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Economics

Research Presentation Video

Click to watch Rebecca Thornquist '14 discuss her research project.

Mapping Global Savings Mechanisms — Bangladesh

Emily Brotman (2013); Mentor(s): Tahir Andrabi

Abstract: Rural poor populations in Bangladesh demonstrate remarkable ingenuity in the management of their meager incomes, particularly in their capacity to save. Working for the research group, Innovations for Poverty Action (IPA) as one of 17 interns placed in 11 different countries, I helped develop a quantitative survey to collect information about the costs, returns, and risks of the various savings arrangements used by the world's poor. I adapted the questionnaire to Bangladesh and surveyed fifty randomly selected households in the sub-district of Tanore. The purpose of this research is to identify the strengths and weaknesses of the financial tools already available to the poor. Should aid foundations invest more money in microfinance or are the existing solutions sufficient? What can a semi-formal financial institution provide that an informal village savings group cannot? These are the kinds of questions this study hopes to inform. Data analysis will be conducted by IPA over the next few months using the information collected this summer.
Funding Provided by: Pomona College SURP; Pomona College Economics Department; Pacific Basin Institute

Primary and Secondary School Interventions in Pakistan

Gabriela Hybel (2013); Mentor(s): Tahir Andrabi

Abstract: In the past few decades organizations have increasingly taken up the cause of improving primary and secondary education within majority world countries. One such country with a high demand for improved education is Pakistan. Disparities between female and male school enrollment continue, and students who do attend school frequently encounter poorly trained teachers and an environment that is not conducive to learning. In response, Development in Literacy (DIL) was created by a group of Pakistani Americans to focus on educating those most in need, primarily girls in remote regions of the country. Today 17,062 students are attending DIL schools. With this attention on education, there is a need for formal and complete evaluations on effective models for implementing schools in countries such as Pakistan. With this demand in mind, this research uses DIL as a starting point to further the current literature on successful methods of school improvement. It focuses on various DIL school interventions, including teacher training, curriculum development, school management, IT support, and community outreach. This research was conducted through numerous interviews with DIL directors and a review of key DIL documents to understand the models and practices used by the organization. It provides a starting point from which future evaluations and studies can potentially be carried out.
Funding Provided by: Faucett Catalyst Fund

Analyzing Education Trends in Pakistan

Joshua Rosenberg (2013); Mentor(s): Tahir Andrabi

Abstract: My project used the newest rounds of household and school-level data from the “Learning and Educational Achievement in Pakistan Schools” (LEAPS) project to analyze various aspects of education in Pakistan. One part of my project involved using STATA and regression analysis to analyze the trends and determinants of pre-school enrollment over time. Some have theorized that pre-school enrollment in Pakistan is increasing because private schools have been able to provide pre-school education cheaply while remaining profitable. However, I found that pre-school enrollment, as a percentage of total enrollment, has not increased in the last 5 years and that private schools have not offered proportionally more pre-school services than public schools. I also found that younger children were more likely to enroll in private schools. To determine causes of enrollment, I constructed variables for parents’ education level, parents’ time use, household wealth, and household demographics, but my regression analysis was inconclusive.
Funding Provided by: Pomona College SURP

Recession Blues: Do Economic Conditions Affect Music Preferences?

Samuel Antill (2013); Mentor(s): Eleanor Brown

Abstract: In this work, I examine the relationship between economic conditions and the market for popular music. While some forms of entertainment, such as movies, immerse the consumer in a prolonged, multisensory experience that offers an escape from daily life, popular music is an expressive art form that is more likely to be chosen based on the listener's mood . I hypothesize that the relative popularity of sad songs increases during economic downturns. To test this, I use the One Million Song dataset to obtain characteristics of a large sample of songs published between 1922 and 2010. Using mode as a proxy for the mood of the song, a song is classified as sad if it is minor and happy if major. I test whether changes in the mood of popular music can be explained by recessions or general economic conditions. Preliminary results suggest that economic downturns have a significant positive correlation with the proportion of contemporary songs that are sad. In addition to a cyclical pattern in the demand for sad songs, my results confirm a recent study’s finding that popular music is getting sadder over time.
Funding Provided by: Paul K. Richter and Evalyn E. Cook Richter Memorial Funds

Parks and Preserved Open Space as Real Estate Amenities

Rebecca Thornquist (2014); Mentor(s): Eleanor Brown

Abstract: Real estate sales data from the Washington, D.C. metropolitan area is used to estimate the effects of proximity to parkland on real estate prices. I use GIS software to measure the exact distance in feet from homes to park boundaries, grouping parks into 4 size categories. I include unrelated demographic and housing characteristic variables to control for other influences. I find that I find that parks with areas of less than 2 acres are not positively correlated to real estate prices. For parks above 2 acres, sale prices increase between $45,038/mi and $81,312/mi with proximity to parks.
Funding Provided by: Schulz Fund for Environmental Studies

Adaptive Market Synthesis: Theory and Application

Zihao Song (2013); Mentor(s): Gabriel Chandler; Pierangelo De Pace

Abstract: I formalize a theory of adaptive market synthesis that tries to address two problems in economic modelling. First, optimization is hard. Perfect rationality implies optimizing behavior. But in reality we can only solve a very small number of optimization problems, and we hope to “progressively” learn how to solve others. Thus bounded rationality leads to suboptimal behavior. Second, learning does not simply happen in a “progressive” manner. Since knowledge is a set of concepts rather than facts, knowledge doesn't necessarily accumulate as facts accumulate. ``Progressive'' learning needs a common frame of reference for any observer to compare models of reality. I provide a statistical theory such that models from any function space can be compared based on metrics such as bias (subjective error) and variance (random error). I present empirical results that show a low-bias non-linear model with a low-variance numerical solution can consistently generate ex ante positive excess returns on equity indices, given historical prices.
Funding Provided by: Faucett Catalyst Fund

A Comparison of RMB with Other Major Currencies in Forex Market

Shiwei Zhang (2014); Mentor(s): Pierangelo De Pace

Abstract: When compared with other major currencies, RMB displays behavior with least appearance to a random walk. The first part of the research examines RMB/USD exchange rate since 2000 using ARMA and PPP (Purchasing Power Parity) models. We find that among predictions for all the major currencies, RMB/USD rate is the least accurate, by a factor of 2 or 24 even more. The second part of the research examines the reaction of RMB in Forex market when there is a shock in domestic monetary policy. In most free economies, currency depreciates when monetary policy loosens, and appreciates when tightens. In China however, we find no statistically significant change in RMB value when monetary policy changes. The above results reaffirm that RMB is a tightly controlled currency. The second result also raises concern to the claim of “undervalued” RMB—with a loose monetary policy for 10 years, is RMB now undervalued or overvalued?
Funding Provided by: Pomona College SURP

An Examination of Income Tax Overwithholding

Ashvin Gandhi (2013); Mentor(s): Michael Kuehlwein

Abstract: In 2004, 77% of people left themselves an average of $2,100 less in their pockets over the year by overwithholding on their income. While they do get this money back in the form of a tax refund, they miss out on interest they could have earned throughout the year. Worse yet, low income taxpayers (who are most likely to overwithhold) are sometimes forced to take out high interest consumer loans to pay for day-to-day expenses. We investigate possible causes for this phenomenon. We reexamine the hypothesis that income tax overwithholding can be explained as a taxpayer's response to uncertainty in income and allowances under threat of penalty. We adjust the models used to justify such a conclusion to account for interest accumulated on underwithheld income, enforce boundary conditions, adjust for appropriate income variability, and incorporate relevant tax rules when determining the expected refund rate. We find that each of the aforementioned weakens the conclusion that income tax overwithholding is a response to uncertainty. Further, we use a panel of tax returns to test the alternate hypotheses that overwithholding is driven by other phenomena, such as mental accounting and the default effect.
Funding Provided by: Pomona College SURP

Aspirations and Educational Attainment in Poor Communities

Maria Zhu (2013); Additional Collaborator(s): Shalaija Fennell*; Mentor(s): Fernando Lozano
*Cambridge University

Abstract: This project focuses on developing a better understanding of the role of aspirations in educational outcomes in poor communities, using both quantitative and qualitative data from Pakistan. Aspiration is defined as goals and hopes regarding educational attainment, which encompasses a variety of factors such as school type and quality, purpose of school achievement, and the ways educational achievement shape an individual’s views for their future. Existing economic literature on the topic measures aspirations in terms of income and savings, as a level of material satisfaction of needs and wants. However, these income models are less relevant for developing nations, where poverty is often structurally embedded and income mobility is restricted. Poor households often lack the access to educational resources and social capital of their wealthier counterparts, and thus experience education in different ways. Thus, educational aspirations manifest in a multitude of qualitative contexts beyond years of schooling. This study looks at the quantitative relationship between subjective well-being and level of education (measured in years) for the communities surveyed, identifying differences in age and gender. The relationship of these results are then linked to the qualitative data from interview and focus group transcripts of parents and students to provide a framework for understanding the relationship between aspirations and education, measured by more than years of attendance.
Funding Provided by: Faucett Catalyst Fund

The Economic Crisis of Spain: two stories

Erin Toothaker (2013); Additional Collaborator(s): Rubén Garcia Iglesias*; Mentor(s): Stephen Marks
*Gobierno de España, CAR

Abstract: The relative impact of the spanish economic crisis on the employment prospects of Spanish citizens and refugees in Spain, specifically Madrid, was evaluated using a combination ethnographicaleconometric approach. Working in the Madrid center for refugee aid during a seven-month period provided a unique opportunity to interview newly arrived refugees, spanish residency-holding refugees, and more established former residents of the refugee center. It also facilitated interviews with long-time employees of the center who have been in a position throughout the last five to ten years to observe these changes across groups of arriving refugees. These interviews are combined with national level econometric analyses of unemployment in citizens and refugees. In this way, the statistical story is informed on a more human level and becomes more individually and personally accessible as well as more complete in its evaluation of the impact of the Spanish economic crisis on the two study groups. Refugees were relatively more negatively impacted by rising unemployment in the earlier stages of the crisis than Spanish citizens, but during more recent increases in unemployment this discrepancy between group impacts has decreased, as have the perceived relative impact discrepancies as reported by members of both groups, refugee center employees, and various employers.
Funding Provided by: Pomona College SURP

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