News and Announcements

  • Your colleagues may be impacting how you save and invest for retirement

    Earlier research has shown that your colleagues may also influence whether you sign up for the 401(k) plan or attend a 401(k) education seminar. One study offered a randomly selected subset of employees who were not yet enrolled in their company's retirement account $20 to attend a benefits information fair. Among those who were offered the financial incentive, 28 percent attended, while only 5 percent of employees who worked in departments in which no one was offered a monetary reward attended. Interestingly, employees who were not offered a financial incentive but who worked in the same department as someone who was offered a reward had a 15.1 percent attendance rate for the seminar, perhaps because their peers receiving the reward influenced them to attend.

    "An employee who sees colleagues receiving the inducement letter might be reminded of the fair and be led to think that this is an important event worth rewarding employees for attending and thus might decide to attend herself," write Esther Duflo of the Massachusetts Institute of Technology and Emmanuel Saez of the University of California - Berkeley in the 2003 study of 6,200 university staff employees. "Individuals who receive the letter and decide to go to the fair might ask their colleagues to join them."

    A year later, the retirement-plan enrollment rates in departments in which some employees received the financial incentive were about 1.25 percentage points higher than in departments in which no reward was offered for attendance. But the sign-up rate was not significantly higher among people who received the reward themselves than among those who worked in a department where someone else received the $20 incentive. "Social-network effects definitely caused some people to take steps which ultimately led them to change their tax-deferred account participation decision," the researchers found. "Our experiment induced 50 extra employees to start contributing to the tax-deferred account."

    Read the full article here.

  • Free from worms, free to learn

    Nov 11/11 | From the newsroom | The Hindu

    The first State-wide school-based de-worming programme which concluded recently in Bihar provides a model that can be rapidly scaled up in other States and sustained over time to improve the education, health and productivity of school children,...

  • 'Loot Camp' tries to give at-risk students financial smarts

    Nov 11/11 | From the newsroom | CT Mirror

    A joint initiative between a local New Haven bank and IPA, with the help of IPA's partner student advocacy group Students for Proven Impact, has been generating some buzz in the media. The "Loot Camp", a financial training program for at-risk students, is the project of Lynn Smith, Senior Vice President at Start Community Bank, "a full-service bank [that] also works to improve financial access in New Haven by lending to local businesses, homebuyers and non-profits while offering financial education and support to low-income or at-risk individuals."

    Highlights from the article:

    ...Last summer, Smith took her "Loot Camp" to the Youth@Work (Y@W) program, which offers part-time summer jobs to 14 to 21 year olds in New Haven who might face socio-economic and academic challenges. Now, with the help of a few Yale students and an international non-profit, she's trying something that's never been successfully done. She's trying to track whether or not financial education actually works.

    The students Smith reaches out to, she said, may have never thought about a checking account, or may not know what credit means. "They have to learn things that many of us take for granted."

    The core of her curriculum is saving, Smith said. "It's about knowing the difference between want and need--knowing what money really is," she said.

    [...]

    By the end of the summer, of the 167 students with accounts, 40 percent saved more than $300. "We did use a little bit of behavioral economics," Smith said. They raffled off an iPad 2 for those who saved the most.

    Then Smith saw a further opportunity -- to track effectiveness of those literacy classes and the account.

    "We still don't know two years out, five years out, 20 years out, whether they have better credit scores, whether they're better savers, or whether they borrow less money," she said.

    Smith got in touch with Rebecca Rouse [Project Coordinator] at Innovations for Poverty Action in New Haven.
    "As far as we're aware, there really aren't any rigorous quantitative evaluations that say 'Yes, financial education programs do lead to behavior change,'" Rouse said. "It's a really hard thing to evaluate."

    [...]

    START and IPA hope to conduct that kind of formal, long-term trial including a control group--kids with no savings account--and a treatment group--those who opt to go for the account.

    "And then we track outcomes after time. Is the treatment group managing money better, do they accumulate more savings? Pay less in check cashing fees? Or is it the control group exactly same?" said Rouse.

    Besides being featured in the CT Mirror, the upcoming evaluation was further covered in Your Public Media, a CT-based public media venture:

    The goal is a 12-18 month trial starting next summer, tracking how students fare after Loot Camp with a savings account for beginners. [...] Smith hopes to have an initial, exploratory survey done before the Thanksgiving break.

    Source: CT Mirror | Your Public Media

     

  • Microcredit Summit 2011 Workshop on November 14

  • SME Initiative Annual Conference

    Nov 08/11 | From the newsroom | 

    The SME Initiative is hosting its Annual Conference on Wednesday, November 30 at the Inter-American Development Bank in Washington, DC.  The conference provides an opportunity to present results from some of the most current research on Entrepreneurship and SME Development in emerging markets to a broad stakeholder group of researchers, practitioners and policymakers.  The conference will begin with a brief presentation on “What we know about SMEs and Development.”  Three sessions will follow focusing on Access to Managerial Human Capital, Access to Finance, and Job Creation.  The conference will conclude with a panel discussion entitled:  Why should we care about the “Missing Middle”? 

    Confirmed Presenters include:

    • Nick Bloom, Stanford University
    • Dean Karlan, Yale University
    • David McKenzie, World Bank
    • Philipp Schnabl, NYU-Stern School of Business
    • Antoinette Schoar, MIT-Sloan School of Management
    • Chris Woodruff, Warwick University

    The conference agenda is available here. If you are interested in attending, please RSVP to sme@poverty-action.org by Wednesday, November 23.*  Please Note:  Space is limited.

    *Include full name and organization in RSVP.

  • Esther Duflo picks apart the Indian education system

    IPA Affiliates Abhijit Banerjee and Esther Duflo attended Tehelka-Newsweek's Thinkfest, a festival offering "the opportunity to interact and debate with the foremost thinkers and innovators from India, Pakistan, USA, Britain, China, Israel, the Middle East and Europe."

    The Times of India summarizes:

    A session at Thinkfest on 'why Indian schools are failing our children' turned out to be strong critique on the present education system in India.

    Abhijit Banerjee, the Ford Foundation International professor of economics at the Massachusetts Institute of Technology felt the Right To Education (RTE) Act was how someone 'elite' in Delhi thinks of helping the poor.

    "The whole bill reads like a building catalogue," said Banerjee. He felt the rigid requirements of the RTE would lead to many smaller educational institutes operating without proper infrastructure but still providing education to many having to shut down as a result of "falling foul of RTE. The students will then be herded back to these (government schools that have proper classrooms, a playground... but no teachers."

    He also faulted parents for their approach to their children's education.

    "Very early parents decide the purpose of education is to get to Class XII and get a job," Banerjee said.

    French economist Esther Duflo, attributed the lack of resolve among a majority of teachers in government schools to the unclear way the mission is defined. "So many students go to school, but at the end of five years they cannot read," Duflo said. She lamented that lower class teachers affect discrimination in grading lower caste students out of conviction that the upper caste students are better. "They believe the lower caste children can't do it. Then the students themselves believe they can't do it and then they really can't do it," she added.

    Broaching the subject of testing, Banerjee said "Testing is important because semi-literate parents have the choice between government and private schools and there has to be a criterion on which they can base their choices."

  • Fresh $150 Million into Development Economics

    Nov 06/11 | From the newsroom | Forbes

    In his blog, Forbes' Tim Ferguson brings attention to an investment into a development think tank at Stanford:

    Investor Robert E. King and his wife have given $150 million (part of which is a challenge grant) to found the Stanford school’s Institute for Innovation in Developing Economies, which will informally be known as SEED. It will join the other work being done to identify and remediate social, cultural, physical and legal barriers to uplift from poverty.

    Ferguson brings up IPA Affiliates' two most recent books, noting the active work in development recently as he joins others in the business world calling attention to the field.

    Beyond Collier’s early work, others active intellectually in this field include Yale’s Dean Karlan, author of “More than Good Intentions: How a New Economics Is Helping to Solve Global Poverty,” and  Esther Duflo, winner of the John Bates Clark Award for outstanding young economist and co-author of “Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty.” (SEED itself will be chaired by Nobel winner Michael Spence, another specialist on development economics and dean emeritus of Stanford GSB.)

    Read his full post here.

  • Worm infections costing India billions in lost income

    Nov 05/11 | From the newsroom | The Hindu

    More than 290 million Indians, including many school-aged children, suffer from Neglected Tropical Diseases (NTDs) costing the region billions in lost productivity each year. A new report from Dr Peter Hotez, the President of the Sabin Vaccine...

  • MIT’s Banerjee, Duflo Win $48,000 FT/Goldman Award With 'Poor Economics'

    Nov 03/11 | From the newsroom | Bloomberg

    Press release commends book as "at once radical in its rethinking of the economics of poverty and entirely practical in the suggestions it offers, allowing a ringside view of the lives of the world's poorest."

    IPA Research Affiliates Abhijit Banerjee and Esther Duflo's Poor Economics has won the Financial Times and Goldman Sachs Business Book of the Year Award, a distinction established in 2005 to highlight one book each year that has provided "the most compelling and enjoyable insight into modern business issues."

    Bloomberg reports on the story:

    Abhijit V. Banerjee and Esther Duflo’s “Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty” won the Financial Times and Goldman Sachs Business Book of the Year Award.

    Banerjee and Duflo, MIT economists and co-founders of the Abdul Latif Jameel Poverty Action Lab, overcame competition from Barry Eichengreen’s “Exorbitant Privilege,” Daniel Yergin’s “The Quest” and other finalists to claim the award of 30,000 pounds ($48,000) during a dinner last night at the Wallace Collection in London.

    In “Poor Economics” (PublicAffairs), Banerjee and Duflo use randomized control trials of the type used to assess new drugs to study the behavior of poor people and the best ways to alleviate poverty.

    Addressing topics from health to education, the authors build a shrewd yet sympathetic portrait of a problem as complex as those individuals who make up the all-too-often stereotyped poor. They shed light on seemingly irrational behavior, such as the Moroccan farmer who finds money to buy a television when he can’t afford food.

    Ultimately, they argue that aid can work, as long as what they call “the three I’s: ignorance, ideology, and inertia” are banished from policy making.

    The authors didn’t think they were writing a business book, Banerjee said.

    “What’s particularly wonderful about winning this award is that these ideas, that in some ways come from a very different world -- the world we live in, which is a world of poverty and policy -- resonate with people who are from the world of business,” Banerjee said after the ceremony. “That these ideas have managed to cross that boundary -- it’s really very rewarding.”

    Read Bloomberg's full article and check out the 4-Traders official Press Release

    In other media:

    Businessweek

    Financial Times

  • The rich did get richer after 1991

    Nov 03/11 | From the newsroom | livemint.com

    A LiveMint.com article uses evidence from a study by Abhijit Banerjee and Thomas Piketty to show how India, despite ranking low in income inequality compared to other similar economies, has still experienced a rise in inequality:

    "Occupy Wall Street (OWS) captured the anger of an American public that feels cheated by the top 1% of earners in the United States, who appear to have emerged largely unscathed from the recession they helped engineer in 2008. This deep well of anger found echoes around the world as the OWS movement went global. India is not exempt – Occupy Dalal Street kicks off on Friday. The rise in income inequality in America is well-documented and is considered to be a root cause for the existence of OWS; as data show, India, despite ranking relatively low in income inequality, has still seen inequality increase in the last 25 years.

    "Economists Abhijit Banerjee and Thomas Piketty charted the income share of the top 1% of earners in India from 1922 to 1999, based on tabulations of annual tax returns published by the Indian tax administration. Their results show that the socialist policies adopted after independence had their intended effect, with income shares for the top 1% falling between 1950 and 1981. The top 1% income share went from about 12-13% in the 1950s to 4-5% in the early 1980s. In the late 1990s, income share rose to 9-10%. It is interesting to note that the turning point according to this data appears to be 1980/81, rather than 1991 (when the economy was liberalized) – the share of the top 1% doubled through the 1980s. This is consistent with the view shared by economists such as Dani Rodrik and J Bradford Delong that there was a structural shift in the Indian economy in the early to mid 1980s. [...]

    "Banerjee and Piketty found that the top 0.1% were able to garner a larger share of total income in the 1990s, suggesting that they were best positioned to take advantage of the new opportunities accorded by the opening up of the economy. It would be interesting to see if this trend has continued over the 2000s, or if the share of the top 0.1% has stabilized since, with more people now equipped to take advantage of their connection to the global economy."

    Read the full article.

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