UC San Diego and MIT Economists May Bring Into Focus the Financial Lives of Billions

CHICAGO, September 22, 2010 - Economists Krislert Samphantharak of UC San Diego and Robert M. Townsend
of MIT have defined a far-reaching framework that may contribute
significantly to the meaningful assessment and analysis of the financial
lives of the world's poor.

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The lack of a cohesive framework for gathering and organizing data about
the finances of poor households often results in data that are inconsistent
or analysis that does not make sense. This inhibits the ability of
researchers and policymakers to make sound decisions that truly benefit the
poor.

In their book Households as Corporate Firms, published by Cambridge
University Press, Samphantharak and Townsend establish a framework that shows
how researchers can create detailed accounts for households based on
corporate financial accounting principles.

The implications of this work are significant. For the first time,
researchers have a logical, precise tool for establishing accounts from
household surveys and for collecting data in a systematic way. By basing the
accounts on the already widely accepted standards of corporate financial
accounting, the data collected have greater accuracy and allow for
unprecedented comparisons across households and regions.

Another significant aspect of this approach is that corporate financial
accounts also serve as the foundation of national income and product
accounts. Therefore, these household accounts could be used to estimate the
contributions of small household businesses to a country's gross domestic
product (GDP) similar to the way that larger incorporated businesses are.

Jonathan Morduch, of New York University and the author of Portfolios of
the Poor, recognized the potential impact of this approach, "The analytical
structures will allow economists to collect better data, ask sharper
questions, and bring into focus important parts of the economic lives of
billions of people."

Krislert Samphantharak is an Associate Professor in the School of
International Relations and Pacific Studies at the University of California,
San Diego. Robert M. Townsend is the Elizabeth and James Killian Professor of
Economics in the Department of Economics at the Massachusetts Institute of
Technology. Their work was made possible, in part, by a grant from the John
Templeton Foundation and by a grant from the Bill & Melinda Gates Foundation
to the University of Chicago for the Consortium on Financial Systems and
Poverty (www.cfsp.org).

Jennifer Roche of the Consortium on Financial Systems and Poverty, +1-773-834-2240, jroche at uchicago.edu