Philip H. Brown Discusses Microlending

Over the past several years microlending has grown in popularity as a tool used throughout the world, particularly in developing countries, for creating employment and building businesses. In 2006, Muhammad Yunus and the Grameen Bank were awarded the Nobel Peace Prize for their microlending efforts in communities throughout Bangladesh.

Microlending provides small loans to individuals who are economically disadvantaged and lack the collateral or credit necessary to secure traditional financing. Microlending operates under the theory that individuals in developing countries have vital skills they can use to operate their own businesses if they have startup capital to launch. For example, an individual may be able to purchase livestock for farming. If the farming operation is successful, the individual not only repays the loan but adds to the local economy through the growth of the operation. Microlending has been particularly popular in developing nations because of the small amounts of the loans involved, sometimes as little as $20. Additionally, microlending has been seen as a way to empower women in developing countries by financing their small business ventures.

Although microlending has increased in popularity, there is disagreement as to whether the practice noticeably improves conditions in developing areas. Thus, the impact remains a point of contention among economists.

Philip H. Brown is a development economist whose studies include health, education, gender, equality, and poverty. He has worked in China, Central America, Africa, and Chile, and his work has been discussed in Time, The New York Times, and on National Public Radio.

Social Factors that Influence Poverty

Philip H. Brown, an economist who has studied poverty in the international sense extensively, has given several lectures on the topic, and is also highly educated on the socioeconomic factors at play in areas such as China and Chile. Several issues influence poverty on a worldwide scale, and this article will list some of those factors, many of which have been studied by Philip H. Brown.

1. Ineffective government policies. When social policies, including those meant to curb violence, increase public health, and provide educational opportunities for children and adults, favor those in the middle and upper classes, those in the lower class are left to fend for themselves.

2. Inadequate responsibility on behalf of the individual. Though many people living at or below the poverty line are a product of the social and political environment around them, the ability to take responsibility for one’s life and do the best one can with what one has can give a person living in poverty opportunities that would never have been found otherwise. Even so, sometimes, few to no opportunities are evident.

3. Exploitative acts by those in power and by business leaders. The inequality between individuals living in poverty and those who are well-to-do is constantly shifting and growing. Part of this is because of the lack of progressive changes made in the business world, and the acceptance of discriminatory or exploitative policies.

The Fight Against Poverty in Chile, By Phillip H. Brown

Although Chile has seen significant reductions in poverty in the past 20 years, the country continues to suffer from high economic inequality. As of 2006, approximately 14 percent of the population in Chile lives in poverty. While this is dramatically lower than the nearly 40 percent of the population that lived in poverty in 1987, it remains a point of concern.

In a recent article I co-authored with Claudio A. Agostini of the Universidad Adolfo Ibañez entitled “Cash Transfers and Poverty Reduction in Chile,” we examined the various anti-poverty programs that have been launched to address the problem. We used data-mapping methodologies to compare the effectiveness of these initiatives at the sub-regional level.

Our research has showed that direct cash transfers have helped to greatly reduce the number of impoverished individuals by between 5 percent and 68 percent. These cash transfers have been particularly effective in rural areas where topography has also been found to have a role in their success. These findings can help guide Chile toward more focused and successful policies to combat poverty.

About Philip H. Brown
Development economist Philip H. Brown studies poverty and solutions to poverty, as well as health, education, the environment, and gender. He also studies the economics of natural disasters, such as the 2004 Indian Ocean tsunami. Brown holds a Ph.D. in Economics from the University of Michigan in Ann Arbor. Philip Brown’s work has been featured in Time magazine, The New York Times, and the book “Superfreakonomics”.

Exploring Media-defined Limits to Altruism by Philip H. Brown

I admire the unconventional and engaging approach to everyday economics undertaken by Steven D. Levitt and Stephen J. Dubner in their Freakonomics books and long-running associated blog. One of the Freakonomics articles I found most personally engaging was How Pure Is Your Altruism?, which was written in May 2008 following two major natural disasters – a devastating earthquake in China and a large cyclone in Myanmar. The article commented on the uneven distribution of individual American charitable giving following major natural disasters. For example, Hurricane Katrina, which resulted in 1,877deaths, brought in a total of $5.3 billion in individual donations from in the U.S. In contrast, the Asian tsunami of 2004 resulted in an estimated 220,000 deaths and brought in less than $2 billion in donations from Americans. Similarly, the 2005 Pakistan earthquake, which resulted in nearly 75,000 deaths, attracted only $150 million in individual U.S. contributions.

Certainly, the fact that Hurricane Katrina was an American disaster, hence closer to home, accounts for much of this difference. However, Levitt and Dubner identify two other factors in explaining low levels of donations, particularly following the Pakistan earthquake: donor fatigue after other high profile natural events and lack of media coverage. In exploring the latter phenomena, the authors excerpted a paragraph from my co-paper “Media Coverage and Charitable Giving After the 2004 Tsunami.” In sum, my paper shows that levels of media coverage following natural disasters have a significant impact on charitable donations made by Americans. Specifically, my co-author and I calculate that each additional minute of nightly television news coverage of a natural disaster results in a 13 percent increase in average donations on that same day. Similarly, each additional 700-word story in the Wall Street Journal or New York Times raises daily average donations by nearly 20 percent.
A sensible question, then, is “what causes certain natural disasters to receive extended coverage, while others are quickly forgotten?” One explanation is that level of media coverage is highly dependent on the occurrence’s distance from major media outlets and resources. Remoteness entails extra expenses in covering the natural disaster. Another significant factor is news cycle timing: both the China and Myanmar disasters occurred at a time when the U.S. Democratic primary between Barack Obama and Hillary Clinton was heating up, diminishing their media impact.

It seems to me that there are a multitude of opportunities for further research into the links between charitable contributions following natural disasters and the media. For example, given our shift to digital news, and a corresponding diffusion of news sources, it is unclear whether the results of our 2004 study apply to the same degree. I would argue that they do: even on the Internet, most readers never make it past the first page of the online edition of the New York Times, and YouTube video searches often follow reading about a disaster from a primary news source.

About the author: Development economist Philip H. Brown has authored numerous articles on issues such as poverty, vulnerability, natural disasters, and health and environmental economics. The referenced Freakonomics article can be accessed at http://www.freakonomics.com/2008/05/13/how-pure-is-your-altruism/. Phil Brown’s other papers may be accessed at http://www.philbrown.me.

The Neighbor Effects of Provision of Public Goods Among Chinese Villages by Philip H. Brown

As a development economist, much of my research has focused on better understanding poverty and inequality in countries such as Chile and China. Working on areas such as health, education, environmental protection, and public goods provision, my work aims to identify hurdles in the fight against poverty and to propose implementable public policies. One recent study is entitled “Neighbor Effects in the Provision of Public Goods in a Young Democracy: Evidence from China.” This project seeks to answer whether higher spending on public goods in neighboring areas is associated with higher spending on public goods at home and whether any such effect is related to nascent elections in Chinese villages. This study is unique in that it examines neighbor effects in an emerging democracy. While yardstick competition and fiscal mimicking have long been observed in developed countries with democratic traditions firmly in place, there is scant empirical evidence regarding young and developing democracies.

In undertaking our research, we looked closely at 86 rural Chinese administrative villages that have undergone democratic transitions in the past 20 years. We find that incumbent chairs of village committees (who are elected) are spurred on by public works projects in neighboring villages to initiate their own projects while incumbent secretaries of the local Communist Party branch (who are appointed) are not influenced by spending in neighboring villages, suggesting that democracy underlies neighbor effects. Expansion of local elections to townships and other higher levels of government may thus result in an increase in competition among village officials, leading to greater accountability to constituents. A working version of this paper was published in the International Food Policy Research Institute’s discussion paper series in September, 2010.

About the author: With a PhD in Economics from the University of Michigan, Philip H. Brown makes extensive use of econometrics and empirical methods in his research on poverty and poverty alleviation in the developing world. Phil Brown’s academic papers are accessible at www.philbrown.me.

About Philip Brown

Development economist Philip H. Brown has lived and worked in rural China, East Africa, Central America, and South America as part of his efforts to understand and combat extreme poverty in developing regions. His more than 30 published articles and presentations at international conferences have earned Phil Brown recognition as an accomplished scholar and researcher, especially in the field of Chinese economics. After obtaining his Bachelor of Arts in International Political Economy from Colorado College, Phil Brown gained valuable hands-on experience working at a refugee camp in Tanzania. He enrolled in the School for International Training to receive additional specialized instruction in sustainable development before earning his Master of Arts and Ph.D. in Economics from the University of Michigan. Phil Brown received fellowships from the Spencer Foundation and the University of Michigan Rackham School of Graduate Studies. In addition to serving on the Colby College faculty for eight years, Brown also worked as an international consultant for the National Developmental and Reform Commission of China, and co-edited the China Economic Review. Phil Brown continues to generate valuable data and research in the field of developmental economics. His most recent article, “Cash Transfers and Poverty Reduction in Chile,” is slated to be published in the Journal of Regional Science. Phil Brown’s recent work generates valuable data and research on the economics of natural disasters such as the 1997 forest fires in Indonesia and the 2008 cyclone in Burma. An analytical piece describing how media coverage affected charitable donations during the tsunami in Southeast Asia brought Phil Brown added distinction when both the New York Times and the popular economics book SuperFreakonomics featured his research findings. He is currently working with data from American charities to evaluate how demographic characteristics of neighborhoods influence giving for disaster relief. When he is not engaged in economic research, Phil Brown enjoys whitewater rafting, kayaking, and baking bread.