regional per capita income convergence in austria hofer h and worgotter a 1997 regional per capita income convergence in austria reg studies 31 1 12 the question of whether there is a tendency for regional convergence has become a central topic for economic research this paper examines growth and dispersion of output per capita across nine austrian regions and 84 districts time series analysis of the austrian regions finds no evidence for cointegration between regional output and national output we extend our empirical work by estimating convergence regressions for austrian regions and districts the rate of convergence is about 1 a year and indicates a convergence pattern with a very slow pace if we include dummy variables for type of district we estimate 2 which is a familiar value from other studies hofer h et worgotter a 1997 la convergence des revenus regionaux par tete reg studies 31 1 12 la tendance eventuelle a la convergence regionale est devenue un theme principal de la recherche economique cet article examine la cro

convergence across the swedish counties 1911 1993 abstract this paper finds strong and robust evidence of convergence in per capita income across the twenty four swedish counties 1911 1993 in contrast to most previous studies on regional convergence this study adjusts incomes to account for regional differences in the cost of living the main conclusion is that using adjusted incomes as opposed to non adjusted incomes does not qualitatively change the results on convergence for the swedish counties however a quantitative difference is that estimated speeds of convergence are higher and the standard deviation of the log of per capita income is lower when adjusted incomes are used which is consistent with cross country evidence

real convergence empirical evidence for latin america this article investigates the real convergence of 17 latin american countries to the us economy for the period 1950 to 2011 time series methods are used to test stochastic and convergence these methods include the possibility of one or two structural changes the results show that when endogenous structural changes are considered several latin american countries exhibit stochastic convergence nevertheless real convergence to the us is found only for three latin american countries chile costa rica and trinidad and tobago with these countries also presenting evidence of stochastic and convergence

is there persistence in the impact of emergency food aid evidence on consumption food security and assets in rural ethiopia we identify the impact of emergency food aid programs after the 2002 drought in rural ethiopia on future welfare based on a difference in differences matching estimator participation in food for work increases growth in total consumption and food consumption eighteen months after the drought separately receiving free food raises growth in food consumption but surprisingly negatively impacts food security food for work benefited households in the middle and upper tail of the consumption distribution while the better targeted free food program benefited the poorest evidence suggests these impacts demonstrate accumulated and persistent effects of food aid received in the first twelve months after the drought

informal insurance arrangements with limited commitment theory and evidence from village economies recent work on consumption allocations in village economies finds that idiosyncratic variation in consumption is systematically related to idiosyncratic variation in income thus rejecting the hypothesis of full risk pooling we attempt to explain these observations by adding limited commitment as an impediment to risk pooling we provide a general dynamic model and completely characterise efficient informal insurance arrangements constrained by limited commitment and test the model using data from three indian villages we find that the model can fully explain the dynamic response of consumption to income but that it fails to explain the distribution of consumption across households

convergence and divergence in latin america 1970 1998 this paper examines the process of convergence in latin america over the period 1970 1998 there has been relatively little work on income convergence among developing countries in general and in latin america in particular even though many studies have examined convergence both within and among developed countries there is little support for the convergence hypothesis over the sample period as a whole although the beta coefficient is positive it is insignificant convergence is strong in the 1970s but by the 1990s it has disappeared there is no evidence of a narrowing in the cross country dispersion of income sigma convergence for the sample period as a whole the results offer little support for the neo classical growth model poorer countries have not grown faster than richer ones there is a strong case for strengthening regional development policy

risk and insurance in a rural credit market an empirical investigation in northern nigeria credit contracts play a direct role in pooling risk between households in northern nigeria repayments owed by borrowers depend on realizations of random shocks by both borrowers and lenders the paper develops two models of state contingent loans the first is a competitive equilibrium in perfectly enforceable contracts the second permits imperfect information and equilibrium default estimates of both models indicate that quantitatively important state contingent payments are embedded in these loan transactions but that a fully efficient risk pooling equilibrium is not achieved the research is based on a year long survey in zaria nigeria conducted by the author

risky debt investment incentives and reputation in a sequential equilibrium the agency relationship of corporate insiders and bondholders is modeled as a dynamic game with asymmetric information the incentive effect of risky debt on the investment policy of a levered firm is studied in this context in a sequential equilibrium of the model a concept of reputation arises endogenously resulting in a partial resolution of the classic agency problem of underinvestment the incentive of the firm to underinvest is curtailed by anticipation of favorable rating of its bonds by the market this anticipated pricing of debt is consistent with rational expectations pricing by a competitive bond market and is realized in equilibrium some empirical implications of the model for bond rating debt covenants and bond price response to investment announcements are explored

risk sharing and public transfers we use public transfers in the form of food aid to test for the presence of risk sharing arrangements at the village level in rural ethiopia we reject perfect risk sharing but find evidence of partial risk sharing via transfers there is also evidence consistent with crowding out of informal insurance linked to food aid programmes

convergence or divergence in latin america a time series analysis this article investigates the occurrence of per capita income convergence in 19 latin american countries we apply a time series approach to test for stochastic convergence and convergence based on structural breaks unit root tests where the dates of breaks are unknown and determined endogenously this approach is essential since it does not impose common break dates and parameter homogeneity among countries in fact the econometric methodology employed attempts to provide what was lacking in previous works as a consequence unlike prior studies the results indicate that there is substantial evidence in favor of conditional convergence in latin america we show that this evidence is even greater when analyzing south and central america separately

moral hazard and secured lending in an infinitely repeated credit market game we analyze repeated moral hazard with discounting in a competitive credit market with risk neutrality even without learning or risk aversion long term bank borrower relationships are welfare enhancing the main result is that the borrower obtains an infinite sequence of unsecured loans at below spot market cost following the first good project realization this contract produces first best action choices prior to this stage the borrower gets secured loans with above market borrowing cost the optimal contract thus displays a selective memory feature taking only one of two forms at any given point in time depending on prior history we consider an infinitely repeated bank borrower relationship with moral hazard and universal risk neutrality and explore the ramifications of credit contract duration when the two well known benefits of long term contracting learning and improved risk sharing are absent our objectives are twofold the first is to analyze an infinitely repeated game with discounting in a credit market context we thus relate the theory of repeated games to financial intermediation theory particularly to issues of moral hazard and collateral related distortions the second objective is to understand noteworthy stylized facts of credit markets such as durability in credit relationships lower borrowing costs for established borrowers and unsecured loans for established borrowers versus secured loans for newer borrowers while these practices may be partly due to learning we show that learning is not essential to rationalize them even if information decays rapidly and banks learn nothing about borrowers through time these aspects of credit contracting arise in a repeated game context our main results are as follows first despite universal risk neutrality and the absence of learning a durable bank relationship benefits the borrower 2 the intuition is that the long term contracting permitted by a durable relationship enables the bank to efficiently tax and subsidize the borrower through time to reduce the use of costly collateral second the average welfare loss due to moral hazard per period is positive even as the time horizon goes to infinity third the optimal infinite horizon contract has the striking property that following the period

local governance and the quality of local infrastructure evidence from village road projects in rural china abstract research has shown that allowing local communities to elect their own leaders increases local infrastructure investment however much less is known about the effects of local governance reform on the quality of local infrastructure this paper examines the effects of governance reform implemented in rural chinese villages on the quality of village road projects we conduct surveys in 101 rural villages and collect data related to the implementation of the reform over the last two decades we also measure the quality of over 550 village road projects completed in these villages using fixed effects and instrumental variable estimation methods we find that the implementation of village governance reform increases the quality of village road projects we also find evidence supporting the following effect mechanisms 1 village leaders become younger and more educated 2 high quality road projects increase incumbent leaders re election chances and 3 village residents participate more actively in the management and monitoring of village road projects

the effects of migration on collective action in the commons evidence from rural china summary over the past three decades scholars have studied the effects of more than three dozen factors on collective action in the commons but little is known about the effects of rural to urban migration we examine this question with the case of china which has the world s most extensive levels of rural to urban migration using ols logit and probit models and data from a survey of 1 780 households from 18 provinces we find that migration has a statistically significant adverse effect on collective irrigation controlling for a large number of theoretically relevant variables the effects of migration on collective action in the commons are possibly mediated by a number of factors frequently identified in the literature including leadership social capital sense of community economic heterogeneity and dependence on resources we speculate that massive out migration partly explains the significant drop in the use of collective canal irrigation and exacerbated the significant increase in groundwater irrigation since the start of reforms in 1980s these findings have important policy implications for commons governance in china given that massive rural to urban migration will continue in the next decade because of the increasing rural to urban migration worldwide especially in developing countries the findings could also partly explain the deteriorating state of rural village infrastructure natural common pool resources and ecological systems in many developing countries

adverse selection in dynamic moral hazard this paper studies a multiperiod moral hazard problem under two assumptions i contracts are subject to renegotiations ii the agent s action has long term effects the action is also interpreted as a choice of characteristic or type renegotiation proof contracts that implement various actions including random ones are characterized under appropriate conditions the equilibrium involves the principal implementing a random action therefore the equilibrium has standard properties of adverse selection models

why financial structure matters the 1958 paper by franco modigliani and merton miller has been justly hailed as a landmark in the modern theory of finance what has not been sufficiently emphasized is the importance of the paper to the development of economic theory and practice indeed it is ironic that a paper which purportedly established that one need not pay any attention to financial structure that financial structure was irrelevant should have focused economists attention on finance merton miller gives what must be part of the explanation in his preceding paper in this issue by providing conditions where financial policy was irrelevant conditions which were close to the assumptions used by most conventional economists the paper forced a reexamination of those standard assumptions that reexamination is still going on the mm results have such great intellectual power and appeal that their direct effect has sometimes been to lead economists astray this result may perhaps be seen most forcefully in the work in investment theory in the major study done prior to mm that of meyer and kuh 1959 financial variables like profitability were identified as having important independent effects on investment but the paradigm that became dominant following the publication of mm most forcefully articulated by dale jorgenson and his associates argues that in the absence of taxation financial structure for instance the magnitude of the firm s equity base or cash fiow would make no difference to the level of investment theory drove the econometrics financial structure variables were excluded because economic theory that is modigliani and miller said they should be excluded only recently as a developing and substantial body of economic theory says once again that such variables should be included have econometricians included profit variables again in their specifications

credit layering in informal financial markets abstract informal lenders with access to markets or capital often find it attractive to delegate loan provision to downstream lenders who have an information or enforcement advantage in dealing with particular borrowers in this paper we examine the conditions under which such an arrangement is preferred by two informal lenders a landlord and a merchant who compete in loan provision to tenant farmers differentiated by wealth we show that credit layering is preferred only when tenants are sufficiently poor in this case the trader lends to tenant farmers via a contract with their landlord otherwise only the trader lends as a consequence a pattern of borrowing emerges in which relatively wealthy tenants borrow from merchants while poor tenants borrow mainly from their landlords interlinkage between land and credit thus arises only for a subset of tenants and purely as a consequence of credit layering this pattern is shown to be supported empirically

convergence in brazil recent trends and long run prospects this paper applies to the analysis of the interstate income distribution in brazil a set of techniques that have been widely used in the current empirical literature on growth and convergence usual measures of dispersion in the interstate income distribution the coefficient of variation and theil s index suggest that sigma convergence was an unequivocal feature of the regional growth experience in brazil between 1970 and 1986 after 1986 the process of convergence seems however to have slowed down almost to a halt a standard growth model is shown to fit the regional data well and to explain a substantial amount of the variation in growth rates providing estimates of the speed of conditional beta convergence of approximately 3 p a different estimates of the long run distribution implied by the recent growth trends point towards further reductions in the interstate income inequality but also suggest that the relative per capita incomes of a significant number of states and the number of very

estimating the benefit incidence of an antipoverty program by propensity score matching this brief summarizes the results of a gender impact evaluation study entitled estimating the benefit incidence of an antipoverty program by propensity score matching conducted between 1997 and 1998 in argentina the study observed that the average direct gain to the participant is found to be about half the gross wage over half of the beneficiaries are in the poorest decile nationally and 80 percent are in the poorest quintile the propensity score matching psm estimator is reasonably robust to a number of changes in methodology participants are more likely to be poor than non participants participants are less well educated live in poorer neighborhoods and are more likely to be members of neighborhood associations and political parties average gains are similar between men and women but are higher for younger workers funding for the study derives from the world bank research committee

financial constraints and the balance sheet channel a re interpretation aggregate demand models extending is lm fixed price framework yield an enhancement mechanism of the traditional monetary transmission mechanism the credit channel which according to the credit view works through the balance sheet channel and the bank lending channel in this paper the augmented is lm model is modified assuming that investments may be financed by both internal and external sources of funds the inclusion of internal funds in the augmented is lm fixed price model suggests a different interpretation of the balance sheet channel as an enhancement mechanism amplifying monetary policy effects through the quantity rather than the cost of borrowing thus changes in borrowers net worth over the cycle can amplify and propagate output fluctuations directly rather than indirectly as in the traditional interpretation of the balance sheet channel the empirical analysis of the monetary transmission mechanism for italy in the last decade accords with the interpretation of the balance sheet c

the cost of capital and optimal financing policy in a dynamic setting abstract this paper revisits the modigliani miller propositions on the optimal financing policy and cost of capital in a dynamic setting in an environment without taxes and bankruptcy costs the results are generally consistent with the modigliani miller propositions 1 and 2 however the first proposition should be presented and interpreted more carefully as given firm characteristics there is only one optimal capital structure thus a firm s capital structure is relevant a relaxation of assumptions about either taxes or bankruptcy costs leads to conclusions that are generally different from those in modigliani and miller 1958 the model predicts that leverage and sales to capital ratios decrease but firm size and capital stock increase with the subjective discount factor of the firm s manager if there are taxes and bankruptcy costs the empirical analysis supports these predictions

the price effects of monetary shocks in a network economy abstract empirical evidence shows monetary shocks have two temporary effects on the distribution of prices one the dispersion of cross section of prices increases in response to monetary shocks two some prices change in the wrong direction some prices decrease in response to positive monetary shocks and increase in response to negative monetary shocks we present a model that generates the two effects of monetary shocks on the distribution of prices as an out of equilibrium phenomena firms are related to each other through a production network monetary shocks change the working capital of a subset of firms and percolate to other firms through buyer seller linkages price dispersion increases because the percolation of a monetary shock through the production network causes prices to differentially deviate from their steady state values some prices change in the wrong direction because a shift in one firm s demand causes a shift in another firm s supply and vice versa thereby generating complicated chains of bi directional price changes monetary shocks can significantly disturb relative prices even when all prices are fully flexible

dynamic microlending under adverse selection can it rival group lending we derive an optimal lending contract in a two period adverse selection model with limited commitment on the borrower side the contract involves penalty interest rates after default and favorable rates after success under some conditions it also charges first time borrowers higher rates than repeat borrowers as in relationship lending because the lender is constrained to keep borrowing attractive while using revealed information to price for risk we compare the efficiency of a group lending contract of the kind popularized by the microcredit movement to the dynamic individual contract both types of contracts reveal the same information but the contracts face different constraints on using the information to improve risk pricing as a result either type of contract can lead to greater efficiency depending on specifics of the environment opening the possibility that dynamic lending has played a role comparable to that of group lending in the success of microcredit we also characterize the optimal dynamic group contract when both lending techniques are feasible and find that it combines both approaches but with varying emphases a recurrent theme is that in more marginal environments dynamic lending performs relatively better than and is prioritized over group lending we also discuss a number of extensions including spatially and serially correlated risk and the effect of competition

the effect of irrigation on poverty reduction asset accumulation and informal insurance evidence from northern mali summary the impact of small scale irrigation investments on household consumption assets and informal insurance is estimated from a panel of northern malian households 1998 2006 access to irrigation increases household consumption by 27 30 relative to water recession and rain fed cultivators the paper also investigates whether irrigation has secondary impacts on risk mitigating strategies by reducing covariate risk and reinforcing informal food sharing networks that allow households to insure against idiosyncratic risk we find that households with irrigation save between 4 5 and 6 4 more tropical livestock units and are 20 more likely to engage in informal food sharing with non irrigators this finding suggests that impact estimates that rely on consumption may underestimate welfare gains by ignoring the household s savings behavior and informal insurance network

aggregate economic fluctuations and regional convergence the finnish case 1988 95 this paper analyses the connection between aggregate economic fluctuations and regional productivity convergence in finland during the period 1988 95 markov chain transition matrices and mobility indices were used to examine the regional distribution of productivity the results indicated that high intra distribution mobility occurred during booms when regional convergence potential was also at its highest conversely recession years were characterized by much lower mobility and a more divergent regional pattern these findings bear important implications in terms of regional policy planning as it seems that poor regions do not manage to keep up with the rich ones during slumps whereas regional disparities diminish naturally during boom years

the life cycle of a microfinance institution the irish loan funds abstract ireland s loan funds were a long lived self sustaining large scale microfinance organization that made millions of loans without collateral to the poor during the first 100 years of their life cycle a period of growth ending in the 1840s they adapted constantly and obtained improvements to their legal structure because they were complementary to the banking system and seen as effective in relieving poverty in their 2nd century they became ossified in part because of competition with commercial banks the loan funds provide an example of sustainable microfinance under harsh economic conditions and illustrate how organizations change incrementally and when successful alter their institutional framework

initial human capital or the rule of law what matters for the income convergence of poor countries the article analyses conditional convergence among the low income countries using a panel data framework covering the period 1960 to 2008 the estimation of conditional income convergence is based on the augmented solow model with system gmm technique for the dynamic panel data more importantly the article assesses the role of initial human capital stock and the rule of law in the income convergence of poor countries by considering further categorizations of the poor countries based on these two variables this is the first study on the comparative properties of human capital and the rule of law in the income convergence of poor countries utilizing a dynamic panel framework the full sample of low income countries does not show any evidence of conditional income convergence the categorizations on the basis of initial human capital stock do not alter the conclusion of no income convergence however the subsample of low income countries with a better rule of law exhibits positive evidence of convergen

hidden impact household saving in response to a poor area development project abstract the possibility that poor households may prefer to save the income gains from a development project raises concerns about how well standard evaluation methods using data collected over relatively short periods can capture the true welfare impacts by the widely used difference in difference method the southwest china poverty reduction project had little current impact on the proportion of people in beneficiary villages consuming less than us 1 day despite a public outlay of us 400 million however the program had much larger impacts on incomes than consumptions uncertainty about the project s future impact probably made it hard for participants to infer the gain in permanent income so they saved a high proportion of the current income gains

evaluating irrigation investments in malawi economy wide impacts under uncertainty and labor constraints irrigation expansion is critical to increase crop yields and mitigate effects from climate change in sub saharan africa but the low profitability has led to little irrigation investments in the region so far using an integrated modeling framework we simultaneously evaluate the returns to irrigation arising from both economic and biophysical impact channels to understand what determines the profitability of irrigation in malawi our results confirm that the returns to irrigation cannot cover the costs in malawi while labor intensive irrigation expansion leads to unfavorable structural change in the short run the profitability hinges on low irrigated yields that fall far from expectations due to insufficient input use and crop management techniques on the other hand we find that the nonmonetary benefits of irrigation regarding higher food security lower poverty and reduced vulnerability to climate change make investments in irrigation worthwhile to improve the livelihoods of smallholders