Browsing by Author "Ross, Donald"

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    A critical review of the literature on UBI experiments
    (2024) Skeyi, Sanele; Ross, Donald; Black, Anthony
    A universally guaranteed basic income is said to be a disarmingly simple idea that could help solve the problems associated with economic insecurity. However, sceptics about this idea argue that it is too simple and that despite best intentions, could have adverse results. These possible adverse results include spreading the welfare revenue too widely and too thinly to have a meaningful effect on the poor who need it the most; demotivating people from working, thus expanding poverty and welfare traps and rendering the transfer unsustainable. While politicians and policymakers have been arguing about the merits of this idea, economists and other social scientists have run experiments to help them understand the mechanisms of responses to a guaranteed income and to be able to advise policymakers. While these experiments have been reviewed separately in the literature, they have not been collated and analysed jointly in a systematic manner. These experiments have mostly been in the form of field experiments which have focused on testing the effects of the two main models of delivering a guaranteed income, that is a Negative Income Tax (NIT) and a Universal Basic Income (UBI). While guaranteed income experiments span over half a century and across the world, in both developed and developing countries, only a handful of these meet the criteria of being universal, unconditional, periodic, individual cash transfers. In this paper, we have sampled experiments that either fully met these criteria or fell at least one element short. We critically evaluate how they were designed, carried out, the inferences drawn from the observations they generated, and the validity of those inferences. The experiments reviewed show that a UBI is efficient at reducing exclusion errors; improving welfare outcomes such as poverty, education, and health; and has a gender equalising effect both in households and in the labour market. However, the findings on the effects of a UBI on economic inequality still need further testing. The studies also show that contrary to expectations, a guaranteed income does not incentivise people to choose more leisure, instead they spend more time in education and training, take up care work or pursue entrepreneurial opportunities. We then recommend some aspects of a UBI that require further testing. These include funding mechanisms, the optimum amount and tenure of the guaranteed income, and the consumption behaviour of poor UBI recipients. Lastly, we recommend design imperatives and methodologies for future experimentation. While most of the experiments have been carried out in the field, we make a case for the use of lab experiments to better study the mechanisms of a guaranteed income.
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    Foundation for a national road prioritisation model for South Africa
    (2020) Townshend, Matthew John; Ross, Donald
    Inefficient road infrastructure investment in South Africa has led to five core policy failures: deterioration in road network conditions; neglect of citizens' constitutional rights of access to basic services; insufficient prioritisation of roads that best promote the general economy; an excessive rural road network; and application of inefficient road surfaces that increase road maintenance and road-user costs and fail to take advantage of the low shadow price of unskilled labour. The thesis first reviews the extent and consequences of these failures and evaluates their opportunity cost with respect to the potential benefits from more efficient road infrastructure investment policy. If fiscal constraints are accepted as exogenous given South Africa's politically driven budgeting process and the magnitude of road maintenance backlogs, then the question can be posed as to the capacity of the current maintenance scheduling systems to efficiently prioritise road investment according to the sector mandate to (i) satisfy citizens' right of access to constitutionally protected basic services, and (ii) maximally contribute to economic growth. The answer to this question is negative: the fact that none of the systems are appropriate to prioritisation explains the identified core failures. The thesis addresses this gap in several stages of analysis. The first stage is to develop a cost-effectiveness analysis-based road classification system that accounts for basic access and economic growth. This generates two important findings: most of the demand for access to basic services, which as per a normative economic framework based on arguments due to Rawls and Binmore is the first lexicographical policy priority, can be satisfied by roads that also support economic growth; and authorities can maintain Basic Access Roads and still have significant fiscal space within current allocations to maintain roads that optimally contribute to economic growth. The optimisation exercise proceeds through three stages. First, lifecycle cost analysis is applied to determine cost-effective surface solutions for low volume roads, many of which are Basic Access Roads, and the employment benefits of a policy to seal low-volume roads. Second, a two-step floating catchment area model is used to identify potentially unproductive roads that may be cost-effectively rationalised through basic service hub relocation. With basic access rights satisfied efficiently, cost-effectiveness analysis is lastly applied to exploit the remaining exogenously given road budget allocation to develop and test a model of road maintenance prioritisation that optimises the sector's contribution to national economic growth via export promotion, which is identified in official literature as the primary variable under policy control to promote national economic growth.
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    Quick response inputs and outcomes in the apparel industry: an example from a South African retailer
    (2017) White, Gary; Ross, Donald
    This paper provides a two-tier framework for empirically analysing Quick Response on a product level. The first part of the framework suggests retail metrics based on the characteristics of Quick Response to allow comparison between supply chains in terms of their adherance ot the strategy. The second section of the framework lays out a methodology for quantifying the benefits of Quick Response by comparing product level performance of Quick Response products to those on traditonal lead times. The suggested methodology is applied to data from a large South African clothing retailer as an example.
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    Studies in risk perception and financial literacy: applications using subjective belief elicitation
    (2019) Schneider, Mark; Ross, Donald; Harrison, Glenn W; Rutström, E Elisabet
    The concept of literacy has grown from “reading literacy” to now encompass many different domain-specific topics and skill sets, such as health literacy, financial literacy, and computer literacy. The way literacy is talked about, examined, measured, and communicated has also evolved. Literacy measures began as a simple metric of counting the number of individuals in a country that could read and dividing that count by the total population to compute the percentage of literate individuals. However, this approach ignores situations in which an illiterate person has access to a literate person that could read to them. This was the premise of research in development economics that introduced the measure of effective literacy, which accounts for potential positive externalities that could arise from access to a literate individual. This dissertation expands on the idea of effective literacy and introduces a concept of extended literacy, which applies to a decision-maker having access to an external scaffold during the decision-making process. The scaffolds considered include access to the internet, to an anonymous person as part of a group, and to a household member. The research presented here measures extended financial literacy under these various scaffolds. Financial literacy reflects an individual’s knowledge about financial matters, including the management of risks. The research assesses subjects’ knowledge about interest and inflation, budgeting, and longevity risk. The techniques used to measure literacy reflect state-of-the-art advances in subjective belief elicitation that allow for the recovery of each decisionmaker’s entire underlying subjective distribution. This method generates a rich characterization of subjects’ beliefs and allows the construction of various measures of literacy, welfare, bias, and confidence with respect to a known, true answer. Using controlled laboratory and artefactual field experiments with real rewards and incentivized elicitation of beliefs, we find that these scaffolds reliably enhance literacy. We relate the notion of extended literacy to concepts in economics, cognitive science and philosophy, such as effective literacy, embedded literacy and embodied literacy.
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    The economics of addiction: an experimental investigation
    (2015) Hofmeyr, Andre Karl; Ross, Donald; Harrison, Glenn
    Addiction is an ideal puzzle for economic theory: why do most addicts expend resources to acquire their targets of addiction but then incur real costs to try and reduce or limit their consumption of these goods? Furthermore, why is the typical course of addiction characterised by repeated unsuccessful attempts to quit prior to final abstention? From the standpoint of standard consumer theory in economics these patterns of behaviour are difficult to rationalise. There is a rich theoretical literature in economics which models habit-forming behaviours, of which addiction is the exemplar, but there is a paucity of experimental economic studies eliciting and comparing the preferences – specifically, risk and time preferences – that economic theory suggests may differ between addicts and non-addicts. The experimental research that has been conducted has been dominated by psychologists, and some economists have begun to follow their methodological lead. However, detailed reviews of the experimental literature on addiction highlight a number of methodological and statistical flaws in the ways these data have been collected and analysed. This thesis is primarily concerned with methodological and statistical issues at the boundary between economics and psychology as these bear upon developing a general, consistent explanation of addiction. An incentive-compatible experimental design is formulated which lends itself to the estimation of several different theories of choice under risk and over time. In addition, a full information maximum likelihood statistical framework, which is consistent with the data generating processes proposed by structural theories and accounts for subject errors in decision making, is used to explore the relationship between risk preferences, time preferences and addiction. This thesis challenges some of the maintained assumptions in the addiction literature; e.g., that the probability discounting and hyperbolic discounting models best characterise choice under risk and over time, respectively. But it also replicates a previous finding; i.e., that smokers tend to discount the future more heavily than non-smokers. It shows, therefore, that some results withstand careful methodological and statistical scrutiny, whereas other results do not. Ultimately, this thesis argues that tools from experimental economics and econometrics, which have been under-used in addiction studies, contribute to a more accurate and reliable characterisation of this phenomenon.