Archive for February, 2012

« Older Entries

the (in)effectiveness of entrepreneur training

Wednesday, February 29th, 2012

A new working paper reports the results of Growing America through Entrepreneurship (Project GATE), an experiment designed and implemented by the U.S. Department of Labor and U.S. Small Business Association between September 2003 and July 2005. More than 4,000 individuals applied for free entrepreneurship training services in seven U.S. cities. Half of the applicants were randomly assigned to the treatment group and given an array of best-practice training services. The other half were assigned to the control group, and not offered any free services. Project GATE differs from previous studies of this type because of its size, because applicants were not limited to individuals receiving unemployment relief or government welfare, and because of follow-ups at 6, 18 and 60 months after treatment.

The results were very disappointing. It seems that entrepreneurs are born, not made, since the free training had no long-term impact on entrepreneurial performance.

We find evidence that the training increased average business ownership in the short-run, but that the marginal businesses were unsuccessful and failed to produce tangible or subjective benefits at any of the three follow-up horizons (6-, 18-, and 60- months). We also find no evidence that training shifts the distribution of firms in important ways (e.g., disproportionately creating very successful firms) that might be missed by analysis of average treatment effects. ….

Many of the rationales put forward for subsidizing training—countering credit or human capital constraints in enterprise development, or labor market discrimination—are not borne out by the data. We do find evidence that GATE’s training had relatively strong positive effects on business ownership for the unemployed in the short run, but these effects disappear by the long run. These findings, and the estimated costs of providing training to GATE recipients of $850 to $1,300, suggest that entrepreneurship training may not be a cost-effective method of addressing credit, human capital, discrimination, or employment constraints.

The results here also speak to the importance of understanding which components of training are more and less helpful, and for which populations. Should subsidies for entrepreneurship training be re-allocated to job training? Should content from entrepreneurship training be grafted onto job training? Understanding more about the effects and mechanisms of entrepreneurship training is particularly important given the continued growth and popularity of these programs around the world.

Robert W. Fairlie, Dean S. Karlan and  Jonathan Zinman, “Behind the GATE Experiment: Evidence on Effects of and Rationales for Subsidized Entrepreneurship Training“, Yale Economics Department Working Paper 954 (25 January 2012).

This report circulates also behind a subscription wall as NBER Working Paper 17804 (February 2012).

The authors are from the University of California-Santa Cruz, Yale University and Dartmouth College, respectively.

Posted in Education | Comments Off

China’s financial opening

Wednesday, February 29th, 2012

China has decided to accelerate opening of its capital account, a move that could produce another global financial crisis. This can be avoided, writes Martin Wolf, provided Chinese policymakers stick to their announced schedule of slow and cautious reform.

[The People's Bank of China last week laid out] three stages for reform. The first, to occur over the next three years, would clear the path for more Chinese investment abroad as “the shrinkage of western banks and companies has vacated space for Chinese investments” and so presented a “strategic opportunity”. The second phase, in between three and five years, would accelerate foreign lending of the renminbi. In the longer term, over five to 10 years, foreigners could invest in Chinese stocks, bonds and property. Free convertibility of the renminbi would be the “last step”, to be taken at an unspecified time. It would also be combined with restrictions on “speculative” capital flows and short-term foreign borrowing. In sum, full integration would be indefinitely delayed. ….

China’s gross savings are running at an annual rate of well over $3tn, which is more than 50 per cent larger than the gross savings of the US. Full integration of these vast flows is sure to have huge global effects. China’s financial institutions, already enormous, are also almost certain to become the biggest in the world over the next decade. One need only think back to Japan’s integration in the 1980s and subsequent financial implosion to recognise the possible dangers. We should be pleased, therefore, that China is taking a cautious approach.

Martin Wolf, “China is right to open up slowly“, Financial Times, 29 February 2012.

Tags:
Posted in Finance | Comments Off

US Republicans

Monday, February 27th, 2012

Republicans are in transition between being one kind of party and another. Yesterday’s Republicans were an upper-middle-class party (small-town lawyers, shop-owners, managers) and tomorrow’s are a lower-middle-class one (landscape gardeners, construction workers, truckers).

In recent years, Democrats, traditionally the party of the vast industrial working class, … became the party of billionaires, academics, minorities and single women, driving white working-class voters into the Republican party.

Mr [Mitt] Romney represents the Republican party as it was back in the 1950s, probably the last decade when most Ivy League professionals joined it. …. Mr [Rick] Santorum is playing the role in these primaries that Mr [Mike] Huckabee did last time. Elected to Congress from a majority Democratic district, he has differed from most Republicans in his defence of minimum wage laws, union rights and his loud opposition to gay marriage. You could call this a confusing mix of Right- and Left-wing positions. Better to call it a consistent platform of working-class attitudes. ….

Torn between their old, Rotary Club wing and their new, Burger King wing, what is going to happen to Republicans? Although things can change, the likely answer right now is that they will lose.

Christopher Caldwell. “The new battle for the old soul of the Republican party“, Financial Times, 25 February 2012.

US journalist Christopher Caldwell (born 1962) is a senior editor at The Weekly Standard, a neoconservative opinion magazine.

    Posted in Political Economy | Comments Off

    Canada and the War of 1812

    Sunday, February 26th, 2012

    We are now celebrating the bicentennial of this misunderstood war. Canadian writer Stephen Marche provides a readable “citizens’ guide” to an event that “defines us as Canadians”.

    Mohawks, Oneidas, Onondagas, Tuscaroras, Cayugas, Senecas, and other First Nations fought alongside British detachments and Canadian militias throughout the war, and they played pivotal roles at the battles of Queenston Heights, the Thames, and Stoney Creek, all up and down the Niagara Peninsula. Yet we rarely recognize this fact.

    For Americans, Indians were enemies to be defeated. For Canadians, Aboriginal peoples were allies to be betrayed. As Pierre Trudeau reportedly told Marlon Brando in 1978, “There are differences in the way we treated our Natives. You hunted them down and murdered them. We starved them to death.” The contrast reveals a great deal about the War of 1812: American territorial expansion was hindered by Indigenous nations, while Canadian territorial integrity depended upon their assistance.

    Stephen Marche, “That Time We Beat the Americans“, The Walrus, March 2012.

    This essay is interesting throughout. The war was initiated by an American invasion of Upper Canada and ended in stalemate, but each side claimed victory. Marche’s own claim becomes clear in his conclusion:

    Our national identity was born during the War of 1812 — which was fought over a distinction that still resonates in provinces and territories that came into existence long after it ended. Canadians in Alberta and Yukon remain as convinced as anyone in Ontario or Quebec that they are not American, a conviction that crystallized during skirmishes and campaigns on the Niagara Peninsula 200 years ago. The fact that a war decided the question may tarnish the sheen of self-righteousness Canadians love so much, but it might also draw us to a harder, clearer truth about our position in the world. No matter what military historians say, we won the War of 1812 — because we fought to be ourselves.

    Stephen Marche (born 1976) has a doctorate in early modern English drama from the University of Toronto. His latest book is How Shakespeare Changed Everything (Harper, 2011).

    Tags:
    Posted in History | Comments Off

    time out

    Wednesday, February 22nd, 2012

    Travel and participation in a conference preclude blogging for the remainder of this week.

    Posted in Uncategorized | Comments Off

    toward a universal minimum pension in Japan

    Wednesday, February 22nd, 2012

    Well, it is not fully universal. Japanese who have received ‘too much’ lifetime income need not apply, even if they are living in poverty in their old age. Those drafting the legislation believe that it will take about 40 years for the new minimum pension to take shape, beginning in 2016.

    The Democratic Party of Japan has released a set of scenarios that could be applied to fundamentally reform the public pension system, with a guaranteed minimum pension of 70,000 yen [US$850] a month at its core. ….

    The 70,000 yen minimum guaranteed pension will be paid in full to people whose lifetime average annual income is up to 2.6 million yen [US$32500], according to the calculations.

    The amount will drop for people whose incomes are higher, with those earning a lifetime average annual income of more than 6.9 million yen [US$86250] ineligible to receive the minimum guaranteed pension.

    As this scenario requires … a consumption tax rate hike of 7.1 percentage points …, public opposition is likely to be strong.

    Therefore, the government has come up with other scenarios to minimize the tax hike by reducing the ranges of recipients who will receive the pension.

    Basically, people whose lifetime average annual income is zero will receive the full minimum guaranteed pension. For others, the amount will gradually drop in accordance with income levels.

    The different scenarios set levels at which the minimum guaranteed pension will be stopped at 6.9 million yen, 5.2 million yen or 3.8 million yen.

    In these scenarios, the hike in the consumption tax rate will be lowered to between 2.3 and 4.9 points. ….

    In response [to a question], Deputy Prime Minister Katsuya Okada said, “The annual income is calculated for individuals. In the case of couples, the minimum guaranteed pension will not be withheld from those with lower incomes.”

    “DPJ releases pension scenarios“, The Daily Yomiuri, 12 February 2012.

    HT: Charles Knox-Vydmanov of HelpAge International

    Tags:
    Posted in Pensions | Comments Off

    Paul Krugman: the Playboy interview

    Tuesday, February 21st, 2012

    KRUGMAN: Obama is very much an establishment sort of guy. The whole image of him as a transcendent figure was based on style rather than substance. If you actually looked at what he said, not how he said it, he said very establishment things. …. He was talking about Social Security cuts during the 2008 primary. That’s how you sound serious in our current political culture. He wasn’t sufficiently distanced to step back and say that a lot of our political culture is completely insane.

    PLAYBOY: Of the three main political candidates in the 2008 primaries, Hillary Clinton and John Edwards had more progressive plans on health care than Obama.

    KRUGMAN: Right. And we might notice that the really big debate, which was furious and screaming, was about whether we needed a mandate on health care reform. And the answer is of course we did. Obama was just wrong and, I have to say, demagoguing a bit during the primary by pretending you wouldn’t need it and by using that as a stick with which to beat Hillary. A lot of people who were normally like me didn’t like me because I was saying, “Obama’s really not the progressive you think he is.” And now they’re all saying, “He’s not the progressive we thought he was.” He came in prepared with the wrong set of instincts, and it’s taken a while to get past that.

    Jonathan Tasini, “Interview: Paul Krugman“, Playboy, 16 February 2012.

    This lengthy interview is interesting throughout. I assume that Princeton economist Paul Krugman needs no introduction.

    Tags: ,
    Posted in Uncategorized | Comments Off

    Vienna

    Monday, February 20th, 2012

    Scottish novelist William Boyd (born 1952) returns to the city that inspired his latest novel Waiting for Sunrise (Bloomsbury Publishing, 2012).

    Why do certain cities haunt the imagination? Not just the city itself but the city in a particular historical period. In my own case I can identify four such cities – Los Angeles in the 1970s, Lisbon in the 1930s, Berlin in the 1920s and Vienna in the years just before the first world war. ….

    [T]races of that world do remain in Vienna. You can still go to the Café Landtmann where Freud enjoyed a kapuziner and a cigar. You can sit in the Café Sperl – my favourite – and imagine Egon Schiele wandering in with one of his models. You can eat Sachertorte and drink schnapps in the Hotel Sacher and watch the patisserie chefs at work in Demel, much as Roth and Musil would have done. Somehow, Vienna has managed to preserve the authenticity of its old style of life in a way that most other European capitals haven’t. It’s true that Jean-Paul Sartre would still recognise the Café de Flore, Alberto Moravia the Caffè Greco, and Charles Dickens would feel at home in the Grapes by Limehouse Basin, but the relentless, homogenising, modernising hand of the 20th and 21st centuries is making all cities of western Europe come steadily to resemble each other. But for the moment, at least, parts of Vienna seem miraculously preserved.

    Perhaps this is because the clock metaphorically stopped for Vienna when Archduke Franz Ferdinand was assassinated in Sarajevo in June 1914 and the first world war began a few weeks later. In those first 14 years of the 20th century, Vienna, more than anywhere else, was the fulminating, bewitching crucible where the modern world was invented. … [W]as there ever such a concentration of genius across the broad spectrum of thought and culture that could be found in Vienna and the Austro-Hungarian empire during those early years of the 20th century? If we start drawing up some lists of names the idea appears ever more plausible. In literature: Rilke, Kafka, Roth, Musil, Zweig, Schnitzler. Music: Mahler, Schoenberg, Webern, Berg. Architecture: Otto Wagner, Adolf Loos. Painting: Klimt, Schiele and Kokoschka. Philosophy: Wittgenstein and the origins of the Vienna Circle school. Journalism: Karl Kraus. The brew is almost too rich. Then throw in Adolf Hitler and, of course, the sine qua non, Sigmund Freud.

    William Boyd, “Oh, Vienna“, The Guardian, 4 February 2012.

    HT: The Browser.

    Posted in History | Comments Off

    small is beautiful

    Thursday, February 16th, 2012

    A team of scientists has discovered the world’s smallest chameleon on a tiny island off Madagascar.

    Adult males of the B. micra species grow to only just over a half-inch (16 millimeters) from nose to bottom, making them one of the smallest vertebrates ever found on Earth.

    From nose to tail, adults of both sexes grow to only 1 inch (30 mm) in length.

    Andrea Mustain, “World’s Tiniest Chameleon Discovered“, Scientific American, 15 February 2012.

    Posted in Uncategorized | Comments Off

    praise for basic pensions

    Tuesday, February 14th, 2012

    The answer to the pension problem is relatively simple, unlikely though it may seem. In the Organisation for Economic Co-operation and Development (OECD), we have repeatedly reached the … conclusion … [that] three types of reform … [should be] introduced. The first involves … postponing the age of retirement to keep pace with the increase in life expectancy; the second, concentrating the public system more on basic social pensions aimed at alleviating and preventing poverty during retirement; and the third, developing private pension saving. … [emphasis added]

    [Do not forget, though,] that the private pension systems themselves also represent a fiscal cost for the government. For instance, voluntary saving is often encouraged by fiscal incentives that may put a heavy burden on the public purse. Furthermore, these incentives do not always have the progressive aim and increased coverage that is claimed ….

    A country like New Zealand …,even though it has one of the lowest levels of public expenditure on pensions in the whole OECD, achieves better protection against poverty for people of retirement age through the basic pillar.

    Juan Yermo, “Unwinding pension reforms – An OECD perspective”, in Advancing in the Strengthening and Consolidation of the Individually-Funded Pension Systems (International Federation of Pension Fund Administrators – FIAP, Santiago, Chile, 2011), pp. 195-204.

    Mr Yermo heads the OECD’s Private Pensions Unit. He makes some good points, but  fails to mention that New Zealand’s basic pension is universal – everyone, rich or poor, receives the same flat pension – and that New Zealand is the only member of the OECD that does not require workers to participate in a contributory pension scheme.

    Posted in Pensions, Universal Transfers | Comments Off

    « Older Entries