Nova workboard

a blog from young economists at Nova SBE


Can new evidence concerning the long-term economic effects of moving out of bad neighbourhoods be used to mitigate long-term economic effects of the current migration movements towards Europe?

The neighbourhood in which children grow up is believed to influence economic success later in life. However, selection biases in efforts to measure the effects of bad neighbourhoods on poverty or economic success later in life led to difficulties in proving the causality for these disadvantages. Recent research by Eric Chyn reveals that the positive impact on the long run economic success of children moving out of disadvantaged neighbourhoods might have been underestimated in the past due to selection biases of participants in previous research. Thereby in previous research, the ‘Moving to Opportunity’ experiment, the participants were selected through a lottery in which prospective participants from disadvantaged neighbourhoods could voluntarily sign up to. However, whilst the experiment gave evidence to the positive effects of moving out of disadvantaged neighbourhoods at an early age, it is assumed to underestimate the effect. Thereby Mr Chyn and others argue that the participants that signed up might have had higher aspirations and were more concerned about moving out of bad neighbourhoods compared to people who did not sign up for the lottery, thus they might have done better even without taking part in the program. However, these selection biases can be countered if the participants would be selected randomly. The research by Eric Chyn achieves that as it is based on a sample of participants that were randomly selected. From 1995 to 1998 the Chicago Housing Authority demolished several public housing buildings due to structural damage but other public housing buildings in the area were left standing, thus people from the demolished buildings were relocated and families in the remaining buildings remained living in them. The people who remained living in the public housing are therefore constituting the control group. The relocated families received housing vouchers to find accommodation on the private housing market. These vouchers are a subsidy to cover the difference between rents on the private market and the family’s required rent contribution (30 percent of adjusted income). Since the people were selected based on whether their house was to be demolished or not it can be viewed as a random selection of participants, thus avoiding the selection bias problem of previous research. The results of Mr Chyn’s research are “that children displaced by public housing demolition have notably better adult labor market outcomes compared to their non-displaced peers”. Furthermore, these findings contrast the findings from the Moving to Opportunity project in such a way that the positive effects were observable irrespective of the age when the child moved.

Since Europe is currently faced with a vast influx of migrants coming to the European Union these recent findings might be helpful when thinking about possible ways to accommodate migrants within the European countries to achieve mutual economic gains for the migrants as well as for the receiving countries too._88578067_europe_migrant_numbers_mar2016

 

Whilst currently challenges still resolve around solving the humanitarian emergencies on a short-term basis it might be important to also develop plans for the long-run. Given the potential positive impact of migration for the receiving countries in the long-run, a successful integration and transition process will be important. Thereby the insights gathered from Mr. Chyn’s research regarding the positive impact of dispersing poorer households among less poor mixed neighbourhoods might also be applicable to placing migrants within less poor neighbourhoods. This could help to aid the integration process as well as help migrants to economically fair better in the long-run, thus reducing costs on social systems as well as generating tax revenues. Furthermore, if migrants are more dispersed within society this could also help to increase acceptance of migrants among the population of the receiving countries. However, this hypothesis concerning altered acceptance among residents in the receiving population might need further investigation and might also vary among different countries.

by Jonas Weber

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Poverty & Food: Children

“Portugal was one of the countries in which inequality among children has grown”

According to the Innocenti Report Card 13, one of the largest increases in inequality occurred in the PIGS countries – Portugal, Italy, Greece and Spain. These inequality changes between 2008 and 2013 are mostly driven by labor markets, since as the rates of unemployment and underemployment rise, less income enters the households with children. However, social transfers can help to reduce the relative income gaps. For example, in the United Kingdom, social transfers cover for almost half of the relative income gap. On the other hand, countries like Portugal, with very similar pre- and post-transfer income gaps, have one of the highest levels of bottom-end inequality.

poverty 1

As the relative income gap is associated with child poverty, the countries with highest relative income gaps have the highest rates of child poverty, having the lower levels of overall child well-being. poverty 2However, relative statistics are not sufficient to conclude about child poverty (since the poorest people in a rich country cannot be compared to the poorest people in a poor country). Thus, it is necessary to analyze children deprivation, considering that if their household cannot afford three or more of the following nine items, the child is deprived: 1) to face unexpected expenses; 2) to afford a one-week annual holiday away from home; 3) to avoid arrears in rent, mortgage and utility bills; 4) to have a meal with meat or proteins every second day; 5) to keep the home adequately heated; 6) to have a washing machine; 7) to have a color TV; 8) to have a telephone; 9) to have a personal car.

Even though the high amount of social transfers in the UK, in 2013, about 20 million meals were distributed, an increase of 54% in just one year, meaning that the number of people that cannot afford to feed themselves increased. According to the Centre for Food Policy, 35% of the poorest households’ income are spent on food in comparison to 11.6% with regards to the budget of households with an average income. This will have negative consequences on children: poor children will suffer from hunger, difficulty in having a meal outside school, bad dietary patterns and eat low amounts of fruit and vegetables, since food is a “flexible” item in the household budget when compared to fixed costs, such as rent and utility bills. With regards to the topic, it is important to explain that, according to the Food Ethics Council, food poverty means that an individual or household is not able to obtain nutritious food, or they cannot have access to the food they want to eat – even if we persuade people to adopt new pattern to maintain nutritional adequacy in time of hardship, if they cannot choose the foods they want, they will consider themselves to be poor: they have been deprived (John McKenzie, 1974). Thus, it is hard to compute numbers according to food poverty, since it is a qualitative concept without quantitative metrics. Moreover, food choices can be seen as a means of demonstrating group acceptance, mood and personality (John McKenzie, 1974). Therefore, it is not an applicable concept to this post.

Surprisingly (for me), children poverty is also linked to obesity: about 22% of poor children suffer from obesity against only 7% of rich children (UK, 2015), since diets of lower income households provide cheap, concentrated energy from fat, sugar, cereals, potatoes and meat products, offering little quantities of whole grains, vegetables and fruit (Adam Drewnoski, 2012).

poverty 3

United Kingdom Data

In addition, low-income consumers usually live in regions where it is difficult to have access to healthy foods, and the fast-food restaurants predominate, in comparison with full-service restaurants (Adam Drewnoski, 2012). According to the Healthy Eating Index (HEI), higher HEI scores are related with higher diet costs, higher incomes, more education and lower rates of obesity (Adam Drewnoski, 2012).

poverty 6

United Kingdom Data

Returning to the PIGS countries, all this discussion can be proven by looking at the trends in overweight or by comparing the percentages (above the OECD-33) for measured overweight between the ages of 5 and 17 (2013) – Greece tops with 44% and 38%, Italy with 36% and 34%, Portugal 27% and 29% and then, Spain 26% and 24% (boys and girls, respectively). All in all, it is another argument that goes hand-in-hand with the problematic of school menus not providing the right dietary choices to poor children that otherwise will not have access to it.

Jessica Martins 2555