farmers' demand for crop insurance in developing countries, with a particular focus on the role played by recent weather shocks. It is divided into two parts. Part one studies the demand for informal insurance (through the growing of drought-resistant crops such as millet and sorghum) using district-level panel data from India. We test empirically whether farmers systematically over-react to the most recent weather shocks, thereby mis-allocating land resources. Using a simple portfolio-choice framework, we can then quantify the magnitude of any potential loss to productivity. Part two studies the demand for formal insurance (through the purchase of index insurance) using individual-level data, also from India. A simple model with recency bias and liquidity constraints, which generates under-insurance, is tested empirically.
October 18th
Presenter: Rachel Gardner (co-author Sarah Reynolds)
Title: The Impact of CCTs on Teenage School Attendance and Fertility in Brazil
Abstract: In 2008, Brazil's conditional cash transfer program expanded its reach by offering poor families increasing the maximum age for which youth would be eligible to receive benefits for attending school from fifteen to seventeen. We use a difference in difference age cohort analysis to analyze the impact of this expansion of the program on school attendance and on teens' fertility outcomes.  Our preliminary analyses show significant impacts of the program change on both attendance and fertility outcomes for sixteen-year-olds, but not for seventeen-year-olds.
October 25th
Presenter: Joshua Blumenstock
Title: Risk and Reciprocity on the Mobile Phone Network: Evidence from Rwanda
Abstract: A large literature describes how local risk sharing networks can help individuals smooth consumption in the face of idiosyncratic economic shocks.  However, when an entire community faces a large covariate shock, and when the transaction costs of transfers are high, these risk sharing networks are likely to be less effective. In this paper, we document how a new technology -- mobile phones – reduces transaction costs and enables Rwandans to share risk quickly over long distances.  We examine a comprehensive database of person-to-person transfers of mobile airtime and find that individuals send this rudimentary form of "mobile money" to friends and family affected by natural disasters.  Using the Lake Kivu earthquake of 2008 to identify the effect of a large covariate shock on interpersonal transfers, we estimate that a current-day earthquake would result in the transfer of between $22,000 and $30,000 to individuals living near the epicenter. We further show that the pattern of transfers is most consistent with a model of reciprocal risk sharing, where transfers are determined by past reciprocity and geographical proximity, rather than one of pure charity or altruism, in which transfers would be expected to be increasing in the wealth of the sender and decreasing in the wealth of the recipient.
November 1st
Presenter: Alex Solis
Title: Initial Endowments and Educational Outcomes
November 8th
Presenter: Alex Rothenberg
Title: Transport Costs and Economic Geography:  Evidence from Indonesia's Highways
Abstract: How do road improvements affect the spatial distribution of economic activity?  Existing theories of economic geography offer conflicting predictions.  In this paper, I study how manufacturing location choices responded to changes in road quality in Indonesia. Using new data, I document massive upgrades to the highway networks of Java, Sumatra, and Sulawesi during the 1990s, a period in which national funding for transport infrastructure increased by 83 percent.  I first show how these road improvements were accompanied by a significant dispersion of manufacturing activity, away from urban areas.  The amount of dispersion varied across industries in predictable ways.  Next, I develop a structural model of firm location choice in which firms face a trade off between locating closer to their sources of demand and paying higher factor prices.  The model can be estimated with discrete choice techniques, but identifying its parameters is extremely challenging.  For instance, many of the location characteristics that firms consider when determining where to operate are themselves affected by the decisions that firms make, creating simultaneity problems.  Using techniques to estimate a random coefficients logit model with endogenous choice characteristics, I find significant differences in willingness to pay for market access between different industrial sectors.  Counterfactual policy simulations suggest that road improvements cause dispersion, but only to the immediate peripheries of existing urban areas.
November 15th
Presenter: Evgeny Yakovlev
Title: Peer effects and Alcohol Consumption: Evidence from Russia
Abstract: The paper presents structural model of heavy drinking behavior with presence of peer effects, habit formation and with forward looking assumption on agent behavior. We find that these assumptions increase estimated price elasticity of alcohol consumption by more than 1.9 times for young generation and in about 1.4 times for old generation (compared to reduced form estimators).  Then, we simulate the effect of introducing tax on alcohol on mortality rates. We find significant age heterogeneity in effect of heavy drinking on the hazard of death: the hazard is much stronger for younger generation. Simulated effect of introducing fifty percent tax leads to a decrease in mortality rates by one forth for males of age 18-29 years, by one fifth for males of age 30-39 years and no effect on mortality of males of older ages.