“Paying the Piper: The High Cost of Funerals in South Africa”
Anne Case, Anu Garrib, Alicia Menendez, and Analia Olgiati
We analyze funeral arrangements following the deaths of 3,751 people who died between January 2003 and December 2005 in the Africa Centre Demographic Surveillance Area. We find that, on average, households spend the equivalent of a year’s income for an adult’s funeral, measured at median per capita African (Black) income. Approximately one-quarter of all individuals had some form of insurance, which helped surviving household members defray some fraction of funeral expenses. However, an equal fraction of households borrowed money to pay for the funeral. We develop a model, consistent with ethnographic work in this area, in which households respond to social pressure to bury their dead in a style consistent with the observed social status of the household and that of the deceased. Households that cannot afford a funeral commensurate with social expectations must borrow money to pay for the funeral. The model leads to empirical tests, and we find results consistent with our model of household decision-making.
“Prompting Microfinance Borrowers to Save: A Field Experiment from Guatemala”
Jesse Atkinson, Alain de Janvry, Craig McIntosh, and Elisabeth Sadoulet
Can microfinance borrowers use the discipline of regular loan repayments in order to accumulate savings if prompted to do so? In an experiment, we offered commercial savings products to the microfinance borrowers of Guatemala’s largest public-sector bank. We find that giving these borrowers the opportunity to develop a saving plan and be reminded of saving at the time of loan repayment caused no increase in the opening of savings accounts but led to balances among savers that were two and a half times those in the control. A second treatment arm that proposed a default savings contribution of 10% of the loan payment caused the fraction of clients using linked savings accounts to double, as well as elevated deposits among savers, leading to final savings balances that were more than five times the control. The savings treatments also generate faster pay-down of debt and weakly better overall repayment performance, suggesting that simultaneous savings and borrowing can be complementary activities. A theoretical model shows that the simultaneous provision of debt and self-commitment savings products can also help a greater fraction of the population to eventually escape a debt-financed equilibrium.
“Risk Sharing within Extended Family: Evidence from the Indonesia Family Life Survey”
In recent years, there has been an increase in the availability of longitudinal household surveys in developing countries that allows the researchers to construct linkages between households with familial ties. This type of data allows the researchers to look at whether some household outcomes are influenced by decisions made at the extended-family level. This paper utilizes data from two waves of the Indonesia Family Life Survey (1997 and 2000) to construct a panel of extended families in order to focus on one particular example of such outcome: whether consumption risk-sharing occurs among households within extended family. Taking advantage of the feature of the survey that follows respondents when they move, extended family networks were constructed by linking split-off households to the original households. The findings show that after controlling for the extended family fixed-effects, changes in household own income still matters on changes in their consumption, rejecting full consumption risk-insurance. However, the coefficients on household own income are small, indicating significant degrees of risk sharing. Results from a set of reduced form estimations also suggests that household consumption is affected by characteristics of other households in the extended family, highlighting the importance of inter-household ties in household allocation decisions. In addition to providing some contributions to the existing literature on risk-sharing, the paper contributes to the literature on household surveys in developing countries by shedding lights on how one could define a household in a panel analysis that use data from longitudinal household surveys in which split-off households are tracked and interviewed.
“The Impact of Adequate Prenatal Care on Urban Birth Outcomes: An Analysis in a Developing Country Context”
Deficient birth outcomes entail greater mortality risks and higher probabilities of poor future health. This study examines the effect of the World Health Organization’s prenatal care recommendations for developing countries. It accounts for the endogenous nature of prenatal care decisions by using an instrumental variables approach based on the opportunity cost and accessibility of prenatal services. Using the urban sample of the Cebu Longitudinal Health and Nutrition Survey I construct a measure of prenatal care based on the WHO recommendations. This measure involves both timing and intensity. The instrumental variable used is shown to be strong and valid. The results show adequate care has a positive impact on birth weight and decreases the probability of poor birth outcomes. The results are robust to seasonality and time effects and are not driven by the potential influence of rainfall shocks on maternal health. I also test the effectiveness of the WHO methodology by modifying the definition of adequate care in terms of both its timing and frequency. The results suggest the current recommendations are appropriately defined.
“Women’s Employment and Childcare Choices in Urban China during the Economic Transition”
Fenglian Du and Xiao-yuan Dong
China’s transition from a centrally planned to a market economy has substantially eroded governmental support for childcare, raising the concern about how the change of childcare provision may affect women’s labor market participation. This paper examines the impact of childcare availability and affordability on the employment and childcare choices of urban Chinese women with preschool children during the transition. The analysis shows that the presence of daycare in the community is positively associated with a mother’s labor force participation and labor hour supply and the rising costs of hired caregivers reduce the mother’s labor hour supply. The analysis also finds that both the costs of hired caregivers and family income have important effects on the use of out-of-home care services. Simulations indicate that the decline in daycare presence would account for 46% of the decrease in mothers’ labor force participation during the public-sector restructuring between 1997 and 2000.
“The Costs of Favoritism: Is Politically Driven Aid Less Effective?”
Axel Dreher, Stephan Klasen, James Raymond Vreeland, and Eric Werker
Governments provide foreign aid for both political and economic reasons, as is now well documented. Conventional wisdom holds that political motivations lower the effectiveness of aid in promoting developmental objectives. We test this claim by focusing on a setting where we observe “effectiveness” with some precision, using the ex-post performance ratings of World Bank projects. Our measures of “political importance” are plausibly exogenous: temporary membership on the United Nations Security Council or the World Bank Executive Board. We find that political motivations have a detrimental effect only for Security Council members when the country already faces excessive short-term debt or debt service. This finding suggests that political influence in aid allocation may impair aid’s effectiveness only when the recipient country faces a weak macroeconomic position.