Bryan McCannon from West Virginia University
Poverty
GDP per capita:
Historically standard measure of income: not perfect. But very useful.
Uganda: about $600 per year
USA: $53,000
China: $6,800
Life expectancy:
Uganda 59
Haiti 61
US 80
https://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy
Tough to ask questions on wealth
Uganda
20% live in mud hut
42 don’t have floors
20% have electricity
Instititutions:
Rules of the game
How courts work, how notaries work
Poor governance leads to poor institutions leads to poor country!
Free the world:
http://www.freetheworld.com/reports.html
Haiti: http://www.freetheworld.com/countrydata.php?country=C54&x=24&y=9
USA:
Three Economic issues
Monitoring is costly
3. Economies of scale
Lending involves high Fixed costs can’t be spread out if only a few loans
Bad legal systems etc exasperate these problems....and cause market to end
Other risks (political, inflation, etc)
So what to do?
Microfinance
Promise of microfinance: small injection of cash can lead to major impacts
Example from Poor Economics: selling bananas....high interest expense...if only one day no interest...so you don’t need to borrow as much...so equity builds up....
(of course, people would behave differently if they have more $)
Group lending: better monitoring for “free”
Ask for group to assess risk of loans
DO not give to men alone---men more apt to waste the money
Still a debate at how much it helps...but microlending does APPEAR to help
His paper:
Looked at spillover effects
Does micro lending lead to pro-social behavior?
Public goods (things we all have to pay for)
4th of July fireworks...picking up litter...volunteering...etc...you incur costs, others benefit
Some examples show that violence etc may reduce public good donations
Hurricane katrina evacuees contributed less
Maybe good things (like micro-finance) would have prosocial benefits
Mikwana finance in uganda (7 years)
Looked at successes
165 people
40% had used the microloans (18-76)
Education avg 8 years...but many had 0
From various Microloan groups
11.5% had jobs that most in US would call jobs
Started game with about a day’s wage (70 cents)
Take as many home with you...you and three others will play the same...we will match it...group then divides it
Findings:
Avg contribution 3.1 (much higher than US)
Gave more when only person giving
Post katrina gave less than 40%,
Sole dictator, gave more
Those who had received micro loans gave about 10% more
Positive spillover
Intentionally doing more than what they think their peers will be doing
Give about 1/3 of a coin more...if micro loan receiver...
He thinks it is caused by social preferences
A handful of things (public goods) are based on more than just consumption....Called social preferences
Not income effect, not social norms....
Robust to all tests...