Predicting Household Poverty: A Methodological Note with a Kenyan Example

Household surveys provide data that is used for identifying and measuring the poverty status of households and individuals. However, carrying out such surveys is expensive, especially in poor developing countries. Thus it is important to make maximum use of the available survey data in developing countries, especially in sub‐Saharan Africa, where such data are expensive to collect and analyse. This paper develops a simple method for using poverty indices derived from survey data for a given year, to predict poverty rates for subsequent periods without having to conduct a new household survey. We illustrate the workings of the method with data from Kenyan household surveys for 1994 and 1997.     

Existence of Sparsely Supported Correlated Equilibria

We show that every N-player K ₁ × ... × K _N game possesses a correlated equilibrium with at least zero entries. In particular, the largest N-player K × ... × K games with unique fully supported correlated equilibrium are two-player games. We thank an anonymous referee for most useful comments. The first author acknowledges financial support from Spanish Ministry of Science and Technology, grant SEJ2004-03619, and in form of a Ramón y Cajal fellowship. The second author acknowledges support by the PASCAL Network of Excellence under EC grant no.506778, as well as from Spanish Ministry of Science and Technology and FEDER, grant BMF2003-03324. Both authors also acknowledge financial support from BBVA grant “Aprender a jugar.”     

A Model of Occupational Choice Applied to Rural Kenya

Abstract: The paper studies occupational patterns in rural Kenya using a large cross-sectional data collected from farm households in seven districts. Consistent with the agrarian nature of the Kenyan economy, we find that 74 per cent of rural households have farming as their principal occupation. The remaining 26 per cent are engaged in nonfarm activities. The existing rural occupational structure is shown to be a consequence of rational career decisions of households. Education and proximity to market centers are the key factors in the transformation of occupational structure in rural Kenya. Résumé: Cet article analyse les schémas de choix professionnels dans les zones rurales du Kenya en se basant sur un vaste esnemble de données recueillies auprès des ménages ruraux de sept districts. Comme le laissait présager le caractère agricole de l'économie kényane, 74 pour cent des ménages ruraux ont l'agriculture pour activité principale; les 26 pour cent restants sont engagés dans des activités non agricoles. Il est démontré que la structure actuelle des choix de professions dans les zones rurales découle de décisions rationnelles prises par les ménages. L'éducation et la proximité des centres de commercialisation sont les facteurs prépondérants qui conditionnent la transformation des schémas professionnels dans les zones rurales du Kenya.     

Financing Medical Care through Insurance: Policy Lessons from Household‐ and Community‐Level Analysis in Kenya

Medical insurance is an important feature of a health care system in which patients pay user charges to get medical treatment. Without insurance, many people would not afford acceptable care in a fee‐for‐service system. Since health is a merit good, making insurance broadly available in communities is a major policy issue in countries where user fees finance medical treatments. The paper analyses data from facility and household surveys in Kenya and shows that policies which popularize medical insurance can be inefficient because there exist community and household level factors that inhibit its use. The results further reveal substantial variations in the way the variables that influence the use of insurance affect different population sub‐groups. In this regard, it is important to ensure that vulnerable groups in communities are not excluded from insurance schemes in which they invest. The policy value of the paper is to call attention to factors such as place of residence, gender, income, education, community institutions, transaction costs and facility quality – that hinder or facilitate use of medical insurance so that these factors can be considered when institutionalizing insurance in communities. We note that using the community as a unit of analysis in field surveys may strengthen policy conclusions usually obtained from such surveys. L’assurance médicale constitue un élément important de tout système de soins de santé dans lequel les patients paient pour obtenir des soins médicaux. Sans assurance, de nombreuses personnes seraient dans l’incapacié de faire face aux coûts d’un système de paiement à l’acte. La santéétant un bien tutélaire, généraliser l’accès à l’assurance au sein des communautés est une question politique majeure dans les pays où les soins médicaux sont financés par les utilisateurs. S’appuyant sur l’analyse des données d’enquêtes dans les institutions sanitaires et auprès des ménages kenyans, l’article montre que les politiques qui visent à généraliser l’assurance médicale peuventêtre inefficaces parce que certains facteurs aux niveaux des communautés et des ménages en inhibent l’utilisation. Il révèle également de fortes disparités dans la faµon dont les variables qui influencent l’utilisation de l’assurance affectent différentes sous‐sections de la population. A cet égard, il est important de veiller à ce que les groupes vulnérables ne soient pas exclus des plans d’assurance dans lesquels les communautés investissent. S’agissant des politiques à mettre en oeuvre, l’intérêt de cet article est qu’il attire l’attention sur des facteurs tels que le lieu de résidence, le genre, le revenu, l’éducation, les institutions communautaires, les coûts de transaction et la qualité des infrastructures, lesquels entravent ou facilitent l’utilisation de l’assurance médicale, et pourraient être pris en compte lorsque l’on institutionnalise l’assurance dans les communautés. Il est à noter qu’utiliser la communauté comme unité d’analyse des enquêtes de terrain peut renforcer les conclusions qu’engendrent généralement ce type d’enquêtes.     

Some consequences of the unknottedness of the Walras correspondence

Two basic properties concerning the dynamic behavior of competitive equilibria of exchange economies with complete markets are derived essentially from the fact that the Walras correspondence has no knots.     

An innovative feature selection method for support vector machines and its test on the estimation of the credit risk of default

Support vector machines (SVM) have been extensively used for classification problems in many areas such as gene, text and image recognition. However, SVM have been rarely used to estimate the probability of default (PD) in credit risk. In this paper, we advocate the application of SVM, rather than the popular logistic regression (LR) method, for the estimation of both corporate and retail PD. Our results indicate that most of the time SVM outperforms LR in terms of classification accuracy for the corporate and retail segments. We propose a new wrapper feature selection based on maximizing the distance of the support vectors from the separating hyperplane and apply it to identify the main PD drivers. We used three datasets to test the PD estimation, containing (1) retail obligors from Germany, (2) corporate obligors from Eastern Europe, and (3) corporate obligors from Poland. Total assets, total liabilities, and sales are identified as frequent default drivers for the corporate datasets, whereas current account status and duration of the current account are frequent default drivers for the retail dataset.     

Trade union membership and earnings in Kenyan manufacturing firms

This study analyses the effect of trade unions on male earnings in the Kenyan manufacturing sector using a regression method, which takes into account endogeneity of the union status of workers. In contrast to earlier studies of the Kenyan labour market that report a negative effect of unions on wages, a positive effect is found. The study further shows that elite workers tend to abstain from union membership.     

Market microstructure,banks’ behaviour and interbank spreads: evidence after the crisis

We present a study of the European electronic interbank market of overnight lending (e-MID) before and after the beginning of the financial crisis. The main goal of the paper is to explain the structural changes of lending/borrowing features due to the liquidity turmoil. Unlike previous contributions that focused on banks’ dependent and macro information as explanatory variables, we address the role of banks’ behaviour and market microstructure as determinants of the credit spreads. We show that all banks experienced significant variations in their liquidity costs due to the sensitivity of interbank rates to the timing and side of trades. We argue that, while larger banks did experience better funding conditions after the crisis, this was not just a consequence of the “too big to fail” perception of the market. Larger banks have been able to play more strategically when managing their liquidity by taking advantage of the changing market microstructure.

     

Pricing methods for α-quantile and perpetual early exercise options based on Spitzer identities

We present new numerical schemes for pricing perpetual Bermudan and American options as well as α-quantile options. This includes a new direct calculation of the optimal exercise boundary for early-exercise options. Our approach is based on the Spitzer identities for general Lévy processes and on the Wiener–Hopf method. Our direct calculation of the price of α-quantile options combines for the first time the Dassios–Port–Wendel identity and the Spitzer identities for the extrema of processes. Our results show that the new pricing methods provide excellent error convergence with respect to computational time when implemented with a range of Lévy processes.     

The Effect of Agricultural Extension on Farm Yields in Kenya

The paper studies land productivity effects of the training and visit (T&V) system of agricultural extension in Kenya, taking into account other determinants of crop yields such as the schooling of farmers and characteristics of agro‐ecology. The T&V system was incorporated in Kenya's national system of agricultural extension in 1982 as a strategy for raising farm yields. The data we use to evaluate its performance were collected by the Government of Kenya in 1982 and 1990, but the estimation results reported in the paper are based primarily on the 1982 data set. The sample used for estimation contains information about crop production, agricultural extension workers (exogenously supplied to farms), educational attainment of farmers, usage of farm inputs, among others. A quantile regression technique was used to investigate productivity effects of agricultural extension and other farm inputs over the entire conditional distribution of farm yield residuals. We find that productivity effect of agricultural extension is highest for farmers at the extreme ends of distribution of yield residuals. Complementarity of unobserved farmer ability with extension service at higher yield residuals and the diminishing returns to the extension input, which are uncompensated for by ability at the lower tail of the distribution, are hypothesized to account for this U‐shaped pattern of the extension effect. This finding suggests that for a given level of extension input, unobserved factors such as farm management abilities affect crop yields differently. Effects of schooling on farm yields are positive but statistically insignificant. Other determinants of farm yields that we analyse include labour input, farmer's experience, agro‐ecological characteristics of farms, fallow acreage, and types of crops grown. Le document étudie les effets de la productivité des terres du systàme T&V (formation et visite) de vulgarisation agricole au Kenya, en prenant en compte d'autres facteurs déterminants des rendements des cultures tels que la scolarisation des exploitants agricoles et les caractéristiques de l'agro‐écologie. Le systàme T&V a été intégré au systàme national kenyan de vulgarisation agricole en 1982 comme stratégie pour accroître les rendements agricoles. Les données que nous utilisons pour évaluer sa performance ont été recueillies par le gouvernement kenyan en 1982 et 1990; cependant, les résultats des estimations dont il est fait état dans le document sont basés essentiellement sur une série de données de 1982. L'échantillon qui a servi pour les estimations contient, entre autres, des informations sur le rendement des cultures, les agents de vulgarisation agricole (éléments extérieurs mis à la disposition des exploitations agricoles), le niveau scolaire des exploitants agricoles, l'utilisation des intrants agricoles. On a utilisé une technique de régression par quantiles pour rechercher les effets de productivité de la vulgarisation agricole et d'autres intrants agricoles sur toute la distribution conditionnelle des résidus du rendement agricole. Nous constatons que les effets de productivité de la vulgarisation agricole est plus forte pour les exploitants agricoles se trouvant aux extrémités de la distribution des résidus de rendements. On admet en hypothàse que la complémentarité de la capacité non observée des exploitants agricoles par rapport au service de vulgarisation aux résidus de rendement plus élevés et le rendement en baisse de l'intrant de vulgarisation, qui ne sont pas compensés par la capacité de l'extrémité inférieure de la distribution, justifie ce modàle en forme de U de l'effet de vulgarisation. D'apràs ce résultat, pour un niveau donné d'intrant de vulgarisation, des facteurs non observés tels que la capacité de gestion des exploitations, affectent différemment les rendements des cultures. Les effets de la scolarisation sur les rendements agricoles sont positifs mais insignifiants au plan statistique. D'autres facteurs déterminants des rendements agricoles que nous analysons les intrants de main‐d'?uvre, l'expérience des agriculteurs, les caractéristiques agro‐écologiques des exploitations agricoles, la superficie des jachàres, et les types de cultures plantées.