Crunching Lebaran, Hidden Fear ... or Power?

Lebaran, the Eid Day in Indonesia is certainly something too interesting to take for granted. It can be religious, cultural, personal. And economic, too. A friend of the Café, Lynda Ibrahim shares her reflection. Like the barristers here, Lynda was at the Salemba School before she went to US. She's back in Jakarta now and among other things, writes for The Jakarta Post. Enjoy.

-- Manager

Crunching Lebaran, Hidden Fear... or Power?
by Lynda Ibrahim

Much has been written on Indonesian Idul Fitri rituals like mudik exodus, city slickers doing chores and herding to malls for food cause maids are off, or Jakarta’s empty streets and clearer air. Idul Fitri is supposedly the victorious day of rebirth, if a Muslim successfully atones for his or her sins through a series of purifying acts and prayers during the holy Ramadhan. Ideally, starting fresh with renewed hope, strength and limitless possibilities.

But how do you keep the spirit alive during a far less ideal time?

While living overseas I had to spend the period in starkly different settings than what I’d grown up in. Braving Ramadhan during winter, dying to gulp down hot chocolate while I had to simultaneously survive the weather and ace finals. Spending Idul Fitri as a student taking a comparative study in Chile, definitely the only Muslim within the school’s group and possibly the only one in the entire area by then. There’s something a bit surreal about swimming in one of Puerto Varas’ picturesque lakes that morning, while imagining my family celebrating back home. But I wasn’t sad. I’d just started my graduate school, was finally visiting the region I’d been so interested with while practicing my newly acquired Spanish, and plotting the next summer internship. Things were looking up and I felt fearless.       

Life changed dramatically just a couple of years later. I graduated right after the U.S entered a mild recession in early 2001. Many graduating Americans didn’t have a job offer, so I was grateful that I got one in my field of study. The company even sent me on a stint in a regional office outside the U.S., enabled me to momentarily taste the so-called high-flying expat life. All peachy until 9/11 dragged the U.S economy further down, causing massive layoffs. That year, I found Lebaran falling on my birthday while also marking my first official day out of employment.  

Surreal couldn’t even begin to describe how I felt that day. The irony of being supposedly reborn victoriously, compounded by supposedly doing better as turning a year older, while in reality you lost the fight thanks to a left-field attack you didn’t even see coming. I probably went through almost all steps of grieving as I moved through the day.

I was on denial of the awaiting downhill as Alika and her children woke me up midnight with birthday cake and candles. I felt anger as I went with Krisna to the morning Idul Fitri mass prayer, knowing that thanks to one misguided group’s actions other Muslims had to gather and perform prayer that day under authority supervision and Islamphobia in the air. I got sad as Bridget dragged me to a joint birthday dinner in the evening, sincerely wishing her the best for her birthday yet not knowing what to celebrate for my own. I missed my parents at such trying time, yet thankful they weren’t there to see their child so beaten and morose.

Looking back later, I realized there must’ve been some sort of inner energy prevailing somewhere in my deep unconscious mind by then that saved me from spiraling down and made me get out of bed the next day, bruised and afraid, to fight for better things that were yet to arrive. So while still going through the grieving cycle I eventually started anew, repatriated and made best with chances I saw.

It’s the same energy that I’m hoping to draw from this year. Granted, my Lebaran last week was within our usual traditions; my parents’ house full of friends and family, including my cousins’ screaming children who went from cheerfully picked Mom’s prized orchids to carelessly murdered her goldfish. But as I chatted up guests and chased the kids around, my mind was consumed with the embroiling turmoil and wondered if the USD 700 billion golden parachute would save the day.    

Thus certainly was unnerving to watched how worldwide markets negatively reacted this week; so wild the freefalling on Wednesday in Asia that JSX got suspended half through the trading, the UK bailout failed to lift Europe markets and 7 central banks interest cut only swung Wall Street violently without a positive ending. Panic bred more panic in a seemingly unison confirmation of global downfall, which isn’t a far stretch considering Iceland, an actual whole country, is bankrupting.

I’d seen my portfolio shrinking and don’t even want to know how much that intended life-saving lost this week as stockmarket rebounds eventually. My worries are on whether our once shaken, though-restructured banking system can withstand this time and keep safe of small cash I have left. On how much more spending power will drop and whether my budding businesses will find enough customers to survive. On when our factories don’t get the usual much-relied Christmastime export orders, how that will trickle down to the average Indonesians early next year, just in time before our election when even in normal time fear would breed more fear, and where majority of our voters are still low-educated, less-exposed citizens who may fail to understand that this time the crisis is largely an unavoidable effect from a global recession rather than, as mostly was the case of ’97-’98 crisis, a mismanagement of the ruling government. On whether I and my unmet husband could save enough for our unborn children’s college funds, because at the age group when one is supposedly most productive the global recession befalls on us.     

Dogged determination. Blind faith. That all isn’t lost yet. Or even sheer pride of not letting myself get defeated. Whatever gets me through the day. Because fear, I have some this week.

Soap operas are not always bad

We've heard many bad things about TV programs. From inducing violent behavior to promoting mysticism or obscenity. Recently, the Indonesian Broadcasting Commission blew their whistle to a famous reality show because 1) the hosts consistently throw sarcastic jokes, and 2) it starts at Maghrib prayer time with limited commercial break, so it doesn't give time for Muslims to perform their prayer (yeah, right!).

A recent work by Robert Jensen and Emily Oster shows that exposure to TV programs may have a positive impact on attitudes toward women in India. Using fixed-effects panel data regression during a period when cable TV services was rapidly expanding in rural India, they found "significant increases in reported autonomy, decreases in the reported acceptability of beating and decreases in reported son preference... [and also] increases in female school enrollment and decreases in fertility (primarily via increased birth spacing)." In terms of indicators, school enrollment and fertility are obviously observable. The other three are behavioral indicators. One can't observe it directly but will have to rely on the reported data.

The Survey on Aging in Rural India (SARI) data, which the paper is relying on, does have the information. On women's autonomy, the survey asked if the female respondents needed permission from their husbands to go to the market or visit friends/relatives. There is another question on who makes some important decision in the household, which deals with household decision making. On perceptions regarding domestic violence, the survey asked whether female respondents think that a husband is justified to beat his wife if if he suspects her of being unfaithful; if her natal family does not give expected money, jewelry or other things; if she shows disrespect for him; if she leaves the home without telling him; if she neglects the children; or if she doesn't cook food properly. Then, preference over gender of the children is measured by the question "Would you like your next child to be a boy, a girl or it doesn't matter?"

Although the authors did not specifically test which/what kind of TV programs are more effective, they mentioned that soap operas are the most popular ones among the rural women.
So, soaps could be the agent of change, then... Bukan begitu, Estella? Jangan tanya padaku, Esposito...

Cafe Salemba's newest member: Lintar Shidiq

The Café welcomes its newest member: Lintar Angestu Wijanarko Shidiq. Congratulations to Rizal and Sisilia in Washington, D.C. Here's Lintar's picture. Aco told me he asked Rizal, "Dude, why didn't you tell me?". And Rizal responded, "Been busy at the hospital, Mate. Lintar's bilirubin was rather high; but he's now fine and sleeping -- after I read him some micro foundation of Keynesian economics".

Does Giffen behavior exist in reality?

Update: somehow I forgot that the Giffen thing has been discussed by Aco, more than a year ago. It was in September 2006, just when I arrived back in Jakarta. Maybe that's why I forgot to refer to it.

In every college-level microeconomics textbook, there is always a discussion on a special circumstance when the demand curve is upward-sloping: the Giffen good. Theoretically, the situation arises when the income effect outweighs the substitution effect under a price change.

A good can be a Giffen one if it is a basic commodity that makes up a large portion of a poor's income. The term was named after Sir Robert Giffen, a Victorian-era British economist, who argued that potatoes during the Irish potato famine fit this bill for the starving Irish:

Since potatoes already made up the bulk of their diet and consumed most of their income, as prices rose due to the potato shortages, what little discretionary money they had for meat and other food disappeared. No longer left with enough for even morsels of meat, the peasants desperately threw their remaining pennies back at the potato vendors for a few more spuds, thus driving prices of the scarce commodity up still further (a summary from The Nation).

If it's still hard for you to imagine the situation, consider Dani Rodrik's opposite illustration when the price declines instead of increases:

Imagine a very poor household who spend a very large part of its income on some subsistence commodity such as rice. Now suppose that the price of rice goes down for some reason. How does the household alter its pattern of consumption? One response is to increase consumption of rice at the expense of other things because rice is now cheaper. This is the standard substitution effect that ensures demand curves are downward sloping. But another is that the household's overall purchasing power--its real income--has increased and therefore the family may choose to consume things, such as meat, that richer families tend to consume. If this decrease in demand for rice outweighs the substitution effect, we have a Giffen good. Put differently, the lower price of rice allows the family to satisfy its nutritional needs by a tastier combination of products, one that relies less on rice and more on meat.

The question is, does a Giffen good exist in reality? No one is quite sure. Even Sir Giffen's argument was based on speculation instead of empirical evidence.

A recent paper by Harvard's Nolan Miller and Robert Jensen (was at Harvard, now at Brown; I happened to took their classes) claimed to be the 'first, rigorous empirical evidence of the existence of Giffen behavior. ' (Note: The authors preferred to use the term 'Giffen behavior' instead of 'Giffen good' since, as they wrote, "it is not the good that is Giffen, but the consumers’ behavior").

They ran a field experiment in the Hunan and Gansu provinces of China, in which they randomly subsidized households’ primary dietary staple (rice in Hunan and wheat flour in Gansu). As the prices of staples are cheaper, they observed a strong evidence of Giffen behavior with respect to rice in the Hunan province. They also found a less clear evidence of Giffen behavior in Gansu with respect to wheat.

They have an interesting way to begin the conclusion section in the paper:

It is ironic that despite a long search, in sometimes unusual settings, we found examples in the most widely consumed foods for the most populous nation in the history of humanity.

On holydays

I love holidays. But I never like the way the Government (here and elsewhere) assigns national holidays. The Coordinating Minister of Social Welfare just announced the national holidays and joint leave ('cuti bersama') days schedule for 2008. The total number of days is 23. That means Indonesians (i.e. government officials, some schools, and others who follow this instruction) will only work around 11 months (and usually get paid for 13 months worth of salary -- or more). But that is not my main concern. My concern is twofold that follows:

First, the idea of giving a leave to an employee is, well, to give him a leave so he can forget about work for a while and instead get some pleasure and come back fully charged. But when I get tired, you are not necessarily in the same position. Likewise, when I am in the mood for traveling, you might be in your peak productivity time. It makes sense for me to take my leave and get some rest. But it does not make sense to make you have to take your leave, too, the same time as I do. Because you might want/have to work or you just have set a plan to spend your holidays sometime else. The 'cuti bersama' policy thinks you and I are identical. And that's wrong. It forces you to reduce your vacation days, whether you like it or not.

Second, it is true that I want a holiday to observe my holy day -- I mean religious holy day. And I think it is fair if you have holiday to observe yours. But why a particular religious holy day is assigned as national holiday in the sense that both you and me and everybody else are supposed to observe it? I guess the reason is because assigning national stamp to an obviously not national thing, like religion (and ethnic), is always troublesome. For example: Why do you give six days to moslems but only one for buddhists? Why do you assign national holiday for imlek but not for Javanese new year, even though each have its own calendar? That is why, I think, the Government decides to make each particular non-national special day national -- as in 'jointly observed'. As a result, we have way too many holidays.

Alright you complainer, you ask me. What is your solution?

Here is an idea. Just give 20 days to employees each year for leave. Let them decide what and when they want to use them for: leisure, travel, celebrating Ied Days, Christmas, etc. Only assign one national holiday: Independence Day (see, I can be nationalist, too!)

OK, when is my next holiday?

They out-attractive us! Please protect us!

These Malaysian wives made my day. According to the news, they are urging the Malaysian authority to block Chinese female domestic helpers from entering Malaysia, because those 'little dragons' could seduce their husbands. Isn't that hilarious? Let me say their request differently:

Oh dear Government, please help us. We think we are not that sexy and attractive. And unfortunately our husbands are all jerks. Please protect us. Don't let the seductive Chinese maids come into the country.

No, it ain't about racism -- they, the angry wives, are Malaysian Chinese, after all. It's just about protection-seeking mentality, nothing to do with race.

Hah.

Being Married May Not Be Like It Used to Be (Comments on: "Signaling game - a trivia" )

In a recent post, AP posed some questions about what signals would a man holding a baby at a mall be sending. Ignoring the self-absorbed nature of his question (after all, self-absorption is partly what this Cafe is all about), I will try to give some comments. The point in that post about the man wearing a certain t-shirt has been dealt with sufficiently in that post's comments and I won't discuss it here.

Being married probably sends different signals than it used to do...
In the old days, a married man would be thought of of having a stable life, an ability to make long term commitment, an aversion to risk etc. On average, marriage men would then be rewarded in the job market in the form of a marriage premium, loosely defined as the difference in wages between married and unmarried men, everything else including age, education, experience and work tenure the same. They would earn more, and accumulate wealth faster.¹⁾

Why does such premium exist? There are three main competing explanations. The first one is the discrimination explanation. This relates to the points raised earlier about married being seen as a signal of stability. Because of that, employers may have some bias in favor of married men when they make decisions on hiring (and firing), wages, benefits, and promotions . The second explanation is the specialization within marriage explanation, that says that marriage premium is a result of actual increased productivity that comes about when married men specialize in the market activities. They are able to do this because their spouses specialize in household/non-market activities (this is partly why I said "in the old days"). This increase in productivity translates to higher wages for married men. The third explanation is the selectivity explanation, which basically says the premium is observed because some of the qualities that make men perform well in the job market (responsibility, 'people' skills, good looks ²⁾) happen to be the same qualities that make them perform well in the marriage market, and thus they are rewarded in both markets. These qualities are observed by both employers and spouses but unobserved by the econometrician who then attributes the difference in wages between married and unmarried men to their marital status.

Empirically, marriage premium has been declining in western societies. I'm not aware of any study using Indonesian data (please enlighten me), but I would imagine even if the premium really has existed in the past, it would be less important now than it is before, especially for the sub-sample of Jakarta white collar workers. Given the lack of empirical evidence, that statement and the following are just conjectures and may well be proven wrong.

First, marriage is probably not such a good signal for stability anymore. With the cost of marriage dissolution (monetary and otherwise) decreasing, people are entering and quitting marriages easier. At least if you believe the newspapers and infotainment. If these anecdotal evidence are anything to go by (they probably shouldn't be ³⁾), marriage may now signal potential instability somewhere down the road, something that employers are keen to avoid.

Second, the gains from specialization are probably not important for Jakarta white collar workers because now, even young households typically would employ maids and nannies: there is not much specialization to begin with.

In short: being observed as a married man is probably not as advantageous in the labor market today as it was before. If that is true, than it seems that there is even less incentive for a woman who is active on the dating/marriage market to look at a man holding a baby at the mall favoringly. A guy who thinks that being observed as a married man is giving out signal that says "sorry I'm not available" is simply flattering himself. The signal he will be sending is probably: "Hi there. Even if I might be available - and remember the cost of dissolving my marriage is relatively low - you might as well look for a single man since I don't command that much premium in the labor market..."

...but having a child may still signal stability
What signal does holding the baby give away? In most cases, the arrival of a baby would be associated with an increase in specialization: the mother would reduce market hours, experience career interruption and a reduction in wages. The father would respond by increasing market hours and probably earning more. No need to look further for an example, read AP's (and Juli's) own account. Whether this would turn into an advantage is not clear; the total family income may stay constant because the increase in the husband's income may be matched by an increase in the family's spending (on the child) and the decrease in the wife's income, as the empirical work by Light ⁴⁾ has demonstrated.

However, having a baby may still send a strong signal about stability. Infotainment watchers probably agree with that statement. A lot of marriages of celebrities seems to hinge on these beautiful couples having an offspring. (Okay, after a disclaimer about not having empirical evidence, I got a little carried away - I am now using infotainment to support my argument!) To what extent it is really important is not clear, but having a child certainly increase the cost of divorce, monetary and otherwise.⁵⁾ Although having a noisy dispute over custody seems to be a new attention-getting vehicle a la Tamara Blezinsky (sorry, can't help it).

So, if you're caught holding a baby in public, you're actually sending a mixed signal. People may see you as a s.n.a.g. (if you still need a definition, you're probably reading the wrong blog). Another signal has been suggested by some commenters: you are a pushover of a husband and are dominated by your wife. Or that you cannot afford a nanny.Or that you chose not to hire a nanny even though you could afford it just to make a point. Or maybe you and your spouse want to make a point about equal bargaining in the household, and so on.

Or, if you're like me, you just enjoy spending time with your baby daughter and couldn't care less about other signals you might be sending.

¹⁾ See papers by Korenman and Neumark (1991), Korenman and Blackburn (1994) , Hersch and Stratton (2002) for examples of empirical papers on marriage premium.
²⁾ Here's a link to the discussion in the Cafe about what beauty can buy you in the labor market. Here's the related Slate article.
³⁾ Note that nationally, the rate of divorce in Indonesia has actually been on the decline in the past decades (Jones 2000), largely due the increase in the age of marriage and the decline in the number of arranged marriages. Shorter term trends or among a subsample of population (urban, white-collar workers) are hard to come by.
⁴⁾ Light (Demography May 2004).
⁵⁾ If the child's welfare is in each parent's utility function, a divorce that may affect the child's well being will be against their own interests.

signaling | marriage premium | household economics

Childrenomics part 3 - household decision making

Another aspect that determines the outcome of children's health, education and other things is who makes the decision in the household (who decides what, and what's the relative 'voice' of each decision maker). Let's now narrow the decision makers to mother and father. We'll deal with another person (i.e. in-laws) later. Two extreme cases: 1) unitary model of household decision making, and 2) collective model.

In the first case, household acts as if there is only one decision maker. So, consumption/spending decisions are only affected by total household income. In the second case, imagine that the two parties (mom and dad) are 'bargaining' over what/how much to spend. The question is what determines each party's bargaining power?

The traditional approach on this is to assume that the bargaining power is determined by how much each party earns money. We can think of the other variants, such as relative 'assets ' (financial, social) brought when both got married, etc. We can think of an extreme situation in which only one party earns money, so he or she has all the voice over household decision. In this case, we are back to the first case.

Of course this is not the perfect approach. After all, we see a lot of cases where the wife does not earn antything but she takes full controls over everything. Welcome to the 'Dictated Husband Association' (Ikatan Suami Takut Istri, ISTI), guys!

Many studies found that when mother has greater say in household spending, it leads to better outcome of children's health. An example is a study by Duncan Thomas (1994), using log calorie intake, log protein intake, survival rate, weight for height and height for age. I can not recall which studies, but I also remembered similar results for mortality rate and low birth weight.

What about the decision made by other parties in the household? For now, I don't have any studies to quote. But we are having a real world experience with the issue...

Childrenomics part 2 - gender preference

Some societies have preference over boys. Perhaps because boys will carry the family's name, but also because they can rely on their boys to do heavy works. Other societies prefer to have girls; because in their cultures girls are responsible to take care of their parents in the old days. Or, parents may not have any preference over a certain gender, but they want to have both genders in the family. Each preference will have implications in the size and resource allocation of the family.

One implication of gender preference is gender discrimination - in terms of within-household resource allocation. Deaton (1989) measured the boy-girl discrimination in terms of the 'reduction of household expenditure on adult goods.' (Adult goods: tobacco, adult clothing, alcohol, eating out, etc.). When a kid is valued more, parents will be more willing to reduce their spending on adult goods. He found no evidence of gender discrimination in Cote d'Ivoire, and a small and insignificant bias in favor of boys in Thailand.

We can also measure boy-girl discrimination in terms of health outcome. Using data from rural Punjab, India, Monica Das Gupta (1987) found that the mortality rate of children below one month is higher for boys. However, as the children gets older, girls mortality rate surpasses boys. Child mortality rate is also much higher for girls who were born as the second child and over.

The fact that boys have higher probability to die within a month after birth is quite logical. Boys have the XY chromosome, while girls have XX. Remember that the Y chromosome is a 'mutated' version of the X - means that boys are by nature mutants (the 'defect' version of girls). That makes boys are more prone to death, which explains the higher rate of postnatal mortality rate. The higher rate of girl mortality rate at the older age reflects the different treatment of parents. For example, girls receive lower nutrition, less clothing etc. And the value of girls is even less when parents have already had more survived children.

My professor at Harvard, Robert Jensen (2006) raised another issue. Parents may not necessarily discriminate against girls (or boys). But they may still prefer a certain gender (let's say, boy). When the first child is a girl, parents is more likely to have another one. When the second one is still a girl, it is more likely for them to have a third one, and so forth. As the result, girls tend to come from big families. Even though parents don't discriminate, coming from big families, girls will have smaller allocation of household resources ("equal treatment, unequal outcome").

How true is that? The answer can't be theoretical - it should be empirical. That may also depend on where do we do the research. But according to his preliminary finding, some Indian states where preference over boys are strong tend to confirm this results.

Childrenomics | Gender

Childrenomics part 1 - fertility decision

Introduction: Having a baby makes me more exposed to children-related economic research. Or, perhaps it is the reverse: having been exposed to children-related research makes me (want to be) having a baby. Nevermind. Here are some literature review of some research in the topic.

Why do people decide to have kids? Is it driven by preference or constraint? Earlier, I raised the debate between the 'family-planning' vs. 'desired demand' hypothesis of fertility. The former argued that people have (many) children because of constrained access to contraceptive. The latter argued that people have many children because they do want to have many children.

I'm leaning towards the 'desired demand' hypothesis. Having children is a rational choice (although for some people, it may be an 'accident' - no judgement on that). Rational means parents calculate the benefits of having kids compared to its costs. The benefts and costs do not have to be perfectly known, nor they should always be measured in financial terms. The bottom line is, economic theory also allows us to predict human behavior in terms of fertility decision.

What's behind the demand (desire) to have kids? In Indonesia, we know the term 'more children, more prosper' ('banyak anak banyak rejeki'). Behind the old saying, there are economic rationales.

First, old-age security. Parents expect their children to take care of them when they are old. Missing market, in this case the market of pension fund and senior citizen care gives the reason for this view.

Second, family (cheap) labor, usually for rural agriculture households. Again, this happens because of the missing or imperfect market for labor, as well as market for goods; so households will have to rely on own production.

Hence, missing markets help explain why people have many children.

In addition to that, parents may decide to have many kids to increase the number of survived kids. This may happen when the health situation and infrastructure is poor. By having many kids, parents can achive their 'targeted' number of kids. Lastly, number of children may also be affected by gender preference. The probability of having a second, third and next child is greater if parents has a preference over a certain gender (more on this).

Childrenomics | Fertility

New member

We'd like to proudly announce the newest addition to the Café Salemba family: Cemara Perdana.

P.S. Regardless of your opinion about population control, please note that my wife and I did not contribute to the population growth. In fact, we were adjusting the supply and demand for children disequilibrium.

Efficient smoking

Ujang is also here in Canberra writing a cool paper on the economics of smoking. (I heard he has promised the manager "to café" some piece of it). So there we were chatting about the issue over coffee.

Ujang mentioned a study in U.S. that found that price policy can not effectively change smoking behavior in favor of health. That is, when the price of cigarette increases, the sales drop slightly, but the nicotine accumulation rate in the smokers' blood remain constant at the least. This finding seems to have bothered Ujang who hypothesized that in order to discourage smoking (and thus to promote healthy life), you simply need to increase the price of cigarette. But that study came up with the surprising conclusion. I think that's why Ujang decided to test his model on Indonesian family data.

But I guess what happened in that study was ... an increase in smoking efficiency as a response to the price change. That is, before the price increases, smokers tend to smoke inefficently: to smoke only half or three quarter of the cigarette and throw it right after, to smoke while talking at the same time (so as letting the wind contributes in consuming the cigarette), etc. When the price increases to some "decisive level" (that is, a level that can alter marginal buying), the smokers might reduce their buy. But they now become more efficient in smoking. They smoke until it really hit the filter, they don't allow "joint-smoking" with the wind, et cetera. As a result, the nicotine level in their blood stays constant. Or even higher.

A friend who was also in the chat, Dede, disagreed. He said that smoking style is hard to change. One might enjoy smoking only half of his cigarette (the taste might not evenly distributed across the cigarette). Another might like to see his cigarette burnt by the wind while he is composing a poem. And so forth. Well, being a chain smoker himself, Dede might be right, too.

Another friend, Aceh, had a better explanation. Because the cigarette becomes more expensive, smokers try to keep the smoke as much as possible inside ... their lung :-)

What do you think, smokers?

Update: Ujang just texted me. The measured substance in the smokers' blood was "cotinine" as a proxy of nicotine intake. My apologies.

Economics of smoking

More on education and contraception

Now I've found an interesting pattern. Discussing polygamy or condoms is how to get many comments and hit rate.. :-) Many thanks for the comments on my previous posting. I was about to make a response to some comments, until I realize my reply worth a separate entry.

Then Yudo mentioned about the need to estimate the effect of education on different contraceptive methods. Actually, that was what I did. In addition to 'any modern method'* I estimated four different methods: 1) birth pills, 2) IUD, 3) periodic abstinence, and 4) condom. There four represents different 'levels of difficulty.'

In terms of difficulty, birth pills are moderate. It is easy to use, but requires some careful attention and understanding on how to effectively use it. IUD is easier -- you just come to the clinic and let the doctor do that for you. But on the same time, you need to have knowledge or awareness and access to the clinic. Periodic abstinence is, well, difficult. A lot of careful calculation is required. Condoms, on the other hand, is no rocket science.

My prior hypothesis is that the more difficult a contraceptive method is, the higher is the impact of education on the probability of using it. So, this is another way to estimate the return on education. But, as I mentioned earlier, I found no statistically significant impact of education on the probability of using the first three. The reason was because the family planning program in Indonesia has been quite successful. So regardless of education and wealth, Indonesian women has relatively had high knowledge and access to contraception.

Interestingly, for condoms -- the easiest method of those four -- the coefficient is (marginally) significant. Meaning that the probability of using condoms still depends on the level of education. This opens the room for more exploration.

Remember that unlike pills, injections or IUD, the use of condoms put the responsibility on men (husbands).** Remember also the unbalanced relative position between men and women in terms of sexual relationship and behavior (read: men are less responsible). For women, more schooling may mean two things: 1) more bargaining position in the household, and 2) higher chance of getting a more educated, more responsible husband.


* Modern method = the term to distinguish 'traditional' or 'folklore' contraceptive method. Boys, please be informed that asking your girlfriend to drink Sprite or jump up and down after having sex is not a modern contraceptive method! It is not even a method...!

** Still yet to find the story for periodic abstinence.

Fertility | Education

More education or condoms?

We congratulate Aco and Anna for their new born baby. Now they have officially contributed to the population growth. As a present to the couple, our entry is about demand for children and education (yes – we can’t avoid talking about education again…).

Economic models generally show that, everything else constant, high population growth is bad for economic growth. For some people, high population growth is a reason why poor countries are poor (“the rich gets richer, the poor gets children”). Let’s say this is true. What makes people in poor countries have many children?

According to the demographers’ view, the answer is unmet needs for contraception. Since they are poor, they can’t afford to buy contraceptives. Hence, the appropriate intervention would be family planning campaign.

Many economists reject this idea. Even in poor countries, condoms cost no more than cigarette or coke (Easterly 2001). So, if they want to reduce the number of children, poor people can in fact afford to do so. This means that high birth rate in poor countries are actually desired. The desired fertility argument (Pritchett 1994) is based on the fact that some markets are missing or imperfect: labor, insurance and even goods market. That makes poor families rely on their children for cheap workers and old-age social security.

Only when the income level is higher, people will demand fewer children. Higher level of national income usually correlates with more availability of formal insurance system. Higher income can also be translated to higher level of parents’ education. This will give more opportunity to enter the labor market, so there will be a trade-off between working and childbearing which then lead to a substitution between quantity and quality of children. We can also say that when people are more educated, the effectiveness of contraceptives will also be increased (smarter people knows better how to put condoms or calculate women’s fertile period, eh?).

In short, development is the best contraceptive, said economists. Or, in a narrower version, education is a good, if not the best, contraceptive.

How true is such premise? I am currently doing a research on that.* Using household data from the Demographic and Health Survey, surprisingly, I found that there is no significant correlation between mother’s (as well as father’s) years of education and number of children.** No such correlation also exists between education and ideal number of children.

The data does not allow me to test the impact of education on the labor market participation. But let’s assume it to be positive. The reason must be that education does not explain contraceptive use. And yes, the data confirms that. I did not find any positive and significant impact of education on the probability of using modern contraceptives such as periodic abstinence or birth pills. There is only a marginally significant impact of education on the probability of condoms.

So does that mean that economists or the pro-education camp lost the intellectual battle?

Can’t say that too fast. The thing is the survey was conducted in 2002/03. Three decades after the family planning campaigns by the Indonesian government (BKKBN) has been considered success. Thanks to the campaign, (poor) people have had the knowledge on and access to contraceptives, regardless of their education level. You don’t need to be that smart to know where to buy condoms or pills and how to use them.

Put it more scientifically, we don’t have the counterfactuals. What would have happened if there was no family planning campaign in the ‘70s-80s? Maybe we can ask our colleague Arya Gaduh to conduct a randomized experience to answer such question.

Notes:

*) The research paper is currently being written. I will post an update if it is available.

**) For the methodology-oriented people, I have corrected the reverse causality and omitted variable bias by applying 2-stage least square estimation, using quarter of birth as the instruments (see Angrist and Krueger 1992).

Fertility | Education | Demand for children