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- 29 Apr 2009
- Working Paper Summaries
Female Empowerment: Impact of a Commitment Savings Product in the Philippines
Does access to personal savings increase female decision-making power in the household? The answer could be important for policymakers looking to increase female empowerment. HBS professor Nava Ashraf and colleagues developed a commitment savings product called a SEED (Save, Earn, Enjoy Deposits) account with a small, rural bank in the Philippines. The SEED account requires that clients commit not to withdraw funds that are in the account until they reach a goal date or amount, but it does not explicitly commit the client to continue depositing funds after opening the account. This working paper examines the impact of the commitment savings product on both self-reported decision-making processes within the household and the subsequent household allocation of resources. Key concepts include: The commitment savings product positively impacts household decision-making power for women (i.e., the household is more likely to buy female-oriented durables) and self-perception of savings behavior (time-inconsistent females report being more disciplined savers), as well as actual consumption decisions regarding durable goods. A simple design feature such as a restriction on withdrawals or encouraging savings through marketing or door-to-door deposits can benefit women in search of self-control devices as well as those who desire to have more decision-making power in the household. Closed for comment; 0 Comments.
- 22 Apr 2009
- Working Paper Summaries
Where is the Pharmacy to the World? International Regulatory Variation and Pharmaceutical Industry Location
The era of paternalistic medicine has passed, but the notion that patients can act as consumers and make appropriate decisions concerning medical treatment poses countervailing risks of its own. A better accommodation among key players needs to be struck to foster the safe use of pharmaceuticals, according to HBS professor Arthur Daemmrich. The "pharmacy to the world," once located at the intersection of Germany, Switzerland, and France, today is found in the United States. Studies of the industry have attributed this sustained competitive advantage to a variety of factors, including U.S. intellectual property policies, funding for biomedical research through the National Institutes of Health, the absence of government controls on drug prices, and the availability of venture capital and other factors that fostered the growth of the biotechnology industry. The data and analysis presented in this working paper, however speculative, are an initial step toward deepening the understanding of interrelationships between government regulation, patients' mobilization both as regulators and as consumers, and the functioning of the pharmaceutical industry. Key concepts include: An open question is whether the current "pharmacy to the world" of the United States will lose ground to competitors from developing countries, especially India and China. Regulation plays a role in the success and failure of the pharmaceutical industry. The consumer mode that has emerged in the United States has proven easy to manipulate for the industry, as in cases of corporate-financed organizations claiming to be self-organized by patients. The consumer mode in the United States has also driven a focus on disease prevalent in wealthy countries, to the detriment of research into HIV/AIDS, malaria, and other ailments prevalent in the developing world. The combination of public attention to drug prices, health concerns from product withdrawals due to adverse reactions, and criticisms of the failure to deliver medicines to patients in developing countries pose significant challenges to the industry and regulators. The emergence of a consumer model of regulation poses a number of critical, unresolved questions about the longer-term role of government, industry, the medical profession, and citizens. Closed for comment; 0 Comments.
- 30 Mar 2009
- Research & Ideas
Professional Networks in China and America
While American managers prefer to separate work and personal relationships, Chinese counterparts are much more likely to intermingle the two. One result: Doing business in China takes lots of time, says HBS professor Roy Y.J. Chua. Key concepts include: It generally takes much longer to build trusting business relationships in China than in the United States. When cultivating business relationships in China, American managers may want to know as many people in the Chinese counterpart's network as possible. Closed for comment; 0 Comments.
- 26 Mar 2009
- Working Paper Summaries
The Bloody Millennium: Internal Conflict in South Asia
What accounts for the disturbing trend of increasing terrorism and associated fatalities in South Asia? In 2007, a quarter of all terrorist attacks worldwide were committed in South Asia, second only to Iraq. HBS professor Lakshmi Iyer presents the first comprehensive analysis of internal conflict in South Asia using multiple data sources and incorporating a long-run time frame. She finds that the intensity of internal conflict in the post-2001 period is strongly associated with poverty, both in a cross-country comparison and in a comparison of districts within India and Nepal. Measures implemented by regional and national governments to combat internal violence vary considerably across countries and over time. Typically, the use of military force or relying on unofficial militias has not proved to be a successful counterinsurgency tactic in South Asia; strengthening police activity and using a political accommodation approach has led to some successes in the past. Key concepts include: Since 2001, incidents of terrorism and associated fatalities have been rising steadily in South Asia. The increasing trend in incidents of terrorism and associated fatalities is observed primarily in the economically lagging regions of South Asia. There is a clear difference in conflict trends in leading and lagging regions. Economic backwardness can have adverse security consequences in the long run. Global events are likely to increase conflict within individual countries. Closed for comment; 0 Comments.
- 11 Mar 2009
- HBS Case
The Energy Politics of Russia vs. Ukraine
A recent Harvard Business School case looks at Russia's decision in 2006 to cut off supply of natural gas to Ukraine's energy company—a move repeated this year. Is Russia just an energy bully? Students of professor Rawi Abdelal learn there is nothing black and white when it comes to Russia's energy politics. From HBS Alumni Bulletin. Key concepts include: The Western notion that Russia uses energy as a weapon is a media oversimplification of very complicated politics. Gazprom is the country's single most important company and biggest taxpayer. Because natural gas is much cleaner than oil or coal, Europe will likely become even more dependent on Russian gas. Energy can be a tool for influence but it's not an effective tool for domination. Russia will be in trouble if Europe decides to stop buying Russian gas. Closed for comment; 0 Comments.
- 29 Jan 2009
- Working Paper Summaries
An Exploration of the Japanese Slowdown during the 1990s
Why was the 1990s a lost decade for Japan? HBS professor Diego Comin argues that it was the combination of some shocks that lasted for about three years and the response of companies that drastically reduced their expenses in adopting new technologies and developing new ones. Though the severe shocks that hit the Japanese economy did not persist, the investments that Japanese companies and entrepreneurs did not undertake to improve technology and production methods during the 1990s propagated those shocks and made their effects very long-lasting. Key concepts include: Technology adoption decisions by firms are a powerful force in propagating shocks and making their effects very persistent. This explains why shocks that lasted for about three years generated a productivity slowdown over a decade. This same model accounts for economic fluctuations in the U.S. In light of this, a critical factor to predict the macro consequences of the current financial crisis in the U.S. is the persistence of the shocks. Since the current shocks are unlikely to last for three years or so, it is unlikely that the U.S. experiences a "lost decade." Closed for comment; 0 Comments.
- 06 Nov 2008
- Working Paper Summaries
Extending Producer Responsibility: An Evaluation Framework for Product Take-Back Policies
Managing products at the end of life (EOL) is of growing concern for durable goods manufacturers. While some manufacturers engage in voluntary "take back" of EOL products for a variety of competitive reasons, the past 10 years have seen the rapid proliferation of government regulations and policies requiring manufacturers to collect and recycle their products, or pay others to do so on their behalf. Toffel, Stein, and Lee develop a framework for evaluating the extent to which these product take-back regulations offer the potential to reduce the environmental impacts of these products in an effective and cost-efficient manner, while also providing adequate occupational health and safety protection. The evaluation framework is illustrated with examples drawn from take-back regulations in Europe, Japan, and the United States. Key concepts include: The authors identify key policy levers that promote cost efficiency while reducing risks to the environment, public health, and the workers involved in recovery operations. Key policy decisions include setting the scope of manufacturer responsibilities, the stringency of recovery and recycling targets, design-for-environment requirements and substance bans, restrictions on when customer fees can be imposed, and limitations on the industrial organization of the recycling market. Closed for comment; 0 Comments.
- 30 Oct 2008
- Working Paper Summaries
Do Voters Appreciate Responsive Governments? Evidence from Indian Disaster Relief
In a functioning democracy, politicians' ability to win reelection declines when they perform poorly. This idea fits well with models of political accountability. Recent evidence suggests, however, that voters may punish politicians even for events outside their control. This behavior may violate standard models of democratic accountability, and has been advanced as evidence of voter irrationality. This paper uses detailed weather, electoral, and relief data to identify the relationship between government responsiveness to an emergency and electoral decisions. Specifically, the authors look at the decisions that Indian voters made in provincial elections, using the intensity of the monsoon rains as an exogenous shock to welfare. They find that voters, on average, punish incumbent politicians for being in office during weather events beyond their control. However, the degree of voter punishment is reduced somewhat when the government responds more vigorously to the crisis. Key concepts include: Voters do a better job of holding governments accountable during these emergencies. Voters punish politicians following adverse weather events, but the degree of punishment depends critically on the quality of the ruling party's response: Those distributing greater amounts of relief aid suffer smaller subsequent electoral losses. Closed for comment; 0 Comments.
- 25 Sep 2008
- Working Paper Summaries
The Cost of Property Rights: Establishing Institutions on the Philippine Frontier Under American Rule, 1898-1918
Economists generally agree that a system of transparent and secure property rights is beneficial for growth and development. A large literature emphasizes the role of property rights in spurring long-term investments, improving productivity, changing labor allocations, and increasing access to formal sources of credit. This paper describes U.S. attempts to implement property rights reforms in the Philippines in the early twentieth century. Iyer and Maurer document that, two decades after the arrival of the Americans, property rights in the Philippines had become unambiguously less secure, and that political and budgetary constraints played a large role in inhibiting the progress of reforms. Key concepts include: Lacking sufficient revenue and unwilling to pay certain political costs, the insular government settled for a very slow pace of progress in property rights reforms. As a result, the Philippine agricultural frontier expanded in a chaotic and unordered manner, which may have contributed to the agricultural unrest of the post-independence era. Closed for comment; 0 Comments.
- 21 Aug 2008
- Working Paper Summaries
Traveling Agents: Political Change and Bureaucratic Turnover in India
Politicians and bureaucrats are two important pillars of governance, but while politicians are motivated by short-term electoral pressures, bureaucrats are driven by long-term career concerns. This difference in the nature of their incentives is, in most cases, deliberate and constitutionally provided for. Iyer and Mani address two key questions in this paper: How do politicians facing short-term electoral pressures control bureaucrats with low-powered incentives? In turn, how do bureaucrats respond to these incentives? The authors develop a simple framework and provide empirical evidence on both the politicians' and the bureaucrats' strategies, using a detailed data set on the entire career histories of officers in the Indian Administrative Service, the top layer of government bureaucracy in India. Key concepts include: The framework suggests that instituting limits to a politician's power to transfer bureaucrats across posts will favorably affect junior officers' incentives to invest in expertise. In India there is significant political influence on the bureaucracy through frequent transfers of bureaucrats across posts, despite the constitutional insulation provided to them against political pressures. Not all officers face the same odds of being transferred. High-skilled officers are much less likely to be transferred by an incoming politician and have more even career paths. Belonging to the same caste as the politician's party base was a factor that helped officers to secure more important posts. Closed for comment; 0 Comments.
- 06 Aug 2008
- Research & Ideas
Are the Olympics a Catalyst for China Reforms?
By hosting the Summer Games, China is putting itself at the center of the world's stage, a position some reformers would like to leverage to spark human rights improvements in the country. Can outsiders influence Chinese policy? Not without help, says HBS professor Tarun Khanna. Closed for comment; 0 Comments.
- 06 Aug 2008
- Working Paper Summaries
Fixing Market Failures or Fixing Elections? Agricultural Credit in India
There are strong theoretical reasons to believe that politicians manipulate resources under their control to achieve electoral success. Yet, compelling examples of this manipulation are heretofore rarely documented in scholarly literature. Cole's paper presents evidence that government-owned banks in India serve the electoral interests of politicians. It also analyzes how resources are strategically distributed. Key concepts include: Findings show that the costs of redistribution are considerable: The estimated effect of 5 to 10 percent higher levels of credit in election years is substantially larger than the average annual growth rate of credit. Efforts to isolate government banks from political pressure, as is done with many central banks, may reduce these effects. Agricultural credit lent by public banks is substantially higher in election years. More loans are made in "swing" districts in which the ruling state party had a narrow margin of victory (or a narrow loss) than in less competitive districts. This targeting is not observed in nonelection years or in private bank lending. Closed for comment; 0 Comments.
- 22 Jul 2008
- Working Paper Summaries
Financial Development, Bank Ownership, and Growth. Or, Does Quantity Imply Quality?
Government ownership of banks, a common phenomenon, is among the most important policy tools used to influence financial development. But what is the actual effect of such ownership on the financial development of a country? This paper uses a policy experiment in India to evaluate the effect of government ownership of banks on development. Key concepts include: Had the Indian government required bank expansion into rural areas and set lending targets, without nationalizing banks, rural areas might have achieved the same, or better, outcomes. Despite a substantial increase in agricultural credit, there is no evidence of improved agricultural outcomes in markets with nationalized banks. Bank nationalization may have slowed the growth of employment in the more developed sectors of trade and services. Closed for comment; 0 Comments.
- 04 Jun 2008
- Working Paper Summaries
Accountability and Inequality in Single-Party Regimes: A Comparative Analysis of Vietnam and China
While both China and Vietnam have experienced rapid annual growth over the past two decades, income inequality has risen more rapidly in China than in Vietnam during the same period. Structural and socio-cultural determinants fail to account for these divergent paths, as nearly every variable predicts higher inequality in Vietnam. This paper by Regina Abrami and colleagues focuses on differences in political institutions to explain these divergent paths. In so doing, it contributes to a growing body of literature describing variation in authoritarian regimes, but focuses on variation within one authoritarian regime type. Key concepts include: Compared with China, Vietnam's institutions empower a larger group of insiders and place far more constraints on the party leadership, both through vertical checks and through semi-competitive elections. As a result, Vietnamese economic policies must consider a larger cross section of society. Vietnam spends a far larger portion of its revenue on transfers, and has been able to engender greater equalization among provinces and individuals. It is still too early to tell whether the development paths in China and Vietnam will converge or diverge. Growing income inequality has pressured the Chinese government to shift its focus from promoting all-out economic growth to solving social tensions. Closed for comment; 0 Comments.
- 02 May 2008
- What Do You Think?
What is the Future of State Capitalism?
In state capitalism, is the operative word "capitalism"? State capitalism is neither to be applauded nor feared, judging from the tone of responses to May's column. Jim Heskett sums up. Online forum now closed. Closed for comment; 0 Comments.
- 01 May 2008
- Research & Ideas
The Marketing Challenges of the China Olympics
The Olympic Games are normally a marketer's dream. Not so much this year, given widespread protests against the Chinese government. Professor John Quelch outlines the branding challenges posed by this year's Games in Beijing. Key concepts include: Political pressure directed at the Chinese government will also pose challenges for Olympic Games sponsors, who don't want to be associated with the controversy. Given the prominence of China as a supplier and customer, it is unlikely that we will witness grandstanding boycotts of the Games by any company. Some marketers are employing a dual marketing approach, with China-specific campaigns inside the country but less Beijing-centric messaging outside. Marketers are not over-committing funds to Olympics-related brand advertising and promotions. The normal Olympics year advertising boost may be less than expected. Closed for comment; 0 Comments.
- 26 Mar 2008
- Sharpening Your Skills
- 28 Feb 2008
- Working Paper Summaries
Colonial Land Tenure, Electoral Competition and Public Goods in India
How is the impact of historical institutions felt today? This comparative analysis by Banerjee and Iyer highlights the impact of a specific historical institution on long-term development, specifically the land tenure systems instituted during British colonial rule. The paper compares the long-term development outcomes between areas where controls rights in land were historically given to a few landlords and areas where such rights were more broadly distributed. The paper also documents the impact of these differing historical institutions on political participation and electoral competition in the post-colonial period. Key concepts include: There are large differences in the development trajectories of areas that had different land tenure systems under British colonial rule. In particular, areas that were put under the control of landlords lag behind in the provision of public goods such as schools and roads compared with areas in which control rights in land were given to small cultivators. These differences are discernible even four decades after the end of colonial rule, and three decades after the landlord-based land tenure systems were officially abolished. Political participation and literacy levels are lower in landlord areas, but these differences are not sufficient to explain the differences in public goods provision. Closed for comment; 0 Comments.
- 04 Feb 2008
- Research & Ideas
Podcast: The Potential Partnership of India and China
Even without cooperation between them, China and India appear headed toward economic superpower status in the coming decades. But what if they worked together? In this podcast, Harvard Business School professor Tarun Khanna discusses the possibility of Sino-Indian cooperation and its impact on global business. Closed for comment; 0 Comments.
Capitalizing On Innovation: The Case of Japan
How can Japan create a better business environment for innovation? Japan presents a unique case of industrial structures that have produced remarkable developments in certain sectors but seem increasingly inadequate to do the same in modern technology industries, which rely on ecosystems of firms producing complementary products. Robert Dujarric and HBS professor Andrei Hagiu present three case studies of software, animation, and mobile telephony to illustrate potential sources of inefficiencies. Like all advanced economies, Japan faces two interconnected challenges. The first challenge is rising competition from lower-cost countries with the capacity to manufacture midrange and in some cases advanced industrial products. At the same time, Japan confronts changes in the relative weights of manufacturing and services, including soft goods, which go against the country's long-standing competitive advantage and emphasis on manufacturing. If Japan is to continue to prosper in a world where its ability to rely principally on manufacturing will diminish, its policymakers will need to capitalize on its untapped innovative power. Key concepts include: The Japanese hierarchical industry organizations can simply "lock out" certain types of innovation indefinitely by perpetuating established business practices. This is the case with software, an industry in which Japan is strikingly weak. Even when vertical hierarchies produce highly innovative sectors in the domestic market—as is the case with animation and wireless mobile communications—the exclusively domestic orientation of the "hierarchical industry leaders" can entail large missed opportunities for other members of the ecosystem, who are unable to fully exploit their potential in global markets. Private-sector initiative is critical in developing the venture-capital sector, which is a key and necessary ingredient for stimulating innovation in modern industries. Closed for comment; 0 Comments.