WED 11:30 AM: Parallel Session: Social Welfare

Full Report: Niyousha Hosseinichimeh: Breaking the Vicious Cycle of Poverty: Micro-Lending

Abstract:

Micro-lending has been introduced as an effective antipoverty tool in recent decades. However not all micro-lending institutes are successful both in accomplishing their mission and in loan recovery. According to World Bankís focus note (2006), less than a quarter of its projects that funded micro-lending were judged successful. This paper describes a specific type of micro-lending (the Grameen way of micro-lending invented by Mohammad Yunus, Nobel Peace Prize winner, 2006). It then summarizes the differences between conventional banks and the Grameen Bank. This paper illustrates the important loops that make the Grameen successful both in loan recovery and in accomplishing its mission. The final contribution of this paper is to develop a system dynamics model to test some Grameen policies that researchers believe are the key elements of Grameenís success. I find support for the fact that small loan size, designed to match the clientís knowledge, maximizes Grameenís capital. Also the model finds that investing some portion of Grameenís capital, giving loans to groups of people, and choosing appropriate interest rates are crucial for Grameen Bank.

Reporting:

The model presented by Niyousha Hosseinichimeh is focused on the investigation of the bankís strategy for micro-lending, including loans for education, improving the standard of living, and for income generation. It is shown that average loan size plays an important role for the success of the bank, and that medium loan size maximizes the bankís capital. Small loans would increase general costs of the bank, while large loans are prone to be recovered only partially. This is due to the fact that the lendersí knowledge might be inadequate to handle large sums of money.

Fabio Diaz Pabon: Rethinking the Conflict Trap: Systems Dynamics as a Tool to Understanding Civil Wars. The Case of Colombia

Abstract:

This paper presents the first phase of a work in progress which aims at building a system dynamics model around two theories concerning internal conflict. In particular the model will assess the particular case of Colombia. The different theories around the economics and causes of war can be separated in two trends. The first one argues that wars are economically motivated, and the real objective of armed groups is the quest for money; this theory is characterized under the term greed. On the other side, there are social, political, and historical factors that allow and facilitate the emergence of armed groups (grievances). This investigation aims to develop a better understanding of the complex interactions around the Colombian conflict, considering both theories, and seeks to build a better comprehension of this conflict in order to study how to generate development during an internal conflict.

Reporting:

The presentation offers an introduction into the conflict in Colombia, dating back to 1948, and into the fundamental theoretical approach. This approach combines the economic roots of the conflict with a variety of factors contributing to outbreak and continuation of armed conflicts. Two causal loop models are presented and explained step-by-step in the paper, integrating economic as well as social factors. It is argued that both categories of factors have to be incorporated in an interconnected way to better understand the nature of the conflict.

Roderick MacDonald, Hyunjung Kim: Understanding the Dynamics of Declining Disability Receipts in New York State

Abstract:

Under the auspices of the New York State Office of Temporary and Disability Assistance (OTDA), the Division of Disability Determinations (DDD) adjudicates New Yorkís Social Security Disability (SSD or Title II) and Supplemental Security Income (SSI or Title XVI) claims according to the requirements of the Social Security Administration (SSA). Over the past few years, DDD has moved from a demand environment to a planned environment to facilitate a responsive rather than reactive approach to workload changes. This report presents the findings of a study that was conducted to examine why the number of initial disability receipts received by DDD has been decreasing since 1998. To accomplish the study, a system dynamics computer simulation model was built to explore various theories that have been put forth as reasons for the decline.

Reporting:

The presentation provided an explanation of the observed decline in disability receipts. Five strands of arguments have been considered and integrated into a system dynamics model: reduction of proactive outreach (resulting in a decline of people filing disability claims), welfare reform (reducing incentives to move people from welfare to disability benefit), decline in manufacturing jobs (which in general generate more disabilities than other sectors), the effect of other applicants (increasing the number of applications if people know other applicants who received benefits successfully), and market saturation (depleting pool of eligible people).

The model analysis indicates that the decline in disability claims are mainly due to reduction in SSAís proactive outreach and due to the welfare reform that removed the financial incentive to transfer people from welfare to disability benefits. It is further argued that the decline will stabilize shortly. As a consequence it is recommended not to lay off staff. On the contrary it might be a reasonable strategy to bring in out-of-state cases to maintain a stable workflow in the short run. Moreover the slack resources should be used to invest in staff training and hiring for stable workforce in the long run.

Justus Gallati

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