Thursday, 21 June 2012

Blog log 6/6

Back to reality, oh there goes gravity...

It is a bit early for the final blog log of my research leave, but Economics is calling and today is my last day at the Stats office. So here is the final list:

During the course of the six months, 5 articles have been accepted for publication, four in 2012 and one in 2013:
  • KRUGELL, W.F. & MATTHEE, M.  (2012).  “The growth of small firms and access to finance: SA evidence from the World Bank Enterprise Survey”. Journal of Economic and Financial Sciences, 5(1).
  • KRUGELL, W.F. & RANKIN, N.  (2012).  “Agglomeration and manufacturing output: Firm-level evidence from South Africa”. Forthcoming in Urban Forum.
  • SAAYMAN, M., KRUGELL, W.F. & ROSSOUW, R.  (2012).  “The impact of tourism on poverty in South Africa”.  Forthcoming in Development Southern Africa.
  • MATTHEE, M. & KRUGELL, W.F.  (2012).  “Barriers to internationalisation: Firm-level evidence from South Africa”.  Forthcoming in Studia Oeconomica.
  • KRUGELL, W.F. & SAAYMAN, M.  (2013).  “Running the green race: Willingness-to-pay evidence from the Two Oceans Marathon 2011.”  Forthcoming in the South African Journal of Research in Sport, Physical Education and Recreation.
And 2 more articles have been submitted for publication:
  • BLAAUW, P.F. & KRUGELL, W.F.  (2012).  “Micro-evidence on day labourers and the thickness of labour markets in South Africa”.
  • VAN TONDER, C., SAAYMAN, M. & KRUGELL, W.F.  (2012).  “Tourists’ valuation of the Big-5”.
2 of my Master’s students submitted their dissertations for examination in May and will hopefully graduate at the Spring ceremony in September.

I had the opportunity to visit the Beijing Foreign Studies University under a new cooperation agreement.  The visit consisted of two guest lectures and discussions with colleagues at BFSU.

In addition to doing the research, I also tried to promote the work through my blog.  Over the course of the six months I wrote 59 posts.

Throughout the semester I was still involved in a number of activities of the School of Economics.  Chief amongst these were the maintenance of the School’s Facebook page and setting up a blog for the School.  For the blog I have written 28 posts as well as developed the resources for Open day and the Reserve Bank’s MPC challenge.

Additional activities included:
Making a geographical economics presentation at the ERSA workshop hosted in Potch in January.
5x Master’s dissertations examined.
1x PhD thesis examined.
1x wrote part of a report prepared for InvestNW on the IPAP-2.
1x article for Woord & Daad (with Melville Saayman).
1x Kindle single book published (with Riaan Rossouw).
1x article reviewed for SAJE
1x SARChl chair evaluated for the NRF.
3x ITEA evaluations.
2x radio interviews.
2x articles in the media.

I would like to thank everyone involved for this opportunity, specifically:
Prof Wilma Viviers at the School of Economics.
Prof Elsabe Loots of the faculty of Economic and Management Sciences.
Prof James Ellison at Statistics, for providing me with hide-away office on campus.
All my co-authors and collaborators for their enthusiasm and their patience.

Back at Economics I will be acting School Director from the 1st of July and teaching ECON621 in the second semester. Keep watching this space.

Wednesday, 20 June 2012

Posts that I liked

I recently came across pages and posts that I quickly want to share:
  • Future Cape Town has a new web page. Lots of news and views for someone who is interested in cities.
  • I'm still looking for something similar for Joburg. If you know about anyone writing about Johannesburg from a urban economics, geography, even town planning perspective, please send in a comment and a link. In the meantime I have come across a nice blog arguing that Joburg rocks!
  • Finally, it is not a geography story, but I enjoyed Johan Fourie's latest post on economic history, his study of the 18th century Cape Colony and what it means for the colonisation of Mars. Private space flight is in the news, Voyager is heading into interstellar space and one day we might have companies out on Mars!

Sunday, 17 June 2012

Youth Day and the story of jobs

This weekend we celebrated Youth Day and the challenge of youth unemployment was discussed all over. As part of a City Press special feature, editor Ferial Haffajee engaged people in discussion on Twitter with the tag #youthjobs and I made a short Storify that captures many of the issues:

To my mind, the point that is not being made clearly enough, in for example the arguments over the youth wage subsidy, is the way the world is moving: Globalisation favours high-skill workers and South Africa's growing labour force and failures in education will contribute to increased inequality and instability for years to come. I wrote more about a recent report be the McKinsey Global Institute on the School's blog.

Thursday, 7 June 2012

Guest post: Neil Rankin on research, publication and my SAJE post

My SAJE post has generated a bit of interest. I have receieved an excellent rejoinder from Neil Rankin and would like to post it here for everyone.

As an academic researcher I empathises with your frustration and as an Associate Editor of the SAJE I think it is useful to partially respond to your post. I do not want to comment on the paper but rather to outline the process and the challenges we face as editors. I also want to put in the usual disclaimer – these are my views and whilst I think they are generally shared by the other editors I am not speaking for them.
For just about every submission I deal with I face the challenge of weighing the trade-off between an interesting question and academic rigour. Sometimes this decision is easy; in many more cases it is difficult. As you know, in many areas of potential research a lack of data is a serious constraint. In these cases I generally give more weight to the interest of the question. Once I’ve decided that the question is interesting and that the paper has a certain level of rigour I then send it out to the referees. My decision as an Associated Editor is then guided by the referee reports since the ‘gold standard’ of academic publication is peer-review.
In many areas of empirical micro issues like selectivity and heterogeneity are what we spend most of our time worrying about now. The level of what is now considered acceptable in empirical micro has increased substantially in the past ten years. Most referees are going to comment on these issues. Having said this, I do not think RCTs (or some other exogenous shock that allows for identification of a causal relationship) are a requirement for publication in the SAJE or that only work that uses panel data is acceptable. Cross-sections, good case studies and rigorous qualitative work tackling an interesting question are all acceptable in my mind. I will send papers using these techniques to referees equipped to evaluate the analytical approach but also with a knowledge of the specific research area. The outcome is then in the hands of the referees.
As an Editorial team we are committed to relevant and rigorous research and also following a transparent and well-defined process. I think we are also sensitive to the challenges facing those researchers working on developing countries. Please continue to comment and provide input on the SAJE. I think it is useful to have an ongoing dialogue on these issues and to let people know how the process works. And please continue to submit papers.
You also make a good point about the incentives South African researchers face – all journal publications regardless of the quality of journal, provided the journal is accredited, count equally to the bureaucrats in research administration. It is up to us as researchers to try to make the case to them that quality, not only quantity, is important. I like the strategy you set out in your comment – it nicely articulates what I think I’m trying to do. And working in a team is more fun too! Looking forward to our next joint paper.

Friday, 1 June 2012

The SAJE has fired a shot across all our bows

Recently I have had a paper rejected by the SAJE. This has happened before and probably will again. In practical terms it means that I will have to revise the paper and find another journal that may be interested. We all know how it works. In this case there are some aspects that I think may inform a broader audience and is worth writing a blog about.

The paper is the one on the thickness of the day labour market with Derick Blaauw – neither the paper nor this blog should be taken to reflect on Derick – he graciously let me borrow data from a country-wide research project on day labourers for this geography-of-the-labour-market story and it has not quite worked out yet.

Obviously I think that it is a good paper with a number of things going for it:
  • We use the unique set of primary data collected by Derick, his co-researcher and fieldworkers: 3800 day labourers from all over the country were interviewed over a period of 10 months in 2007. Collecting this type of primary data present numerous challenges for researchers and is no easy task.
  • Not a lot has been written about the geographical economics aspects of the labour market in South Africa and nothing about day labourers. Given the context of large scale unemployment and a relatively small informal sector, the day labourers are an interesting part of the SA labour story.
  • The key claims we wanted to test were whether large urban areas do allow for a better match between workers and jobs, whether it allows for day labourers to become more specialised and if these factors contribute to higher earnings.
  • The geography is not just a rural-urban dummy, we have district council level population density, a measure of occupation density and interactions of other cool measures with a metro dummy.
The drawback is that we only have the one cross-section and the regression model can say something about the direction of relationships, but not about causation. The sub-editor writes:

I find the topic of this paper to be quite interesting but I am afraid that the paper fails to deal with the difference between causation and correlation. The authors find that living in larger metro area is correlated with higher earnings. However, if more able workers (even after controlling for education) tend to be in larger urban areas then the paper is overestimating the effect.

To the uninitiated, the problem is unobserved heterogeneity. There are characteristics of the day labourers that influence their wages, like ability or the fact that some are more honest or dependable than others. These end up in the error term of the regression. This is fine as long as these effects are random and uncorrelated with the explanatory variables that we do have. Unfortunately, this is unlikely to be the case and the consequence is that the results are biased and we are in violation of CLRM assumptions. We know this, the SAJE knows this, but until recently it was a limitation that people could live with as long as the results are carefully written up and the rest of the story is interesting. But in this case and probably more frequently in the future, more will be required.  This serious implications for future research.

How much further out the goal posts are moving is the point that I want to get to. To solve the above problem you can go one of two routes:
  • Use panel data. If you are able to observe the same people, households, firms or countries over time you can control for unobserved fixed effects and make bolder claims about causality.
  • Undertake a randomized control trial. If you have a control group and you are able administer some kind of treatment to an experimental group you would be able to identify the causal effect.
It is easy to see that these solutions are non-trivial, particularly if you are also teaching a few courses every year, have limited research funding and research management thinks that you should be averaging 3 or 4 publications a year.

So what is my advice to microeconometricians trying to get into SAJE?  If you have been following a panel of day labourers across the country, or if you have a RCT where you have enabled random day labourers to move to Gauteng (and others not) and you have observed changes in their earnings, controlling for everything else, you probably would not be submitting to SAJE anyway.  Shortly after walking on water you would be submitting to JEG or JDE.  Barring this there are a few options. You can trawl through existing data looking for exogenous variation. You will need data in which there has been some kind of change that allows you to distinguish a before and after and then you can talk about RCT-type causality.  Similarly you can sharpen your econometric skills and see if you can use techniques like propensity score matching to identify RCT-type causality in cross-sectional data.  An alternative is to use existing cross-section data, pool it and build pseudo-panels.  All this is possible and is being done by some, but I’m not sure how sustainable it is.  If you do want to collect your own primary data in panel or RCT format, know that it will take considerable time and resources and require some hard thinking during the conceptualization of the project.  With that panel, reviewers will always have issues with the sample and attrition.  With RCTs, there is a whole debate raging on the internet about reliability, validity and repeatability. All of this implies time and resources that most academics do not have.  If you are able to do such good work, research management will have to make peace with smaller quantities of outputs in return for the better quality.  It may in fact be easier to try and join a team that is already doing this sort of work.  There is NIDS at UCT, firm-level work at Wits, education work at Maties and gender and migration work at UKZN.  If all else fails, learn DSGE models!

On subnational data - pick your black box

South Africa faces significant challenges such as a low economic growth rate, high unemployment rate, high poverty rate and substantial inequality.  I often argue that these problems and their possible solutions have a spatial dimension that is neglected.  But, to support local economic development the public and private sectors require access to reliable sub-national data.  Statistics South Africa collects and disseminates socio-economic data, but information about local economies is limited to two private sector databases: Global Insight's REX and Quantec's Regional indicators.Recently, one of my Master's students set out to compare the two databases and we found some interesting differences.

The first thing to note is that in both cases the data are derived or imputed. This in itself is not a problem - it is also the case with for example the EU's NUTS-3 data - but the questions are about the amount of source data that do exist and the assumptions made to generate economic data at municipal level. It has been said that sub-national economic data in South Africa are not suitable for dynamic analysis because it is generated from aggregate GDP figures on the basis of a static algorithm. Our look at the data did not find simple disaggregation of official national or provincial total to the municipal level based on some or other fixed proportion, or fixed growth rates over time. We did find some interesting differences in, for example, population numbers.

There is hardly any way of knowing which is more correct, so for the economic data we argued as follows. If you subscribe to the idea that agglomerations of economic activity are characterised by cumulative causation and path dependency you would expect that over the short period for which there is data available, some places would grow faster and others slower than the national average but there would be persistence in relative positions and ranking. This is typically what the databases show. There is a lot more in the dissertation about the growth rates of GVA and different places' share of GVA, but the table below gives a brief summary of a test of rankings.

Each database shows internal consistency, but there are large (and significant) differences in rankings of places' share of GVA between the two databases.

Our conclusion: There is no evidence that the private sector databases are a simple breakdown of national or provincial numbers. There are no exploding standard errors. But the databases are black boxes and they differ substantively. They should not be used together. It is a question of picking your black box. 

What we need is an academic, open source dataset - a resource that can be vetted, applied and improved by all users.