Aging and Death under a Dollar a Day

This paper uses household survey data form several developing countries to investigate whether the poor (defined as those living under $1 or$2 dollars a day at PPP) and the non poor have different mortality rates in old age. We construct a proxy measure of longevity, which is the probability that an adult's mother and father are alive. The non-poor's mothers are more likely to be alive than the poor's mothers. Using panel data set for Indonesia and Vietnam, we also find that older adults are significantly more likely to have died five years later if they are poor. The direction of causality is unclear: the poor may be poor because they are sick (and thus more likely to die), or they could die because they are poor.

Limited Attention and Income Distribution

Economists have long been interested in the idea that there is a direct circular relation between poverty and low productivity, and not just one that is mediated by market failures, usually in asset markets. The nutrition-based efficiency wage model (Partha Dasgupta and Debraj Ray, 1987) is the canonical example of models where this happens: However it has been variously suggested (see for example T. N. Srinivasan, 1994) that the link from nutrition to productivity and especially the link from productivity to nutrition is too weak to be any more than a small part of the story. Partha Dasgupta himself acknowledges this when he writes "nutrition-productivity construct provides a metaphor,..., for ... an economic environment harboring poverty traps" (Partha Dasgupta, 1997, page 5). We propose an alternative approach to this question based on the idea that attention is a scarce resource that is important for productivity. Specifically, people may not be able to fully attend to their jobs if they are also worrying about problems at home and being distracted in this way reduces productivity. But not paying attention at home is also costly: early symptoms of a child's sickness may go unnoticed; water may run out at the end of the day; kerosene for lighting lamps at home might run out and make it hard to do homework; etc. Finally, the extent to which home life distracts depends on the nature of home life. Specifically, certain goods (e.g. a good baby sitter, a 24-hour piped water supply, a connection to a power supply grid) can reduce the extent of home life distraction. These three assumptions generate an interesting relation between income and productivity that is at the core of our model. The non-poor in this model, by virtue of owning distraction-saving goods and services at home, are able to focus more on their work. Hence they will be more productive at work and will be able to afford more distraction-saving goods. This simple two-way relationship between income and productivity produces a discontinuity in the relation between human capital and earnings which is certain cases can lead to a poverty trap, even in the absence of any market failures.Economic

Giving Credit where Credit is Due

March 12, 201

Do firms want to borrow more? : testing credit constraints using a directed lending program

May 2002. Revised: May 200

The shape of temptation : implications for the economic lives of the poor

April 29, 200

Under the Thumb of History? Political Institutions and the Scope for Action

Draft prepared for the Annual Review of Economics, Oct. 5, 2013Under the Thumb of History? Political Institutions and the Scope for Action This paper discusses the two leading views of history and political institutions. For some scholars, institutions are mainly products of historical logic, while for others, accidents, leaders, and decisions have a significant impact. We argue that while there is clear evidence that history matters and has long-term effects, there is not enough data to help us distinguish between the two views. Faced with this uncertainty, what is a social scientist to do? We argue that given the possibility that policy decisions indeed make a difference, it makes sense to assume they do and to try to improve policymaking

Information, the Dual Economy, and Development

We examine the interactions between different institutional arrangements in a general equilibrium model of a modernizing economy. There is a modern sector, where productivity is high but information asymmetries are large, and a traditional sector where productivity is low but information asymmetries are low. Consequently, agency costs in the modern sector make consumption lending difficult, while such loans are readily obtainable in the traditional sector. The resulting trade-off between credit availability and productivity implies that not everyone will move to the modern sector. In fact, the laissex-fair level of modernization may fail to maximize net social surplus. This situation may also hold in the long run: in a dynamic version of the model, a "trickle-down" effect links the process of modernization with reduction in modern sector agency costs. This effect may be too weak and the economy may get stuck in a trap and never fully modernize. The two-sector structure also yields a natural testing ground for the Kuznets inverted-U hypothesis: we show that even within the "sectoral shifting" class of models, this phenomenon is not robust to small changes in model specification

Migration, Integration, and Development

We re-examine the Lewis undermigration by studying a two-sector model in which there is a trade-off between higher productivity in the modern sector and better information in the traditional sector. The consequent presence of well-functioning local insurance markets in the traditional sector and their absence in the modern sector leads to the possibility of inefficient undermigration: total social surplus would be increased if migration were larger than its laissez-faire level; whether this occurs depends in part on the distribution of wealth. In a dynamic version of the model, modernization of the economy may be too slow, and it is possible that the economy gets stuck in an undermigration trap (never fully modernizes). The migratory dynamics also lead to well-defined dynamic relations between average income and inequality. We find that although the Kuznets inverted-U curve may arise, it is equally likely that the relation of inequality and income follows other patterns, including an upright U

Information, the Dual Economy, and Development

We examine the interactions between different institutional arrangements in a general equilibrium model of a modernizing economy. There is a modern sector, where productivity is high but information asymmetries are large, and a traditional sector where productivity is low but information asymmetries are low. Consequently, agency costs in the modern sector make consumption lending difficult, while such loans are readily obtainable in the traditional sector. The resulting trade-off between credit availability and productivity implies that not everyone will move to the modern sector. In fact, the laissex-fair level of modernization may fail to maximize net social surplus. This situation may also hold in the long run: in a dynamic version of the model, a "trickle-down" effect links the process of modernization with reduction in modern sector agency costs. This effect may be too weak and the economy may get stuck in a trap and never fully modernize. The two-sector structure also yields a natural testing ground for the Kuznets inverted-U hypothesis: we show that even within the "sectoral shifting" class of models, this phenomenon is not robust to small changes in model specification