Next Week

Lots of reading this week - in addition to chs.12 and 14....for Tuesday

https://www.sciencedirect.com/science/article/pii/S2214851514000024

 

Please comment on one of these for Thursday

https://ophi.org.uk/does-aid-reduce-poverty/

 

https://www.nber.org/papers/w24303

Comments

[EricDragon9]

In Juliana Yael Milovich’s working paper, “Does Aid Reduce Poverty?”, she looks into the relationship between the number of years countries have been temporary members of the United Nations Security Council (to estimate the average amount of economic aid disbursed by the United States between 1946 and 1999) and the impacts on reducing people who are multidimensionally poor (using the MPI index) and with GNI growth. She finds that a 1% increase in U.S. aid results in a decrease of the MPI by .61% on average with reductions in the education, health and living standards categories by 0.82%, 0.36% and 0.64%, respectively. However, she finds that the relationship between aid and income poverty, as measured by the gap and headcount ratio at $1.90/day and $3.10/day, does not seem to be statistically significant.

One interesting aspect that I noticed regarding this article was how limited data existed for the multidimensional poverty index in the early 2000s and how there was no data previous to 2000 (of course this is due to the MPI not existing before then) and how that impacts the quality of data. Obviously, since there is a lack of data the data has lower quality. This raises the question of how well can studies account for this lack of data when performing analysis. While it can be mitigated, there will be a loss of strength in the conclusions or a limiting of the potential questions a researcher could pose. Milovich was able to get around these limitations by looking at the impact of aid before MPI was taken into account 1946-1999 and when it was (after 2000), which also coincided with increased aid from the US during the Cold War. However, having data on those 53 lost years would be invaluable. Fortunately, in the future this data will be available, which is exciting for researchers going into this field now, since the data will only get more and more comprehensive. This also raises the question of what variables are we not taking into account that would be important for future analysis. Could access to internet and internet freedom (considering the restraints placed on China's and Russia's internets) be an important variable in the future?

A side note to my statements above, is that if the MPI had not been recorded then the conclusion of this paper would just be a statistically insignificant relationship between US aid and the headcount and gap ratio. Thus, the improvements in non monetary aspects of the poor would not have been realized.

[Beverley_xia]

In “Does Aid Reduce Poverty?”, Juliana Yael Milovich discussed whether US aid actually helps alleviate poverty.

While previous literature shows inconsistent results as to whether foreign aid can reduce poverty, Milovich points out that the reason for such inconclusiveness is the use of an inaccurate measure. Previous literature generally focused on economic poverty, which turned out not to be a sufficient measure because economic growth is not the sole solution to poverty. Using multidimensional poverty index (MPI) instead, Milovich finds statistically significant correlation between US aid and lower MPI, which indicates the alleviation of poverty. This article thus reflects the importance of using the correct and comprehensive variable in econometric analyses. If economists continue to see income poverty as the only burden on the poor that needs relief, they would ignore the importance of human capital, health, and living conditions and their ability to impede people from exercising their full potentials even with access to enough money. If economists continue to use income poverty in their analysis, the effectiveness of foreign aid would be largely undermined. Their analyses may be used as a reference for countries to reduce financial aid to developing countries thinking that aiding them would be a waste of money. However, Milovich’s data tells us that aid from the US does indeed reduce MPI. The misconception that aids are ineffective would cause countries to miss the chance to help alleviate poverty, which would be a great loss for humanity.

I find the fact that 1% increase in aid resulted in different improvements in health, education and living standards, with education having the highest return, encouraging. Since education appears a long-term investment that seems to reflect differently for different students, many countries choose to cut back on education investment before anything else. However, data has shown yet again that, after a relatively long period of time, returns to education investment would be higher than infrastructure investment, and much higher than health investment. Relating to the fact that better education would reduce fertility rate, crime rate and improve productivity, this paper gives government more reason not to reduce education investment.

The politics of assistance is also interesting. Milovich’s paper reminds us to not ignore the role of politics in economics. When countries send out foreign aid, their goal is not only to be benign. Countries have political motivations like maintaining ideological dominance and so on. Politically motivated, the US hesitates to aid Cuba because the US wants to attract more countries into having liberal democratic regimes, and Cuba has a communist regime. Thus, adopting a dependence theory mindset, one cannot solely blame Cuba for its slow development. Instead, biased foreign aid may have contributed to the idea that communist regimes fail to alleviate poverty. [Disclaimer: unrelated to personal political viewpoint.]

I’ll end my reflection with a question: in table 6, why does religiousness contribute to reducing MPI? Would pious people not “irrationally” donate too much to the church, creating a big disparity between the clergymen and commoners?

[EC Myers]

"Does Aid Reduce Poverty?" is a paper that Dr. Blunch would absolutely love, so I imagine you've already sent it his way. I found it very interesting that Juliana Milovich was able to use econometrics to analyze the correlation between poverty and aid metrics, particularly the number of years spend on the Security Council of the United Nations and its relation to the lower multidimensional poverty. I think that we would be hopeful that a 1 % increase in the average amount of aid received by a developing country from the US would result in greater the 1% reduction in their MPI, but alas the money does not go as far as we would wish in the terms of poverty reduction. However, MPI does decrease .61% on average for every 1% increased in the amount of average aid received. In some senses, this seems like both a lot and a little. It seems like not very much when you think that just 10% extra aid would decrease MPI by over 6%; however, considering how much 1% of aid is in dollars, it makes you consider how so much money would be spent on a relatively small change in MPI, not even being 1 for 1. Then, we consider that MPI can be broken down into education, health and living standards. A 1% increase in US aid decreases deprivation in education for the multidimensionally poor people by .82%. This made me think of the Returns to Investments in Education paper we read earlier in the semester. Increases in health and living standards are included in the spillover effects that investing in education has. This makes me wonder, if education were to be controlled for in the regressions, would health and living standards much lower (ie if there weren't investments in education, would there be any increase in health and living standards)? If US aid were to invest more directly in education, would it decrease the reduction in the MPI by an even greater amount?

[Alec Horne]

The article Does Aid Reduce Poverty, by Juliana Yael Milovich discusses whether aid has an effect on poverty alleviation. While the article does seem to have some uncertainty on the matter, it does seem like aid has an effect considering that “an average increase of 1% in U.S. aid is related to a lower percentage of multidimensionally poor people deprived in education, health and living standards by 0.82%, 0.36% and 0.64%” (Milovich, 1). Even so, we know that the factors in the well-being of people, education, health, and quality of life depend on each country and aid impacts them differently. In other words, for the impact of aid in poverty alleviation, it depends.

Even though this article addresses the impact of countries and their aid to reduce poverty, one topic comes into my mind when reading this paper. The idea of aid from an individual themselves and not just countries. Look at the Bill & Melinda Gates Foundation for example. This foundation is composed of Bill Gates's wealth where he uses his money to make an impact in the world for those in great need. I watched a documentary titled, Inside Bill’s Brain, which discussed the effects of the Gates Foundation in other countries. In the first episode, we see Bill trying to solve the problem of sanitation in Africa where people lack the necessary systems to go to the bathroom. Their water becomes contaminated as a result and many individuals end up dying with terrible diarrhea. The Gates Foundation spent $200 million on the issue and resulted in utilizing a solar-powered toilet. Aside from the efforts of Bill in this one example, he has spent $28 billion (start of foundation to 2013) for the Gates Foundation to solve issues like these. The US, for example, spent $14.7 billion on foreign aid in 2018 with only $5.8 billion of that going to economic support and development (Revell).

These are obviously big numbers. It goes to show just how much capital is needed to actually make an impact in places less fortunate. In essence, more funding is needed not just from other countries, but from ultra-billionaires like Bill Gates. The question then is, how do we get more funding for issues which are continually on-going whether it be from rich countries or rich individuals? Obviously, people like Jeff Bezos aren’t doing any good and for those billionaires who try to make an impact, something like a wealth tax could hurt their efforts.

[Maisie Strawn]

I found Susan Parker and Tom Vogel’s “Do Conditional Cash Transfers Improve Economic Outcomes in the Next Generation? Evidence from Mexico” to be an incredibly fascinating and impact paper. Of course, the most important finding of the paper is that the answer to the question they pose in the title is, yes. The conditional cash transfers studied in this paper improve educational attainment, geographic mobility, and household economic impacts. The benefits were especially powerful for women, for whom early exposure to the Progres program increased labor market participation 7-11 percentage points. It is not necessarily surprising that giving cash to families contingent on children’s attendance and completion of school might affect educational attainment, but the significance of the effect of the Progresa program on completed years of schooling is impressive. The impact of these additional years of completed schooling on monthly labor market earnings for women particularly are truly impressive. It is interesting to me to connect these findings back to our discussions on investment in human capital and public returns to education. This study focuses on the individual impacts of the Progresa program on economic outcomes; it would be fascinating to study the community-wide effects of the program. How do the increased educational attainment, labor market participation, and increases in wages associated with the Progresa program impact the entire community?
The impact of these conditional cash transfers made me think about the program that my mom runs through the Virginia Community College System called Great Expectations. The goal of the program is to help young adults who have experienced foster care to graduate or earn a credential from community college. The program mostly operates through a coaching program, but also offers financial aid to cover the cost of attending classes. The program has been reasonable successful, but reading the Parker and Vogel paper made me think about how helpful conditional cash transfers might be in a program like this. Similarly to the situation in Mexico, these young adults face a significant opportunity cost to attend classes when they could be putting in more time at mostly hourly jobs. Conditional cash transfers could lower this opportunity cost, and I have a feeling that such a program would have many of the same effects of the Progresa program. The increased educational attainment in the Great Expectations program has already been linked to lower unemployment, lower levels of homelessness, and lower rates of crime for youth experiencing foster care in Virginia. It seems likely that using something like a CCT to further increase that educational attainment would improve those effects even further.

[Kate_groninger]

In the paper “Do Conditional Cash Transfers Improve Economic Outcomes in the Next Generation? Evidence From Mexico,” Susan W. Parker and Tom Vogl attempted to measure the effects of childhood exposure to the Mexican conditional cash transfer program, Progresa. They determined that exposure to Progresa did, in fact, improve educational attainment, geographic mobility, labor market outcomes, and household economic outcomes in early adulthood.

An interesting point that the study addressed was the relevance of both internal and international migration. In an effort to produce unbiased estimates of the program’s effects, the study did its best to mitigate the effects of endogenous internal migration. The study accomplished this by including questions on the individual’s municipality of residence and original state of birth to try and “return” migrants to where they were originally when they became involved with Progresa. The possibility of international migration seemed more complicated to account for. There may be a significant difference between individuals who were exposed to Progresa and decided to emigrate from Mexico and those who decided to stay, which could have skewed the results. In order to account for international migration, the study tracked the cohort size and noticed some changes (the study also included census questions on international migration). The results lean toward the conclusion that Progresa recipients tended to stay in the areas where the program was offered because those areas might seem more appealing to raise a family. I thought that migration was an interesting factor to consider given our discussion in class about the underlying assumption in comparative advantage trade theory and how reducing controls over the flow of human capital within and between countries would be beneficial to countries’ economies.

[Anne Riter]

Susan Parker and Tom Vogl's "Do Conditional Cash Transfers Improve Economic Outcomes in the Next Generation? Evidence from Mexico" attempts to analyze the data from the Progresa program in Mexico and estimate the long-run impacts. After looking at the data and running several tests, they found that exposure to the Progresa program did improve the well-being of the people who used it.
I found this paper to be interesting, since they were able to look so closely at a program in Mexico and see the direct results. I also found the program itself to be a clever way to improve economic and social well-being of those living in poverty. The idea of the conditional cash transfer is that the program will allocate cash payments to families as long as the children regularly attend schools and the family members regularly visit health clinics for check ups. It places an incentive for people to continue their education as well as focus on their health and well-being, which are two of the most important (and endogenous) factors in development. The results from this study were clear: kids who received the full benefit of this program, meaning that they began school as it was implemented, attended school more regularly and for longer and were healthier.
I thought it was important that this study was a generational study, and that they looked at how these student's educations positively impacted their work-force participation. Labor force participation was high and rose with age, and the impact for women was even larger. They also worked more hours, were more productive, and their labor earnings rose. Conditional on participation in the program, "men [saw] significant increases in paid work, decreases in agricultural work, and increases in weekly hours," while women "[saw] significant increases in paid work, marginally significant increases in labor income, and insignificant increases in hours." Clearly the impacts of such a program are powerful enough.
A program like Progresa clearly has positive impacts on households living in poverty. It incentivizes focusing on education and health and well-being, and keeps children in school for longer. When more people are able to be productive members of a country's labor force, the country will see a rise in GDP and hopefully an improvement in poverty. I think it would be interesting to see a study like this done in a different country and to compare the results to see if these results are actually because of the program itself.

[William Chapman]

In her paper “Does Aid reduce poverty,” Juliana Yael Milovich uses a very unique identification strategy in order to identify causality between aid and poverty reduction. I do not know how Ms. Milovich was able to come up with this idea but comparing her approach to the literature provided, showed the strong advantage of this approach. This approach helped deal with endogeneity and reverse causality by taking advantage of the United States’ attempt to influence other countries with aid money to no one’s surprise given the recent events in Ukraine.

I have already found the arguments against aid to feel a little thin. While maybe there is some sort of truth that providing too much aid would disincentivize productivity in some circumstances but not for the people living in the situations that many of the poorest living in developing countries find themselves. That argument makes more sense for a situation more like Saudi Arabia where they have thrown oil money at their citizens to keep them happy with the government. This spending is not to placate citizens to keep them from rebelling but to help provide for their basic needs of food, health, and education. For example, building a well that provides clean drinking water directly helps alleviate poverty at least to some extent, even if it does not necessarily lead to measurable economic growth. Previous studies may not have been fully capturing this improvement by only looking at income. Milovich’s findings were certainly helped by her ingenious identification strategy but also by incorporating the MDGs and the broader poverty measures.

[Lauren Paolano]

In Parker and Vogl's paper, "Do Conditional Cash Transfers Improve Economic Outcomes in the Next Generation? Evidence from Mexico", the authors talked about the difference in schooling, labor, and income as a result from the conditional cash transfer programs. I was mainly interested in the significant difference in opportunity women are given in Mexico despite this paper being under 2 years old. For example, in US dollars, the average monthly labor income was about $200 for men and about $55 for women. Another important piece of data that stood out to me what the sample size of the men and women conducted in the research. The male sample is about 15% smaller than the female sample due to two reasons: migration and mortality. Men are more likely than women to emigrate from Mexico in search of work and the male life expectancy in Mexico declined between 2005 and 2010 driven by a rise in homicide mortality in the specific age group studied.

In a group of low female labor force participation and lagging female education, Progresa has led to increasing growth in both sections for young adult women. Estimated results on labor income are positive for both sexes but statistically significant only for women. In my business ethics class, we have been discussing the topic of diversity in education and the workplace and I wanted to mention a few outside examples that could help explain why women, specifically, are benefiting so much in schooling from the conditional cash transfer programs. We've talked about the difference in self-identity versus work-identity for an individual and sometimes for an individual part of the minority group, there seems to be a lack of confidence in their own skill and behavior which leads to conforming the majority. Individuals apart of the minority group have to work harder to prove themselves and their own skill in order to be well-perceived by their peers. The women in Mexico might be dropping out of school for emotional reasoning such as a lack of confidence and missing sense of belonging when she is in a classroom surrounded by men. Obviously there are many other factors that play into the smaller percentage of women than men in higher education and higher income, however, I think it would be interesting to conduct a study based upon the emotional and psychological data from the Mexican women that were apart of this study.

[Alice Chen]

Parker and Volg’s paper on conditional cash transfers was fascinating to me because I had never thought about using incentives to keep poor children in school. Progresa has significantly increased paid work, decreased agricultural work, and increased weekly hours for men, and also helped keep more girls in school.

I thought it was interesting that in this study, older students did not have as much positive effect as the younger students because “the program came too late to undo dropout.” Is there a specific age we should target to help keep them in school? How young do we have to start? I also thought the idea of migration was interesting. When analysing the outcomes for men and women, the authors found that men earned much more than women in the future. However, they explained, this could be attributed to two reasons: migration and mortality. Men are more likely to emigrate from Mexico, and possibly seek a higher paying job elsewhere rather than staying in the country. Mortality was also a concern because there was an increase in homicide mortality. I think migration could be an interesting subject of further study because I’m curious if conditional cash transfers could cause a brain drain from these lower income nations.

Though not a conditional cash transfer, as I was reading this paper I was reminded of how in the Netherlands, all families with children receive a “child allowance” to help pay for school fees, clothing and any other costs associated with raising children. This made me wonder if cash transfers had to be conditional, though governments would have to allocate a large amount of money for this to occur. While “child allowance” doesn’t have any impact on keeping students in school, it would be interesting to explore in a developing country.

[Margot McConnell]

Parker and Vogl’s paper on conditional cash transfers really stuck out to me because I think it shows the importance that these CCTs can have on people, specifically children, in developing countries, especially in the long run. CCTs create a unique opportunity that incentivizes low income families. The CCTs will be provided to the family conditional on the fact that the children must have regular attendance at school and go to the health clinic regularly for check-ups.
This paper emphasizes multiple things we have been talking about all semester in this class. First, increases in investment in education can lead to better labor market outcomes, health outcomes, and more generally, increased investment in human capital. The paper mentions that the principal driver to other outcomes including labor market outcomes is investments in education. CCTs not only incentivize people to send their children to school, but also lead to increases in health outcomes which leads to longer lives and better labor market outcomes in the long-run.
One thing that caught my attention was the positive impact it had on women. As we have discussed in this class, empowerment of women, in general, is so important to economic growth. This study has shown that CCTs do incredible things for women. Before Progresa was put in place in Mexico, labor force participation for women was very low; most women worked within the home. Due to CCTs, women had increased labor market participation as well as incomes. I also thought it was interesting that migration seemed to play a possibly big role for the increases in labor market outcomes, especially if women are moving to the urban core.
This article sparked my interest in CCTs, so I thought I would look into what other countries are doing in terms of CCTs and seeing if they see similar results as was seen in Mexico. An article recently posted in the Bangkok Post states that its CCT program allowed 98% of poor students go to school, which increased equality in education. This program was targeted mainly to primary and secondary school, which is important as stated in Parker and Vogl’s paper.
Another article discussed CCTs targeted at women in Nigeria, specifically those who were breast feeding. These were targeted at increasing trips to the health clinic for pre-natal and natal care. Additionally, these were targeted at increasing vaccinations. These should increase the health of not only the mother but also the child, which could have positive long term impacts.

[Prakriti Panthi]

Parker and Vogl's paper on the effect of conditional cash transfers on economic outcomes was interesting to read because it attempted to measure the future effects of investment in human capital. Cash transfers clearly have positive effects on years of schooling, increase help labor participation rate, wages, wealth and the effect is higher for women. I think this is another example of how a policy targeted towards economic development helps empower women.
Although the paper doesn’t discuss the pros and cons of conditional transfers versus unconditional transfers, I think that is something important to be discussed. One of the conditions that are mentioned in the paper are that if a student fails more than once, then the schooling benefits are taken away. This bit of information made me wonder if there are certain groups of students that are more likely to fail more than others due to some external factor outside of their control. I know that in rural areas in Nepal, due to lack of access to toilets, some girls miss out on school during the time of their menstruation. So, I wonder if there is a potential for another research to be done to find out if certain students with certain characteristics, or that come from a certain background, are more likely to fail, and what we should do in hand with cash transfers to help those students keep this benefit.
The paper also talks about how sometimes the transfers came too late to prevent school dropout, which is a concern. Someone in the blog mentioned how in the Netherlands, families get unconditional cash transfers for every child they have. I know this is true also for other Scandinavian countries. These countries have high investment in human capital and there is a safety net in place for children born that ensures that their basic needs are met. There is just an immense need for early intervention, for both the short run and long run benefits.

[Travis_Dover]

The paper on aid’s impacts on poverty reduction reflects the thesis that we have been working with all semester: the question of effectiveness of policies for economic development are most often answered with “it depends.” As maddening as this can be for policymakers and researchers, I found this article to be extremely comforting. No, most aid programs are not resulting in skyrocketing income levels that politicians can build campaign rhetoric around. However, there are statistically significant increases in education, sanitation levels and many other aspects of the MPI with increased aid. As we discovered earlier in the semester, the extremely poor are not less happy on average than the non-poor, however they do face significantly higher stress and anxiety levels due to all the headaches thrown their way on a daily basis. If aid can alleviate this stress through allowing children to be healthier and have access to more calories and go to school longer then I would strongly disagree with anyone who argues against the effectiveness of aid, despite its inability to raise income levels. Another aspect of the paper that was interesting and confirmed many of our findings from the semester was the increased impact on growth from aid for countries with effective institutions already in place. We cannot expect huge increases in growth by just throwing money at developing countries and not working with them to build their human and physical capital levels. In conclusion, I do think this paper proves that aid is useful, and poor people are often extremely crafty in their use of additional income to better their lives.

[Christopher Watt]

In Parker and Vogl’s paper on Conditional Cash Transfers, they convey some of the long term human capital benefits of providing assistance to students in primary and secondary school. The program of focus, Progresa, aims to both alleviate current poverty by increasing incomes for families with children in school, as well as improve the long term well-being of these students and their life time earning potential in Mexico. Their results show large increases in education and later labor market outcomes for those who benefited from the program, particularly those who had full exposure, or received transfers from the time they were between 7-11 years old. It is notable that females experienced large benefits relative to their baselines, particularly in education, hours worked, and wages. Labor force participation rates went up dramatically as well: increases of 7 to 11 percentage points. Much of the drive for this is attributed to increases in paid work. Though there were some labor market benefits for men as well, the improvements for females is highly notable. There is convincing evidence that this program does both raise human capital for those who benefit from and, in turn, contributes to improvements in a number of indicators of well-being and development, particularly in the labor market and housing quality for both men and women, largely attributable to the improvements in education and human capital.
Some questions arise after reading the paper, particularly in reared to the mechanisms by which these transfers improve education and labor market outcomes, as well as whether they would be more effective if non-conditional, something I noticed other students bringing up. Though it would have required a lot more of Parker and Vogl’s paper, a study into the mechanisms through which cash transfers lead to the measured results could aid in the specification of future transfers. They note that the funding may work not only through increased education but also other mechanisms such as higher caloric consumption or higher quality diets in childhood. Additionally, were these transfers not conditional, it is possible that more individuals could be supported or that grants could be used for needs other than just education. Evidently the program already has massive positive effects, and there may be little that can be done to improve it further.
I was curious about similar programs to Progresa and found lots of recent news about a program being instituted in the Philippines. Due to the revocation of rice import restrictions, poor rice farmers are threatened by increased supply of foreign rice coming into the market. A program will be funded by tariffs on imported rice, and transfers will target “poor and near-poor” rice farmers, as classified by the country’s Statistics Authority. More information can be found in the following links:
https://businessmirror.com.ph/2019/11/19/da-to-give-2nd-cct-worth-p3-billion-to-rice-farmers-next-year/
https://www.bworldonline.com/bill-creating-cash-transfer-scheme-for-rice-farmers-filed-in-senate/

[Lucas Flood]

A comparison of Juliana Yael Milovich’s work and the work of Susan W. Parker and Tom Vogl demonstrates the perennial determining factor to whether a particular development economic policy is beneficial: it depends. In the case of Milovich’s work, she was able to find that aid helped people from a multidimensional poverty perspective, but was unable to find statistically significant results for the relationship between aid and income. Milovich’s conclusions illustrate the importance of approaching development economics from a perspective that includes variables other than income. Although aid may not have led to statistically significant increases in income, the fact that U.S. increases in aid led to increases in education, health, and living standards in developing nations is a victory in and of itself for increasing human capability.

This week in my international relations class we have been discussing the end of colonialism in Africa. Along with our discussion, we have been reading Frederick Cooper’s 2002 book, Africa Since 1940. Cooper’s main argument, that independent African governments simply replaced colonial governments as the “Gatekeepers” of economic development, is highly relevant to the discussion of foreign aid. Cooper argues that many of the governments of modern African countries simply replaced the authoritarian, tariff-based trade controls of colonialism with their own system of corruption and nepotism. According to Cooper, many African countries are still in the process (or at least was still in the process in 2002) of reshaping their economies in order to free themselves of the corruption stemming from the north-south dependence of colonialism. In the meantime, while Milovich may not have found that foreign aid has statistically significantly increased income in developing nations, the usefulness of aid in regards to the MPI is certainly a strong argument to continue aid; especially in light of the historical challenges in Africa that have stemmed from centuries of colonialism. To synthesize Milovich and Cooper, Cooper establishes the economic challenges faced by developing nations in Africa, while Milovich provides the evidence of the success of aid for developing nations.

Of course, it is important to remember the political ramifications of American aid. As Milovich argues, by comparing aid to the status of the recipient country in the United Nations Security Council, American aid often comes with political strings attached. With Milovich’s argument in mind, one cannot help but think about the benefits of a Progresa-style program in Africa. As Parker and Vogl found, conditional cash transfers can have an incredible impact on the educational, economic, and social lives of individuals living in low income environments. Such a measure is, in my opinion, more successful than typical American approaches to aid. Instead of supporting the apartheid government of South Africa and a variety of ruthless dictators throughout the 60s, 70s, and 80s, small, targeted aid packages, following the method of Progresa’s conditional cash transfers, could have done a lot to benefit the disadvantaged and poor individuals of post-colonial African countries.

[Danh Nguyen]

I find Parker and Vogl’s “Do Conditional Cash Transfers Improve Economic Outcomes in the Next Generation? Evidence from Mexico” very uplifting. Through the data on labor outcomes and years of education, they have managed to tell a story of how the Progresa program have made positive improvements in the well-being, intellectual development, and shared value in the community. Having learned about the Conditional Cash Transfers system in India for female birth certifications, I have been much more fascinated about the full potential of this policy, especially when applied in a low-health and low-education context. The fact that conditional cash transfers actually increase the years of schooling, participation in the labor market, and the rate of health check-ups revokes any claim that subsidies are a waste of financial resources. The effects were significant across the board, more impressive in children and females.
Although the conditional cash transfers in Mexico were not specifically designed to empower women, the results show that the effects on female labor participation is particularly more significant than that of males. This has come to show that women empowerment in developing countries start at the roots. In my opinion, the years of schooling alone does not have a significant impact on women labor participation, but how empowered they feel when exposed to education and being able to improve and compete side by side their male peers. Conditional cash transfers have the potential to be developed into a female assistance program so as to close the gender inequality gap currently existing in Mexico and other developing countries. It is disheartening to see women only earned one third of that of men prior to the studies, but hopefully with the appropriate measures and program design, they can actually earn whatever men earn for the same amount of job. I feel like this conditional cash transfer system can also fit very well with what has been implemented in India to minimize the instance of “missing women” in Mexico and other developing countries.
The conditional cash transfers system has the potential to solve a lot of social issues that we have discussed throughout the course of the class, including gender inequality, urban bias, poverty, education, and healthcare. This paper inspires me to do some more research into CCT currently in place to find out more about the full potential of this policy and also what policies can complement CCT to explore its potential.

[Jack_curtis25]

In “Does Aid Reduce Poverty” Milovich explores the relationship between a foreign aid a country receives and its effects on different poverty levels. I thought the paper was robust in it’s explication of methodology, data, and results. I found it interesting how dependent aid flows are on a nation’s membership on the UNSC, to the tune of an increase of 59% when occupying a seat. Such a large increase seems to suggest that aid is not necessarily dependent on the level of need of a nation but rather its exposure to the international community and diplomacy. In the context of the Cold War where discretion for security enhancement in target countries was the main goal rather than development. I think it is important to consider the purpose of aid as a tool for the US to extend it influence across the globe and buildup its soft power. The selectivity and focus of aid align closely with my Global Politics class where the US dominates the international organizations created after WWII and uses them along with aid to shape developing nations in a manner agreeable to American interests.

The results generated from this paper are informative and important. First, establishing that poverty and economic growth is important. As we have seen in our own country even if the economy is growing at a healthy rate, the distribution of that growth can change dramatically. In fact, during my study of Thailand leading up to their financial crisis of 1997, they were the fastest growing economy from 1985-1995 at 10% per annum. Despite this actual income inequality worsened significantly. The findings are quite striking. A 1% increase in US aid is associated with a 0.61% reduction in MPI. I think these results are somewhat in-line with what I had expected. Observationally, aid tends to be most concentrated in improving the living standards of people and providing access to basic human necessities. Therefore, the results matchup well with my personal expectations. In terms of the effectiveness of aid to fight income poverty the results of no statistical relationship between aid and income poverty are somewhat surprising. If the results are so impactful on reducing MPI, specifically in education, why is there no relationship with income poverty? Perhaps as discussed in the paper there is a lag effect occurring where the results are not yet showing up. Or perhaps the high increases in education are being held back by more modest increases in health. While the answers is somewhat ambiguous perhaps the answer can be found in the failure for aid, investment, and government policy to correctly implement the frameworks, institutions, and resources to create industries and opportunities to allow for the benefits aid provides to be fully taken advantage of. One piece of information can be found in the variability of aid flows and the relationship with investment spending. While not specified in the paper it does briefly comment “aid shortfalls lead to cuts in investment spending”. Perhaps the uncertainty associated with aid inhibits investment therefore inhibiting income growth as a function of aid.

[Olivia Luzzio]

In her paper, “Does Aid Reduce Poverty?”, Milovich reports her finding that a 1% increase in U.S. aid among the countries sampled is associated with a .61% decrease in the Multidimensional Poverty Index (MPI). However, there does not appear to be a relationship between U.S. aid and income poverty for the sampled countries. In other words, while health, education, and living standards improve with U.S. aid, the same impact was not observed on income.
I am particularly interested in the impact of international aid on underdeveloped societies due to my extensive service work in high school in the Dominican Republic. The program I worked with was careful to be attentive to the needs of the Santiago, DR community despite being an organization headquartered in the United States. Still, I am aware that aid can be detrimental rather than helpful to societies if not applied properly. I would be interested to see literature regarding the potential negative effects of international aid on communities and believe Milovich could have acknowledged these more extensively in her paper. It would also be compelling to differentiate forms of aid geared towards health and aid geared towards education (such as building schools, training teachers, or providing school supplies) and examine which are more beneficial than others.
Personally, I believe much of the discrepancy surrounding the question of the impact of international aid results from failure to provide aid in a way that targets the developmental needs of individual communities. Often, Americans seem to be wrapped up in the altruistic component of international aid and pay less attention to what occurs once the assistance reaches underdeveloped countries. On a government level, as cited by Milovich, the U.S. has historically been much more concerned with the political and strategic implications of international aid than the well-being of other societies. In order for aid to be successful, it must be targeted, thorough, and aimed at enhancing human capital in order to truly sustain development in underdeveloped nations.

[Julia Moody]

I liked how the author points out that economic growth is not always good for the poor. I think it is easy to assume that a country’s economic growth and development automatically improves the lives and wellbeing of everyone in that country, but that is not always the case. This perspective reminded me of the last paper we read, “Does Trade Reduce Poverty?”. In this paper, the author emphasized that trade increases economic activities, which simultaneously can increase income inequality. Although economic development and trade openness has many benefits, there are other policies that would target poverty more directly.

Also, I had mixed feelings on the measurement of poverty used in this paper. I liked that the author used a more complex measurement than just the poverty gap or poverty headcount, instead opting for a weighted score of how deprived of basic needs a person was. This measurement yielded a larger number of observed people living in poverty and included more information on their wellbeing. However, this new measurement had some limitations. It only included a few years and had a limited number of observations, in some cases only one observation per country. Also, the measurements come from different years in different countries, so it seems like it would be hard to find trends throughout the data. Despite these concerns, I thought it was smart that the author used data on US aid from 1946-1999 and data on poverty from 2000-2014, because aid would be expected to have delayed effects on a country’s poverty.

[MarkLamendola1]

In “DO CONDITIONAL CASH TRANSFERS IMPROVE ECONOMIC OUTCOMES IN THE NEXT GENERATION? EVIDENCE FROM MEXICO”, Susan W. Parker and Tom Vogl attempt to show the long term effects of the conditional cash transfer systems in Mexico. Progresa gives money to families whose children attend and pass each year of schooling as well as visiting getting medical “check ups”. This creates incentives for children to attain more education and receive health care. One figure stood out most to me after reading this paper and that was the intianal level of participation in the program; 97 percent of the families that were offered the program participated. I found this to be an impressive rate and clearly a good incentive for families to keep their kids in school. The results showed an increase in wages by almost $40 per month. What I found to be even more astonishing was the program’s effect on women; women’s labor participation increased by 7-11 percent. Taking a Sen type approach already validates the effectiveness of a Conditional Cash transfer system like Progresa. Education rates and women’s empowerment both increase due to this system. As we have learned, this is both an ends and a means to development.

[TevinPanchal]

In Parker and Vogl's paper, "Do Conditional Cash Transfers Improve Economic Outcomes in the Next Generation? Evidence from Mexico", the authors dive into the findings of the Progresa Program and the long run impacts it has. The programs goal was to minimize poverty and increase the long term health and well being financially of children and families in Mexico. What stuck out to me the most was the outcomes of this program with respect to women. The effects were positive in both men and women but the effects were more drastic with women. Women staying in the program and staying in School led to,"estimated effects on female labor force participation exceeding one-quarter, and the estimated effects on female labor income exceeding one half". We have talked about and studied the correlation between female empowerment and development being one of the most crucial and driving forces of economic development as a whole. This study has to provide some sort of hope to developing countries and an incentive for more programs to be put into place. People are driven by results and the benefits that come along with it, so giving people an incentive is key to development. Why would someone do something if they knew they were not going to be successful or benefit from it? Given these people an incentive proves to lead to success not just for these individuals but economies and development as a whole. Implementing in this in other developing areas and countries can lead to great strides and improvement on overall development. This program is investing in human capital which is what needs to be done. We have proved that investing in human capital is what needs to happen. I really like the idea of the program and it creates real opportunity for improvement and development. Starting the program early is key as well. Investing in human capital at an early age translates to great development and positive outcomes in the future. Education and Women's empowerment are the means and the ends in development like Sen said. Everything relates back to that point in some shape or form.

[Tommy Mottur]

The paper "Does Aid Reduce Poverty", by Juliana Milovich, aims to characterize the causal relationship between foreign aid and poverty levels. It does this by targeting one country, the US, and comparing the aid given by the US during specific periods to countries who have spent time as temporary members of the UN security council with the data from the multidimensional poverty index (MPI), which measures levels of access to education, health services, and general quality of life, from the countries which received aid from the US during these periods. Although she finds a statistically significant difference in percentage levels of access to education, health, and quality of life, she notes that when poverty is measured simply with income variables, no statistical difference is found in these countries.
The part that I take some issue with is that the countries being examined, the temporary members of the UNSC, are in an entirely different situation when they find themselves on the council than when they do not occupy a seat. The paper notes that these countries receive an average of 59% higher amounts of aid when on the council. This allows for a useful sample of countries who all experience heightened levels of aid for a fixed time, which is a good feature for a study of this kind. However, these countries are now privy to international contracts with powers that much outrank their own, and may well often be manipulated or bought into making economic decisions that they would not otherwise make in absence of their position on the council. This means that changes in any economic variables, including the poverty variables examined in the MPI, may be affected by the lurking variable of increased international standing just as much as they are by the increased aid they receive as a result of their position. As such, it seems like this sample of countries is not an isolated example of increased aid, but rather a sample of countries who all gain temporary access to a new level of international bargaining power, access which may cause them to make decisions in entirely different ways than usual.

[drewwoodfolk]

I found the paper "Does Aid Reduce Poverty" to be highly thought provoking as it was the first time I've ever seen concrete imperial data about the effectiveness of international aid. From a personal perspective, I've always found myself to be somewhat skeptical about the about of aid that the US in particular lends out to developing nations. While I understand that American foreign aid can play an important role in spurring growth and reducing poverty in developing nations, I find our level of aid offered to developing nations hard to justify when I look at the vast amount of need that exist within our own country. Furthermore, from a polical perspective, I find it hard to justify using large amounts of American tax payer dollars to aid developing nations when our own country faces a myriad of domestic issues (albeit much less severe than those faced in the developing world). This paper has given me a new perspective on foreign aid and the existing literature that justifies it.

The first thing that stood out to me in this article was the method in which previous studies had measured the effectiveness of foreign aid on development. I was very suprised to learn that the vast majority of economic research has been about the causal link between aid levels in growth. While economic growth is certainly a major factor in measuring development, it is far from painting the whole picture about the day to day living standard of those in developing nations. It was refreshing to see that this article focus on the relationship between aid and poverty alleviation. This, in my opinion, is by far the more effective way to measure the effectiveness of aid as it capture the micro level benefits that foreign aid can provide to those in devleoping nations.

The second thing I found interesting from the article was the effectiveness of aid to improve some measures of development but not others. While I wasn't surprised to see that aid across the board helped decrease multidimensional poverty significantly, I was somewhat surprised to see that aid had no statistically signifigant effect on income poverty. This goes to show that growth and income levels aren't the whole story when it comes to development.

[Colby Boudreau]

Does Aid Reduce Poverty? Brings to light a recurring theme throughout the blog posts that we have been doing in that every issue that is talked about there appears to be the opportunity to make meaningful gains in areas of poverty and underdevelopment, but either ignorance, lack of willpower, or lack of personal benefit prevents many people and countries from tackling issues around the world. Milovich provides statistics that say for an average increase of 1% in U.S. aid is related to a lower percentage of multidimensionally poor people deprived in education, health and living standards by 0.82%, 0.36% and 0.64%, respectively. To wrap my head around this, I relate this to market inefficiencies. For example, when a company gathers resources to make products, there is bound to be a portion of those resources that go to excess waste, transaction costs, or simply defective products. This appears to be a similar situation, as there may not be a direct 1-1 relationship in the aid provided to increase in living standards due to aid slipping through the cracks in forms of transaction costs, lost potential, or non-recognition until the long term. Yet the evidence still shows that it does help, in varying degrees and dependant on the situation. But since when is no help better than making a little difference simply because it can’t be concretely concluded on the exact benefits? This brings to mind a discussion we had the other week in class about a prominent economist who abandoned his experiment because, while he hadn’t gotten enough evidence to make a concrete and legitimate argument for his thesis, he had gathered enough evidence to know with his naked eye that the benefits of the results were too important to continue depriving the control group from. The staggering amount of money that the U.S has provided aid demonstrates the pure scope of these problems, but also demonstrates the amount of potential good that can be done.

[Caroline Florence]

In “Does Aid Reduce Poverty?”, Juliana Yael Milovich attempts to determine whether aid lowers income poverty and the multidimensional poverty index by observing how long a country has been a member of the United Nations Security Council. The study finds that, on average, a 1% increase in US aid from 1946 to 1999 results in a .61% decrease in MPI between 2001 and 2014. Although I think this is a really interesting and important study, we need to be careful in how we interpret the results. The paper looks at aid generally, but it does not look into what specific programs the aid helped support. With a program as big as the UNSC, it can be hard to discern what works and what doesn’t. It is possible that certain aspects of aid played a major role in reducing poverty while other programs were less successful. For example, perhaps returns to education were low because people were not healthy enough to go to school. The political institutions and stability of a country is another likely contributor to aid’s success or failure.

I think it would be interesting to look into the impacts of specific programs within the UNSC to see what is really making an impact. Although I think this study is a good place to start in determining whether or not aid reduces poverty, there is still a lot of work to be done before we can determine if aid works. We need a lot more research before we can determine the best way to alleviate global poverty.