University of Notre Dame economist Joseph Kaboski has been awarded a $415,000 grant by the National Institutes of Health to lead a research project that will explore the poor’s motives and reasons for saving in developing countries.
The study, now underway, is called “Unlocking the Black Box of Savings: Using Quantitative Theory and Microfinance” and will focus on the nation of Uganda, combining structural theory with experimental data.
“We know that the poor do indeed save, and there is substantial demand for formal savings accounts, even those that pay negative interest rates,” says Kaboski, the David F. and Erin M. Seng Foundation Associate Professor of Economics in Notre Dame’s College of Arts and Letters.
The question, he says, is why?
Understanding Motivations
“The goal of this project is to measure how much of savings is for precautionary reasons—for example, saving in case someone gets sick, loses a job, or a crop fails—and how much is saving for self-financing reasons—for example, saving to start or make an investment in a business.”
The answers, he says, will help economists and policy makers know what to expect as financial services like credit and savings accounts become more widely available in developing countries.
“Will financial services lead to growth and poverty reduction or not?”
Alleviating Poverty
“I became interested in economics because I was concerned about poverty,” says Kaboski, who is also a fellow at the University’s Kellogg Institute for International Studies, where he is involved in the Ford Family Program in Human Development Studies and Solidarity.
“As I delved in deeper, I realized that the biggest problems of poverty are really in developing countries, and the issue is a lack of growth and development in these areas.”
Kaboski’s teaching and research focus on growth, development, and international economics, with an emphasis on structural change, finance and development, schooling and growth, and microfinance.
“Microfinance has been an area of excitement and hope in the development community,” he says, “but back when I was in graduate school, we really knew very little about the economics and impact of microfinance.”
Thanks in part to Kaboski’s research, that is starting to change.
Determining Effectiveness
Last year, he received the prestigious Frisch Medal for a paper evaluating the impact of microfinance as a tool to fight poverty in Thailand. Presented biennially by the Econometric Society, the award honors for the best applied empirical or theoretical paper published in Econometrica within the past five years.
“The Frisch medal was a huge surprise—almost every paper in Econometrica is exceptionally good, so for the committee to consider ours the best in the past five years was really quite an honor,” says Kaboski, who co-authored the paper with Robert Townsend, professor of economics at the Massachusetts Institute of Technology.
With the new NIH grant—which builds on a pilot project supported by the Kellogg Institute—Kaboski looks forward to continuing to shed light on the effectiveness of microfinance in helping impoverished countries grow and develop.
Learn More >
- Department of Economics
- Joseph Kaboski faculty page
- Kellogg Institute for International Studies
- National Institutes of Health
- Related story: Economist Joseph Kaboski Receives 2012 Frisch Medal
- Related story: Joseph Kaboski Joins Notre Dame Economics Faculty
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