We are releasing this newsletter in recognition of the continued importance of underlying issues of impact and equity. We will be sharing important data and insights related to COVID-19 on an ongoing basis going forward as a bespoke COVID-19 Research Series.

Education

• EdSurge article highlights key trends that may impact edtech investing in the coming decade. The article equates offering affordable educational opportunities to attract and retain talent as the new healthcare benefit at workplaces. Additionally, the need for effective edtech products that protect user privacy and cater to the growing need for improved social and emotional learning products in schools is highlighted. As the correlation between educational attainment and economic opportunity continues to drive the edtech market, these trends may help investors in both emerging and developed markets. (Rogers, J., 2020)

• Private school voucher programs in Florida improve achievement of students remaining in public schools, especially those from low-income families. The authors of the NBER working paper studied the impact of private school voucher programs on students who remained in public schools. To test how competition from private schools affects public school performance, the authors tracked students in public schools over 14 years following implementation of the Florida Tax Credit Scholarship program, the private school voucher program studied, which increased in size sevenfold since 2001. Students in public schools that faced increased competition as a result of vouchers show statistically significant improvement in combined math and reading scores and declines in suspensions and absences, with stronger effects seen for students from lower income families. This research extends previous findings by looking at a larger sample of students and looking at the effects over a longer period. (Figlio, D. et al., 2020 [p])

• Systematic review of literature comparing reading text from paper versus a screen shows that reading from paper may be more effective. Use of digital books among readers of all age groups has been increasing. This meta-analysis synthesized findings related to the effects of medium on reading and comprehension. The author identified 33 studies comparing reading performance, reading time, and self-assessment of reading performance from paper and screens. The vast majority—29 out of 33 studies—found that readers learned better from paper than screens for expository texts, such as newspaper and magazine articles, but the results were less pronounced for narrative texts. The results also showed readers were better at assessing their own performance when reading on paper. This analysis adds to two previous meta-analyses which also arrive at the same conclusion. (Clinton, V., 2019 [p]; Delgado, P. et al., 2018; Singer, L. et al., 2017)

Energy

• A new report finds that energy efficiency has made substantial contributions to the economy, including $540M in annual public health benefits in 2017 and 2.3M jobs, as well as contributing 50% of the total reductions in carbon dioxide emissions in the power sector since 2005. The report, authored by the American Council for an Energy Efficient Economy, also finds that US investment in energy efficiency declined by almost 20% between 2016 and 2018 due to policy changes, despite continued growth in the global market. The report cites improved financing tools for energy efficiency like Property Assessed Clean Energy Programs and Energy Saving Performance Contracts as options for increasing domestic energy efficiency. (ACEEE, 2020)

• A recently published study in Energy Economics finds substantial self-aggravation effects from residential electricity consumption in China. When temperatures are high, air quality deteriorates due to increased coal-fired generation used to power air conditioning. As air quality deteriorates, people choose to stay indoors relatively longer, which further increases air conditioning usage. The authors’ estimate that this self-aggravation feedback loop leads to a 6% increase in PM_2.5 emissions, suggesting that the benefits of reducing peak energy use in China are even greater than typically estimated. (Yi, F. et al., 2020 [p])

Financial Services

• A policy change in Rhode Island that lowered the cap on payday loan interest rates from 15% (~390% APR) to 10% (~260% APR) to protect customers may have led to more debt and default. A study published in the Journal of Banking and Finance explores consumer response to the interest rate change and found that lowering the interest rate cap increased the number of borrowers (30-34%), the number of loans per borrower (3-4%), and the average principal amount (4-6%), but also increased loan sequences (consecutive loans) and sequence default. These findings suggest that lowering interest rates, even if done to benefit customers, may not improve borrower welfare, if borrowers have limited financial literacy. The study of a similar policy change in Oregon showed negative impacts on loan borrowing due to shrinking credit supply. The cap on payday loan interest caused lenders to exit the market, shifting payday borrowers to inferior substitutes such as overdrafts, late bill payments, etc. Other studies on payday loan access show increased difficulty in paying mortgage, rent, and utilities bills, increased likelihood of filing for bankruptcy, and decreased job readiness among military personnel. (Fekrazad, A., 2020 [p]; The Economist, 2020 [p]; Zinman, J., 2010 ; Melzer, B., 2011; Skiba, P. et al., 2009; Carrel, S. et al., 2014[p])

• A regulation reducing the interest rate ceiling in Chile for consumer loans reduced access to credit. A study in Chile analyzed the impact of legislation introduced in 2013, which gradually reduced the maximum legal interest rate for consumer loans from 54% to 36%. Results show that the rate cap reduced the probability of credit access by 8.7%, on average, and resulted in 9.7% of borrowers, the equivalent of 197K families, being excluded from bank consumer loans. The law’s impact was strongest on the youngest, least educated, and poorest families. (Madeira, C., 2019)

• Despite exhibiting better loan performance and lower default rates than men in peer-to-peer (P2P) lending, female borrowers do not receive better access to funding. A study analyzing a peer-to-peer lending platform in China (Rendrendai) finds that lending to female borrowers is associated with better loan performance including a lower probability of default, a higher expected profit, and a lower expected loss, in comparison to their male counterparts. Despite their higher creditworthiness, authors fail to find any measurable impact on funding success rate. The author concludes that lenders discriminate against female borrowers regardless of the amount of information disclosed by borrowers: women effectively pay more for credit. These findings contribute to the existing evidence on lending behaviors in P2P markets – with some studies showing discriminatory behavior on lending platforms in the US, while others found no bias on German lending platforms. (Chen, X. et al., 2020; Pope, D. et al, 2011; Ravina, E., 2019; Barasinska, N. et al., 2014 [p])

Food and Agriculture

• Recent studies show that substantial changes are needed in consumer behavior and agricultural practices to allow the Earth to support 10B people. Nearly half of global food production exceeds planetary boundaries for biodiversity, land, water, nitrogen flows, and climate. Under current practices, the earth can support a balanced diet for an estimated 3.4B people. This figure could grow to 10B people through the redistribution of cropland, improved water-nutrient management, reduced food waste and loss, and widespread dietary changes. In additional to changes in agricultural practices, various authors studying the subject suggest a more sustainable and healthful change in diet, incorporating more vegetables, fruits, whole grains, legumes, nuts, and unsaturated oils. (Rockstrom, J. et al., 2020; Gerten, D. et al., 2020 [p]; Willet, W. et al., 2019; Springmann, M. et al., 2018 [p])
• A study published in Science reviews the functional relationship between biodiversity and economic value. The authors survey the literature linking biodiversity to economic outcomes, cataloging the various relationships between biodiversity (i.e., the number of individual species in a given area) to a monetized outcome value ranging from utility of land use to carbon sequestration potential. The relationship between biodiversity and economic outcomes is more complex than often assumed. In order to improve decision-making, the actual contribution of biodiversity to economic value needs to be made explicit and context specific. (Paul, C. et al., 2020)
• Foodborne illness leads to over 400K deaths and the loss of 33M disability-adjusted life years (DALYs) annually, disproportionately affecting children. The global health impact of foodborne illness is comparable to that of malaria. A literature review of foodborne illness finds several systems challenges facing low-and middle-income countries (LMIC) including lack of consumer awareness, low willingness-to-pay for food safety, limited government oversight of food service providers, and the cost of implementing food safety techniques for smallholder farmers. Some interventions have proven effective on a small scale—farmer training, trader certification, and training of goods handlers. There are also opportunities for investors and businesses to reduce foodborne illness through improved testing for contamination, packaging, and data analysis to monitor supply chains. (Hoffmann, V. et al., 2019 [p]; Hoffmann, V., 2019; AgFunder, 2019)

Healthcare

• New study highlights effects of public health insurance on non-poor children in Vietnam. The author studies the effects of a 2005 health insurance reform in Vietnam, which expanded public insurance to children above the national poverty line (previously excluded) and required the use of public health facilities. The results, published in Health Economics, found that despite health coverage among these children increasing nearly three times, there was little or no evidence that the reform significantly increased health care utilization, changed care locations from private to public sites, lowered out-of-pocket costs, or improved health status for non-poor children. The findings suggest a preference for private or out-of-network healthcare in non-poor Vietnamese families, and a "bypassing" phenomenon whereby these families skipped free health care. This paper contributes to a broader set of literature that studies the effects of public health insurance in developing countries, which has been found to have increased utilization in some regions.(Nguyen, M., 2020 [p])
• Observational study measures correlation between emergency department (ED) crowding and patient mortality. The author studies the change in patient mortality in American hospitals when new emergency departments open nearby, thereby increasing ED capacity. The results, published in the Journal of Health Economics, find that a 10% alleviation of ED patient volume lowers average patient's chance of mortality by ~20% - a finding that is realized both inside the hospital and after the patient is discharged. These results are also consistent with other studies on ED wait times and point to broader benefits of increasing healthcare capacity. (Woodworth, L., 2020 [p]; Gruber, J. et al, 2018)
• New randomized controlled trial published in the American Economic Review finds that a diverse physician workforce may increase take-up of preventive care among African American men. The authors randomized black male patients to black or non-black male medical doctors in Oakland, corresponding to the experiment's treatment and control groups. Pre-consultation, subjects selected a similar number of preventive treatments. Post-consultation, subjects who met with a racially concordant doctor were 15% more likely to request a blood pressure measurement and 27% more likely to have their body mass index (BMI) measured. Patients in the treatment group were also more likely to take up invasive services: they were 49% more likely to agree to a diabetes screening, 71% more likely to accept a cholesterol screening, and 56% more likely to agree to the flu shot, conditional on financial incentives being offered. These findings are extrapolated to estimate that black doctors would reduce mortality from cardiovascular disease by 16 deaths per 100K per year, accounting for a 19% reduction in the black-white male gap in cardiovascular mortality. (Alsan, M. et al., 2019)

Infrastructure

• A recently published study in the American Economic Journal estimates that the marginal cost of congestion during rush hours is about $0.30 per vehicle-km in the urban core of Beijing. The authors use 2014 data on traffic costs, which amounted to 0.5% of Beijing’s annual GDP. To estimate marginal costs, the authors consider the value of commuter’s time lost to traffic and exploit variation in traffic density induced by license number. The study is the first of its kind to estimate the marginal cost of traffic congestion and provides a benchmark for valuing transportation improvements that ease congestion. (Yang, J. et al. 2020)

Disclaimer:  Views presented in the linked articles are the author’s own and not representative of Y Analytics. For informational purposes only, not intended as investment advice. Content may not be comprehensive of all timely research within each sector.  Text is often drawn directly from cited sources.