Nobel Peace Prize to Mohamed Yunus

Yunus is founder and chief executive of Grameen Bank, a microfinance entity that has singlehandedly transformed the landscape of thought and practice about how women can be empowered to improve their lives and the lives of their children, and, of yes, the lives of their reluctant husbands... ;-)

See the Nobel press release.

Intrahousehold economics

I just found a very nice introductory paper on bargaining by Abhinay Mutoo, a little technical, but motivates things well. Worth a read.

I told you there was a rabbit in the house...

Enjoy the weekend and see you Monday, ready to discuss intrahousehold issue sand more on marriage.

Dowries in Bangladesh

On the Heterogeneity of Dowry Motives
Raj Arunachalamy and Trevon D. Loganz

Dowries have been modeled as pre-mortem bequests to daughters or as groom-
prices paid to in-laws. These two classes of models yield mutually exclusive
predictions, but empirical tests of these predictions have been mixed. We draw
from historical evidence that suggests a bifurcated marriage market, in which
some households use dowries as a bequest and others use dowries as a price.
The competing theories of dowry allow us to structure an exogenous switching
regression that places households in the price or bequest regime. The empirical
strategy allows for multiple checks on the validity of regime assignment. Using
retrospective marriage data from rural Bangladesh, we nd evidence of het-
erogeneity in dowry motives; that bequest dowries have declined in prevalence
and amount over time; and that bequest households are better o compared to
price households on a variety of welfare measures.

The full paper is here.

"Keep Her Under Control" video

Use the comments section here to comment on the video "Keep Her Under Control". Your comments should be about the specifics of the video, and not about your ethical reactions to the video (those are interesting, but this is not an ethics course).

For example, here is a comment from previous course"

I would just like to say that this video was not about our culture. I do not think that it is fair to other cultures to hold them to our standards. Although I understand where the outrage over this situation stems from, I also am sympathetic towards those people who live this way of life. Who are we to set and enforce our way of life on people across the world?

Again, this course is not a course in ethics, so the questions raised by the commentator, while interesting, are not germane. I do not care very much whether you are outraged or indifferent, I care whether you have watched the video closely enough to understand the nature of the nuanced gender structures in the village. One last thing: the video is of one village in India, so it it most emphatically NOT about something you might want to call "Indian culture". That would be like saying that the all-Goth party you attended over the weekend was "American culture"....

Regression and table hints

1- When it is a table of percentages, nicer to display the percentables as decimals, and indicate in the title or heading that is percent, rather than reproduce % sign for each number. Remember that 43% = .43

2- Be careful with "affect" and "effect". In economics "effect" is used as a noun ("The effect was large." and "affect" is a verb ("The explanatory variable did not affect the outcome.")

3- Whne using dummy variables and interactions with dummy variables, you have to include in the regression both the dummy alone and the interaction; you can;t just include the interaction term and omit the dummy. i.e. time = oxen + bwa + bwa*oxen, and not time = oxen + oxen*bwa.

4- Generally in tables you do not need column or row totals. They clutter and distract!

5- Regression results that are not significant are not "unfortunate"... they just are what they are. (So don't write a sentence like, "Unfortunately, the coefficienct was not statistically significant.")

6- When discussing regression results always use the same, or very similar, formula: "The estimated coefficient was 2.75, which means that a one unit change in xxx would cause a 2.75 change in yyy, and it was statistically significant. This effect (not affect!) is quite large/small."

7- In most economics studies, an R-square of .14 is perfectly reasonable, for example. There is a lot of idiosyncratic variation across individuals and households and nations. There is no "cutoff" R-square.

8- The intercept in a regression is not the average! Draw a scatterplot of the data as we have done in class, then draw a regression line- you will easily see that the intercept cannot be the average of anything.

9- When you are doing crosstabs, it is good practice to do some t-tests in Excel. it will get you in the habit of always checking to see if two means are statistically different. Remember you can only do the t-test when comparing two groups. For other types of comparisons you use ANOVA or more complex tests that you can learn from stats courses.

10- In a regression analysis you cannot include categorical data (generally) as a variable. You have to convert to dummy variables. I.e. Ethnicity= 1 for Mossi, 2 for Bwa, 3 for Djula. Including ethnicity is meaningless- what does it mean to increase your ethnicity by 1 unit? So you have to convert to dummies- 3 dummies, of which you only include 2 (you always exclude one dummy category.)

Assignment 6

Does rapid growth seem to have been correlated with marriage patterns? What about your other variable?

In step three you would have one table with 5 columns (each column reporting the output of the regressions)

In this last part you would three tables- each table with 5 columns. So you are running 15 regressions. The first table has just the gdp growth and the regional dummies. The second table has just the other variable and the regional dummies. The third table has both variables and regional dummies.

Marriage Laws and Growth in Sub-Saharan Africa

Marriage Laws and Growth in Sub-Saharan Africa
Todd Schoellman and Michele Tertilt

Many countries in Sub-Saharan Africa are highly polygynous. The percentage of married men in polygynous unions ranges from 10.2 in Malawi to 55.6 in Cameroon. Polygynous countries are poorer than similar non-polygynous countries, and are characterized by higher fertility, higher spousal age gaps, and lower savings rates (Tertilt 2005).

The economics of polygyny was pioneered by Becker (1974), Grossbard (1978), and Bergstrom (1994). Recently, a small literature has emerged analyzing the link between marriage institutions and economic outcomes (Jacoby (1995), Edlund (1999), Edlund and
Lagerloef (2004), Lagerloef (2005), and Gould, Moav and Simhon (2004)). Tertilt (2005) argues that polygyny might be contributing to underdevelopment in SSA: Polygyny raises demand for wives, which increases the equilibrium bride-price. While men make payments to obtain brides, they are also the recipients of these payments when they sell their daughters. Women thus function as a good investment opportunity. This scheme can crowd out investment in physical assets, lowering the aggregate capital stock. Moreover, the incentives to have children are high. Together, a low capital stock and high fertility lead to low GDP per capita. Based on a calibrated model, Tertilt (2005) argues that enforcing a ban on polygyny might decrease fertility by 40 percent, increase the savings rate by 70 percent, and increase output per capita by 170 percent. If enforcing monogamy raises output, then an obvious questions is: should countries in Sub-Saharan Africa be encouraged to give up their traditions and adopt a law that prescribes monogamy? The United Nations (UN), for example, has been pursuing such a policy. In this paper we analyze the transitional dynamics following a marriage reform. We study how rapidly the economy converges to the new, higher-savings steady state.

We also identify the winners and losers along the transition path. The results may shed some light on recent experiences in countries like Gambia, Togo, and the Ivory Coast that have made polygyny illegal but have found enforcement to be difficult (Tertilt 2006). While some of the resistance may be due to cultural factors, we argue that there are also economic forces that work against moving to a monogamous society. While output might increase in the long run, we find that initial generations of men are clear losers from the marriage reform. Some of the women alive during the reform period benefit from the change in marriage laws; however, their gain is not large enough to compensate the men. Hence, it is di±cult to argue that enforcing monogamy is unambiguously beneficial.

Collusion conundrums...

Nick asked at the end of class the other day about the Nash equilibrium in the collusion game. the idea is that in the collusion game the men are deciding whether to continue colluding to not hire each other's wives, and thus be able to extract monopoly rents from the wife (her husband becomes her only employer, a monopsonist). Each man can, however, cheat on the agreement and hire some of the other wives at the low wage and thus make a temporary profit. if, however, the strategy of the men is to "collude until someone cheats, and then cheat thereafter", once one man cheats, all the others will cheat.

In the collusive game as presented, the payoffs are identical. And, time is not continuous. Time happens in discrete periods, and if you cheat on your mates in one period, and they don't (play is simultaneous) then you get the benefit and they are the suckers. So you evaluate the benefit of cheating compared with continuing to collude. Of course, everyone else is making the same evaluation.

So here is Nick's question. if your discount rate of the future is such that you decide it is worthwhile to cheat, then it must be the case that everyone else has the same calculus, and so everyone will cheat simultaneously. So, Nick suggest, you get no benefit from cheating when you cheat because everyone else will do the same thing. So the condition for colluding is that the discounted stream of profits from colluding be greater than the discounted stream from the competitive equilibrium (which it is by assumption). But... can this really be the Nash equilibrium condition for sustaining collusion? It is an easier condition to have hold that the one we have, where the discounted stream of profits from colluding has to be greater than the one period return from cheating plus the future discounted return of the competitive equilibrium. Suppose that we were in an equilibrium where everyone was colluding, and everyone continued to collude because they though the condition for colluding was this easier condition. but now one person would come along and say:, "Everyone else is going to be a sucker; they think collusion is going to continue, so they will play collude, but I'll cheat and get the one period profits." So that cannot be a Nash equilibrium strategy for he players.

The Folk Theorem says that this repeated game setup of a collusive possibility repeated infinite amount of tie has many different Nash equilibria, involving complex strategies that depend on the history of play. The strategy we looked at is sometimes called the "grim trigger strategy" since when it is played if someone cheats everyone loses forever. A different less grim strategy might be to say that if someone cheats you will cheat for 10 periods after, or until you see them collude, and then you collude thereafter.

One can go a step further and ask, in Nick's question was suggested a problem with the idea of the men being identical- didn't that mean they all had the same thoughts and each knew the other had the same thoughts? But this last part is not quite the idea of game theory, where each actor is independent. While the payoffs may be identical, and the valuation of those payoffs identical also, nobody can exert any kind of "mind control" that "makes" the other person decide the way you want them to. Moreover, in game theory, it is typically assumed that you cannot exercise that mind control over yourself! That is, you cannot commit your future self to behave in a way that your present self would like your future self to behave ("Ill eat the ice cream today because I'll make my future self go to the gym, when tomorrow arrives.")

Nice introduction ot nash equilibrium concept from game theory

A lecture from Yale University.

Reading about the Mossi, why not listen to some music

Some econometrics stuff if you are interested

Colonial Origins of Comparative Development

The econometric technique of instrumental variables is very important in empirical studies, especially in gender economics where social scientists try to determine the relationship between gender equality and subsequent GDP levels and growth. A great paper to start thinking about instrumental variables is James Robinson, Daron Acemoglu and Simon Johnson's paper on the colonial origins of comparative development. They use settler mortality as an instrument for current institutions of governance (measured by, for example, the risk of expropriation) in order to estimate the effect of good governance on economic growth. The paper has spawned a large literature and commentary, including much critical re-examination of the data. But that is a good thing!

The paper is also interesting as a key component in a long-running debate over the relative importance of economic and political institutions versus natural resources, geography and environment as key detemrinants of economic growth. here's a recent article on the importance of malaria, for example.

A nice introductory Powerpoint lecture on the estimation methods of "difference in difference" and instrumental variables is available from MIT.

Interaction terms

Someone comments, "I'm a little confused on how we use interaction variables for our regression. For instance, if our interaction variable is oxen * ethnicity, how do we interpret the numbers this gives us (since the value attached to ethnicity, 1,2 or 3, is just an arbitrary number used for organizational purposes)? Or something like birth group * married?"

You are right- if you leave ethnicity with multiple categories there is no possible interpretation (even without interacting)! it doesn;t mean anything to be ethnicity 2 and go to ethnicity 3, or to go from ethnicity 500 to 560.

So the ethnicity variable has to be recoded to be a dummy variable- 1=bwa, 0= non-bwa, for example. Then this dummy variable can be interacted (i.e. multipled) by the oxen, to create bwa*oxen.

Then if the regression were y = a + b*bwa + c*oxen + d*oxen*bwa,

the effect of more oxen on outcome y would be
c - for non bwa
c+ d - for bwa households

in other words, the slope differs for the two different groups.

Great example of nash equilibrium

Ezra Klein : [Russell] Shorto... [thinks that in] the Netherlands.... [T]here's "a cultural tendency not to stand out or excel...the very antithesis of the American ideal of upward mobility." But... Americans are in the odd position of fervently believing in upward mobility while not actually having very much of it. Eruopeans, conversely, don't really believe in economic mobility but have plenty of it.... Brookings... examined the relative mobility in other Nordic countries. And the United States doesn't come out that well.... The United States believes itself to be uncommonly meritocratic. But compared to European countries who don't believe themselves very meritocratic, it actually exhibits less income mobility....

If you believe that your country is extremely mobile, you're likely to believe the results of the economic competition are relatively fair. As such, you won't want to slap the rich with particularly high tax rates and you won't be terribly concerned about spreading economic opportunity. After all, anyone can make it! On the other hand, if you don't believe your country is terribly mobile, then you're less likely to believe economic outcomes are fair. And if you don't believe the outcomes are fair, you're likely to tax the winners relatively heavily and plow those profits into things like universal health care and free college. Policies, in other words, that spread opportunity more widely and thus make your society more mobile. Put like that, it sort of makes sense. If you believe your society is already economically mobile, you don't spend a lot of time trying to solve the problem of insufficient economic mobility. if you don't believe that, then you implement policies meant to increase mobility. What's odd is that the public perceptions in Europe and America don't seem to be changing much in response to actual outcomes.

African AIDS widows left without inheritance

An article from Afrol News...

afrol News, 8 March - Due to customary laws, thousands of AIDS widows throughout Africa are denied an inheritance, which leaves them homeless and destitute. Today, on Women's Day, a coalition of women's groups urges the African Commission on Human Rights to urgently address the growing problem.

- On International Women's Day, we call upon the Commission to focus on an important issue that is constantly overlooked, says Birte Scholz, from the Geneva-based Centre on Housing Rights and Evictions (COHRE). This issue, Ms Scholz says, is "the denial of inheritance to thousands of widows throughout Africa, which leaves them homeless, destitute, violates their human rights and adds to the spread of HIV/AIDS in the region."

The women's group coalition, in which COHRE participates, today is urging the African Commission on Human Rights to urgently review customary laws in several African countries "that deny women from inheriting property, endanger their socio-economic security and thereby contributes to the spread of AIDS.