Assignment #8

           It is easy and plausible to attribute high birth rates in developing countries to ignorance about sex or to a lack of supply of contraceptives.  Why would anyone who is already under financial stress want to take on the financial burden of being responsible for nine children? I certainly wouldn’t.   While it seems completely impractical to put oneself in this situation, the authors in chapter 5 show that many families in developing countries are fully aware about the risks of unsafe sex and make conscious decisions to produce large families.   The authors have come to find that making contraceptives free and available does little to incentivize the poor to use them.  They also find that education does little to keep young boys and girls from having unprotected sex. 

            What I found most interesting about this chapter is how much societal norms differ between cultures.  One of the reasons I answered in the negative to the question I asked myself above is that I do not live in those countries nor do I understand or share their norms and views on what is socially acceptable.  For me, having nine children might not be the best life decision and I’d imagine my family would feel the same way.  On the other hand, for Pak Sudarno, a father of nine living in Indonesia where social expectations make the children responsible for taking care of their elders, having nine children increases his probability of getting financial aid in the future. 

            Similar to the example I used above about Pak Sudarno, the authors argue that in China children are usually responsible for taking care of their elders.  But in 1972 when family planning was introduced, there was a sharp decline in births, which caused the parents to save more for their own future. 

            “Households that had their first child after 1972 have one less child on average than those who had that child before 1972, and their savings rates are approximately 10 percentage points higher”(120).  

            Despite the author’s argument that the Chinese savings rate increased in 1972 due to a fall in births caused by the introduction of family planning, I would argue that this may have an impact on the savings rate but there might be other economic factors causing the savings rate to go up as well.  Parents might have started saving more in order to invest more in their single child’s education and college career.   

          

  Y(Savings Rate)=B1(family planning)+B2(fertility rate)+B3(college education for child)

           

          My dummy variable in this regression model would be whether the parents made an investment in their child’s college education.  If the child went to college they would receive a 1, and if they did not they would receive a 0.  If this dummy variable proved to be statistically significant it could potentially show that the parents were saving to invest in their child rather than saving to take care of themselves in the future.

Assignment #7

The more I read about UI (unemployment insurance) the more I learn about how simple but unseen underlying incentives can cause a policy to work in opposition to its intention.  As a policy maker it would seem that helping people achieve financial stability by allocating money to them while they are suffering the financial stresses of unemployment is a humane and rational thing to do.  But what I have come to understand so far in my research is that government payments create dependency.  Simply giving people money destroys the incentive to make money on their own.  

  The title of the article, “Is Unemployment Insurance Addictive?,  is self explanatory as to the thesis of the argument.  The author uses research called “occurrence dependence” where he looks at whether using unemployment insurance in the past causes the unemployed to use the insurance more in the future, or simply put, is it addictive? Through using data and creating regression models he finds that there is a positive correlation between past and future claims of unemployment insurance. 

            Before reading this article I had not thought about unemployment insurance in terms of “occurrence dependence”.  In my thesis I focused on whether using unemployment insurance increases the duration of unemployment but not its affect of increasing future uses of UI. 

It also brought to light an interesting theory as to why this addiction might form.  The author said there is a stigma about unemployment insurance, but once an unemployed worker receives UI for the first time, the stigma goes away and they continue to use the insurance more frequently.  He also argues that when the unemployed use UI they learn more about the program and find the process of receiving UI to be very easy which gives them an incentive to use it more. 

The author’s regression line is different than mine because he is using the duration of UI as his dependent variable while I am looking at the duration of unemployment as my dependent variable.  He also made his regression an exponential one due to that fact that UI durations cannot be less than 0.  I am interested to see if this would work for my regression as well.   

Corak, Miles. 1993. Is unemployment insurance addictive? evidence from the benefit durations of repeat users. Industrial and Labor Relations Review 47 (1) (10): 62-72.