Everyday Policy Studies No. en24

New Year’s Day 2021

 This year, although we had New Year’s Day, it is hard to say “Happy” New Year.
At the beginning of the year, I would like to express our sincere gratitude to all the medical personnel and many others who are still engaged in hard work fighting the menace of the novel coronavirus infection (COVID-19). Furthermore, I pray that the day will come as soon as possible when those who are experiencing trouble in their daily lives will feel at ease.
 Now is the time for the next generation of young people to think about COVID-19 and others. We have all lived for almost a year in a completely different environment. How did you spend most of your time in the anxious and uncertain environment of COVID-19? If you’ve written your schedule in a notebook, diary, or calendar, please try to measure how many hours you spent in a month or week in 2020. For example, what was the daily hourly average of how you passed your time in April, August, and December 2020? Compare it with the daily average of the way you spent your time in the same month a year previously.
 Please calculate the approximate average time spent on the following three kinds of activities: 1. Average time for physiologically necessary activities (primary activities) such as sleeping, eating, and bathing; 2. Average time for absolutely necessary activities (secondary activities) such as commuting to school or work, schoolwork, housework, childcare, and long-term care; and 3. Average time for activities (tertiary activities) in your free time, which are generally referred to as leisure activities, such as watching television, resting, learning other than at school, self-development, hobbies, entertainment, sports, and dating. (See Note).
 Especially, ask what was the activity that you spent the most time on in the breakdown of the tertiary activities? The spent time on those activities is the key to opening the door to your future. Do not ignore the activity that you devoted your maximum time to, rather cherish it, and think of it as a clue to connect the activity with your individuality, charm, and strength. I would like you to think about how you make use of that activity so that it will help those who are in trouble in their daily lives as a result of COVID-19. It may take 3 to 5 years or more to reach a conclusion about that.
 However, I would like young people to realize for themselves by adopting such a medium- to long-term perspective and by making the most of their individuality, charm, and strengths. I wish you all the best of luck this year as well.

(Note) For the definition of the average time of the primary activity, secondary activity, and tertiary activity here, see the living times outlined in the document entitled “Social Life: Basic Survey” (in Japanese), which is available at https://www.e-stat.go.jp/koumoku/koumoku_teigi/M (Accessed on 2020.12.30)

This essay is the English version of No. 198, January 1, 2021 on the Japanese website.

(Author: Akira Yokoyama)

Everyday Policy Studies No. en23

Index Based Livestock Insurance (IBLI) 04

 My previous essay reviews the household data we collected to study insurance uptake and impacts. In this essay, I will review how to measure the impact using the data and insurance premium discount coupons.
 The major challenge in measuring the impact is endogeneity of insurance uptake. Our central question is how much insurance improves households’ welfare. The cause is insurance and the result is welfare. Studying this causality is difficult due to unobserved household characteristics and endogeneity of insurance uptake. To simplify this reasoning, let us say unobserved household characteristics is household ability and more able households buy insurance more likely (and endogenously). Let us call the latter endogeneity of insurance uptake. If so, we cannot tell whether insurance improves household welfare or more able households improve their welfare and buy insurance at the same time. In this case, if we do not control this endogeneity of insurance uptake, our estimate of the impacts of insurance on household welfare will end up larger than the true value.
 To control this endogeneity, we designed a randomized controlled trial (RCT). Since it is difficult to ask insurance companies to sell insurance to particular households or in particular villages and not to sell to the others, we provided insurance premium discount coupons to particular households among our 924 sample households in Marsabit, Kenya and 515 sample households in Borena, Ethiopia. We call households who received the coupons treatment group and the other households who did not receive the coupons control group. We randomly split the households into treatment group and control group. The simplest RCT compares average welfare in the treatment group with average welfare in the control group and the impacts is the difference in welfare. In our case, if we did so, the difference in average welfare would be the impacts of discount coupon rather than the impacts of insurance.
 In order to obtain the impacts of insurance, we use an Econometircs method called instrument variable (IV) method. Our dependent variable Y is household welfare such as income and explanatory variable X is insurance uptake. Our equation of interest is Y = a + bX + e where a is average welfare (called constant term) and e is other factors influencing welfare (called error term). Coefficient b is the estimate we would like to have and the impacts of insurance (X) on household welfare (Y). IV method allows us the following. Even if insurance uptake (X) is influenced by ability captured in error term (e), we can estimate coefficient b using an instrument variable (Z) which is strongly related to insurance uptake (X) but unrelated to error term (e). Let us consider whether discount coupon can be an instrument variable (Z). First, discount coupon encourages insurance uptake and thus our instrument variable (Z) can strongly related to insurance uptake (X). Second, we randomly split households into treatment group who receives discount coupons and control group who does not and thus our instrument variable (Z) should be unrelated to other factors affecting household welfare (error term, e).
In this essay, I review that insurance premium discount coupon allows us to measure the impact of insurance on household welfare. In the next essay, I will review studies on insurance uptake and impacts using the household data and the discount coupons.

(Author: Munenobu Ikegami)

Everyday Policy Studies No. en22

Index Based Livestock Insurance (IBLI) 03

 My previous essay reviews the process from insurance design to pilot implementation. In this essay I will start reviewing how we study insurance uptake and impacts.
 Mude et al. (2009) proposes to study insurance uptake and impacts and we designed and implemented a baseline household survey in September 2009 before an insurance company started selling the insurance in January 2010. The number of sample households is 924 and they are located in 16 sublocations in Marsabit County in northern Kenya. Initially we had a research grant only for the baseline survey but we obtained several grants subsequently and could have annual follow up survey five times.
 The baseline survey in 2009 was new experience for me. Before that, I have been studying the data which were designed and collected by someone else. This was my first time to design and implement a survey. This was my first fieldwork as well. I have travelled in rural areas in developing countries but the length of each trip is less than two weeks and the purpose is to satisfy my curiosity rather than research or work. I remember I was very excited to go to Marsabit for the survey after a year of office work in Nairobi.
 We piloted the insurance in Borena Zone in southern Ethiopia as well. Borena Zone and Marsabit County are sharing the border and my colleagues had known the area from their previous research project. In Borena Zone, the baseline household survey was in March 2012 and the initial insurance sale was in August 2012. 515 sample households are located in 17 study areas. We could have annual follow up survey three times. Ikegami and Sheahan (2017, 2018) explains more details of each survey and the data are publicly available at http://data.ilri.org/portal/dataset/ibli-marsabit-r1 and http://data.ilri.org/portal/dataset/ibli-borena-r1.
 In my next essay, I will review how to measure the impacts of insurance using the data. Our main tool was insurance premium discount coupon.

Ikegami, M. and M. Sheahan (2017) “Index Based Livestock Insurance (IBLI) Marsabit Household Survey Codebook” http://data.ilri.org/portal/dataset/ibli-marsabit-r1
Ikegami, M. and M. Sheahan (2018) “Index Based Livestock Insurance (IBLI) Borena Household Survey Codebook” http://data.ilri.org/portal/dataset/ibli-borena-r1
Mude, A., C. B. Barrett, M. R. Carter, S. Chantarat, M. Ikegami, and J. McPeak (2009) “Index Based Livestock Insurance for Northern Kenya’s Arid and Semi-arid Lands: The Marsabit Pilot” http://ssrn.com/abstract=1844758

(Author: Munenobu Ikegami)

Everyday Policy Studies No. en21

Index Based Livestock Insurance (IBLI) 02

 My previous essay https://apsf.jp/en/2020/09/16/everyday-policy-studies-no-en15/ review why and how my colleague designed Index Based Livestock Insurance (IBLI) in Northern Kenya. In this essay, I will review the process from insurance design to pilot implementation.
 When I joined IBLI project at International Livestock Research Institute (ILRI) as a post-doc in September 2008, my colleague has already designed the insurance. One of my tasks was to contribute to our efforts to modify the insurance design for pilot implementation. For example, area boundary for insurance premium calculation and area boundary for index calculation can be modified based on what an insurance company think as the best. Also, insurance premium changes as insurance payout trigger, deducible, and exit (maximum payout) change.
 We talked to several insurance companies in Kenya and several reinsurance companies as potential implementation partners for the insurance pilot. Fortunately, an insurance company and an insurance broker company in Kenya, and a reinsurance company in Europe agreed to pilot the insurance with us. Several international development donors also agreed to provide grants to support the insurance pilot including insurance premium subsidy. We agreed on that all of insurance parameters (premium, premium subsidy, trigger, deducible, exit, area boundary). The pilot area is Marsabit County (previously Marsabit District), area boundary for insurance premium calculation divides Marsabit County into two areas (Upper and Lower Masabit), and area boundary for index calculation divides Marsabit County into 5 areas (1. Central and Gadamoji, 2. Laisamis, 3. Loiyangalani, 4. Maikona, 5. North Horr).
 The insurance was launched in January 2010. My task to contribute to the pilot implementation continued since IBLI project team at ILRI is responsible to calculate the index and support insurance companies. In retrospect, my transition to a graduate student to a post-doc is quite a change. My study as a graduate students is academic. On the other hand, my work as a post-doc is development project implementation more than academic research. I wrote scripts to download remote sensing data, calculate index, upload update on index to the project web site. I wrote documents explaining how index is calculated for insurance companies and had meetings with them.
 In my next essay, I will move to the next topics: insurance uptake and impact.

(Author: Munenobu Ikegami)

Everyday Policy Studies No. en20

Information concerning the spread of the novel coronavirus infectious disease (COVID-19)

 In Japan as well as in other countries, the effects of the spread of COVID-19 are becoming serious. I think that even young people see various pieces of information in the mass media such as TV, radio and newspapers, as well as on web media and social media etc. through the internet and smartphones. However, how can you be sure that you get really reliable information about such a topic?
 I see the reports in the national newspapers I subscribe to as well as NHK and commercial broadcasters, but my main sources of information are various websites. In particular, I obtain information regarding the primary materials on scientific knowledge and policy responses, including data referred to in various media from websites, as follows: the government of Japan (especially the Prime Minister’s Office, the Cabinet Secretariat, the Ministry of Health, Labor and Welfare), local governments (especially Tokyo, Osaka and Saitama), the National Institute of Infectious Diseases, the Japan Medical Association and WHO (the World Health Organization). Among these, NHK’s “Special Site: Novel Coronavirus”, the Cabinet Secretariat’s “COVID-19 Information and Resources” and the Ministry of Health, Labor and Welfare’s “About Coronavirus Disease 2019 (COVID-19)” serve as portal sites.
 From the perspective of multicultural coexistence, the website of the Cabinet Secretariat is linked to the English and Chinese pamphlets published by the Prime Minister’s Office, but this is not always sufficient. In this regard, concerning the novel coronavirus, the English and Chinese versions of the Ministry of Health, Labor and Welfare; the English, Chinese, Korean, and easy Japanese editions of the Tokyo Metropolitan Government; and the website of CLAIR (the Council of Local Authorities for International Relations) may be useful for citizens who are not native speakers of Japanese.
 In addition to the above websites, I always read the personal website of Professor Shinya Yamanaka (the Nobel Prize winner) entitled “Shinya Yamanaka’s novel coronavirus information transmission”. In particular, I think it is a must-see for the sections “Information classification according to the strength of evidence”, “5 recommendations” and “What’s new” which are posted on the site.
 Based on the information presented on these websites, I find that I am able to grasp and contemplate the current situation regarding the spread of COVID-19, and making active choices as an individual. Writing this essay is one of those active choices.

(Note) Of the websites referred to in the text, the following can be read in English:
Cabinet Secretariat
Ministry of Health, Labor and Welfare,
National Institute of Infectious Diseases,
Osaka Prefectural Government,
Prime Minister’s Office,
Saitama Prefectures,
Tokyo Metropolitan Government,
WHO, “Coronavirus disease (COVID-19) Pandemic,”

These URLs were accessed on August 28, 2020, and different to those mentioned on the Japanese website.

(Author: Akira Yokoyama)

This essay is the English version of No. 135, April 7, 2020 on the Japanese website.

Everyday Policy Studies No. en19

In commemoration of No.100 of “Everyday Policy Studies (in Japanese)”

 With the support of many people, we were able to celebrate the publication of the 100th essay of “Everyday Policy Studies (in Japanese)”. I would like to express my appreciation to all the forum members who wrote the essays and those who read the essays.
 The aim of the forum is as oultlined on the website, but as the president I have been trying to achieve an additional aim. The stated aim is to educate junior high and senior high school students and other young people so that they will become responsible citizens. Therefore, I hoped that each member could send some useful messages to young people and help achieve this purpose.
 With this in mind, I would like to ask the members to write essays in such a way that allows young people to understand the following: the basic ideas of policy studies, their own thoughts in their daily lives, and the results of their research. Writing for young people to understand as much as possible will help the authors to think about how they should talk about policies and daily lives in order that the next generation will understand their thoughts.
 It may also have the effect of making people ask of themselves “what does one owe to one’s children.” Parents (the adult generations) become aware of themselves as parents only when they have children (the child generations), and it becomes difficult for parents to take actions that are contrary to what children think are correct. Even adults who do not walk across the road on the pedestrian crossing when they are without their children do cross the pedestrian crossing when they are with their children because they are aware that their children are watching. And adults who see the children taking eco-friendly actions such as saving water and saving electricity then start to copy such actions. Therefore, I would like the authors to write essays for these young people to understand.
 Also, I would like the authors to translate each essay published in the “Everyday Policy Studies (in Japanese)” into English, so that they will be able to convey the message to young people all around the world who will play a leading role in the future, not only in Japanese society but also on a global scale.
 In addition, I have a request for those who have read the essays so far. If you have an essay that you would especially like young people to read, please recommend them to read it. Through these efforts, if the readers can carry out such a role, I think that the value of “Everyday Policy Studies” can be further enhanced.
 We therefore look forward to your continued support for the “Everyday Policy Studies” series.

(Author: Akira Yokoyama)

This essay is the English version of No. 100, December 2, 2019 on the Japanese website.

Everyday Policy Studies No. en18

Representative Democracy: Voting and Abstention

 The basis of representative democracy lies in voters casting ballots in elections, but of course not all voters vote. Some voters may abstain in elections by not voting. In the first place, why do voters vote?
 Voters are likely to vote if there is an expected benefit from voting. This is a rational voter hypothesis and she or he will vote if, and only if,:
                pB – C + D >0
where p is the subjective probability that their vote will affect whether they get the election outcome they want, B is the benefit derived from the election outcome they want, C is the voting cost, and D shows the benefits of voting itself, regardless of the outcome.
 The first term (pB) on the left-hand side of the equation is the benefit of voting as an instrument for influencing the election results, and is called the “instrumental benefit” of voting. On the other hand, the third term (D) on the left-hand side of the equation shows the subjective benefit obtained from expressing support for the preferred candidate or political party, or the subjective benefit obtained from the fulfillment of obligations as a citizen and the maintenance of the democratic system. It is the utility derived from voting regardless of the outcomes, and is said to be the “expressive benefit” of voting. Also, the voting cost (C) is the cost that must be sacrificed to carry out the voting. It consists of not only the transportation cost to go to the voting place, but also the costs of opportunity lost as a result of sacrificing possible benefits that may instead have been gained from work, listening to music, sports, etc. if they hadn’t gone to the voting station.
 For the individual voter, there is almost no situation in which their vote would be decisive for determining the election outcome they want (p≈0), and there is almost no difference in any candidate or political party (B ≈ 0); therefore there is usually no “instrumental benefit ” of voting (pB ≈ 0). And then, they vote if the benefit of the act of voting itself outweighs the cost of voting (D>C), but they will abstain if it doesn’t. This is a cause of abstention. Isn’t it good to abstain? Please think about it.
 If abstentions are not good, how do you think you can reduce the number of abstentions? For example, what about introducing Internet voting or penalizing those who abstain? Or what about conducting social education that emphasizes the importance of elections? Please think about that as well.

(Author: Akira Yokoyama)

This essay is the English version of No. 88, November 5, 2019 on the Japanese website.

Everyday Policy Studies No. en17

True pathology in the US, where COVID -19 infection is the largest in the world (Continued)―Inadequate health security system and the severity of economic disparity at the base―

 Let us take a closer look at the US income gap. In a recent paper “Declining worker power versus rising monopoly power”, A. Stansbury and L.H. Summers argue that the decline in worker power―as private sector unionization and union power fell, the real value of the minimum wage declined, shareholder activism increased, and ‘ruthless’ management tactics became widespread―redistributed income from workers to capital owners, leading to a fall in the labor share, rising corporate valuations and measured markups, ・・・.
 According to the US Bureau of Labor Statistics, the labor share of employees (wages and salaries divided by the value added) dropped from 58.1% in 1970 to 55.7% in 1990. In the 2000s, it has dropped significantly from 57.1% in 2000 to 52.8% in 2015.
 According to The Distribution of Household Income and Federal Taxes, 2013, edited by the Congressional Budget Office (CBO), while the share of labor income in the income source of all households was 77.4% in 1979, 72.5% in 2013, that’s share of the top 1 % group was 33.1% in 1979, 36% in 2013, which was quite low. The above-mentioned decline in the labor share over a long period of time, apart from the top 1 % group, stagnated the real wages of other income groups, specially middle income and low income groups, and widened the income gap.
 On the other hand, looking at the capital share (ratio of capital income to total private income before taxation and pre-government transfer) in the US Bureau of Economic Analysis, it rose from less than 40% in the early 1980s to more than 46% in the middle of the 2010s.
 According to the CBO data above, the share of capital-related income of the top 1 % income group is very high, in the 60% range, unlike the average household income of about 20%.
 The main sources of capital -related income are capital income, capital gains, and business income. In particular, the share of business income rose from 10.8% in 1979 to 23.2% in 2013. This is because the Reagan tax reform in 1986 lowered the maximum personal income tax rate below the maximum corporation tax rate. So many C(Ordinary)corporations that had paid corporate tax passed corporate income to shareholders by the conversion to S (small business)corporations or partnerships or other pass-through entities.
 In other words, the profits of S corporations, partnerships, and other pass-through entities are fully distributed to shareholders every year, so business income has increased. Here, we can see a part of the US equity capitalism.

(Author: Masatoshi Katagiri)

This essay is the English version of No. 159, July 28, 2020 on the Japanese website.

Everyday Policy Studies No. en16

Representative Democracy: Quasi-Representative and Pure Representative

 The majority rule mentioned in “One Person One Vote and One Yen One Vote” (No. en3 ) implicitly assumed direct democracy. Let us now consider representative democracy (Note).
 Representative democracy is a system in which members of the parliament, who are elected following an election by the people and residents, and then carry put collective decision-making in parliament on behalf of the people and residents. It can be said that the system has been adopted as a constructive direct democracy because there are too many voters in large societies such as today’s nations and local governments. However, there is also another completely different form of representative concept. This is not the same as constructive direct democracy, but in order to overcome the harmful effect of direct democracy, that is, the so-called mobocracy where representatives completely bow to the wishes of the masses. In this system, elected persons, or good persons, make collective decision-making on behalf of the general public or ordinary people.
 The difference between these two representative systems lies in the relationship between the voters and the members of parliament. The representative system known as constructive direct democracy requires the members of parliament to be merely agents of the voters and to carry out actions that reflect the political will of the voters. This representative system is referred to as a “quasi-representative” system. On the other hand, in the delegation system whereby enlightened selected persons carry out collective decision-making on behalf of the general public, members of parliament are entrusted with a blank sheet of delegation from the voters. The representative based on this idea is called a “pure representative” and is comparable to a “quasi-representative.” It is sometimes said that the quasi-representative is the people’s representative and the pure representative is a representative of the whole nation.
 The electoral system that selects representatives with different aims and meanings has different desirable systems due to the difference in its underlying philosophy. The proportional representation system is the preferred election system for selecting quasi-representatives (people’s representatives), and the single-seat constituency system is the preferred election system for selecting pure representatives (representatives of the whole nation). In reality, a representative democracy is a system that has both quasi-representatives and pure representatives.
 Next time, I will discuss voting and abstention in a representative democracy.

(Note) This essay is based on A. Yokoyama (1998) “Economic Theory of Democratic Democracy” H. Tanaka, H. Mifune, A. Yokoyama, Y. Iijima, Public Economics, Toyo Keizai, Inc., p.196.

(Author: Akira Yokoyama)

This essay is the English version of No. 72, October 1, 2019 on the Japanese website.

Everyday Policy Studies No. en15

Index Based Livestock Insurance (IBLI) 01

 Hello, my name is Munenobu Ikegami. This is my first essay in English in this forum. I have worked for Index Based Livestock Insurance (IBLI) project from September 2008 to February 2018 at International Livestock Research Institute (ILRI) and I would like to review what we learned in this essay series.
 Pastoralists in Northern Kenya and Southern Ethiopia face drought and associated risks that are large in magnitude (frequently causing a 20-40% livestock mortality rate) and frequent (once every 4-5 years). ILRI and its research and implementation partners launched a commercial IBLI product in January 2010 in an effort to mitigate the negative consequences of livestock mortality risk. Research on IBLI can be divided into three groups: 1) insurance design; 2) insurance uptake; and 3) insurance impacts. In this essay I will review 1) insurance design.
 Chantarat et al. (2013) explains the design. What we would like to insure is the negative economic shock due to drought and livestock mortality. Livestock is the second largest productive asset the pastoralists have following their own human capital. When drought occurs, all of forage and water for livestock, livestock milk production, birth rate would decrease and livestock mortality would increase. Note that decreased livestock herd size due to decreased birth date and increased mortality rate affect the pastoralists negatively even in the following seasons after the drought.
 Traditional insurance for livestock mortality would not be commercially viable due to large transaction costs due to that pastoralists are herding livestock in remote and large space and it is difficult to verify each animal’s death by a insurance company. Index insurance can overcome these problems. Instead of making indemnity payout based on each animal’s death like traditional insurance, index insurance makes indemnity payout based on an index which represents average loss in a region. IBLI applies this idea to livestock mortality due to droughts in the region.
 Index should have the following properties: 1) closely related with the loss to be insured; 2) not manipulated; 3) available timely; 4) constructed with low costs. The index Chantarat et al. (2013) provides is predicted livestock mortality based on Normalized Difference Vegetation Index (NDVI). NDVI is measurement on how green earth surface is based on satellite. Chantarat et al. (2013) shows that NDVI can explain livestock mortality due to droughts in the area in the past well and suggests to use predicted livestock mortality based on NDVI as the index for IBLI.
 In the next essay, I will continue reviewing the design of IBLI.

(Author: Munenobu Ikegami)

Chantarat, Sommarat, Andrew G. Mude, Christopher B. Barrett, and Michael R. Carter. 2013. “Designing Index-Based Livestock Insurance for Managing Asset Risk in Northern Kenya.” Journal of Risk and Insurance. Vol. 80, No. 1, pp. 205-237.