Nutrition and Economic Development

By: Damon Aitken

Empirical Models, Survey Evidence, and their Implications for Food Assistance

Food is crucial for all of us and proper nutrition is essential for a healthy, enjoyable life. However, access to food and good nutrition is especially important for the world’s poor.  Food makes up the vast majority (between 60 and 80 percent) of consumption expenditures for the extremely poor (defined as living on less than $1 a day). A commonly referenced topic in health and development economics is the nutrition-based poverty trap, the idea that extremely poor people are trapped in poverty because they cannot access food or essential nutrients. Malnutrition is a severe issue worldwide; 795 million people suffer from chronic malnourishment, according to the UN Food and Agriculture Organization. 780 million of these people live in developing countries. Nearly half of all deaths in children under 5 are due to undernutrition– a total of 3 million per year. Various statistics demonstrate the acute need for adequate nutrition at a young age. Malnutrition stunts growth and hungry children can’t concentrate in school. Cognitive development can be impaired by a lack of access to nutrition, which affects performance in school and future job prospects. Perhaps most importantly, the effects of being hungry as a baby are shown to last into adulthood. It is not simply a question of being hungry but also being able to eat healthy nutrients that have a long-run impact on personal development.

All of this shows that investing in children’s nutrition is necessary to ensure that detrimental effects do not last into adulthood. Viewing health and nutrition as an investment that raises future productivity creates the model (Strauss 1998):


This model conceptualizes health at the current time t as a function of inputs in previous periods N (representing health inputs), L (labor supply), D (public health and disease environment), A (socio-demographic characteristics), B’ (family background), μ (health endowments), and e (measurement error). John Strauss also found in a 1986 paper that the effect of eating more calories on farm labor productivity in Sierra Leone followed an L-shape curve. The effect is greatest at the start but tapers off at higher levels of calorie consumption.

The Engel curve is commonly used in microeconomics to represent household expenditure given household income. In 1857, German statistician Ernst Engel discovered that the proportion of income spent on food decreases as income rises. This observation, now known as Engel’s Law, has been verified empirically ever since– note the similarities between the theoretical graph below on the left and the graph of Indian empirical data on the right. People generally don’t consume drastically more food if their income increases.


As incomes per capita increase, consumption of meat and shrimp rises compared to that of staples such as rice. This certainly seems reasonable. Just because someone has lower income does not mean that they do not want to eat well. The goal is not to maximize caloric consumption; it’s to maximize taste. To this end, studies have shown that the extremely poor don’t necessarily eat more as their incomes go up. They substitute towards better-tasting food.

In order to confirm consumer preferences, randomized control trials (RCTs) have been run. This is an econometric strategy that looks at the difference in means for a group that receives a treatment and a control group that doesn’t receive the treatment. The fact that groups are assigned at random means that selection bias is eliminated. It also allows for estimations of counterfactual totals.

Giffen goods, for which demand increases when the price increases and vice-versa, are a theoretical oddity in microeconomics that are quite rare in real life. An RCT run in the Hunan province of China found evidence of Giffen good behavior with respect to food staples. The staple food, as it is in all of southern China, is rice. When vouchers were randomly distributed to extremely poor households in Hunan, consumption of rice increases when the price of rice increased. Poor consumers who weren’t extremely poor (i.e. they had some purchasing power) consumed more of a staple good when the price of that good increased. Their elasticity of demand depended significantly but nonlinearly on how poor they were.

It seems that poverty traps based on consumption do not necessarily exist, but that more pernicious traps arise due to a lack of micronutrients. Micronutrients include minerals and vitamins– substances that are only required in relatively small quantities but have significant health benefits. Evidence suggests that lacking micronutrients when one is young can hobble them later on in life. A study in Peru showed that a lack of iron in one’s early diet can impair cognitive development. This can be modeled as a permanent negative shock to someone’s lifetime wages. This is not simply a problem in developing nations; the CDC estimates that around half of children between the ages of 6 months and 5 years worldwide suffer from at least one micronutrient deficiency.

One potential way of allowing people to eat healthier is to make food cheaper by increasing its supply. An issue in countries such as Nigeria is that domestic food production is very expensive and inefficient. Agricultural productivity in equatorial African countries has historically been low. Marcella Alsan (2015) found that regions with a historically high concentration of Tsetse flies had lower agricultural productivity today. These flies transmit “sleeping sickness” that is especially deadly for livestock. Having large draft animals boosts productivity and makes large-scale farming possible. Investments in increasing agricultural productivity are necessary in regions such as Sub-Saharan Africa with historically low agricultural productivity. However, though there have been many development aid programs that have sought to improve agricultural productivity, it is still an issue decades later.

With all these concepts in mind, policies intended for improving nutrition must be nuanced in order to be effective. Heterogeneity between individual demands for types of food is just one factor making it difficult to target food aid. When you donate to food aid programs, take care when identifying how they actually serve communities. Simply shipping food from a rich nation to a poor nation can drive local farmers out of business. Sending food by grown by American farmers at cheaper prices due to higher American agricultural productivity is dumping.

When it comes to ensuring that populations receive proper micronutrients, optimism can be found in the fact that nutritional supplements are very cheap. However, consumers often do not find these supplements to be salient to their situation. Good nutrition can be an abstract concept to families struggling to obtain the bare necessities. Health campaigns are shown to have an effect on consumer behavior but the literature is split over whether promotion of a healthy product or demotion of an unhealthy product is the best strategy. Perhaps these two strategies working in tandem could let to better nutritional outcomes on a micro level.

The takeaway, as with numerous issues in development, is that policymakers concerned about nutrition must understand micro-level local contexts. With the advent of big data in emerging economies; smarter policymaking could eradicate hunger and ensure that everyone is on an even playing field from a nutritional standpoint. Fair and equitable access to nutrition is a fundamental right upon which development foundations are built.

Works Cited

Agricultural productivity in Africa: Trends, patterns, and determinants. (n.d.). Retrieved from

Banerjee, A. V., & Duflo, E. (2012). Poor economics: Barefoot hedge-fund managers, DIY doctors and the surprising truth about life on less than 1 dollar a day. Penguin Books.

D., I., W., P., H., M, J., . . . Philip WJ. (2005). Micronutrient deficiencies and gender: Social and economic costs | The American Journal of Clinical Nutrition | Oxford Academic. Retrieved from

Definition and Identification of rural poverty in India. (2017). Retrieved from

Food Aid as Dumping. (n.d.). Retrieved from

International Micronutrient Malnutrition Prevention and Control (IMMPaCt). (2018). Retrieved from

Jensen, R. T., & Miller, N. H. (2008). Giffen Behavior and Subsistence Consumption. American Economic Review, 98(4), 1553-1577. doi:10.1257/aer.98.4.1553

Strauss, J. (1986). Does Better Nutrition Raise Farm Productivity? Retrieved from

The Game of Cash Flows: Competition to be China’s Financial Capital

By Damon Aitken

Is there a competition to be the financial center of an emerging financial superpower?

Global financial centers are essential to the working of the global financial system and with it the world economy. What makes a city a global financial center? The IMF defines them as

large international full-service centers with advanced settlement and payments systems, supporting large domestic economies, with deep and liquid markets where both the sources and uses of funds are diverse, and where legal and regulatory frameworks are adequate to safeguard the integrity of principal-agent relationships and supervisory functions.

The leading financial centers of the world are New York and London while Hong Kong and Singapore lead ever rapidly-growing East Asia. The Global Financial Centers Index places Hong Kong 3rd after London and New York. London and New York rose to the top on the back of geographical advantages. London’s central location means that working hours overlap at some point with all other continents. New York snatched the role of America’s financial center from Philadelphia due to its excellent natural port fueling commercial growth.

There is a variety of reasons that Hong Kong became a financial center. Hong Kong is blessed with a deep natural harbor that has meant that it has always been a hub for trade. It’s economy is ranked the freest in the world and its competitive markets are underpinned by a strong regulatory framework and low taxes. Hong Kong’s laissez-faire tax structure is particularly attractive to firms looking to base themselves there. Hong Kong remains a top international center that is home to 70% of the world’s largest 100 banks. Stability and proximity to China’s massive economy also contribute to continued prominence today. Hong Kong retains its perch at the top but does it face a threat from mainland Chinese cities looking to catch up?


Hong Kong benefited from China’s liberalization in the 1980s due its robust financial and regulatory systems allied to its convenient location. The Hong Kong stock exchange played host to major IPOs for Chinese companies. Hong Kong served as a model for Chinese development and proved to the Chinese government the success of opening up an economy.

In 1997, Hong Kong represented 16% of China’s GDP but today it represents 3%, a testament to the enormous economic growth that China has undergone in the intervening years. Hong Kong is now reliant on trade with China and one-third of inbound foreign direct investment in 2014 came from mainland China. The Chinese government also benefits from Hong Kong’s strong regulatory environment that attracts investors looking for a stable base from which to invest in China. At the same time, the government hopes to reduce its reliance on the Special Administrative Region.

Much of the ability of domestic Chinese cities to become truly global financial centers rests on liberalization of the renminbi (人民币).  The People’s Bank has historically implemented strong capital controls; controlling the flow of the currency. Much of this relates to the Asian Financial Crisis of 1998, where nations ranging from Thailand to South Korea saw massive capital outflows. Concerns over China’s slowing growth in 2014 also led to capital flight and the People’s Bank exerted a great deal of effort and currency in order to prop up the renminbi.

The global financial system still operates by and large in dollars. The Chinese government is looking to make the RMB a globally traded currency and has made signs that it will move away from fixing the currency. The German Bundesbank, among other central banks, has voted to adopt it as a reserve currency; a significant boost to the currency’s credibility as a reserve currency. Hong Kong retains its own monetary authority and its currency, the Hong Kong dollar (港幣), which is the 13th-most traded in the world. Hong Kong has the largest share of the offshore renminbi trading market with a 38.6% market share in 2016 though its market share declined from 43% in 2013. This decline was in spite of a rise in absolute terms. The majority of offshore renminbi trades are FX and currency swaps; looking to help firms investing in China mitigate risk.

In practice, capital controls can entail limits on transfers to overseas accounts and greater regulatory attention paid to companies looking to transfer money abroad. Capital controls are also a factor in the recent investment bubbles in China. Since domestic investors are limited in their overseas investment options despite booming cash flows; money pools in domestic markets. This raises the risk of saturation and the forming of subsequent bubbles.

The internationalization of the renminbi has the potential to threaten Hong Kong’s status as the main offshore center for payments in RMB; but voices within the city maintain confidence. There are essentially two markets for the RMB at present; the domestic and offshore markets. Tight controls over them have not slowed the pace of adoption as assets denominated in RMB are offered in markets all around the globe. If the RMB becomes freely convertible anywhere and investors are not forced to go through offshore trading hubs such as Hong Kong, Hong Kong could lose its preeminent status as China’s financial center. Nevertheless, Hong Kong still retains significant advantages in infrastructure and it would likely take political will rather than market forces to topple the city from its perch. Hong Kong also retains first-mover advantage. If firms in Hong Kong invest in diversifying their offering of financial instruments in RMB, Hong Kong can still retain a hefty advantage. It seems to be suggested that Hong Kong will remain ahead of domestic Chinese cities as long as capital controls are tight.


The image taken from Bloomberg above shows how the values of indexes representing the Shanghai and Shenzhen stock exchanges have surpassed Hong Kong’s Hang Seng Index at points during the last 5 years.

Now that many Chinese cities are surpassing Hong Kong’s development, the question is will Hong Kong be toppled from its preeminent status as China’s financial center? There are 3 main candidates:

  • Shanghai

The State Council declared that Shanghai would be a global financial center by 2020, an ambitious statement that is in keeping with this massive, modern city. Shanghai’s Lujiazui district, low-rise hinterland before the 1990s, is now a gleaming urban landscape dotted with skyscrapers that is instantly recognizable as a symbol of the modern China. Office rents in Shanghai are now the 8th most expensive in the world. However, investors along with government officials talk of Shanghai and Hong Kong being “parallel markets” and do not suggest direct competition. Shanghai listings prioritize state-owned enterprises (SOEs) as opposed to Hong Kong’s range of offshore investment products.

  • Beijing

Beijing has not done well in international financial center rankings but retains significant strengths and it’s rise up the rankings reflects its true potential. Political muscle has led to many large corporations basing themselves in the capital. Major SOEs are based in Beijing and financial firms looking to work closely with SOEs view Beijing as an advantageous location. Foreign investment banks tend to choose Beijing to be their Chinese headquarters in order to maintain strong personal relationships with regulatory officials. This is contrast to commercial banks choosing to base themselves in Shanghai, the commercial capital where business transactions are the focus rather than political relations.

  • Shenzhen

Another interesting case is that of Shenzhen. The story of Shenzhen’s growth is in itself remarkable and a testament to the power of foreign investment and free trade. A market town of 30,000 before 1979 is today a metropolis teeming with around 10 million people and another 8 million migrant workers who commute in. Shenzhen positions itself in the market as a specialist in technology. The Shenzhen Stock Exchange mainly trades technology stocks and has seen a surge in recent years as China’s technology sector becomes ever-more innovative. This can be seen in the SZCOMP portion of the graph above. Qianhai is a special zone in Shenzhen set up to test offshore RMB trading with Hong Kong. Shenzhen benefits from close proximity to Hong Kong and excellent transport networks throughout the wider Pearl River Delta; a hub for high-tech manufacturing.

These 3 cities are the major financial centers but China has many large cities that are deepening international financial links. Guangzhou is the center of the Pearl River Delta region, the most densely populated urban area in the world. Dalian and Qingdao are coastal cities that are noted as up-and-coming players. China is such a large country with different regional clusters and characteristics that a single financial center such as London is unlikely.



Cainey, A. (n.d.). Perspective: Shanghai: Building an International Financial Center with Chinese Characteristics. Retrieved from Booz & Company website:

Cheung, Y., Cheng, Y., & Woo, C. (2016). Hong Kong’s Global Financial Centre and China’s Development : Changing Roles and Future Prospects. Retrieved from

Ehlers, T., Packer, F., & Zhu, F. (2016). The changing landscape of renminbi offshore and onshore markets. BIS Quarterly Review, 72-73. Retrieved from

Guralnick, M. (n.d.). Renminbi Liberalization: Evolving Opportunities for Multinationals. Retrieved from Citi Treasury and Trade Solutions website:

Kärnfelt, M. (2017, November 10). China’s Tight Capital Controls Fail to Address Underlying Problems. Financial Times. Retrieved from

Lai, K. (2011). Differentiated Markets: Shanghai, Beijing and Hong Kong in China’s Financial Centre Network. Urban Studies, 49(6), 1275-1296. Retrieved from SAGE Journals Online database.

Wan, A. (2015, April 1). Too Ambitious? Shanghai Aims to be Both Top Financial Hub and ‘China’s Silicon Valley’ by 2020. South China Morning Post. Retrieved from

Z/Yen, & China Development Institute. (2017, September). Global Financial Centres Index: Vol. 22. The Global Financial Centres Index 22. Retrieved from



The Derivatives Market in Emerging Economies

By: Damon Aitken

How Financial Instruments Can Aid Development

Derivatives are financial instruments that derive their value from another asset or from any underlying variable. These variables can be anything from the cash flows underlying a painter’s works to the exchange rate of a currency. Some financial literature claims derivatives originated in the 1970s; in reality, the basic concept has been around since antiquity. Commodity traders in Mesopotamia agreed on simple contracts to borrow products and repay the loan at a set value after a certain amount of time. Derivatives have been maligned as a contributor to the financial crisis of 2008, but when managed properly, they may well play vital roles in economic development and the emergence of markets. They have a long history but have shot to prominence in the modern era. Today, the global derivatives market has a value estimated between $542.4 trillion to $1.2 quadrillion– 10 times the world’s GDP. However, much of this value is contained in the markets of high-income countries.

Derivatives mitigate risk by allowing for fluctuations in value. For example, one of the most common forms of a derivative is the currency swap. Currency swaps allow firms to make efficient transactions and maximize profit without losing money during exchange. On the international investment side, risk from exchange rate fluctuations is removed and foreign firms can receive local currency to finance local investments. Below is a demonstration of how a currency swap works and benefits both firms. Firms can take advantage of less favorable lending conditions in their home markets and reduce interest paid on loans.


Low and middle-income countries often face unstable capital flows. Firms lack access to finance to grow and expand. Banks are often ill-equipped to provide loans and incoherent central bank policy can lead to currency shortfalls.  Capital markets stimulate investment and contribute to economic growth by allowing firms and governments to raise capital. Capital is essential for economic growth, particularly in developing countries, as it allows firms to materialize, providing employment and wages for workers. Capital allows agents in the economy to carry out essential functions in this manner. Financial instruments essentially can boost the creation of capital. A lack of derivative markets in developing countries can make them unattractive to global investors, and as derivatives increase continue to gain prominence, developing countries may get left in the financial dust. Empowering financial firms in emerging markets involves developing robust financial instruments in those markets.

Derivatives are increasing in use in emerging markets around the world. Commodity futures are a simple yet effective way to ensure against seasonal shortfalls in agricultural production.  They were the most-traded type of derivative in 2016. Currency swap derivatives dominate in emerging markets. Currency derivatives tend to be traded in New York, London, Hong Kong, or Singapore. Instruments from a country will usually trade close to that country’s time zone so Latin American instruments generally trade in New York, European instruments generally trade in London, and Asian instruments generally trade in Hong Kong or Singapore.

Markets to Watch


A pan-regional African commodities exchange has tremendous potential as African countries have strong commodity reserves. However, many African countries lack the necessary prerequisites to set up exchanges on their own. A regional or continental initiative could be effective since it would have greater financial backing. There have been efforts to use mobile apps (Sangonet in the DRC, KACE in Kenya, etc.) to connect buyers and sellers in an informal exchange but this suffers from high inherent risk since there is no guarantee of payment. This risk would be less present in an organized exchange setting where the exchange’s clearinghouse provides insurance (page 22 in AfDB guidebook).

It must be noted that while derivatives can be effective in raising capital in developing countries, care must be taken. Countries without strong financial systems in place will most likely be unable to successfully accommodate a derivatives market. A lack of liquidity is a major barrier. Derivatives also rely on the use of borrowed money to finance investment, also known as leverage. This means that investment has the potential to fluctuate large amounts. In cases of economic downturn and instability, investors will be reluctant to commit financial resources. The financial and political stability necessary for truly strong derivative markets precludes many unstable low-income countries from being able to trade these financial instruments.

Policymakers in developing countries hoping to build strong derivatives markets and strong capital markets in general must focus on sufficiently training market professionals to understand the associated risks. They must also pursue policies which help to mitigate these risks and encourage participation in derivatives markets, in order to provide the entire economy with crucial financial instruments. There is also room for public-private partnerships, in which the government creates a strong regulatory environment to prevent mismanagement and private firms lend their expertise, such as high-speed trading computers.


African Development Bank. (2014, January). Guidebook on African Commodity and Derivatives Exchanges.

Anton, S., & Delia-Elena, D. (2011). Development of Exchange-Traded Derivatives Markets in Selective Central and Eastern European Countries.

Anyacheni, O., & Okoye, O. (n.d.). Derivatives as a Risk Management Tool in Nigeria (Rep.). Nigeria: Sefton Fross.

Bank for International Settlements. (2016, December). Emerging Derivative Markets? (C. Upper & M. Valli, Authors).

Bloomberg. (2017, September 27). As MiFID Jolts Derivatives, Hong Kong Eyes $483 Trillion Market. Retrieved from

Hong Kong Monetary Authority. (2013). The Foreign Exchange and Derivatives Markets in Hong Kong (Hong Kong Monetary Authority Quarterly Bulletin, Rep.). Hong Kong Monetary Authority.

IMF. (2009, September). The Derivatives Market in South Africa: Lessons for Sub-Saharan African Countries (Report No. Working Paper No. 09/196) (O. J. Adelegan, Author).

International Growth Centre. (2013, February). Derivatives in Financial Market Development (R. K. Sundaram, Author). Retrieved from

Making Finance Work for Africa. (2018). Derivatives. Retrieved from

Weber, E. J. (n.d.). A Short History of Derivative Security Markets (Report No. DISCUSSION PAPER 08.10). Retrieved from



Economic Inequality in England

By: Damon Aitken

Distributing the Gains from London’s Growth

Any discussion of the English economy must include the City of London. This global powerhouse creates 22 % of the GDP of the United Kingdom. However, there is a severe divide between the City of London and the UK’s other regions. Though some of the division is perceived more than actually present; this perception is also dangerous as it fueled the fury that guided Brexit voters. England has become an unequal country with severe economic deprivation in regions contrasting with the booming success of London as a global financial capital. Brexit was driven by voters who felt that they had not received an adequate share of the huge economic gains over the past few decades.

There have been many reasons proposed for this economic divide. The North was once England’s industrial heartland and suffered during deindustrialization and the transition to a service-oriented economy. Lancashire in the north-west (historically including Liverpool and Manchester) once dominated the world cotton textile industry. Now, it is home to 3 of the most deprived towns in Britain; let alone England. Deindustrialization took away manufacturing jobs that were never adequately replaced by a service sector that clustered in London. Elite universities have historically been clustered in the South and spending cuts to education have also exacerbated the skills gap in Northern towns.

The economy history of England emphasizes the key role that international trade has played in giving England its strong economic position. Natural resources such as coal drove the boom of industrialization and gave England a strong comparative advantage in producing goods such as textiles. Colonial possessions also gave Britain unparalleled access to natural resources. Over time, the economy of England evolved to be dominated by the service sector and this is no different in Northern England. Skilled jobs in the services sector have long been drifting towards the south and London. London attracted the financial services industry due to many factors. London’s status as the capital of the massive British Empire led to it being the hub for financial activities related to the empire that spanned the globe. Similar firms tend to cluster together as this lowers costs for them.  For example, banks benefit from the concentration of skilled workers in one area and can capitalize on low transition costs when workers shift jobs. Being a part of the EU has given firms based in London access to the Eurozone economies and economic powerhouses such as the Netherlands and Germany. This is naturally under threat due to Brexit as firms will look to move to within Eurozone to retain this access.

This is not to say that the Northern economy is lacking in high-skilled industries and innovation. The large cities in the North are doing well; such as Leeds and Manchester. Manchester in particular has been the beneficiary of efforts to decentralize the media from London and the neighboring city of Salford is home to BBC offices. On a sporting side, Manchester City and Manchester United provide significant soft power recognition of Manchester abroad. Leeds is the second largest center of legal and financial services in the United Kingdom. A focus on digital growth and improving internet connectivity attracted firms in the 1990s and today Leeds boasts the most diverse economy of any English city.

The Conservative government has a proposal called Northern Powerhouse that aims to boost economic growth in the North of England. A key part of this proposal is devolution. The mayor of Greater Manchester will assume greater powers and authority to carry out economic reforms. This proposal is driven by political expediency as the Conservatives look to solidify seat gains in the North.

Infrastructure is key to economic development. Manchester Airport is the largest airport outside the London area. Much of the focus has been on the high-speed rail service linking London and Manchester but what also needs to be emphasized is connections to the ports on the Humber Estuary near Hull and on the River Mersey in Liverpool. Infrastructure is also necessary for agglomeration. As firms cluster; costs are lowered across the board.

Education is also crucial as better education has the potential to reduce the skills gap present in the North. Firms can be attracted to localities by an existing pool of high-skilled local workers. The Conservative government in charge of the Northern Powerhouse proposal has previously proposed spending cuts to education. Spending cuts will hobble the generation of high-quality human capital.

The government could also improve the situation by aiding the dissemination of venture capital firms throughout the country. Venture capital firms are concentrated in London and this means that firms founding in London have natural advantages. Manchester is also a regional hub for venture capital and is a promising area for growth in the field. Leeds, with its strong digital connections and network of professional service firms, could also be a potential center.

A potential issue with the Northern Powerhouse proposal is that it focuses on the major cities. 10 of the top 12 struggling cities in the UK are found in the North but are small in size. Struggling cities were those with the lowest rates of job creation. None of the top 10 fastest growing cities are in the North. Overall, it can be seen that the economic performances and wealth is more unevenly distributed in the North. A statistic that helps illustrate this divide is GVA (gross value added). Looking at the same situation in France or Ireland; the regional disparities in GPA per capita do not differ as widely.

Brexit poses a danger since funds provided by the EU for economic development will be lost. It remains to be seen if Parliament will make up the shortfall and if there is any concrete contingency plan. It is ironic and deeply sad that many of the poorest areas of England voted for Brexit. They stand with the most to lose from this disastrous economic undertaking. The view may be that London firms with international links may be hurt most; but the British economy is strongly linked to the European economy and Brexit’s effects will be felt throughout the system. The image below shows 9 of the most deprived cities in England with the jobs density statistic below. Jobs density is the total number of filled jobs in an area divided by the resident population in that area. For reference, the Jobs Density for Great Britain as a whole is 0.83. All of these places voted Leave during the Brexit vote.


It is imperative that the British government tackle deprivation and poverty throughout the United Kingdom. Centering efforts on increasing economic opportunity in the North of England could help prevent the thinking that led to Brexit.


Works Cited


Lack of Language Ability Hindering Labor Mobility in the EU

By: Damon Aitken

Does 24 Official Languages Mean 24 Barriers? 

Immigration is a hot topic in EU politics with recent surges in right-wing populism gaining impetus from anti-immigrant rhetoric. Though much of the focus has been on immigration from outside the EU, there exists a portion of the EU population that fears fellow EU citizens coming and taking their jobs. This is worrying, considering the fact that an essential right of EU citizens is the freedom of movement between member states and labor mobility is  of vital economic importance. Efforts  to increase intra-EU labor mobility have not succeeded in creating a truly open labor market.

The theory of an Optimum Currency Area (OCA) implies that labor mobility is essential for a currency union such as the European Monetary Union as it reduces the detrimental effects of a crisis and spreads skills across the market through an efficient allocation of resources. In crises, labor can move freely to a more successful part of the union and preserve employment across the board. In addition, free movement in theory makes a labor market more efficient by solving skills shortages and can smooth unemployment differences between member states even when crises are not present. This effect can be seen in countries such as the UK and Germany; which depend on migrational workers in the agriculture sectors to pick and prepare crops.

Representation of Median Wage Levels in the EU


The graphic above shows relative median wages in the EU member states with darker meaning  higher and lighter meaning lower. We would infer a large general westward migration from Eastern European countries where median wages are low. With every expansion of the EU, there has been concern in rich EU countries that expanding into the relatively poorer East would lead to a surge in migration from those countries. Though comparatively large numbers of people from expansion countries have migrated; there has not been the flood that politicians predicted. In fact, when the annual flow of EU citizens is measured; the 0.3% of EU citizens moving to another EU country each year is far lower than the 3% flow in the United States between states.

One phenomenon that European policymakers are concerned about is brain drain. Though labor mobility overall throughout the European Union will likely have positive effects on the EU labor market; highly-skilled workers could find themselves even more incentivized to move to successful member states. This could mean that workers in the thriving Estonian IT industry move to the startup hub Berlin; for example. However, less developed member states have an advantage in that low costs also make them attractive to firms looking to flee high rents in cities such as Vienna and Munich. An overall “brain drain” can be ameliorated by improving fortunes in poorer countries that convince workers to return home. This is seen in countries such as Slovakia and Hungary. In Hungary in particular, 73% of manufacturers are lacking workers. The long-term solution to brain drain simply is improving the economies of less-developed EU members and the trend appears to be reversing.

The main incentive for the movement of labor is comparative wage rates. Wages in Germany are significantly higher than wages in Romania. However, we do not see a massive rush of Romanians moving to Germany. Young and highly educated workers are those most likely to move. They have the highest amounts of human capital as highly-skilled workers and this allied to their greater flexibility in moving around means that have the best prospects. However, labor economic theory also takes into account the psychic costs of migrating for work. These are the simple facts that humans usually do not like to be away from familiar surroundings in a country where they do not speak the language. Though wage and quality of life considerations are often foremost in migrants’ minds, it can be outweighed by the daunting goals of cultural assimilation. This can lead to decreased job satisfaction and productivity. Learning another language is seen as a significant investment; especially when grows older and language acquisition becomes less intuitive. Cultural differences usually dissuade workers from considering other countries.

The European Union has incredible linguistic diversity with 24 official languages. However, the vast majority of these languages are only spoken by small populations in their home countries. German is the largest language measured by native speakers in Europe at 18% of the EU population but English is the most widely known overall. English was also deemed the most useful language to learn in a poll of EU citizens; which makes sense due to its status as an international lingua franca.  In the table below, it can be seen how the vast majority of children are learning English in school.


The other major languages in the EU, French and German do not have the same cachet. German has an advantage over French in the newer member states since many Eastern European nations have long prioritized German over French due to closer proximity to Germany or historical ties. The EU expansions as well as Germany’s larger population have led to a higher number of German speakers across the EU than French. Knowledge of German is estimated at 32% compared to 28% of the EU population knowing French. German proficiency is generally a requirement for working in Germany outside international firms or IT startups; meaning that it tends to be educated workers who move there. Nevertheless, the percentage of pupils learning German in school programmes declined by 5% across the 28 EU countries and is generally on the decline in individual countries.  French showed a decline of 3% while the level of English learners remained around the same.

The EU is aware of the importance of linguistic competence and has stated a goal of each EU citizen mastering two languages in addition to their native language. The extent to which populations of each member state have achieved this varies widely. 72% of adults in Luxembourg in 2011 reported mastery of 3 or more languages whereas 72% of adults in Ireland reported knowing no foreign languages. Though there are these success stories; the general trend seems to be that small, affluent Western and Northern European countries have higher linguistic skills.

One striking example in the EU is Belgium. This country is divided into Dutch-speaking Flanders in the north and French-speaking Wallonia in the south and the economic performances of these regions diverges greatly.  Unemployment rates are higher across Wallonia than in Flanders. They are overall about twice as high as in Flanders. Economic studies have targeted low geographic mobility as a driving factor behind economic quality. Despite this divergence, wages remain around the same level in the two regions partly due to extensive bargaining and a high level of worker’s rights. However; workers should be incentivized to move from Wallonia to Flanders to pursue jobs; not necessarily to seek higher wages. The language barrier in Belgium is significant as the French-speaking Walloons historically promoted French against Dutch; leading to severe discontent among the Dutch-speaking Flemish. The two regions (aside from the small German-speaking community) exist in largely separate cultural spheres with low intermarriage between groups. Linguistic and cultural differences lead to the low level of geographic mobility. Surveys of language ability in Flanders and Wallonia show that those living in Flanders are much more likely to speak multiple languages (i.e. French in addition to Dutch) and are especially more proficient in English; which helps with finding work. There is also a much larger number of people who learn French as a second language as there are of people learning Dutch (48% with French knowledge vs. 15% with Dutch knowledge)  This suggests the important role that language policy plays and the greater economic flexibility of the Flemish population. In allowing this degree of linguistic separation, the weak Belgian government contributes to weak economic outcomes.

Though language and related cultural differences are often the most direct barrier to workers; a lack of cohesive qualification standards is also an obstacle. This can be fixed more simply through policy. The EU has programs such as Europass (a sort of passport that displays a person’s skills simply) and the European Qualifications Framework provides a framework for comparing standards across countries. Firms will not tend to gamble on hiring workers outside their frame of reference. Qualifications act as signals of worth to employers and if the firm is not familiar or feel they cannot rely on a relatively unknown qualification then they will not tend to hire a worker.

Nevertheless, EU member states in the wealthier North and West benefit from workers coming from the east that plug labor gaps. The EU should take steps towards boosting labor mobility throughout the union by standardizing qualifications. In addition, commissioning studies looking at migration numbers between EU member states would help in assessing where bottlenecks are occurring. Sourcing better-quality data would help refute populist claims about a perceived flood of migrants coming into a country. There is a tricky balance that needs to be maintained between protecting the fascinating and unique languages that exist in each EU member state while having a more standard lingua franca. English is the de facto business language of the EU as it is in international business; but making it a de jure business language could assist business links between different countries and also aid those workers who have mastered English but not some of the less-commonly taught languages in the Eurozone. It must be noted that there have been calls for English to be removed from its position of prominence as if Brexit occurs; Ireland will be the only native English-speaking country left. This argument ignores the widespread role that English has and will continue to have. Expanding cultural exchange programs such as the Erasmus scholarship program for studying abroad would also allow more meaningful cross-cultural communication.

Works Cited

Barslund, M., & Busse, M. (n.d.). Labour Mobility in the EU: Dynamics, Patterns and Policies(Rep.). ZBW – Leibniz Information Centre for Economics. doi:0.1007/s10272-014-0495-x

Corbi, R., & Freguglia, R. (n.d.). Non-monetary Costs of Immigration and Adaptation to the Host Country (Rep.).

Estevão, M. (2002). Belgium : Selected Issues—Regional Labor Markets in Belgium (Country Report No. 02/43, Rep.). IMF.

Eurostat. (2017). Foreign Language Learning Statistics. Retrieved from

Eurostat. (2017). Foreign Language Skills Statistics. Retrieved from

The Economist. (2017, August 26). Eastern Europe’s Wave of Emigration May Have Crested. Retrieved from

Wagner, B., & Hassel, A. (2015). Europäische Arbeitskräftemobilität nach Deutschland (Rep.). Hans-Böckler Stiftung.



Football Finance

By: Damon Aitken

Business is booming in the beautiful game. The recent summer transfer window took team spending to new heights with Paris St. Germain splashing out €222 million ($261 million) on 24-year-old Brazilian forward Neymar. Teams in the English Premier League had a net spend of 1.4 billion pounds; a staggering figure  even in the context of the largesse that has been present in the sport over the past 2 decades. Concepts  from accounting, economic, financial, and international relations theory such as amortization, revenue analysis, and soft power can shed light on why clubs are more successful than others and can spend these large sums.

These eye-grabbing fees are not paid all at once; instead they are amortized over the life of the player’s contract. Therefore, a club is not paying say $30 million at once; they are spreading out the cost so it could be $6 million per year for 5 years (the length of the contract). This is the standard for transfers and lets clubs manage large spending on a relatively sustainable basis. Amortization becomes even more key when analyzing player sales. If we take the example of the player above; selling him after two years leaves $18 million on the club accounts to be paid in the future. If he is sold for more than $18 million, the club will actually be making a profit since they are saving money on future wage and amortization payments. A player cannot be considered a simple employee as they are assets to the club. Balance sheets show players as capital assets and their wages as operating expenses of these assets. This makes sense since it has been shown how important on-pitch performance is for a club’s revenue performance.

The world of football finance is less transparent than in American sports; which have salary cap s and where every transaction is made public. Commonly-used valuation methods focus on profitable companies; but they are hard to apply to football clubs as clubs are not always profitable. A better measure of measuring profitability is using EBITDA (earnings before interest, depreciation, and amortization). Therefore, analysis of the valuations of football clubs focusses on revenue analysis.  There are 3 main forms of revenue for clubs: matchday revenue (ticket sales), TV rights revenue, and commercial revenue. In fact, spending as a percentage of revenue has remained around 15% since the 1990s; which implies that revenue has skyrocketed.

Matchday revenue is not a major component of club revenues anymore. Despite increased ticket prices, Premier League clubs only generated less than 20% of their revenue from ticket sales in the 2015-16 season. The German Bundesliga boasts the highest average attendances of any football league with 41,515 spectators on average during the 2016-17 season. This is mainly due to having the highest average stadium capacity. An increased focus on corporate matchday revenue has been a factor spurring the construction of modern stadiums that have more amenities such as corporate suites. Nevertheless, TV money is far more important to clubs in accruing revenue.

TV deals have skyrocketed in value over the past few decades. The Premier League was founded as an attempt to maximize TV revenue as an independent league that could negotiate its own deals. British broadcasters Sky and BT have been engaged in a bidding war over the lucrative rights to screen matches. They fund these acquisitions by charging increasing subscription fees and since then, it has proved itself to be profitable. International rights also command large fees as there is huge demand for the Premier League around the world. These contribute to the Premier League remaining ahead of its rivals in terms of revenue. The Premier League also distributes broadcast money on a collective basis; where small clubs are guaranteed a relatively large sum. In addition, international TV rights are equally divided among the 20 clubs. This is in contrast to Spain, where the division of revenue on a club-by-club basis has contributed to the Real Madrid-Barcelona duopoly (which Atlético Madrid only managed to break with smart investing and coaching).

One can ask why is the English Premier League so popular internationally? Many reasons exist; including the fact that having English as the language of the league makes it accessible to an international audiences. In addition, British broadcasters exported football around the world even before the Premier League and fanbases are particularly large in former Commonwealth countries.  In lower profile leagues, star players are harder to come by.  PSG had to find other ways to increase its global profile in a league where TV revenue is not so large. High-profile footballers such as Neymar also bring significant commercial clout. By signing Neymar, PSG showed that they could bring one of the most famous players in the world to a league that is often regarded as the weakest of Europe’s 5 big leagues. It is part of the Qatari owners’ attempts to establish Qatar as a leading soft power.

Clubs have also resorted to floating themselves on a stock exchange in order to raise funds but this has been discontinued by many clubs as prices remained stagnant. Stocks are not a good way to generate revenues for clubs for a number of reasons. The performance of clubs can fluctuate and it is not a guarantee that a club will consistently perform at the top of its league. In addition, many clubs do not generate profits; which means a lack of consistent dividends for shareholders. Therefore, clubs have not been able to attract significant investment on the stock market.

In a way, it is a cycle of large clubs generating massive revenues from prize and TV money allied to commercial revenues; who then in turn distribute the money to smaller teams through large transfer fees. Small clubs can use transfer fees to invest in themselves. Spillover effects are not distributed evenly but can boost the whole league if player transfers boost the global profile of the league. It will be interesting to measure the change in global interest in Ligue 1 after the first season with Neymar.

Economic happenings in countries spillover to domestic sports leagues. The declining value of the pound makes it harder for English clubs to buy from European rivals. In addition, the case of a hard Brexit could make the Premier League less competitive as increased immigration controls make buying top European players harder. In addition, football investment from specifically China and the oil-rich states of the Middle East can be seen as attempts to exert geopolitical soft power as they seek to increase their reputation and global influence. Seeing a country’s involvement in football can boost its profile among a truly global audience.

Though this global engagement and increased revenue have boosted revenue streams; the business side of football needs to continue to adapt and innovate. TV Viewership figures are decreasing in the age of streaming so TV companies will either have to adapt or clubs will have to find alternative ways of reaching paying fans. In addition, clubs need to take care by not alienating their fans in order to attract greater and greater revenue returns. Historically working- class clubs charging higher ticket prices are already facing backlashes from fans in England. Sustainable revenue growth must pay attention to fan needs and desires if clubs are to continue their stratospheric spending levels in the future.


Works Cited

Cohen, J. (2016, August 24). Transfer window: exposing the widely held myths about how clubs sign players. Retrieved from

The Economist. (2017, August 12). Why the world’s best footballers are cheaper than they seem. Retrieved from

Elder, R. (2017, June 15). The Premier League viewership dip bodes ill for live sports on TV. Retrieved from

Kazeem, Y. (2016, February 9). English soccer fans pay the most in Europe for ticket prices—now they’ve had enough. Retrieved from

Morrow, S. (1996, December). Football Players as Human Assets. Measurement as the Critical Factor in Asset Recognition: A Case Study Investigation [Scholarly project]. In ResearchGate. Retrieved from

Sarkar, N. (2017, May 31). Why have football clubs failed in the stock exchange? Retrieved from


CES 2017: The Latest Innovations from the Tech World


“The Future of Lifestyle Technology is voice-controlled and automated.”

By Damon Aitken

    CES 2017 showed off plenty of gadgets, and provided a view of how tech companies imagine we will live in the future. Consumer electronics is shifting from entertainment to lifestyle essentials, as they are becoming a ubiquitous part of our everyday lives whether it be in the home or in our cars.

    Voice technology is seen as the future method of user interaction. The January 7th-13th issue of Economist may have featured voice control as its cover story, but the technology still has some hurdles to overcome . Voice control still struggles in noisy, or inappropriate, environments, and the technology can have difficulty with strong accents or unsupported languages. Though, the tech industry is constantly attempting to find solutions. One startup, Knocki, provided an alternative, which allows users to tap a surface such as a desktop to execute commands. For example, the sensor could pick up a tap on a dining room table and turn on the room lights. The success of Amazon Echo demonstrates however that voice technology has huge demand among consumers (5.2 million in 2016).

    Voice control technology has been extended to other technologies too. For example, one company developed a talking solar panel that provides varied responses to the same command. Solpad, the firm that produced the panel, presented ideas that aim to provide more fluid communication between users and machines. These ideas can be promulgated among different user devices.

    Outside of home devices, autonomous cars were a big theme, with major car manufacturers presenting their takes on self-driving cars. One of the most striking innovations was Toyotas i Concept ( is the Japanese kanji for love). The slick presentation imagined a future where car AIs are personalized to each user. They would learn user preferences and use an in-car camera to detect facial expressions to determine the drivers emotional state. This is different to another view of autonomous cars, in which car ownership will cease to exist and everyone will use a taxi service. Another major manufacturer that believes in personalized cars is Chrysler. They demonstrated a moddable interior that uses exterior cameras to recognizes users as they get in and provides personalized media to each passenger seat with its own screen.

    Two other well-represented areas of tech were smart homes and robotics. Smart homes are essentially devices that have automated tech inside them, which allow users or an AI to control functions in one’s house. Voice control is a key way to input commands. Current smart home devices are often rather piecemeal; wifi-connected dongles that connect into power plugs. Firms displayed visions of smart tech built into the house itself and suggested that future new homes will be built specifically for this form of technology. Smart homes could dovetail with robots in the future; robots are becoming ever more capable of interacting with humans. One Chinese-built robot could give sassy retorts in Mandarin before following instructions.  

    CES 2017 gave glimpses how modern technologies will be further integrated into our lives, but the current U.S. Administration will introduce more exogenous uncertainty. Rhetoric about about a potential trade war with China could have repercussions for the consumer electronics industry. Higher tariffs on goods manufactured in China would affect a vast swathe of electronics products. Cities like Shenzhen, in Chinas Pearl River Delta, have built up expertise in electronics manufacturing, which combined with low-cost but skilled labor, has made them massive producers. China has huge potential advantages for its tech industry in its massive potential human capital and sheer size. In addition, the cheap production costs mean that Chinese companies can produce far cheaper goods. One example is that of Huawei which produces affordable smartphones that rival American manufacturers in build quality. Its Honor line of smartphones were on show at CES and impressed many media outlets with their build quality, UI, and low price.

    Chinese companies rarely used to be represented, but now comprise a significant proportion of companies present at CES. Though the United States still has a massive influence on the innovation occurring in the industry, international firms are also providing their own innovations as well. Francois Fillon, a candidate for the French Presidency, dropped in for a talk with Techcrunch. German firms continue to be represented in manufacturing realms. A French smart home concept employed machine learning to help the AI learn user routines to do things such as open the blinds at a certain time. Japanese and Korean firms continue to produce their popular products. Panasonic presented a smart kitchen with transparent screens displaying recipes and a countertop that could also be used as a stove.  An overseeing program would inform users what remained in their fridge and compose recipes based on that information. Samsung also presented a wide range of products ranging from new phones to ultra-modern washing machines.

    Though the devices showcased were futuristic, consumers will be inhibited by one key factor in choosing which device they want to buy: price. The tech industry has faced criticism for exacerbating income inequality. The vast majority of those displaced by gentrification in Silicon Valley will not be able to afford the technologies on display today. There is also the tendency for the tech industry to favor monopolies and benefit the better educated. In order for consumers to adopt what Silicon Valley is pitching as the lifestyle of the future, costs will have to drop significantly before they become truly widespread and enhance the way we all live.


Image Source:
Dunn, Jeff. “It’s been a good year for the Amazon Echo.” Business Insider. Business Insider, 28 Dec. 2016. Web.
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The Importance of Regulating High-Frequency Trading

High-frequency trading is a new trading mechanism that, unregulated, poses a danger to healthy markets.

By Damon Aitken

    Technology has allowed financial markets to act more efficiently than ever before. However, there are new risks that must be taken into account. High-frequency trading , a form of algorithmic trading that uses high speeds, powerful computers, frequent turnover and rapid trades, to exploit small mispricings and arbitrages in financial markets across the world. Using very powerful and complicated algorithms and by co-locating near execution centers such as stock exchanges, HFT firms execute trades in less than milliseconds. Shaving even fractions of a millisecond of a trade has the potential to get ahead of competitors, and has driven firms to reduce latency between transmission of a trade and its confirmation.

    Trading algorithms can range from simple to complex. Simple ones involve arbitrage; exploiting differences in pricing of stocks from their true, intrinsic value. Others algorithms are designed to hurt the competition such as programs that analyze rival trades and trade speed to undercut them. One such strategy is spoofing, where firms make deceitful and fake trades aimed at influencing rivals. Even though spoofing is highly illegal and is enforced by the Dodd-Frank Act, it is often hard to prove due to the speed and complication of the algorithms. It took over 5 years to bring charges against Navinder Singh Sarao, the trader responsible for the 2010 Flash Crash.

The success of HFT firms shows that there is massive potential for disrupting traditional forms of trading. Websites such as Quantopian give retail users the tools to create their own successful algorithms. This form of crowd-sourcing has the potential to let investors truly make their own custom investment choices. However, the dark side to this freedom is that markets could become much harder to regulate. Furthermore, individuals with faulty, but powerful, algorithms have much greater potential to cause market crashes and dislocations.

    When an algorithm fails, it can lead to massive crashes often due to simple glitches or typos. One famous incident was in 2012 when a program created by Knight Capital Group lost $440 million. Defective code was left in an untested program and the program bought shares at market prices repeatedly. Each stock has a different bid and ask price, which refer to the price that shares are bought and sold at, with the ask price usually above the bid price. The difference is usually very small, but allows market-makers to profit off a small spread. The faulty algorithm bought shares at the offer price and sold at the bid price repeatedly; this small difference of a few cents multiplied exponentially. The high frequency of trades led to tremendous losses very quickly.

    Applying specific circuit breakers to algorithms that stop algorithms making suspect trades is a potential regulatory step. This would require further algorithms that monitor trades in the market. Firms can also do their part in testing algorithms more rigorously. Large firms such are not immune to these oversights; exemplified by an error at Goldman Sachs in 2013 that led to a $100 million loss. Andrew Haldane, the executive director for financial stability at the Bank of England, suggested a tax on transactions that are canceled before execution. Regulators in the US have implemented circuit breakers to halt trading of stocks that move more than a certain percentage up or down; however, this oftentimes is triggered at the wrong times and halts legitimate trading. Even worse, the lack of liquidity that is created when these triggers catch sometimes cause even greater price decreases due to investor panic and confusion.

    The world of algorithmic trading and high-frequency trading requires more oversight if markets are to avoid preventable errors in code or design. However, predatory algorithms like spoofers are not only unethical but can lead to crashes as well. Regulating them is challenging, but necessary as technology saturates the financial sector. Germany implemented a regulatory policy in 2013 that makes firms tag their trading algorithms. This allows algorithms to be identified but there are naturally issues with monitoring so many transactions at once. Reports have found that this regulation has had positive effects in shifting the culture in the industry towards compliance. To ensure compliance with US trading laws and to reduce unfair trading advantages, the SEC has worked with different exchanges around the country to enforce speed limits on trades, and create less-intrusive switch breakers that can preempt trading glitches and avoid market dislocations. These laws are still being tested and have many flaws, as traders are able to quickly alter their algorithms to sidestep any legislation. However, by working with trading houses and exchanges, the SEC is able to enact and enforce much more tenacious regulation than ever before.


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Universal Basic Income: A Development Policy

October 4th 2013 A celebration of the successful collection of more than 125,000 signatures, which forced the government to hold a referendum on whether or not to incorporate the concept of basic income in the Federal constitution. Source:

By Damon Aitken

The possibility of a Universal Basic Income (UBI) has become a hot topic in the political and economic world. Supporters have risen from across the ideological spectrum, touting it as the solution to poverty. Switzerland held a referendum in June on the issue, and although it was rejected by the Swiss people 78% to 22%, it has sparked increasing discussion and was a significant step for the UBI movement. However, what if the UBI was not just a social welfare replacement for developed countries such as Switzerland, but a way out of poverty for the populations of developing countries?

The main idea is that instead of the complex welfare and social benefit systems governments currently run, the governments will pay out a monthly income to citizens, funded by taxes. The main argument against the UBI comes as people believe that such a payment will serve as encouragement for workers to leave the labour market. However, a recent MIT study in 7 randomized trials found that direct cash transfers did not lead to decreased participation in the labour market.

Moving this theoretical construct into practice, however, will require policy experiments on a smaller scale that tests the feasibility. To this regard, the World Bank conducted three experiments to test the feasibility of such a system; in Brazil, Namibia and India.

Since 1996, Brazil has implemented programs in some form or another which incentivise families to keep their children enrolled in school, mostly through direct cash transfers. A study conducted in 2003 found that this program increased school enrollment and attendance, but were too small to mitigate the problem of child labour. Nevertheless, almost a quarter of the Brazilian population could be counted as beneficiaries of the program by 2012 and has been a part of the decline in the Brazilian Gini coefficient, a measure of income inequality by 0.062 from 2003 to 2012. The current government has not expanded the program to a true basic income and given the turmoil in Brazil at the present both politically and economically; it is doubtful that it will happen in the next few years as funding will be short.

Give Directly is a non-profit founded by economics professors from UCSD and MIT that gives unconditional cash transfers to poor people in Kenya and Uganda. They are planning an experiment in which they will provide 6,000 Kenyans with a basic income lasting from 10 to 15 years. The results will be closely tabulated and monitored to see if this model can truly be a successful poverty reduction scheme. The co-founder Paul Niehaus said, I do think the political opposition to UBI rests on some pretty strongly held beliefs about human nature – other people are irresponsible, we can judge better what’s best for them – that this project will speak to, and at least force a closer examination. The Give Directly project is similar to previous projects carried out by numerous NGOs in India that lead to positive results such as healthier recipients, higher school attendance, greater investment in tools, and increased empowerment of female recipients.

The use of UBI in Namibia was spearheaded by a Coalition of Namibian NGOs from 2008 to 2010. 930 people took part and received about $12.40 a month. The low cost of living in many developing countries means that the cost on the donor’s side would remain quite low. An important positive effect was that social relations among the villagers in the project improved as they longer had to beg others for essentials.

The evidence from the experiments done so far show that UBI as a key part of developmental policy can lead to positive results but the question is now how to implement it. The cash involved will not be as much per person as would be required in richer countries. Excellent record-keeping is certainly required and technological innovations such as biometric identification and banking apps can lead to better results as they will help prevent fraud and provide easier access.


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