– (S)cars in the great recession
with K. Larkin, M. Ravn, and M. Padula (Forthcoming 2022, Econometrica)
Abstract: US households’ consumption and car purchases collapsed during the Great Recession, for reasons that are still poorly understood. In this paper we use the Consumer Expenditure Survey to derive cohort and business cycle decompositions of consumption profiles. When decomposing the car expenditure data into its extensive and intensive margins, we find that the intensive margin contracted sharply in the Great Recession, a finding in stark contrast to conventional wisdom and to the experience of prior recessions. We interpret the evidence through the prism of a very rich life-cycle model where individuals are subject to idiosyncratic uninsurable income shocks, aggregate income shocks, wealth shocks, and credit shocks. We show that, because of their salience and the transaction costs, cars are particularly sensitive to changes in the perception of fu- ture expected income and its variability. We find that on top of a large aggregate income shock, life-cycle income profile shocks and wealth shocks are important determinants of consumption choices during the Great Recession.
– Early Childhood Development, Human Capital and Poverty Review
with C. Meghir and S. Cattan (April 2022, Annual Reviews of Economics)
Abstract: Children’s experiences during early childhood are critical for their cognitive and socio-emotional development, two key dimensions of human capital. However, children from low income backgrounds often grow up lacking stimulation and basic investments, leading to developmental deficits that are difficult, if not impossible, to reverse later in life without intervention. The existence of these deficits are a key driver of inequality and contribute to the intergenerational transmission of poverty. In this paper, we discuss the framework used in economics to model parental investments and early childhood development and use it as an organizing tool to review some of the empirical evidence on early childhood research. We then present results from various important early childhoods interventions with emphasis on developing countries. Bringing these elements together we draw conclusions on what we have learned and provide some directions for future research.
– Early Stimulation and Nutrition: The Impacts of a Scalable Intervention
with H. Baker-Henningham, R. Bernal, C. Meghir, D. Pineda, and M. Rubio-Codina (January 2022, Journal of the European Economic Association)
Abstract: Early childhood development is becoming the focus of policy worldwide. However, the evidence on the effectiveness of scalable models is scant, particularly when it comes to infants in developing countries. In this paper, we describe and evaluate with a cluster-Randomized Controlled Trial an intervention designed to improve the quality of child stimulation within the context of an existing parenting program in Colombia, known as FAMI. The intervention improved children’s development by 0.16 of a standard deviation (SD) and children’s nutritional status, as reflected in a reduction of 5.8 percentage points of children whose height-for-age is below -1 SD.
– Growing Apart: Declining Within- and Across-Locality Insurance in Rural China
with C. Mommaerts, C. Meghir, and Y. Zhen (September 2021, CEPER Working Paper No. DP16654)
Abstract: We consider risk sharing in rural China during rapid economic transformation from the late 1980s through the late 2000s. We document an erosion of consumption insurance against both household-level idiosyncratic and village-level aggregate income shocks, and show that this decline is related to observable economic changes: the shift from agriculture to wage employment, the decline of publicly owned Township-and-Village Enterprises, and increased migrant work. Further evidence suggests that as these changes took place at the village level, higher levels of government failed to offset these effects through the tax-and-transfer system, leaving households more exposed to both idiosyncratic and village-aggregate shocks.
– Long Term Effects of Cash Transfer Programs in Colombia
with L. Cardona-Sosa, C. Medina, C. Meghir, and C.M. Posso-Suárez (July 2021, NBER Working Paper No. 29056)
Abstract: Conditional Cash transfer (CCT) programs have been shown to have positive effects on a variety of outcomes including education, consumption and health visits, amongst others. We estimate the long-run impacts of the urban version of Familias en Acción, the Colombian CCT program on crime, teenage pregnancy, high school dropout and college enrollment using a Regression Discontinuity design on administrative data. ITT estimates show a reduction on arrest rates of 2.7pp for men and a reduction on teenage pregnancy of 2.3pp for women. High school dropout rates were reduced by 5.8pp and college enrollment was increased by 1.7pp for men
– From Quantity to Quality: Delivering a Home-Based Parenting Intervention Through China’s Family Planning Cadres
with S. Sylvia, N. Warrinnier, R. Luo, A. Yue, A. Medina, and S. Rozelle (April 2021, The Economic Journal)
Abstract: A key challenge in developing countries interested in providing early childhood development (ECD) programmes at scale is whether these programmes can be effectively delivered through existing public service infrastructures. We present the results of a randomised experiment evaluating the effects of a home-based parenting programme delivered by cadres in China’s Family Planning Commission (FPC)—the former enforcers of the one-child policy. We find that the programme significantly increased infant skill development after six months and that increased investments by caregivers alongside improvements in parenting skills were a major mechanism through which this occurred. Children who lagged behind in their cognitive development and received little parental investment at the onset of the intervention benefited most from the programme. Household participation in the programme was associated with the degree to which participants had a favourable view of the FPC, which also increased due to the programme.
– Targeting High School Scholarships to the Poor: The Impact of a Program in Mexico
with R. De Hoyos and C. Meghir (January 2021, NBER Working Paper No. 26023, Economic Development and Cultural Change R&R)
Abstract: Based on an RCT, we evaluate a scholarship program in Mexico (PROBEMS) aimed at improving graduation rates and test scores among upper secondary school students from poor backgrounds. We find that, on average, the program has no impact either on graduation rates or on Math and Spanish test scores. We point to two possible reasons for this failure: a. the program was badly targeted, with many of the recipients being from less disadvantaged families than intended; b) the prior academic achievement of those eligible was often insufficient for completing successfully the academic requirements of upper secondary school. This points to accumulated achievement deficits that could be addressed by interventions targeting learning at an earlier stage.
– Group Sessions or Home Visits for Early Childhood Development in India: A Cluster RCT
with S. Grantham-McGregor, A. Adya, B. Augsburg, J. Behrman, B. Caeyers, M. Day, P. Jervis, R. Kochar, P. Makkar, C. Meghir, A. Phimister, M. Rubio-Codina, and K. Vats (December 2020, Pediatrics)
Objectives: Poor early childhood development in low- and middle-income countries is a major public health problem. Efficacy trials have shown the potential of early childhood development interventions but scaling up is costly and challenging. Guidance on effective interventions’ delivery is needed. In an open-label cluster-randomized control trial, we compared the effectiveness of weekly home visits and weekly mother-child group sessions. Both included nutritional education, whose effectiveness was tested separately.
Methods: In Odisha, India, 192 villages were randomly assigned to control, nutritional education, nutritional education and home visiting, or nutritional education and group sessions. Mothers with children aged 7 to 16 months were enrolled (n = 1449). Trained local women ran the two-year interventions, which comprised demonstrations and interactions and targeted improved play and nutrition. Primary outcomes, measured at baseline, midline (12 months), and endline (24 months), were child cognition, language, motor development, growth and morbidity.
Results: Home visiting and group sessions had similar positive average (intention-to-treat) impacts on cognition (home visiting: 0.324 SD, 95% confidence interval [CI]: 0.152 to 0.496, P = .001; group sessions: 0.281 SD, 95% CI: 0.100 to 0.463, P = .007) and language (home visiting: 0.239 SD, 95% CI: 0.072 to 0.407, P = .009; group sessions: 0.302 SD, 95% CI: 0.136 to 0.468, P = .001). Most benefits occurred in the first year. Nutrition-education had no benefit. There were no consistent effects on any other primary outcomes.
Conclusions: Group sessions cost $38 per child per year and were as effective on average as home visiting, which cost $135, implying an increase by a factor of 3.5 in the returns to investment with group sessions, offering a more scalable model. Impacts materialize in the first year, having important design implications.
– Inequality in socio-emotional skills: A cross-cohort comparison
with R. Blundell, G. Conti, and G. Mason (November 2020, Journal of Public Economics)
Abstract: We examine changes in inequality in socio-emotional skills very early in life in two British cohorts born 30 years apart. We construct comparable scales using two validated instruments for the measurement of child behaviour and identify two dimensions of socio-emotional skills: ‘internalising’ and ‘externalising’. Using recent methodological advances in factor analysis, we establish comparability in the inequality of these early skills across cohorts, but not in their average level. We document for the first time that inequality in socio-emotional skills has increased across cohorts, especially for boys and at the bottom of the distribution. We also formally decompose the sources of the increase in inequality and find that compositional changes explain half of the rise in inequality in externalising skills. On the other hand, the increase in inequality in internalising skills seems entirely driven by changes in returns to background characteristics. Lastly, we document that socio-emotional skills measured at an earlier age than in most of the existing literature are significant predictors of health and health behaviours. Our results show the importance of formally testing comparability of measurements to study skills differences across groups, and in general point to the role of inequalities in the early years for the accumulation of health and human capital across the life course.
– Mothers’ Social Networks and Socioeconomic Gradients of Isolation
with A. Andrew, B. Augsburg, J. Behrman, M. Day, P. Jervis, C. Meghir, and A. Phimister (November 2020, NBER Working Paper No. 28049, Economic Development and Cultural Change R&R)
Abstract: Social connections are fundamental to human wellbeing. This paper examines the social networks of young married women in rural Odisha, India. This is a group for whom highly-gendered norms around marriage, mobility and work are likely to shape opportunities to form and maintain meaningful ties with other women. We track the social networks of 2,170 mothers over four years, and find a high degree of isolation. Wealthier women and women from more-advantaged castes and tribes have smaller social networks than their less-advantaged peers. These gradients are primarily driven by the fact that more-advantaged women are less likely to know other women within the same socioeconomic group than are less-advantaged women. There exists strong homophily by socioeconomic status (SES) that is symmetric across socioeconomic groups. Mediation analysis shows that SES differences in social isolation are strongly associated with ownership of toilets and labor force participation. Further research should investigate the formation and role of female networks.
– Temptation and Commitment: Understanding Hand-to-Mouth Behavior
with A. Kovacs and P. Moran (October 2020, NBER Working Paper No. 27944)
Abstract: This paper presents a model of consumption behavior that explains the presence of ‘wealthy hand-to-mouth’ consumers using a mechanism that differs from those analyzed previously. We show that a two-asset model with temptation preferences generates a demand for commitment and thus illiquidity, leading to hand-to-mouth behavior even when liquid assets deliver higher returns than illiquid assets. This model fits other features of the data, such as the fact that the Marginal Propensity to Consume declines only slowly with shock size. Moreover, temptation and commitment have important policy implications: we show that housing subsidies and mandatory mortgage amortization increase household savings.
– The Effect of Gender-Targeted Conditional Cash Transfers on Household Expenditures: Evidence from a Randomized Experiment
with A. Armand, P. Carneiro, V. Lechene (October 2020, The Economic Journal)
Abstract: This article studies the differential effect of targeting cash transfers to men or women on household expenditure on non-durables. We study a policy intervention in the Republic of North Macedonia that offers cash transfers to poor households, conditional on having their children attending secondary school. The recipient is randomised across municipalities, with payments targeted to either the mother or the father of the child. Targeting transfers to women increases the expenditure share on food by 4 to 5 percentage points. At low levels of food expenditure, there is a shift towards a more nutritious diet.
– Child Development in the Early Years: Parental Investment and the Changing Dynamics of Different Dimension
with R. Bernal, M. Giannola, and M. Nores (September 2020, NBER Working Paper No. 27812, Journal of Labor Economics R&R)
Abstract: This paper uses the data on child development collected around the evaluation of a nursery program to estimate the details of the process of human development. We model development as made of three latent factors, reflecting health, cognitive and socio-emotional skills. We observe children from age 1 to age 7. We assume that, at each age, these factors interact among themselves and with a variety of other inputs to determine the level of development at following ages. Relative to other studies, the richness of the data we use allows us to: (i) let the dynamics be rich and flexible; (ii) let each factors play a role in the production of any other factor; (iii) estimate age-specific functional forms; (iv) treated parental investment as an endogenous input. We find that the dynamics of the process can be richer than usually assumed, which has important implications for the degree of persistence of different inputs in time. Persistence also changes with age. This has important implications for the targeting of investment and interventions, and the identification of windows of opportunities. The endogeneity of investment is also important.
– Parental Beliefs about Returns to Different Types of Investments in School Children
with T. Boneva and C. Rauh (September 2020, Journal of Human Resources)
Abstract: Using a representative sample of 1,962 parents in England, we study how parents perceive the returns to parental time investments, material investments and school quality. Parents perceive the returns to 3h of weekly time investments or £30 of weekly material investments to matter more than moving a child to a better school. Material investments are perceived as more productive if children attend higher quality schools. Perceived returns do not differ with the child’s initial human capital or gender, and they are highly correlated with actual investment decisions.
– The Persistence of Socio-Emotional Skills: Life Cycle and Intergenerational Evidence
with A. de Paula and A. Toppeta (September 2020, NBER Working Paper No. 27823
Abstract: This paper investigates the evolution of socio-emotional skills over the life cycle and across generations. We start by characterising the evolution of these skills in the first part of the life cycle. We then examine whether parents’ socio-emotional skills in early childhood rather than in adolescence are more predictive of their children’s socio-emotional skills. We exploit data from the 1970 British Cohort Study (BCS70) and focus on two dimensions of socio- emotional skills: internalizing and externalizing skills, linked respectively to the ability of focusing attention and engaging in interpersonal activities. When looking at the evolution of socio-emotional skills over the life cycle, we notice a considerable amount of persistence which leads to a rejection of the simple Markov dynamic models often used in the literature. The BCS70 contains data on the skills of three generations. Moreover, the skills for cohort members and their children are not observed at the same calendar time, but at similar ages. We establish that parents’ and children’s socio-emotional skills during early childhood are comparable and estimate intergenerational mobility in socio-emotional skills, examining the link between the parent’s socio-emotional skills at age 5, 10 and 16 and the child’s socio-emotional skills between ages 3 and 16. We show that the magnitudes of intergenerational persistence estimates are smaller than the magnitude of intergenerational persistence estimates in occupation and income found for the United Kingdom. Finally, we estimate multi-generational persistence in socio-emotional skills and find that the grandmother’s internalizing skill correlates with the grandchild’s socio-emotional skills even after controlling for parental skills.
– Consumption Insurance in Networks with Asymmetric Information
with S. Krutikova (July 2020, Journal of European Economic Association)
Abstract: This paper uses a dataset from Tanzania with information on consumption, income, and income shocks within and across family networks. Crucially and uniquely, it also contains data on the degree of information existing between each pair of households within family networks. We use these data to construct a novel measure of the quality of information both at the level of household pairs and at the level of the network. We also note that the individual level measures can be interpreted as measures of network centrality. We study risk sharing within these networks and explore whether the rejection of perfect risk sharing that we observe can be related to our measures of information quality. We show that households within family networks with better information are less vulnerable to idiosyncratic shocks. Furthermore, we show that more central households within networks are less vulnerable to idiosyncratic shocks. These results have important implications for the characterisation of the empirical failure of the perfect risk-sharing hypothesis and point to the importance of information frictions.
– Human Capital Development and Parental Investment in India
with C. Meghir and E. Nix (June 2020, The Review of Economic Studies)
Abstract: We estimate production functions for cognition and health for children aged 1–12 in India, based on the Young Lives Survey. India has over 70 million children aged 0–5 who are at risk of developmental deficits. The inputs into the production functions include parental background, prior child cognition and health, and child investments, which are taken as endogenous. Estimation is based on a nonlinear factor model, based on multiple measurements for both inputs and child outcomes. Our results show an important effect of early health on child cognitive development, which then becomes persistent. Parental investments affect cognitive development at all ages, but more so for younger children. Investments also have an impact on health at early ages only.
– Economic Resources, Mortality and Inequality
with T.H. Nielsen (March 2020, CEBI Working Paper 06/20, Economica R&R)
Abstract: Using full-population register data from Denmark, this study shows that estimates of the economic gradient in mortality depends on the specific measure of economic resources used, where we investigate permanent income, annual income or financial and housing wealth. Our favorite measure is what we call ’Permanent income’, that is the average level of income over a long interval. We find that when using annual income or current wealth, the gradient is overestimated, unless one controls for a number of additional variables, such as education, civil status and initial health. In the last part of the paper, we compare the results from Denmark to results from the UK. Although the countries are very different in terms of inequality, the estimates of the gradient we find are very similar, suggesting that differential levels of resources (including information), rather than inequality itself, determine the gradient in survival and mortality.
– Nonlinear Pricing in Village Economies
with E. Pastorino (February 2020, Econometrica)
Abstract: This paper examines the prices of basic staples in rural Mexico. We document that nonlinear pricing in the form of quantity discounts is common, that quantity discounts are sizable for basic staples, and that the well-known conditional cash transfer program Progresa has significantly increased quantity discounts, although the program, as documented in previous studies, has not affected unit prices on average. To account for these patterns, we propose a model of price discrimination that nests those of Maskin and Riley (1984) and Jullien (2000), in which consumers differ in their tastes and, because of subsistence constraints, in their ability to pay for a good. We show that under mild conditions, a model in which consumers face heterogeneous subsistence or budget constraints is equivalent to one in which consumers have access to heterogeneous outside options. We rely on known results to characterize the equilibrium price schedule, which is nonlinear in quantity. We analyze the effect of nonlinear pricing on market participation as well as the impact of a market-wide transfer, analogous to the Progresa one, when consumers are differentially constrained. We show that the model is structurally identified from data on prices and quantities from a single market under common assumptions. We estimate the model using data on three commonly consumed commodities from municipalities and localities in Mexico. Interestingly, we find that relative to linear pricing, nonlinear pricing is beneficial to a large number of households, including those consuming small quantities, mostly because of the higher degree of market participation that nonlinear pricing induces. We also show that the Progresa transfer has affected the slopes of the price schedules of the three commodities we study, which have become steeper as consistent with our model, leading to an increase in the intensity of price discrimination. Finally, we find that a reduced form of our model, in which the size of quantity discounts depends on the hazard rate of the distribution of quantities purchased in a village, accounts for the shift in price schedules induced by the program.
– Estimating the Production Function for Human Capital: Results from a Randomized Controlled Trial in Colombia
with S. Cattan, E. Fitzsimons, C. Meghir, and M. Rubio-Codina (January 2020, American Economic Review)
Abstract: We examine the channels through which a randomized early childhood intervention in Colombia led to significant gains in cognitive and socio-emotional skills among a sample of disadvantaged children aged 12 to 24 months at baseline. We estimate the determinants of parents’ material and time investments in these children and evaluate the impact of the treatment on such investments. We then estimate the production functions for cognitive and socio-emotional skills. The effects of the program can be explained by increases in parental investments, emphasizing the importance of parenting interventions at an early age.
– Consumption and Wage Inequality in the US: The Dynamics of the Last Three Decades
with N. Amin-Smith (January 2020, Fiscal Studies)
Abstract: In this paper, we look at the evolution of consumption and wage inequality from 1980 to 2016 in the US. We use data from the Consumer Expenditure Survey (CEX) and the Current Population Survey (CPS) to look at differences in consumption and wages across groups in the population defined by educational attainment of the household head and year-of-birth cohort. We show that the results obtained by Attanasio and Davis (1996) for non-durable consumption still hold in more recent decades. In addition to non-durable consumption and services, we look at inequality measured in terms of expenditure on and stock of vehicles. The advantages of looking at these measures are that information on cars is typically measured more accurately than other components of expenditure and consumers are more likely to react by adjusting their stock of vehicles on the basis of long-term expectations about their economic prospects.
– Effects of a Scalable Home-visiting Intervention on Child Development in Slums of Urban India: Evidence from a Randomised Controlled Trial
with A. Andrew, B. Augsburg, M. Day, S. Grantham-McGregor, C. Meghir, F. Mehrin, S. Pahwa, M. Rubio-Codina (December 2019, The Journal of Child Psychology Psychiatry)
Background: An estimated 63.4 million Indian children under 5 years are at risk of poor development. Home visits that use a structured curriculum to help caregivers enhance the quality of the home stimulation environment improve developmental outcomes. However, achieving effectiveness in poor urban contexts through scalable models remains challenging.
Methods: Using a cluster randomised controlled trial, we evaluated a psychosocial stimulation intervention, comprising weekly home visits for 18 months, in urban slums of Cuttack, Odisha, India. The intervention is complementary to existing early childhood services in India and was run and managed through a local branch of a national NGO. The study ran from August 2013 to July 2015. We enrolled 421 children aged 10–20 months from 54 slums. Slums were randomised to intervention or control. Primary outcomes were children’s cognitive, receptive language, expressive language and fine motor development assessed using the Bayley-III. Prespecified intent-to-treat analysis investigated impacts and heterogeneity by gender. Trial registrations: ISRCTN89476603, AEARCTR-0000169.
Results: Endline data for 378 (89.8%) children were analysed. Attrition was balanced between groups. We found improvements of 0.349 of a standard deviation (SD; p = .005, stepdown p = .017) to cognition while impacts on receptive language, expressive language and fine motor development were, respectively, 0.224 SD (p = .099, stepdown p = .184), 0.192 SD (p = .085, stepdown p = .184) and 0.111 (p = .385, stepdown p = .385). A child development factor improved by 0.301 SD (p = .032). Benefits were larger for boys. The quality of the home stimulation environment also improved.
Conclusions: This study shows that a potentially scalable home-visiting intervention is effective in poor urban areas.
– Subjective Parental Beliefs. Their Measurement and Role
with F. Cunha and P. Jervis (November 2019, NBER Working Paper No. 26516)
Abstract: We study the importance of maternal subjective beliefs about the technology of skill formation in determining parental investments on child development. We describe our framework in three steps. First, we discuss the construction of the survey instrument we used to elicit maternal subjective beliefs. Second, we show how to convert the answers to the survey instrument into estimates of maternal subjective beliefs. Finally, we correlate maternal subjective beliefs with maternal investments of child development. We apply our framework to a unique dataset collected as part of an 18-month-long parenting stimulation program in Colombia, whose target population were low-income households with children aged 12 to 24 months at baseline and lasted 18 months. In this program, home visitors paid weekly visits to randomly chosen households to improve mother-child interactions and other maternal behaviors that foster the development of children’s cognitive and non-cognitive skills. We show that the vast majority of mothers believe that the technology of skill formation follows a Cobb-Douglas parameterization, but there is significant heterogeneity in coefficients of investments across mothers. In particular, mothers hold low subjective expectations, which means that mothers underestimate the returns to their investments. We also find that maternal subjective beliefs predict investments, but that the program did not affect maternal subjective beliefs.
– Preschool Quality and Child Development
with A. Andrew, R. Bernal, L. Cardona-Sosa, S. Krutikova, and M. Rubio-Codina (August 2019, NBER Working Paper, Journal of political Economy R&R)
Abstract: Global access to preschool has increased dramatically yet preschool quality is often poor. We use a randomized controlled trial to evaluate two approaches to improving the quality of Colombian preschools. We find that the first, which was rolled out nationwide and provides additional resources for materials and new staff, did not benefit children’s development and, unintentionally, led teachers to reduce their involvement in classroom activities. The second approach additionally trains teachers to improve their pedagogical methods. We find this addition offset the negative effects on teacher behavior, improved the quality of teaching and raised children’s cognition, language and school readiness.
– Euler Equations, Subjective Expectations and Income Shocks
with A. Kovacs and K. Molnar (June 2019, Economica)
Abstract: In this paper, we make three substantive contributions. First, we use elicited subjective income expectations to identify the levels of permanent and transitory income shocks in a lifecycle framework. Second, we use these shocks to assess whether households’ consumption is insulated from them. Third, we use the shock data to estimate an Euler equation for consumption. We find that households are able to smooth transitory shocks, but adjust their consumption in response to permanent shocks, albeit not fully. The estimates of the Euler equation parameters with and without expectational errors are similar, which is consistent with rational expectations. We break new ground by combining data on subjective expectations about future income from the Michigan Survey with microdata on actual income from the Consumer Expenditure Survey.
– Freeing Financial Education via Tablets: Experimental Evidence from Colombia
with M. Bird, L. Cardona-Sosa, and P. Lavado (June 2019, NBER Working Paper No. 25929)
Abstract: Financial knowledge is critical for making sound decisions that foster financial health and protect consumers from predation. A widely-used tool for building this capability is financial education. Yet evidence suggests that conventional approaches which teach concepts in classroom-style settings are ineffective and expensive at scale, especially for lower-income users. More recent findings indicate that customizing financial education to the needs, interests, and location of participants may increase impact, though doing so in a cost-effective and scalable way remains challenging. This randomized evaluation of a tablet-based financial education program with mostly female recipients of a conditional cash transfer (CCT) program in Colombia offers evidence for how to design and scale an effective digital-based financial education program. Results indicate that the LISTA Initiative had significant positive impacts on financial knowledge, attitudes, practices, and performance, increasing for poorer, less educated, and more rural populations, with users exhibiting increased financial health over two years later. Critical mechanisms included well-designed content and a social learning component. Yet the longer-term impact on formal financial inclusion was limited, suggesting the possible benefits of combining supply-side solutions with financial education interventions.
– The effects of the transition from home-based childcare to childcare centers on children’s health and development in Colombia
with R. Bernal, X. Peña, and M. Vera-Hernández (2nd Quarter 2019, Early Childhood Research Quarterly)
Abstract: Colombia’s national early childhood strategy launched in 2011 aimed at improving the quality of childcare services offered to socio-economically vulnerable children, and included the possibility that children and their childcare providers could transfer from non-parental family daycare units to large childcare centers in urban areas. This study seeks to understand whether the offer to transfer and the actual transfer from one program to the other had an impact on child cognitive and socioemotional development, and nutrition, using a cluster-randomized control trial with a sample of 2767 children between the ages of 6 and 60 months located in 14 cities in Colombia. The results indicate a negative effect of this initiative on cognitive development, a positive effect on nutrition, and no statistically significant effect of the intervention on socioemotional development. We also explored the extent to which these impacts might be explained by differences in the quality of both services during the transition, and report that quality indicators are low in both programs but are significantly worse in centers compared to community nurseries
– Aggregating Elasticities: Intensive and Extensive Margins of Women’s Labour Supply
with H. Low, P. Levell, and V. Sanchez Marcos (November 2018, Econometrica)
Abstract: We show that there is substantial heterogeneity in women’s labor supply elasticities at the micro level and highlight the implications for aggregate behavior. We consider both intertemporal and intratemporal choices, and identify intensive and extensive responses in a consistent life-cycle framework, using US CEX data. Heterogeneity is due to observables, such as age, wealth, hours worked, and the wage level, as well as to unobservable tastes for leisure: the median Marshallian elasticity for hours worked is 0.18, with corresponding Hicksian elasticity of 0.54 and Frisch elasticity of 0.87. At the 90th percentile, these values are 0.79, 1.16, and 1.92. Responses at the extensive margin explain about 54% of the total labor supply response for women under 30, although this declines with age. Aggregate elasticities are higher in recessions, and increase with the length of the recession. The heterogeneity at the micro level means that the aggregate labor supply elasticity is not a structural parameter: any aggregate elasticity will depend on the demographic structure of the economy as well as the distribution of wealth and the particular point in the business cycle.
– Microcredit Contracts, Risk Diversification and Loan Take-Up
with B. Augsburg and R. De Haas (August 2018, Journal of the European Economic Association)
Abstract: We study theoretically and empirically the demand for microcredit under different liability arrangements and risk environments. A theoretical model shows that the demand for joint-liability loans can exceed that for individual-liability loans when risk-averse borrowers value their long-term relationship with the lender. Joint liability then offers a way to diversify risk and reduce the chance of losing access to future loans. We also show that the demand for loans depends negatively on the riskiness of projects. Using data from a randomised controlled trial in Mongolia we find that these model predictions hold true empirically. In particular, we use innovative data on subjective risk perceptions to show that expected project risk negatively affects the demand for loans. In line with an insurance role of joint-liability contracts, this effect is muted in villages where joint-liability loans are available.
– Insurance in Extended Family Networks
with C. Meghir and C. Mommaerts (July 2018, NBER Working Paper No. 21059)
Abstract: We investigate partial insurance and group risk sharing in extended family networks. Our approach is based on decomposing income shocks into group aggregate and idiosyncratic components, allowing us to measure the extent to which each component is insured. We apply our framework to extended family networks in the United States by exploiting the unique intergenerational structure of the Panel Study of Income Dynamics. We find that over 60% of shocks to household income are potentially insurable within extended family networks. However, we find little evidence that the extended family provides insurance for such idiosyncratic shocks.
– Measuring and Changing Control: Women’s Empowerment and Targeted Transfers
with I. Almas, A. Armand, and P. Carneiro (July 2018, The Economic Journal)
Abstract: This article uses a novel identification strategy to measure power in the household. Our strategy is to elicit women’s willingness to pay to receive a cash transfer instead of their spouse receiving it. We selected participants from a sample of women who had already participated in a policy intervention in Macedonia offering poor households cash transfers conditional on having their children attending secondary school. The programme randomised transfers at the municipality level to either household heads (generally a male) or mothers. We show that women who were offered the transfer on average have stronger measured empowerment. Here, IV estimation confirms this result.
– Using Data Differently and Using Different Data
with I. Almas, J. Jalan, F. Oteiza, and M. Vigneri (June 2018, Journal of Development Effectiveness)
Abstract: The lack of adequate measures is often an impediment to robust policy evaluation. We discuss three approaches to measurement and data usage that have the potential to improve the way we conduct impact evaluations. First, the creation of new measures, when no adequate ones are available. Second, the use of multiple measures when a single one is not appropriate. And third, the use of machine learning algorithms to evaluate and understand programme impacts. We motivate the relevance of each of the categories by providing examples where they have proved useful in the past. We discuss the challenges and risks involved in each strategy and conclude with an outline of promising directions for future work.
– Impacts 2 years After a Scalable Early Childhood Development Intervention to Increase Psychosocial Stimulation in the Home: A Follow-up of a Cluster Randomised Controlled Trial in Colombia
with A. Andrew, E. Fitzsimons, S. Grantham-McGregor, C. Meghir, and M. Rubio-Codina (April 2018, PLOS Medicine)
Abstract: Poor early childhood development (ECD) in low- and middle-income countries is a major concern. There are calls to universalise access to ECD interventions through integrating them into existing government services but little evidence on the medium- or long-term effects of such scalable models. We previously showed that a psychosocial stimulation (PS) intervention integrated into a cash transfer programme improved Colombian children’s cognition, receptive language, and home stimulation. In this follow-up study, we assessed the medium-term impacts of the intervention, 2 years after it ended, on children’s cognition, language, school readiness, executive function, and behaviour.
– Holy Cows or Cash Cows? The Economic Return to Livestock in Rural India
with B. Augsburg (January 2018, Economic Development and Cultural Change)
Abstract: This paper revisits recent claims that poor households owning cattle in developing countries settings do not behave according to the tenets of capitalism. We point out that the discussion was based on evidence from one single year only, while cows and buffalos are assets whose return varies through time. In drought years, when fodder is scarce and more expensive, milk production is lower and profits are low. In nondrought years, when fodder is abundant and cheaper, milk production is higher and profits can be considerably higher. Therefore, the return on cows and buffalos, like that of many stocks traded on Wall Street, is positive in some years and negative in others. The fact that in a given year the observed return on a risky asset is negative could certainly not be used as a contradiction of one of the basic tenets of capitalism. We report evidence from 3 years of data on the return on cows and buffalos in the district of Anantapur and show that in one of the 3 years returns are very high, while in drought years they are predominantly negative.
– Cultural Adaptation of a Neurobiologically Informed Intervention in Local and International Contexts
with E. Pakulak, A. Hampton Wray, Z. Longoria, A. Garcia Isaza, C. Stevens, T. Bell, S. Burlingame, S. Klein, S. Berlinski, and H. Neville (December 2017, New Directions for Child and Adolescent Development)
Abstract: The relationship between early adversity and numerous negative outcomes across the lifespan is evident in a wide range of societies and cultures (e.g., Pakulak, Stevens, & Neville, 2018). Among the most affected neural systems are those supporting attention, self-regulation, and stress regulation. As such, these systems represent targets for neurobiologically informed interventions addressing early adversity. In prior work with monolingual native English-speaking families, we showed that a two-generation intervention targeting these systems in families improves outcomes across multiple domains including child brain function for selective attention (for detail, see Neville et al., 2013). Here, we discuss the translation and cultural adaptation (CA) of this intervention in local and international contexts, which required systematic consideration of cultural differences that could affect program acceptability. First, we conducted a translation and CA of our program to serve Latino families in the United States using the Cultural Adaptation Process (CAP), a model that works closely with stakeholders in a systematic, iterative process. Second, to implement the adapted program in Medellín, Colombia, we conducted a subsequent adaptation for Colombian culture using the same CAP. Our experience underscores the importance of consideration of cultural differences and a systematic approach to adaptation before assessing the efficacy of neurobiologically informed interventions in different cultural contexts.
– Education Choices and Returns on the Labor and Marriage Markets: Evidence from Data on Subjective Expectations
with K.M. Kaufmann (August 2017, Journal of Economic Behavior & Organization)
Abstract: In this paper we analyze the role of expected labor and marriage market returns as determinants of the college enrollment decisions of Mexican high school graduates. Moreover, we investigate whether the (relative) weights of these factors differ by gender. We use data on individuals’ expectations regarding future labor market outcomes which we directly elicited from the youths, and two different measures of marriage market returns. First, marriage market returns are proxied by the (net-)supply of potential partners in the youths’ local marriage markets. Second, we use data which elicits youths’ beliefs about their future spouse’s earnings conditional on their own education level. We find that labor market as well as marriage market returns are important determinants of the college enrollment decision. However, boys’ and girls’ preferences differ in terms of the relative role of the two determinants, in that the relative weight of labor market versus marriage market returns is larger for boys than for girls.
– Mediating Pathways in the Socio-economic Gradient of Child Development: Evidence from Children 6–42 Months in Bogota
with M. Rubio-Codina and S. Grantham-McGregor (June 2017, International Journal of Behavioral Development)
Abstract: Research has previously shown a gap of near 0.5 of a standard deviation (SD) in cognition and language development between the top and bottom household wealth quartile in children aged 6–42 months in a large representative sample of low- and middle-income families in Bogota, using the Bayley Scales of Infant and Toddler Development. The gaps in fine motor and socio-emotional development were about half that size. Developmental deficits increased with age. The current study explored the associations amongst child development, household socio-economic status (SES), and a set of potential mediating variables—parental characteristics, child biomedical factors, and the quality of the home environment—in this sample. We ran mediation tests to quantify the contribution of these variables to the SES gap, and explored the role of age as a moderator. Parental education, particularly maternal education, and the quality of the home environment mediated the SES gap in all outcomes examined. Height-for-age mediated a small amount of the deficit in language scales only. More educated mothers provided better home stimulation than less educated mothers and the home environment partly mediated the effect of maternal education. These results suggested that in interventions aimed at promoting child development, those focusing on the quality of the home environment should be effective.
– Human capital growth and poverty: Evidence from Ethiopia and Peru
with C. Meghir, E. Nix, and F. Salvati (April 2017, Review of Economic Dynamics)
Abstract: In this paper we use high quality data from two developing countries, Ethiopia and Peru, to estimate the production functions of human capital from age 1 to age 15. We characterize the nature of persistence and dynamic complementarities between two components of human capital: health and cognition. We also explore the implications of different functional form assumptions for the production functions. We find that more able and higher income parents invest more, particularly at younger ages when investments have the greatest impacts. These differences in investments by parental income lead to large gaps in inequality by age 8 that persist through age 15.
– Vocational Training for Disadvantaged Youth in Colombia: A Long-Term Follow-Up
with A. Guarín, C. Medina, and C. Meghir (April 2017, American Economic Journal: Applied Economics)
Abstract: We evaluate the long-term impacts of a randomized Colombian training and job placement program. Following the large short-term effects, we now find that the program effects persist, increasing formal participation and earnings contributions to social security and working in larger firms. By using a large administrative source we are also able to establish that the program improved both male and female labor market outcomes by a similar amount–a result that was not apparent with the smaller evaluation sample. The results point to a cost-effective approach to reducing informality and improving labor market outcomes in the long run.
– Why is Multiple Micronutrient Powder Ineffective at Reducing Anaemia Among 12–24 Month Olds in Colombia? Evidence from a Randomised Controlled Trial
with A. Andrew, E. Fitzsimons, and M. Rubio-Codina (December 2016, SMM – Population Health)
Abstract: In Colombia’s bottom socio-economic strata, 46.6% of children under two are anaemic. A prevalence of above 20% falls within the WHO guidelines for daily supplementation with multiple micronutrient powder (MNP). To evaluate the effect of daily MNP supplementation on anaemia amongst Colombian children aged 12–24 months we ran a cluster RCT (n=1440). In previous work, we found the intervention had no impact on haemoglobin or anaemia in this population. In this current paper, we investigate this null result and find it cannot be explained by an underpowered study design, inaccurate measurements, low adoption of and compliance with the intervention, or crowding out through dietary substitution. We conclude that our intervention was ineffective at reducing rates of childhood anaemia because MNP itself was inefficacious in our population, rather than poor implementation of or adherence to the planned intervention. Further analysis of our data and secondary data suggests that the evolution with age of childhood anaemia in Colombia, and its causes, appear different from those in settings where MNP has been effective. Firstly, rates of anaemia peak at much earlier ages and then fall rapidly. Secondly, anaemia that remains after the first year of life is relatively, and increasingly as children get older, unrelated to iron deficiency. We suggest that factors during gestation, birth, breastfeeding and early weaning may be important in explaining very high rates of anaemia in early infancy. However, the adverse effects of these factors appear to be largely mitigated by the introduction of solid foods that often include meat. This renders population wide MNP supplementation, provided after a diet of solid foods has become established, an ineffective instrument with which to target Colombia’s childhood anaemia problem.
– Concurrent Validity and Feasibility of Short Tests Currently Used to Measure Early Childhood Development in Large Scale Studies
with M. Rubio-Codina, M.C. Araujo, P. Muñoz, and S. Grantham-McGregor (August 2016, PLOS ONE)
Abstract: In low- and middle-income countries (LIMCs), measuring early childhood development (ECD) with standard tests in large scale surveys and evaluations of interventions is difficult and expensive. Multi-dimensional screeners and single-domain tests (‘short tests’) are frequently used as alternatives. However, their validity in these circumstances is unknown. We examined the feasibility, reliability, and concurrent validity of three multi-dimensional screeners (Ages and Stages Questionnaires (ASQ-3), Denver Developmental Screening Test (Denver-II), Battelle Developmental Inventory screener (BDI-2)) and two single-domain tests (MacArthur-Bates Short-Forms (SFI and SFII), WHO Motor Milestones (WHO-Motor)) in 1,311 children 6–42 months in Bogota, Colombia. The scores were compared with those on the Bayley Scales of Infant and Toddler Development (Bayley-III), taken as the ‘gold standard’. The Bayley-III was given at a center by psychologists; whereas the short tests were administered in the home by interviewers, as in a survey setting. Findings indicated good internal validity of all short tests except the ASQ-3. The BDI-2 took long to administer and was expensive, while the single-domain tests were quickest and cheapest and the Denver-II and ASQ-3 were intermediate. Concurrent validity of the multi-dimensional tests’ cognitive, language, and fine motor scales with the corresponding Bayley-III scale was low below 19 months. However, it increased with age, becoming moderate-to-high over 30 months. In contrast, gross motor scales’ concurrence was high under 19 months and then decreased. Of the single-domain tests, the WHO-Motor had high validity with gross motor under 16 months, and the SFI and SFII expressive scales showed moderate correlations with language under 30 months. Overall, the Denver-II was the most feasible and valid multi-dimensional test and the ASQ-3 performed poorly under 31 months. By domain, gross motor development had the highest concurrence below 19 months, and language above. Predictive validity investigation is needed to further guide the choice of instruments for large scale studies.
– Challenges to Promoting Social Inclusion of the Extreme Poor: Evidence from a Large-Scale Experiment in Colombia
with L. Abramosky, K. Barron, P. Carneiro, and G. Stoye (Spring 2016, Economia)
Abstract: We evaluate the large-scale pilot program of an innovative and major welfare intervention in Colombia, which combines home visits by trained social workers to households in extreme poverty with preferential access to social programs. We use a randomized control trial and a very rich data set collected as part of the evaluation to identify program impacts on the knowledge and take-up of social programs and the labor supply of targeted households. We find no consistent impact of the program on these outcomes, possibly because the way the pilot was implemented resulted in very light treatment in terms of home visits. Importantly, administrative data indicate that the program has been rolled out nationally in a very similar fashion, suggesting that this major national program is likely to fail in making a significant contribution to reducing extreme poverty. We suggest that the program should undergo substantial reforms, which in turn should be evaluated.
– Consumption Inequality
with L. Pistaferri (Spring 2016, Journal of Economic Perspectives)
Abstract: In this essay, we discuss the importance of consumption inequality in the debate concerning the measurement of disparities in economic well-being. We summarize the advantages and disadvantages of using consumption as opposed to income for measuring trends in economic well-being. We critically evaluate the available evidence on these trends, and in particular discuss how the literature has evolved in its assessment of whether consumption inequality has grown as much as or less than income inequality. We provide some novel evidence on three relatively unexplored themes: inequality in different spending components, inequality in leisure time, and intergenerational consumption mobility.
– Subjective Expectations and Income Processes in Rural India
with B. Augsburg (April 2016, Economica)
Abstract: This paper uses unique primary data on directly elicited individual subjective expectations to analyse and characterize the process that generates the income of poor, rural Indian households. We validate and use responses to subjective expectations questions and a parametric assumption to fit a household-specific probability distribution for future income. Combining computed moments from this distribution with data for actual current income, we specify and estimate a dynamic model of household income. We find that our households face a very persistent income process. Our paper is one of the first that uses subjective expectations data to model income processes.
– The Determinants of Human Capital Formation During the Early Years of Life: Theory, Measurement, and Policies
(November 2015, Journal of the European Economic Association)
Abstract: In this paper, I discuss a research agenda on the study of human capital accumulation in the early years, with a particular focus on developing countries. I discuss several methodological issues, from the use of structural models, to the importance of measurement and the development of new measurement tools. I present a conceptual framework that can be used to frame the study of human capital accumulation and view the current challenges and gaps in knowledge within such an organizing structure. I provide an example of the use of such a framework to interpret the evidence on the impacts of an early years intervention based on randomized controlled trial.
– The Socioeconomic Gradient of Child Development: Cross-Sectional Evidence from Children 6–42 Months in Bogota
with M. Rubio-Codina, C. Meghir, N. Varela, and S. Grantham-McGregor (Spring 2015, The Journal of Human Resources)
Abstract: We study the socioeconomic gradient of child development on a sample of low- and middle-income children aged 6–42 months in Bogota using the Bayley Scales of Infant and Toddler Development. We find an average difference of 0.53, 0.42, and 0.49 standard deviations (SD) in cognition, receptive, and expressive language respectively, between children in the top and bottom quartile of the wealth distribution. These gaps increase substantially to 0.81 SD (cognition), 0.76 SD (receptive language), and 0.68 SD (expressive language) for children aged 31–42 months. These robust findings can inform the design and targeting of interventions promoting early childhood development.
– Global Demographic Trends, Capital Mobility, Saving and Consumption in Latin America and Caribbean
with A. Bonfatti, S. Kitao, and G. Weber (May 2015, IDB Working Paper No. IDB-WP-586)
Abstract: This paper studies the effect of demo graphic transitions on the economy of Latin America and the Caribbean (LAC). The paper builds a model of multi- regions of the world and derive s the path of macroeconomic variables includ ing aggregate output, capital, labor and the saving rate as economies face a rapid shift in demographics. The ti ming and the extent of the demo graphic transition di ffer across regions. The model is simulate d under both closed economy and open economy assumptions to quantify the roles pl ayed by factor mobility across regions in shaping capital accumulation and equilibrium factor prices.
– Should Cash Transfers Be Conditional? Conditionality, Preventive Care, and Health Outcomes
with V. Oppedisano and M. Vera-Hernandez (April 2015, American Economic Journal: Applied Economics)
Abstract: We study a Conditional Cash Transfer program in which the cash transfers to the mother only depend on the fulfillment of the national preventive visit schedule by her children born before she registered in the program. We estimate that preventive visits of children born after the mother registered in the program are 50 percent lower because they are excluded from the conditionality requirement. Using the same variation, we also show that attendance to preventive care improves children health.
– Frank Ramsey’s A Mathematical Theory of Saving
(March 2015, The Economic Journal)
Abstract: In 1928, Frank Ramsey, a British mathematician and philosopher, at the time aged only 25, published an article (Ramsey, 1928) whose content was utterly innovative and sowed the seeds of many subsequent developments. Beside the theory of optimal growth, as developed in Cass (1965) and Koopmans (1965), one could argue that the essence of several subsequent influential theories, such as the permanent income/life cycle theory of consumption to model individual saving choices, were already contained in that seminal article. In this note, I first summarise the content of Ramsey’s paper and then relate it to subsequent developments in economics. Before starting, however, I cannot help mentioning the modernity and originality one perceives in Ramsey’s writings when going through the original texts. His papers and contributions are astonishingly ahead of their time. This is true for his article on optimal taxation, (Ramsey, 1927), which is reviewed elsewhere in this issue and for his article on ‘Truth and probability’ (Ramsey, 1926), in which he discusses choices under uncertainty decades ahead of Von Neumann and Morgenstern (1944) and even proposes an experimental way to disentangle preferences and probability assessments from choices. In this note, I discuss how the article on saving and optimal growth anticipated several branches of the literature that followed in subsequent decades. The treatment of individual consumption and saving choices, for instance, is a very modern one. Interestingly, Ramsey’s article refers explicitly to conversations with John Maynard Keynes, who was Ramsey’s colleague at Cambridge and the Economic Journal‘s editor, in formulating part of the main proposition. And yet, in his General Theory, Keynes (1936) used a much more simplistic and stylised theory of consumption, which had profound implications for the working of his model of the macroeconomy.
– The Impacts of Microfinance: Evidence from Joint-Liability Lending in Mongolia
with B. Augsburg, R. De Haas, E. Fitzsimons, and H. Harmgart (January 2015, American Economic Journal: Applied Economics)
Abstract: We present evidence from a randomized field experiment in rural Mongolia to assess the poverty impacts of a joint-liability microcredit program targeted at women. We find a positive impact of access to group loans on female entrepreneurship and household food consumption but not on total working hours or income in the household. A simultaneously introduced individual-liability microcredit program delivers no significant poverty impacts. Additional results on informal transfers to families and friends suggest that joint liability may deter borrowers from using loans for noninvestment purposes with stronger impacts as a result. We find no difference in repayment rates between both types of microcredit.
– Cognitive Deficit and Poverty in the First 5 Years of Childhood in Bangladesh
with J. Hamadani, F. Tofail, S. Huda, D.S. Alam, D.A. Ridout, and S. Grantham-McGregor (October 2014, Pediatrics)
Objective: We aimed to determine the timing and size of the cognitive deficit associated with poverty in the first 5 years of life and to examine the role of parental characteristics, pre- and postnatal growth, and stimulation in the home in Bangladeshi children. We hypothesized that the effect of poverty on cognition begins in infancy and is mainly mediated by these factors.
Methods: We enrolled 2853 singletons, a subsample from a pregnancy supplementation trial in a poor rural area. We assessed mental development at 7, 18, and 64 months; anthropometry at birth, 12, 24, and 64 months; home stimulation at 18 and 64 months; and family’s socioeconomic background. In multiple regression analyses, we examined the effect of poverty at birth on IQ at 64 months and the extent that other factors mediated the effect.
Results: A mean cognitive deficit of 0.2 (95% confidence interval –0.4 to –0.02) z scores between the first and fifth wealth quintiles was apparent at 7 months and increased to 1.2 (95% confidence interval –1.3 to –1.0) z scores of IQ by 64 months. Parental education, pre- and postnatal growth in length, and home stimulation mediated 86% of the effects of poverty on IQ and had independent effects. Growth in the first 2 years had larger effects than later growth. Home stimulation had effects throughout the period.
Conclusions: Effects of poverty on children’s cognition are mostly mediated through parental education, birth size, growth in the first 24 months, and home stimulation in the first 5 years.
– Modelling Movements in Individual Consumption: A Time Series Analysis of Grouped Data
with M. Borella (October 2014, International Economic Review)
Abstract: We characterize the time-series properties of group-level consumption, income, and interest rates using microdata. We relate the coefficients of moving average representations to structural parameters of theoretical models of consumption behavior. Using long time series of cross sections to construct synthetic panel data for the United Kingdom, we find that for high-educated individuals the Euler equation restrictions are not rejected, the elasticity of intertemporal substitution is higher than one, and there is evidence of “excess smoothness” of consumption. Low-educated individuals, conversely, exhibit excess sensitivity of consumption to past income, and the elasticity of intertemporal substitution is not statistically different from zero.
– Admixture in Latin America: Geographic Structure, Phenotypic Diversity and Self-Perception of Ancestry Based on 7,342 Individuals
with A. Ruiz-Linares, K. Adhikari, V. Acuña-Alonzo, M. Quinto-Sanchez, C. Jaramillo, W. Arias, M. Fuentes, M. Pizarro, P. Everardo, F. de Avila, J. Gómez-Valdés, P. León-Mimila, T. Hunemeier, V. Ramallo, C.C. Silva de Cerqueira, M. Burley, E. Konca, M. Zagonel de Oliveira, M.R. Veronez, M. Rubio-Codina, S. Gibbon, N. Ray, C. Gallo, G. Poletti, J. Rosique, L. Schuler-Faccini, F. M. Salzano, M. Bortolini, S. Canizales-Quinteros, F. Rothhammer, G. Bedoya, D. Balding, and R. Gonzalez-José (September 2014, PLOS Genetics)
Abstract: The current genetic makeup of Latin America has been shaped by a history of extensive admixture between Africans, Europeans and Native Americans, a process taking place within the context of extensive geographic and social stratification. We estimated individual ancestry proportions in a sample of 7,342 subjects ascertained in five countries (Brazil, Chile, Colombia, México and Perú). These individuals were also characterized for a range of physical appearance traits and for self-perception of ancestry. The geographic distribution of admixture proportions in this sample reveals extensive population structure, illustrating the continuing impact of demographic history on the genetic diversity of Latin America. Significant ancestry effects were detected for most phenotypes studied. However, ancestry generally explains only a modest proportion of total phenotypic variation. Genetically estimated and self-perceived ancestry correlate significantly, but certain physical attributes have a strong impact on self-perception and bias self-perception of ancestry relative to genetically estimated ancestry.
– Using the Infrastructure of a Conditional Cash Transfer Programme to Deliver a Scalable Integrated Early Child Development Programme in Colombia: A Cluster Randomised Controlled Trial
with C. Fernández, E. Fitzsimons, S.M. Grantham-McGregor, C. Meghir, and M. Rubio-Codina (September 2014, British Medical Journal BMJ)
Objective: To assess the effectiveness of an integrated early child development intervention, combining stimulation and micronutrient supplementation and delivered on a large scale in Colombia, for children’s development, growth, and hemoglobin levels.
Design: Cluster randomized controlled trial, using a 2×2 factorial design, with municipalities assigned to one of four groups: psychosocial stimulation, micronutrient supplementation, combined intervention, or control.
Setting: 96 municipalities in Colombia, located across eight of its 32 departments.
Participants: 1420 children aged 12-24 months and their primary carers.
Intervention: Psychosocial stimulation (weekly home visits with play demonstrations), micronutrient sprinkles given daily, and both combined. All delivered by female community leaders for 18 months.
Main outcome measures: Cognitive, receptive and expressive language, and fine and gross motor scores on the Bayley scales of infant development-III; height, weight, and hemoglobin levels measured at the baseline and end of intervention.
Results: Stimulation improved cognitive scores (adjusted for age, sex, testers, and baseline levels of outcomes) by 0.26 of a standard deviation (P=0.002). Stimulation also increased receptive language by 0.22 of a standard deviation (P=0.032). Micronutrient supplementation had no significant effect on any outcome and there was no interaction between the interventions. No intervention affected height, weight, or hemoglobin levels.
Conclusions: Using the infrastructure of a national welfare program we implemented the integrated early child development intervention on a large scale and showed its potential for improving children’s cognitive development. We found no effect of supplementation on developmental or health outcomes. Moreover, supplementation did not interact with stimulation. The implementation model for delivering stimulation suggests that it may serve as a promising blueprint for future policy on early childhood development.
Trial registration: Current Controlled trials ISRCTN18991160.
– Education Choices and Returns to Schooling: Mothers’ and Youths’ Subjective Expectations and their Role by Gender
with K.M. Kaufmann (July 2014, Journal of Development Economics)
Abstract: In this paper we investigate the role of expected returns to schooling and of perceived risks (of unemployment and earnings) as determinants of schooling decisions. Moreover, our data also allow us to analyze whether youths’ and/or mothers’ expectations predict schooling decisions, and whether this depends on the age and gender of the youth. In particular, we use Mexican data that contain labor market expectations of mothers and youths. We find that expected returns and risk perceptions are important determinants of schooling decisions, the latter in particular from the perspective of the mother. Boys’ expectations predict the decision to enter college, but not to enter high school. While girls’ own expectations do not predict either of the two educational decisions, mothers’ expectations are particularly strong predictors of their daughters’ decisions.
– Consumption Inequality over the Last Half Century: Some Evidence Using the New PSID Consumption Measure
with L. Pistaferri (May 2014, American Economic Review)
Abstract: This paper contributes to the debate regarding trends in consumption inequality in the United States. We present a new measure of consumption inequality based on the redesigned 1999–2011 PSID. We impute consumption to the families observed before 1999 using the more comprehensive consumption data available from 1999 onward. One advantage of this procedure is in sample verification of the quality of the imputation procedure; another is that it yields a long time series (1967–2010). Consumption inequality was stable in the 1970s, as was income inequality. It increased significantly after 1980. The Great Recession was associated with a decline in consumption inequality.
– Efficient Responses to Targeted Cash Transfers
with V. Lechene (February 2014, Journal of Political Economy)
Abstract: We estimate and test the restrictions of a collective model of household consumption, using z-conditional demands, in the context of a large conditional cash transfer program in rural Mexico. The model can explain the impacts of the program on the structure of food consumption. We use two plausible and novel distribution factors: the random allocation of a cash transfer to women and the relative size and wealth of the husband’s and wife’s family networks. Our structure does better at predicting the effect of exogenous increases in household income than an alternative, unitary, structure. We cannot reject efficiency of household decisions.
– Community Nurseries and the Nutritional Status of Poor Children. Evidence from Colombia
with V. Di Maro and M. Vera-Hernandez (September 2013, The Economic Journal)
Abstract: We use two different data sets and three different instruments to estimate the impact of a long-established pre-school nursery programme on children’s nutritional status. We use variables related to cost (fee, distance to the nursery) and programme availability (capacity of the programme in the town) as instruments. One of our data sets is representative of very poor individuals living in rural areas of Colombia, while the other focuses in urban areas and includes individuals relatively less poor. We find that programme participation increases children’s height, with the size of the effect being consistent across the three instruments and the two data sets.
– Welfare Consequences of Food Prices Increases: Evidence From Rural Mexico
with V. DiMaro, V. Lechene and D. Phillips (September 2013, Journal of Development Economics)
Abstract: This paper presents an analysis of the welfare consequences of recent increases in food prices in Mexico using micro-level data. We estimate a QUAIDS model of demand for food, using data collected to evaluate the conditional cash transfer program Oportunidades. We show how the poor have been affected by the recent increases and changes in relative prices of foods. We also show how a conditional cash transfer program provides a means of alleviating the problem of increasing staple prices, and simulate the impact of such a policy on household welfare and consumer demand. We contrast this policy with alternative policy responses, such as price subsidies, which distort relative prices and are less well-targeted.
– The demand for food of poor urban Mexican households: Understanding policy impacts using structural models
with M. Angelucci (February 2013, American Economic Journal: Economic Policy)
Abstract: We use Oportunidades, a conditional cash transfer to women, to show that standard demand models do not represent the sample’s behavior: Oportunidades increases eligible households’ food budget shares, despite food being a necessity; demand for food and high-protein food changes over time only in treatment areas; the treatment effects on food and high-protein food consumption are larger than the prediction from the Engel curves at baseline; and the curves do not change in eligible households with high baseline bargaining power for the transfer recipient. Thus, handing transfers to women is a likely determinant of the observed nutritional changes.
– The Impact of Oportunidades on Consumption, Savings and Transfers
with M. Angelucci and V. Di Maro (September 2012, Fiscal Studies)
Abstract: In this paper, we estimate the effect of the Mexican conditional cash transfer programme, Oportunidades, on transfers, savings and consumption for treated households. We find positive effects on consumption of non-durable and durable goods, an increase in savings coupled with a drop in the number and values of loans, and a reduction of in-kind transfers received by households in treatment areas. These results are consistent with the existing evidence that conditional cash transfer programmes have beneficial effects in both the short and medium term, but that they partly crowd out private transfers.
– Risk Pooling, Risk Preferences, and Social Networks
with A. Barr, J.C. Cardenas, G. Genicot, and C. Meghir (April 2012, American Economic Journal: Applied Economics)
Abstract: Using data from an experiment conducted in 70 Colombian communities, we investigate who pools risk with whom when trust is crucial for enforcing risk pooling arrangements. We explore the roles played by risk attitudes and social networks. Both empirically and theoretically, we find that close friends and relatives group assortatively on risk attitudes and are more likely to join the same risk pooling group, while unfamiliar participants group less and rarely assort. These findings indicate that where there are advantages to grouping assortatively on risk attitudes those advantages may be inaccessible when trust is absent or low.
– Food and Cash Transfers: Evidence from Colombia
with E. Battistin and A. Mesnard (March 2012, The Economic Journal)
Abstract: We study food Engel curves amongst the poor population targeted by a conditional cash transfer programme in Colombia. After controlling for the endogeneity of total consumption and for the price variability across villages, our estimates imply that an increase in consumption by 10% would lead to a decrease of 1% in the share of food. However, quasi-experimental estimates of the impact of the programme show that the share of food increases. This result is not inconsistent with the hypothesis that the programme could increase the bargaining power of women, inducing a more than proportional increase in food consumption.
– Modelling the Demand for Housing Over the Life Cycle
with R. Bottazzi, H. Low, L. Neisham, and M. Wakefield (January 2012, Review of Economic Dynamics)
Abstract: We model individual demand for housing over the life cycle, and show the aggregate implications of this behaviour. Individuals delay purchasing their first home when incomes are low or uncertain. Higher house prices lead households to downsize, rather than to stop being owners. Fixed costs (property transactions taxes) have important impacts on welfare (a wealth effect) and house purchase decisions (substitution effect). In aggregate, positive house price shocks lead to consumption booms among the old but falls in consumption for the young, and reduced housing demand; positive income shocks lead to consumption booms among the young and increased housing demand.
– Education Choices in Mexico: Using a Structural Model and a Randomized Experiment to Evaluate PROGRESA
with C. Meghir and A. Santiago (January 2012, The Review of Economic Studies)
Abstract: In this paper we use an economic model to analyse data from a major randomised social experiment, namely PROGRESA in Mexico, and to evaluate its impact on school participation. We show the usefulness of using experimental data to estimate a structural economic model as well as the importance of a structural model in interpreting experimental results. The availability of the experiment also allow us to estimate the program’s general equilibrium effects, which we then incorporate into out simulations. Our main findings are : (i) the program’s grant has a much stronger impact on school enrolment than an equivalent reduction in child wages; (ii) the program has a positive effect on the enrollment of children, especially after primary school; this result is well replicated by the parsimonious structural model; (iii) there are sizeable effects of the program on child wages, which, however, reduce the effectiveness of the program only marginally; (iv) a revenue neutral change in the program that would increase the grant for secondary school children while eliminating for the primary school children would have a substantially larger effect on enrollment of the latter, while having minor effects on the former.
– Behind the Scenes: Experience Managing and Conducting Large Impact Evaluations in Colombia
with B. Briceo and L. Cuesta (December 2011, Journal of Development Effectiveness)
Abstract: As more resources are being allocated to impact evaluation of development programmes, the need to map out the utilisation and influence of evaluations has been increasingly highlighted. This paper aims at filling this gap by describing and discussing experiences from four large impact evaluations in Colombia on case- study basis. On the basis of learning from our prior experience in both managing and conducting impact evaluations, desk review of available documentation from the monitoring and evaluation system, and structured interviews with government actors, evaluators and programme managers, we benchmark each evaluation against 11 standards of quality. From this benchmarking exercise, we derive five key lessons for conducting high-quality and influential impact evaluations: investing in preparation of good terms of reference and identification of evaluation questions; choosing the best methodological approach to address the evaluation questions; adopting mechanisms to ensure evaluation quality; laying out the incentives for involved parties in order to foster evaluation buy-in; and carrying out a plan for quality dissemination.
– The Impact of Cash Transfers to Poor Women in Colombia on BMI and Obesity: Prospective Cohort Study
with I. Forde, T. Chandola, S. Garcia, and M. Marmot (December 2011, International Journal of Obesity)
Introduction: Prevalence of obesity is rising in Latin America and increasingly affecting socially disadvantaged groups, particularly women. Conditional cash transfers are recently established welfare interventions in the region. One, Familias en Accion, transfers ?20% of average monthly income to women in Colombia’s poorest families. Previous work has found that families buy more food as a result. We tested the hypothesis that participation in Familias would be associated with increasing body mass index (BMI) in participating women.Methods Women from participating areas and control areas (matched on environmental and socioeconomic criteria) were surveyed in 2002 and 2006. Pregnant, breast-feeding or women aged <18 or with BMI <18.5?kg?m(-2) were excluded. The sample comprises 835 women from control and 1238 from treatment areas. Because some treatment areas started Familias shortly before baseline data collection, a dummy variable was created that identified exposure independent of time point or area. Follow-up was 61.5%. BMI was measured by trained personnel using standardized techniques. Overweight was defined as BMI ? 25?kg?m(-2) and obesity as ? 30?kg?m(-2). The effect of Familias was estimated using linear regression (or logistic regression for dichotomous outcomes) in a double-difference technique, controlling for several individual, household and area characteristics, including parity and baseline BMI, using robust standard-errors clustered at area-level in an intention-to-treat analysis.
Results: At baseline, women’s mean age was 33.3 years and mean BMI 25.3?kg?m(-2); 12.3% women were obese. After adjustment, exposure to Familias was significantly associated with increased BMI (?=0.25; 95% confidence interval (CI) 0.03, 0.47; P=0.03). Age (?=0.09; 95% CI 0.06, 0.13; P<0.001) and household wealth (?=0.78; 95% CI 0.41, 1.15; P<0.001) were also positively associated with BMI. Familias was also associated with increased odds of obesity (odds ratio (OR)=1.27; 95% CI 1.03, 1.57; P=0.03), as was age (OR=1.04; 95% CI 1.02, 1.06; P=0.001).
Conclusion: Conditional cash transfers to poor women in Colombia are independently associated with increasing BMI and obesity risk. Although conditional cash transfers are generally regarded as popular and successful schemes, parallel interventions at individual, household and community level are needed to avoid unanticipated adverse outcomes.
– Changes in Consumption at Retirement
with E. Aguila and C. Meghir (August 2011, Review of Economics and Statistics)
Abstract: Previous empirical literature has found a sharp decline in consumption during the first years of retirement, implying that individuals do not save enough for their retirement. This phenomenon is called the retirement consumption puzzle. We find no evidence of the retirement consumption puzzle using panel data from 1980 to 2000. Consumption is defined as nondurable expenditure, a more comprehensive measure than only food used in many of the previous studies. We find that food expenditure declines at retirement, which is consistent with previous studies.
– Subsidizing Vocational Training for Disadvantaged Youth in Colombia: Evidence from a Randomized Trial
with A. Kugler and C. Meghir (July 2011, American Economic Journal: Applied Economics)
Abstract: This paper evaluates the impact of a randomized training program for disadvantaged youth introduced in Colombia in 2005. This randomized trial offers a unique opportunity to examine the impact of training in a middle income country. We use originally collected data on individuals randomly offered and not offered training. The program raises earnings and employment for women. Women offered training earn 19.6 percent more and have a 0.068 higher probability of paid employment than those not offered training, mainly in formal-sector jobs. Cost-benefit analysis of these results suggests that the program generates much larger net gains than those found in developed countries.
– Risk Sharing in Private Information Models with Asset Accumulation: Explaining the Excess Smoothness of Consumption
with N. Pavoni (July 2011, Econometrica)
Abstract: We study testable implications for the dynamics of consumption and income of models in which first-best allocations are not achieved because of a moral hazard problem with hidden saving. We show that in this environment, agents typically achieve more insurance than that obtained under self-insurance with a single asset. Consumption allocations exhibit “excess smoothness,” as found and defined by Campbell and Deaton (1989). We argue that excess smoothness, in this context, is equivalent to a violation of the intertemporal budget constraint considered in a Bewley economy (with a single asset). We also show parameterizations of our model in which we can obtain a closed-form solution for the efficient insurance contract and where the excess smoothness parameter has a structural interpretation in terms of the severity of the moral hazard problem. We present tests of excess smoothness, applied to U.K. microdata and constructed using techniques proposed by Hansen, Roberds, and Sargent (1991) to test the intertemporal budget constraint. Our theoretical model leads us to interpret them as tests of the market structure faced by economic agents. We also construct a test based on the dynamics of the cross-sectional variances of consumption and income that is, in a precise sense, complementary to that based on Hansen, Roberds, and Sargent (1991) and that allows us to estimate the same structural parameter. The results we report are consistent with the implications of the model and are internally coherent.
– Do House Prices Drive Consumption Growth? The Coincident Cycles of House Prices and Consumption in the UK
with A. Leicester and M. Wakefield (June 2011, Journal of the European Economic Association)
Abstract: This paper uses a realistic structural lifecycle model of consumption and housing decisions to understand how data might distinguish different mechanisms that explain the correlation between house prices and consumption. The model includes price and earnings shocks estimated from data (the latter including aggregate and idiosyncratic components), and incorporates realistic features of the UK mortgage market. We simulate the model using more than 30 years of realized shocks and under counterfactual scenarios. Our results confirm the intuition of earlier studies: house price shocks should have a larger effect on the consumption of older households and earnings shocks on young households.
– Intertemporal Consumption Choices, Transaction Costs and Limited Participation into Financial Markets: Reconciling Data and Theory
with M. Paiella (March 2011, Journal of Applied Econometrics)
Abstract: This paper builds a unifying framework based on the theory of intertemporal consumption choices that brings together the limited participation-based explanation of the Consumption Capital Asset Pricing Model’s poor empirical performance and the transaction costs-based explanation of incomplete portfolios. Using the implications of the consumption model and observed household consumption and portfolio choices, we identify the preference parameters of interest and a lower bound for the costs rationalizing non-participation in financial markets. Using the US Consumer Expenditure Survey and assuming isoelastic preferences, we estimate the coefficient of relative risk aversion at 1.7 and a cost bound of 0.4% of non-durable consumption. Our estimate of the preference parameter is theoretically plausible and the bound sufficiently small to be likely to be exceeded by the actual total (observable and unobservable) costs of participating in financial markets.
– Consumption and Saving: Models of Intertemporal Allocation and Their Implications for Public Policy
with Guglielmo Weber (Journal of Economic Literature, Vol. 48(3) September 2010, pp693–751)
Abstract: This paper provides a critical survey of the large literature on the life cycle model of consumption, both from an empirical and a theoretical point of view. It discusses several approaches that have been taken in the literature to bring the model to the data, their empirical successes and failures. Finally, the paper reviews a number of changes to the standard life cycle model that could help solve the remaining empirical puzzles.
– Mandated Attendance at Parenting Workshops Improves Womens Healthcare Knowledge But May Widen Health Inequities in Low and Middle Income Countries
with I Forde, T Chandola and M Marmot (Journal of Epidemiology and Community Health, Vol. 64, September 2010, ppA58)
Abstract: Conditional cash transfer schemes (CCTS) are relatively new policies in low and middle income countries which aim to improve the health and welfare of poor families by investing in their knowledge, skills and resources. Families are offered regular cash as long as they comply with certain conditions. One of these is that mothers/carers attend workshops where parenting and children’s healthcare issues are discussed. We hypothesised that presence of a CCTS in Colombia would be associated with an increase in women’s healthcare knowledge.
– Conditional Cash Transfers, Women and the Demand for Food
with V. Lechene (September 2010, IFS Working Paper W10/17)
Abstract: We examine the effect of large cash transfers on the consumption of food by poor households in rural Mexico. The transfers represent 20% of household income on average, and yet, the budget share of food is unchanged following receipt of this money. This is an important puzzle to solve, particularly so in the context of a social welfare programme designed in part to improve nutrition of individuals in the poorest households. We estimate an Engel curve for food. We rule out price increases, changes in the quality of food consumed and homotheticity of preferences as explanations for this puzzle. We also show that food is a necessity, with a strong negative effect of income on the food budget share. The decrease in food budget share caused by the large increase in income is cancelled by some other relevant aspect of the programme so that the net effect is nil. We argue that the program has not changed preferences and that there is no labelling of money. We propose that the key to the puzzle resides in the fact that the transfer is put in the hands of women and that the change in control over household resources is what leads to the observed changes in behaviour.
– Mexico in the 1990s: the Main Cross-Sectional Facts
with Chiara Binelli (Review of Economic Dynamics, Vol. 13(1), January 2010, pp238-264)
Abstract: This paper describes the main cross-sectional facts on individual and household earnings, labor supply, income, consumption and wealth in Mexico in the decade of the 1990s. We use two different data sources: the Mexican Employment Survey (ENEU) and the Mexican Income and Expenditure Survey (ENIGH). The contribution of this paper is twofold. First, we integrate the two surveys to provide a complete characterization of the changes in employment, wages, income, consumption and wealth in the 1990s. Second, we highlight some distinctive features that characterize the Mexican economy in this decade. In particular, we focus on the changes in the size of the informal sector and we study the relationship between changes in informality and changes in wage inequality.
– Childrens education and Work in the Presence of a Conditional Cash Transfer Program in Rural Colombia
with Emla Fitzsimons, An Gomez, Marta I. Rodriguez, Costas Meghir and Alice Mesnard (Economic Development and Cultural Change, Vol. 58(2), January 2010, pp181-210)
Abstract: The paper studies the effects of Familias en Acción, a conditional cash transfer program implemented in rural areas in Colombia since 2002, on school enrollment and child labor. Using a difference?in?difference framework, our results show that the program increased school participation of 14–17?year?old children quite substantially, by between 5 and 7 percentage points and had lower effects on the enrollment of younger children, in the region of 1–3 percentage points. The effects on work are largest in the relatively more urbanized parts of rural areas and particularly for younger children, whose participation in domestic work decreased by around 13 percentage points after the program, as compared to a decrease of 10 percentage points for older children in these same areas. The program had no discernible impacts on children’s work in more rural areas. Participation in income?generating work remained largely unaffected by the program. We also find evidence of school and work time not being fully substitutable, suggesting that some, but not all, of the increased time at school may be drawn from children’s leisure time.
– Building Trust? Conditional Cash Transfers Programs and Social Capital
with Luca Pellerano and Sandra Polania-Reyes (Fiscal Studies, Vol. 30(2), June 2009, pp139–177)
Abstract: In this paper, we propose a measure of social capital based on behaviour in a public goods game. We conducted a public goods game within 28 groups in two similar neighbourhoods in Cartagena, Colombia, one of which had been targeted for over two years by a conditional cash transfer programme that has an important social component. The level of cooperation we observe in the ‘treatment’ community is considerably higher than that in the ‘control’ community. The two neighbourhoods, however, although similar in many dimensions, turn out to be significantly different in other observable variables. The result we obtain in terms of cooperation, however, is robust to controls for these observable differences. We also compare our measure of social capital with other more traditional measures that have been used in the literature.
– Oportunidades: Program Effect on Consumption, Low Participation, and Methodological Issues
with Manuela Angelucci (Economic Development and Cultural Change, Vol. 57(3), April 2009, pp479-506)
Abstract: In this paper we estimate the effect of the Mexican conditional cash transfer program, Oportunidades, on consumption, and we explore some issues related to participation to the program and to the estimation of treatment effects. We discuss the comparability of treatment and control areas, provide evidence that the expected transfer may not be sufficiently high to induce many eligible households to participate, and find positive effects on consumption.
– Estimating Euler Equations with Noisy Data: Two Exact GMM Estimators
with S. Alan and M. Browning (Journal of Applied Econometrics, Vol. 24(2), March 2009, pp309-324)
Abstract: In this paper we exploit the specific structure of the Euler equation and develop two alternative GMM estimators that deal explicitly with measurement error. The first estimator assumes that the measurement error is log-normally distributed. The second estimator drops the distributional assumption at the cost of less precision. Our Monte Carlo results suggest that both proposed estimators perform much better than conventional alternatives based on the exact Euler equation or its log-linear approximation, especially with short panels. An empirical application to the PSID yields plausible and precise estimates of the coefficient of relative risk aversion and the discount rate.
– Booms and Busts: Consumption, Expectations and House Prices in the UK
with L. Blow, R. Hamilton and A. Leicester (Economica, Vol. 76(301), February 2009, pp20-50)
Abstract: Over much of the past 25 years, house price and consumption growth have been closely synchronized. Three main hypotheses for this have been proposed: increases in house prices raise household wealth and so their consumption; house price growth reduces credit constraints by increasing the collateral available to homeowners; and house prices and consumption are together influenced by common factors. Using microeconomic data, we find that the relationship between house prices and consumption is stronger for younger than older households, contradicting the wealth channel. We suggest that common causality has been the most important factor linking house prices and consumption.
– Explaining Changes in Female Labor Supply in a Life-Cycle Model
with Hamish Low and Virginia Sánchez-Marcos (American Economic Review, Vol. 98(4), September 2008, pp1517-52)
Abstract: This paper studies the life-cycle labor supply of three cohorts of American women, born in the 1930s, 1940s, and 1950s. We focus on the increase in labor supply of mothers between the 1940s and 1950s cohorts. We construct a lifecycle model of female participation and savings, and calibrate the model to match the behavior of the middle cohort. We investigate which changes in the determinants of labor supply account for the increases in participation early in the life-cycle observed for the youngest cohort. A combination of a reduction in the cost of children alongside a reduction in the wage-gender gap is needed.
– Credit Constraints in the Market for Consumer Durables: Evidence from Micro Data on Car Loans
with Penelopi Goldberg and Ekaterini Kyriazidou (International Economic Review, Vol. 49(2), May 2008, pp401-436)
Abstract: We investigate the significance of borrowing constraints in the market for consumer loans. Using data from the Consumer Expenditure Survey on auto loan contracts we estimate the elasticities of loan demand with respect to interest rate and maturity. We find that, with the exception of high income households, consumers are very responsive to maturity and less responsive to interest rate changes. Both elasticities vary with household income, with the maturity elasticity decreasing and the interest rate elasticity increasing with income. We argue that these results are consistent with the presence of binding credit constraints in the auto loan market.
– The Impact of a Conditional Cash Transfer Programme on Consumption in Colombia
with Alice Mesnard (Fiscal Studies, Vol. 27(4), December 2006, pp421-442)
Abstract: This paper studies the impact of a conditional cash transfer programme in Colombia on the total consumption of very poor households and on its components. Our evaluation methodology involves comparing household expenditures in areas in which the programme was not implemented (control) and those in which it was (treated). We use a quasi-experimental approach, as the Familias en Acción programme was not randomly assigned across localities, for political reasons. We condition on a large range of household- and municipality-level characteristics, and also control for pre-programme differences in the outcomes of interest using a differences-in-differences methodology. We find that the programme has been effective at greatly increasing total consumption and its main component, food consumption, in both rural and urban areas. The programme has also contributed to improvements in the quality of food consumed, in particular of items rich in proteins (milk, meat and eggs) and of cereals. Furthermore, the programme has created redistributive effects in favour of children through expenditure on education and children’s clothing, while it has not significantly affected consumption of adult goods such as alcohol and tobacco or adults’ clothing.
– Quantifying the Effects of the Demographic Transition in Developing Economies
with Sagiri Kitao and Giovanni Violante (The B.E. Journal of Macroeconomics, Vol. 6(1), April 2006)
Abstract: This paper evaluates quantitatively the impact of the observed demographic transition on aggregate variables (factor prices, saving rate, output growth), and on inter-generational welfare in developing economies. It does so by developing a large-scale two-region equilibrium overlapping generations model calibrated to the North (more developed countries) and the South (less developed countries). The paper highlights that the effects of the demographic trends for less developed regions may depend on the degree of international capital mobility and on the extent to which the large Pay-As-You-Go systems in place in the more developed world will be reformed.
– Child health in rural Colombia: determinants and policy interventions
with L.C. Gomez, A. Gomez and M. Vera-Hernandez (Journal of Economics and Human Biology, Vol. 2(3), December 2004, pp411-438)
Abstract: We study the determinants of child anthropometrics on a sample of poor Colombian children living in small municipalities. We focus on the influence of household consumption, and public infrastructure, taking into account the endogeneity of household consumption using two different sets of instruments: household assets and municipality average wage. We find that both household consumption and public infrastructure are important determinants of child health. We have also found that the coverage of the piped water network positively influenced child health if the parents have some education.
– Trade reforms and wage inequality in Colombia
with Pinelopi Goldberg and Nina Pavcnik (Journal of Development Economics, Vol. 74(2), August 2004, pp331-366)
Abstract: We investigate the effects of the drastic tariff reductions of the 1980s and 1990s in Colombia on the wage distribution. We identify three main channels through which the wage distribution was affected: increasing returns to college education, changes in industry wages that hurt sectors with initially lower wages and a higher fraction of unskilled workers, and shifts of the labor force towards the informal sector that typically pays lower wages and offers no benefits. Our results suggest that trade policy played a role in each of the above cases. The increase in the skill premium was primarily driven by skilled-biased technological change; however, our evidence suggests that this change may have been in part motivated by the tariff reductions and the increased foreign competition to which the trade reform exposed domestic producers. With respect to industry wages, we find that wage premiums decreased by more in sectors that experienced larger tariff cuts. Finally, we find some evidence that the increase in the size of the informal sector is related to increased foreign competition—sectors with larger tariff cuts and more trade exposure, as measured by the size of their imports, experience a greater increase in informality, though this effect is concentrated in the years prior to the labor market reform. Nevertheless, increasing returns to education, and changes in industry premiums and informality alone cannot fully explain the increase in wage inequality we observe over this period. This suggests that overall the effect of the trade reforms on the wage distribution may have been small.
–Estimating Euler Equations
with Hamish Low (Review of Economic Dynamics, Vol. 7(2), April 2004, pp406-435)
Abstract: In this paper we consider conditions under which the estimation of a log-linearized Euler equation for consumption yields consistent estimates of the preference parameters. When utility is isoelastic and a sample covering a long time period is available, consistent estimates are obtained from the log-linearized Euler equation when the innovations to the conditional variance of consumption growth are uncorrelated with the instruments typically used in estimation. We perform a Monte Carlo experiment, consisting in solving and simulating a simple life cycle model under uncertainty, and show that in most situations, the estimates obtained from the log-linearized equation are not systematically biased. This is true even when we introduce heteroskedasticity in the process generating income. The only exception is when discount rates are very high (e.g. 47% per year). This problem arises because consumers are nearly always close to the maximum borrowing limit: the estimation bias is unrelated to the linearization and estimates using non-linear GMM are as bad. Across all our situations, estimation using a log-linearized Euler equation does better than nonlinear GMM. Finally, we plot life cycle profiles for the variance of consumption growth, which, except when the discount factor is very high, is remarkably flat. This implies that claims that demographic variables in log-linearized Euler equations capture changes in the variance of consumption growth are unwarranted.
– Wage shocks and consumption variability in Mexico during the 1990s
with Miguel Székely (Journal of Development Economics, Vol. 73(1), February 2004, pp1-25)
Abstract: This paper presents evidence on the relationship between shocks to relative male wages and changes in household consumption in Mexico during the 1990s decade, which is a period characterized by high volatility. Apart from performing analysis of this type for Mexico for the first time, the paper has mainly two contributions. The first is the use of alternative data sources to construct instrumental variables for wages. The second is to examine differences across four consumption categories: nondurable goods, durable goods, education, and health. Our results for nondurable goods consumption reject the hypothesis that Mexican households are able to ensure idiosyncratic risk. For the comparisons across consumption categories, the conclusion is that households in Mexico tend to react to temporary shocks by contracting the consumption of goods that represents longer run investment in human capital, which makes them more vulnerable in the future.