Investment In Productive Assets Research Articles

Being Well-in with the Joneses? A Lab-in-the-Field Experiment on Conspicuous Consumption among Rural Communities

Conspicuous consumption, specialised consumption of high visibility but without apparent economic benefit, is reducing investment in productive assets and thus hindering economic development in low-income countries. In previous research, the phenomenon was commonly explained by status-seeking and herding behaviour. Our study follows a novel angle in testing the role of risk sharing, assuming that investment into social status is perceived to increase access to informal credits in times of crises. We conduct a random-effects hurdle model along a lab-in-the-field experiment along a sample of 197 wheat farmers in Uzbekistan, a country characterised by high levels of risk and uncertainty. Within our experimental setup, both risk attitude and real-life risk management decision are found to be significant determinants of conspicuous consumption. Our findings support the notion of a complex decision-making process with risk sharing as one important motivator. Providing first empirical evidence on the topic, our findings have implications beyond our narrowly defined study case: We argue that strengthening options of formal risk-sharing tools might remove one of the motivators for conspicuous consumption; thus, it could improve the economic welfare of low-income households worldwide by allowing for more productive investment of scarce financial resources.

The impacts of cash transfers on mental health and investments: Experimental evidence from Mali

Stress and cognitive burden associated with poverty constrain decision- making regarding investments in the future, which can in turn perpetuate poverty. We exploit the randomized roll-out of Mali's national cash transfer program to estimate its impact on measures of psychological and emotional well-being, time preferences, and cognitive function among households’ primary decision-makers. We find that receiving transfers reduced decision-makers’ self-reported stress and worry, as well as improved their self-esteem. The program did not affect measures of cognitive function but led to a modest increase in a measure of patience. Consistent with reduced stress, improved self-esteem, and increased patience, the program also increased investments in productive assets. Results suggest that, in addition to cash transfers providing the economic resources to support investments in the future, they may also build psycho-social well-being for supporting these investments.

Cash Transfer Program and Socio-Economic Empowerment. A Study on Communities in Dadaab Refugee Complex, Kenya

Decent work and economic growth is outlined as one of the seventeen sustainable development goals which is framed on ensuring that all the individuals in the world as a whole are socio-economically empowered irrespective of their status or their countries as outlined in the United Nations Sustainable Development Goals in 2015. Cash transfers programs are proven to be a powerful poverty-reduction instrument, with positive impacts on poverty, dietary diversity, school attendance, investment in productive assets, child labor and empowerment indicators. The study purposed to establish the effect of cash transfer program on socio-economic empowerment of communities in Dadaab refugee complex, Kenya. The study objectives were: to examine the influence of funding of cash transfer program on socio-economic empowerment, to examine the influence of governance of cash transfer program on socio-economic empowerment, to examine the influence of needs assessment on recipients transfer program on socio-economic empowerment and to examine the influence of monitoring and evaluation of cash transfer program on socio-economic empowerment of communities in Dadaab refugee complex, Kenya. The study adopted universalism theory and theory of change and cash transfer programs to underpin this study. The research design used was descriptive survey design. The study targeted a population of 27,285 comprising of cash transfer officers, key informants and refugee households. A sample size of 427 of the respondents was carefully selected using probability sampling. The research relied on interview guides and research questionnaires as tools for data collection which were subjected to reliability and validity tests to ensure they achieved the recommended status before they were used in the actual study. Descriptive statistics such as percentages, standard deviations and means and also inferential analysis such as Pearson correlation coefficient and regression analysis were used to analyze the collected data. The study established that established that there was positive relationship between funding of cash transfer program and socio-economic empowerment, there was positive relationship between governance of cash transfer program and socio-economic empowerment, there was positive correlation between needs assessment and socio-economic empowerment. Lastly, the study revealed that there was positive relationship between monitoring and evaluation of cash transfer program and socio-economic empowerment. The study concluded that both funding of cash transfer programs, governance of cash transfer programs, needs assessment on recipients and monitoring and evaluation of cash transfer programs had positive and significant effect on socio-economic empowerment of communities in Dadaab refugee complex. The study recommends that there is need to ensure that more stakeholders are brought to board so as to ensure funding is well achieved and that the organizations have adequate funds to reach all the refugees that may be needy. The stakeholders should also come up with various strategies and programs to ensure the beneficiaries are educated on financial literacy as well as providing coaching and mentorship to apply in the various economic activities that promote economic empowerment. There is also need to ensure that more professionals are engaged by the support groups to ensure that there is proper governance and that the cash transfers only reach the intended and needy beneficiaries. Finally, the study recommends that through monitoring and evaluation of cash transfer programs, the support groups should ensure that any shortcomings that may result from the programs are quickly traced and proper correction measures undertaken for the benefit of the beneficiaries. The intention of this article is also for resource mobilization for refugees in Dadaab refugee camp, Kenya, as well as for other marginalized communities in the world.

Why has the Brazilian economy stagnated in the 2010s? A Minskyan analysis of the behavior of non-financial companies in a financialized economy.

The Brazilian economy entered a deep recession in 2015–2016 and since then has shown a sluggish recovery. In this paper, we offer an interpretation for the slow growth based on Minsky’s financial instability hypothesis and recent literature on financialization and growth. We analyze the balance sheet of large non-financial companies over the period 2012–2019, a period that comprises the positive investment cycle—initiated during the commodities boom which lasted from the second half of the 2000s until 2014—the 2015–2016 recession, and the period preceding the shock of the COVID-19 pandemic. Based on Minsky’s taxonomy of financial profiles, we map a proxy for financial instability at the firm level based on Davis et al. (2019). We also propose an aggregate financial stability index. We conclude that after the 2015–2016 recession, companies have been restructuring their debt profile and adopting a defensive behavior, increasing their liquidity preference. Our analysis supports the interpretation that, even with the sharp fall in domestic real interest rates, the degree of confidence on expectations to recover investment in productive assets is low. This corroborates with the thesis that agents’ decisions do not respond only to supply stimulus, but are guided by expectations of future returns, which fundamentally depend on the performance of aggregate demand. Since 2015, Brazilian economic policy has been driven by fiscal consolidation, which has proven ineffective in increasing economic growth.

Financial Inclusion and Household Wellbeing in Namibia

Purpose: Financial inclusion is increasingly being recognised as having an important influence on household wellbeing, as it provides resources and income, enhances consumption and investment in productive assets and stimulates overall economic growth. In this paper, we examine the impact of financial inclusion on household wellbeing in Namibia. Design/methodology: Using data extracted from the 2017 Namibia Financial Inclusion Survey, a UNDP approach for computing human development indices is used to generate a wellbeing index. Two-stage least squares regression analysis is employed to address the potential endogeneity associated with financial inclusion. Findings: The results suggest the positive and significant effects of financial inclusion on household wellbeing. The effects are consistent across location and gender when different methodological approaches are applied. Household characteristics such as education, income, and financial decisions, are important determinants of household wellbeing. Implications: National and international agencies are encouraged to promote policies that enhance the ability of both the public and private sector to innovate and expand financial services to vulnerable populations. Originality/value: An inclusive financial system is key in determining the level of household wellbeing, but many studies have utilised macro time-series data as opposed to household data, to tease out this relationship.

Menger and Keynes: On the demand for money and uncertainty

The aim of the article is to compare the theories of demand for money by C. Menger and J. M. Keynes. The history of economic thought states Keynes’s priority in developing a system of motives for demand for money within the framework of his theory of liquidity preference. Despite the prevailing opinion, in this article it is shown that Menger distinguished the same elements. The basic method is content analysis of Menger’s little-known works of the 1880—1890s, in which he examined the motives of demand for money for transactions, precautionary motive, and the initial outline of a speculative motive. It is important that for both authors the key factor of the precautionary motive is the equally understood uncertainty of the future, and it is this factor that determines the limited impact of increasing the supply of money on economic processes, since economic agents begin to prefer money as a durable asset compared to the investments in productive assets. In the analysis of the current macroeconomic situation, the legacy of such different authors opens up additional prospects for the formation of rethinking economic policy.

A Review of the Aspirational Districts Program of The National Institute of Transforming India, Government of India

This paper reviews the recently launched Aspirational Districts Program of the Government of India. It opens with a review of the Human Development Index formulated by the United Nations Development Program which aims to go beyond the traditional measure of per capita income as a measure of human development to encompass the broader development of a nation’s population to include health, education and income. India’s ranking in the human development remains low at the bottom 30% of all nations highlighting the disparity between India being regarded as one of the fastest growing economies and still having one of the largest poor populations in the world. In the backdrop of this disparity, this is a review of the Backward Regions Grant Fund which was launched by the Panchayati Raj, Government of India in 2006 to reduce the regional imbalances across 272 backward districts in 28 states. This was seen as a large scale initiative to this effect at the time. A review of this after several years showed that whilst there was the availability of funds, the average utilisation was low at 23% across the districts with low investment in productive assets overlapping with other flagship programs where funds were also available, highlighting the non-uniformity in progress and development. After 10 years, in 2016, this program was discontinued. The Aspirational Districts Program was launched in 2018 by the Government of India in the newly established think tank National Institute for Transforming India (NITI) Aayog that replaced the erstwhile Planning Commission with the aim of achieving sustainable development goals for India. The program has highlighted the 115 most backward districts out of 615 districts to reduce the regional imbalances. The program has a cooperative federalism approach whereby central and state governments target to work collaboratively to reduce and improve the baseline ranking of district development with real time data on 49 indicators across 5 thematic sectors including Health & Nutrition, Education, Infrastructure, Financial Inclusion and skill development at its core and working alongside civil agencies and experts in respective fields is seen as a dramatic and progressive step incorporating the learning and suggestions from the Backward Regions Development Fund and suggestions from independent agencies including the World Bank. The program is vastly different in its scale, scope and ownership and increases competition between backward districts and encourages better utilisation of existing resources but faces several challenges in its implementation including governing mechanism, incentivising district development via cooperative federalism, data collection and accuracy to reflect actual socio-economic development, dealing with Naxalite and left wing extremist districts amongst others. The implementation and progress of the program will test the not just the district’s but the nation’s resolve in reducing the socio-economic gap in the most backward districts in the world’s second most fastest growing economy with could positively change the trajectory of India’s in its post-Independence era.

The Impacts of Technical Standards on Global Trade and Economic Efficiency

In summary, the fundamental role of multinational trade agreements such as the TPP and the TTIP is to eliminate tariff and non-tariff barriers across substantially all trade categories, which includes goods, services and investments in productive assets. The ultimate objective is to integrate national markets into regional ones and thereby realize greater efficiencies by facilitating specialization on the supply side and the realization of economies of scale through access to larger markets. Individual domestic economies will realize greater market opportunities and easier access to critical inputs, thereby promoting innovation, productivity, and overall competitiveness.However, such globalization of supply chains and related markets poses a threat to domestic industries protected through previously erected trade barriers. Inefficient industries will have to be restructured and domestic workers will have to be reskilled, in order for targeted comparative advantages to be realized. Thus, the removal of tariffs and quotas will initially cause shifts in location of various high-tech products and services, as effective relative prices adjust. Such “transition costs” must be managed by each economy and the international organizations overseeing implementation of trade agreements.

Selling to Overconfident Customers: The Impact on Operating Risk

Research has shown that firms with overconfident CEOs are more likely than others to overinvest because of an unrealistically optimistic estimate of their firms’ future performance. We argue that such managerial biases in customer firms could bias upstream supplier firms’ estimation of future sales, which could lead them to a higher level of investment in productive assets as well as exposure to a higher level of operating risk. We find strong evidence to support this argument, especially when customers invest intensively in capital and perform mergers and acquisitions, and also when they possess high market power. Such effects are mitigated, however, when the economic importance of the supplier-customer relationship increases. The results are robust using OLS regressions and firm fixed effects with controls of various firm-specific and relationship-specific characteristics.

Can cash transfers reduce child labor?

Cash transfers are a popular and successful means of tackling household vulnerability and promoting human capital investment. They can also reduce child labor, especially when it is a response to household vulnerability. But if not properly designed, cash transfers that promote children’s education can increase their economic activities in order to pay the additional costs of schooling. The efficacy of cash transfers may also be reduced if the transfers enable investment in productive assets that boost the returns to child labor. The impact of cash transfers must thus be assessed as part of the entire social protection system.

Allocation of resources to cyber-security: The effect of misalignment of interest between managers and investors

Cyber-security is increasingly seen as an important determinant of firm-specific financial risk. Agency theory suggests that managers and investors have different preferences over such risk because investors can diversity their capital over different firms to reduce firm-specific risk but managers cannot diversify their investment of human capital in their firm. Therefore managers face greater personal cost of financial distress during their limited tenure. We develop an analytical model for optimally allocating investments to general productive assets and specific cyber-security assets incorporating costs of security breaches, borrowing and financial distress. We note that investment in productive assets can generate cash flows that allow the firm to better withstand security threats in the long run but investment in specific security-enhancing assets reduce security breaches in short run while leaving the firm's finances vulnerable over a longer period. Using our model, we show that managers over-invest in specific security-enhancing assets to reduce security breaches during their tenure. We then incorporate cyber-insurance in our model and show that it has the effect of reducing managers' over-investment in specific security-enhancing assets.

Revisiting the Brain Drain Literature with Insights from a Dynamic General Equilibrium World Model

AbstractThe existing brain drain literature has found various mechanisms through which the high‐skilled South‐to‐North migration affects developing economies. However, some of the new‐found effects remain disputable due to limited evidence. This study aims to provide suggestive guidelines for future research by identifying the mechanisms that can generate larger economic impacts at the aggregate. The analysis is based on a dynamic general equilibrium world model that is calibrated to published statistics and incorporates empirical estimates on the effects of brain drain. It simulates short‐ and long‐run impacts of increased brain drain on GDP per capita, GNI per capita, and income inequality. The results suggest that more studies should be conducted to further examine how the brain drain influences human capital formation and technology spillovers. Both have significant impacts on domestic production and national income. A better understanding of different remitting patterns is also desirable to understand how to reduce inequality and promote recipients’ investment in productive assets.

How the Macroeconomic Theories of Keynes influenced the Development of Government Economic Finance Policy after the Great Depression of the 1930’s: Using Australia as the Εxample

How the macroeconomic theories of Keynes influenced the development of Government Economic Policy after the Great Depression of the 1930’s: Using Australia as the example. Keynes’ economic work, The General Theory of Employment, Interest and Money, was first published in 1936. The General Theory was written as a response to the human tragedy caused by Great Depression. Keynes’ General Theory was written with a view to challenging the economic orthodoxy of the times and not written with a view to practical application. The prevailing economic orthodoxy was the classical theory of economics in the Ricardian tradition. Keynes’ theory became, for a time, the new orthodoxy and profoundly affected economic policy especially in the post-World War 2 period, in the Western World. Keynes prescribed a number of measures that governments should undertake to provide economic stability that could not be left to the unfettered operation of the market. For example, he explicitly proposed that taxes could be used to redistribute wealth and thus increase the propensity to consume and that taxes could be used as a form of forced corporate savings, to reduce national debt, and so, reduce the propensity to consume. In other words, taxation policy, in a package of policy measures, could be used to stimulate or slow down an economy as required. Prior to Keynes, taxation policy was more about raising funds for essential government expenditures. Keynes also propounded that interest rates in an economy be kept low so that investment in productive assets, as opposed to non-productive investment, be encouraged. This paper starts by examining Keynes’ General Theory of Employment and will then illustrate how Keynesian economic theory influenced Australian government economic policy development from 1930, the pre-Keynesian era, to 1949 the height of the Keynesian era.

New homes, new lives - the social and economic effects of resettlement on Tibetan nomads (Yushu prefecture, Qinghai province, PRC)

Abstract This paper observes the effects state-sponsored resettlement in two Tibetan nomad counties of Yushu Prefecture, Qinghai Province (PRC). As nomads increasingly move to urban areas, regional and local economies are shifting, as are social relations and the traditional systems that have managed rangeland resources for millennia. Yet few studies have investigated the empirics of life within these resettled communities. This research takes a snapshot of key socio-economic indicators for resettled Tibetans as they transition to urban life and evaluates if and how nomads are benefiting, and what new challenges have arisen as a result of these processes. Drawing from survey and interview data, I suggest that while resettlement offers nomad families opportunities in terms of access to public services such as education and health care, it also entails significant new expenses for households even as their earnings potential contracts; these trends are exacerbated in the case of poorer households and income inequalities are likely to worsen when families move to urban areas. Likewise, while resettlement has resulted in increased purchase of consumption goods, household investment in productive assets has seen a corresponding decline. Even though access to some public services may increase with resettlement, quality of life in urban areas may suffer with respect to pollution exposure, lack of water and sanitation infrastructure, and increasing prices for basic commodities. With higher rates of school enrollment and the deskilling of the rural labour force, resettlement to urban areas is likely to undermine the long-term economic viability of pastoral production in Tibetan areas of China. Resettlement is also affecting the continuity of social institutions and modes of knowledge transmission, encouraging certain opportunities and closing off other potentialities for nomadic culture. This paper contributes to the literature on development-induced displacement, governance at China's margins, and the adaptability of pastoral production systems amidst state efforts to modernise and assimilate nomads. Leveraging this case study, we can theorise more broadly about the social, ecological, and economic repercussions of resettlement.

The Intended Consequences of the Social Assistance Grants in South Africa

This paper was drawn from a broader study conducted on the role of social grants in Ngqwushwa Local Municipality in the Eastern Cape Province in South Africa. The study used a sample of 541 beneficiaries who were either administered questionnaires, interviewed or participated in focus group discussions. The aim of this paper is to explore whether the intended consequences of the social grants are being achieved among the poor rural population. The results of the study have identified social grants as effectively targeted; because of its relatively efficient targeting, social grants are by far the category of government expenditure that most concentrates its benefits on the poorest. It emerged that social grants improve both the welfare of beneficiaries and their entire households. Also, there is support of the investment in productive assets, both human and capital. The grants money is further used for education expenditure that includes school fees, transport and uniforms. The money is used even to upgrade/construct houses; buy clothes and payment of water, electricity and other bills. Thus the grant money is used by beneficiaries in a number of ways, some urbane, some less so. However the study confirms that the poor are well aware of their individual needs and some of the intended consequences of the social grants are remarkable. However, the issue of poverty still remains as a major problem. DOI: 10.5901/mjss.2014.v5n2p659

Insuring the Uninsurable for Poverty Alleviation in Nigeria: What Micro-Insurance can do?

The populace in developing countries be it better or worse offs are exposed to a variety of risks like illness, disability, death, unemployment, or crime vulnerable to become poor. Low income households, however, are less able to prevent and mitigate risks and so they are less able to cope with the consequences. The developmental role of conventional insurance service any nation is pivotal. This is because economic development focuses attention upon the development and use of recourses to increase supply and improve the distribution of economic goods. However, in Nigeria where there is low insurance patronage and instead the vast majority of the citizen are exposed variants types of risk. The resulting effects are poverty, economic insecurity, insurgency, and social vices. Micro-insurance is considered as one of the most effective means of reducing the vulnerability of the poor from the impacts of disease, theft, violence, disability, fire and other hazards. This method of insurance can protects against unexpected losses by pooling the resources of the many to compensate for the losses of the few, the more uncertain the event the more insurance becomes the most economical form of protection. Micro-insurance moreover, can break the cycle of poverty experience in Nigeria by providing low-income households, business and farmers with access to post disaster liquidity, thus protect their livelihoods and providing for reconstruction. Therefore, insured households and firms are more credit worthy; these kinds of insurance can also promote investments in productive assets and higher risk yield crops. As a result, this study recommends the establishment of micro-insurance in Nigeria. While setting the micro-insurance caution should be exercise to make it in conformity with social, cultural and religious setting of the populace for it to gain recognition and acceptability otherwise it is likely to get low patronage. DOI: 10.5901/mjss.2013.v4n2p375

Migrating Between Rural Raichur and Boomtown Bangalore: Class Relations and the Circulation of Labour in South India

This paper is concerned with circular migration between the agriculture and construction sectors in Karnataka, South India. It analyses the class and household-based outcomes of migration during the 2000s between Karnataka’s poorest district and the building sites of Bangalore – a city seen internationally as one of the epicentres of globalisation in South Asia. Its central argument is that migration’s spatial extension of exploitation slightly shifts the balance of class forces in favour of the labouring class in source areas. 62 percent of households are found to gain from migration, but better design and implementation of welfare policies intended for migrant labourers (primarily those relating to health) would significantly increase migration’s contribution to labouring class socio-economic and socio-political mobility. Positive outcomes are restrained, though, by the broader social relations of production and the ways in which capital shapes the outcomes of public policy. It is found that class-based impacts and household investments in productive assets are greater in villages with higher levels of migration and socio-economic and socio-political inequality, whilst household gains amongst unskilled labourers are more likely where socio-economic inequalities are lower.

Risks and farmers’ investment in productive assets in Nigeria

The majority of farmers in sub-Saharan Africa (SSA) lack the means to mitigate the impact of risks associated with rainfall and commodity prices due to capital constraints and the imperfect insurance market in these countries. Because most SSA farmers are risk averse, they may be willing to invest in productive assets that can mitigate the impacts of such risks if their capital constraints are relaxed through external financial assistance. We test this hypothesis by using panel data on investment behavior of Nigerian farmers who received financial assistance on productive assets. The empirical results show that farmers facing higher rainfall risks are more likely to invest in irrigation pumps that can mitigate the impact of rainfall risks, while those facing higher risks of white gari price are more likely to invest in milling machines that enable them to process cassava into flour instead of gari, which supports our hypothesis.

Risk Spillovers and Hedging: Why Do Firms Invest Too Much in Systemic Risk

In this paper we show that free entry decisions may be socially inefficient, even in a perfectly competitive homogeneous goods market with non-lumpy investments. In our model, inefficient entry decisions are the result of risk-aversion of incumbent producers and consumers, combined with incomplete financial markets which limit risk-sharing between market actors. Investments in productive assets affect the distribution of equilibrium prices and quantities, and create risk spillovers. From a societal perspective, entrants under-invest in technologies that would reduce systemic sector risk, and may over-invest in risk-increasing technologies. The inefficiency is shown to disappear when a complete financial market of tradable risk-sharing instruments is available, although the introduction of any individual tradable instrument may actually decrease efficiency. We therefore believe that sectors without well-developed financial markets will benefit from sector-specific regulation of investment decisions.

Risk Spillovers and Hedging: Why Do Firms Invest Too Much in Systemic Risk?

In this paper we show that free entry decisions may be socially inefficient, even in a perfectly competitive homogeneous goods market with non-lumpy investments. In our model, inefficient entry decisions are the result of risk-aversion of incumbent producers and consumers, combined with incomplete financial markets which limit risk-sharing between market actors. Investments in productive assets affect the distribution of equilibrium prices and quantities, and create risk spillovers. From a societal perspective, entrants under-invest in technologies that would reduce systemic sector risk, and may over-invest in risk-increasing technologies. The inefficiency is shown to disappear when a complete financial market of tradable risk-sharing instruments is available, although the introduction of any individual tradable instrument may actually decrease efficiency. We therefore believe that sectors without well-developed financial markets will benefit from sector-specific regulation of investment decisions.