Random thoughts of an economist

Should we donate to help …

Posted in Economics, Natural disasters, teaching by kafuwong on April 26, 2013

You want to help the needies (and of course your money always has alternative uses). Suppose for every 100 dollars you donate, x reaches the hands of the needies. What is minimum value of x such that you will still decide to go ahead with the donation? Would your answer differ if you know where the 100-x goes?

We all have a different number of x.  Obviously, when x=0, nobody will donate.  When x=100, those who want to help the needies will donate.  For a lot of people (me included) x may range about 75-90.   To make the decision to donate, we need to collect the information about x for different government or non-government organizations.   I do not have the information to do the calculation.  I hope someone would do this for us.

Do we care where the 100-x goes?  What if 100-x goes to the workers who do the transportation of the donation.  What if 100-x becomes the expensive watch worn by someone who helps distribute the donations?

Earthquake at Qinghai, China

Posted in Economic growth, Economics, Natural disasters, Research by kafuwong on April 15, 2010

Sad to read the news about the earthquake at Qinghai, China (http://www.guardian.co.uk/world/2010/apr/14/china-earthquake-death-toll-yushu).   At magnitude 7.1 and in a poorly developed province of China, the causalty can easily exceed 1000.  Indeed, in January 2010, an earthquake of magnitude 7.0 at Haiti killed more than 200,000.   So, a natural question is:  How is the causalties related to the level of economic development and the population density in the cities or countries?   What is the likely causalty at Qinghai?

It turns out that United States Geological Survey’s (USGS) Earthquake Hazards Program  (http://earthquake.usgs.gov/earthquakes/world/world_deaths.php) keeps data about earthquakes in the US and around the world.  One can easily obtain data bout GDP (a measure of economic development) and the population density of different countries.  With the collected information, a multiple linear regression of the causalties on the magnitude of earthquake, a time trend, the GDP and the population density should provide a reasonable answer to the question posted.  It turns out that a similar research has been conducted — “Economic development and the impacts of natural disasters” by Hideki Toya and Mark Skidmore (Economics Letters 94 (2007) pp.20-25). 

Of course, we might be interested in the alternative question: How does the frequency of earthquakes (or natural disasters) affect the economic development of a country?  I will leave that to you to tell me the relevant research papers on this question.