bulls bears and market sheep abstract a deterministic excess demand model of stock market behavior is presented that generates stochastically fluctuating prices and randomly switching bear and bull markets

models for referendum data the structure of discrete choice models for contingent valuation abstract in 1979 bishop and heberlein introduced an appealing variant of the contingent valuation method which required only yes or no responses hanemann developed a utility theoretic interpretation of the yes no responses which has helped popularize the approach recently cameron has offered another interpretation also utility theoretic which she argues is more general than the hanemann random utility model this paper compares the deterministic models suggested by hanemann and cameron showing them to be dual to each other it shows that correct specification of either function must exclude endogenous variables such as quantity demanded it also demonstrates that using utility theoretic models allows one to compare travel cost models and contigent valuation models on the basis of their implied behavior not on the unobservable surplus or variation measure

you can t save alone commitment in rotating savings and credit associations in kenya abstract this article examines one reason why individuals develop and maintain local level financial savings organizations known as rotating savings and credit organizations or roscas economic theories suggest that individuals form roscas to finance the purchase of a lumpy durable good in response to intrahousehold conflict over savings or to provide themselves with insurance the article proposes an additional hypothesis for rosca participation saving requires discipline and some roscas may be formed to provide a collective mechanism for commitment in the presence of time inconsistent preferences data from 70 roscas located in western kenya indicate that the commitment hypothesis is plausible and broadly consistent with the design and patterns of participation in these roscas as many rosca participants put it you can t save alone

group lending repayment incentives and social collateral abstract in this paper we investigate the impact on repayment rates of lending to groups which are made jointly liable for repayment this type of scheme especially in the guise of the grameen bank in bangladesh has received increasing attention we set up and analyze the repayment game which group lending gives rise to our analysis suggests that such schemes have both positive and negative effects on repayment rates the positive effect is that successful group members may have an incentive to repay the loans of group members whose projects have yielded insufficient return to make repayment worthwhile the negative effect arises when the whole group defaults even when some members would have repaid under individual lending we also show how group lending may harness social collateral which serves to mitigate its negative effect

rotating and accumulating savings and credit associations a development perspective abstract financial self help groups in low income countries consist of two basic types rotating and accumulating savings and credit associations or roscas and ascras in the ascra funds are not immediately withdrawn but are left to grow for loan making comparing the two groups the author finds similarities and differences efforts to rectify the rosca s shortcomings have prompted many innovations and given birth to a hybrid preserving the best of both types in constant adaptation to changing environments

keep your friends close the effect of local social networks on child human capital outcomes abstract social networks can affect demand for human capital investments by relaxing household time or budget constraints or by defining and reinforcing human capital preferences however empirically identifying the effect of social networks on human capital investment is usually problematic because households self select their networks in ways that may be correlated with their abilities to make these investments in northern ugandan internally displaced persons camps networks were not entirely self selected rebel activity which forced households into camps in 2002 disrupted pre existing social networks in ways that were exogenous to household human capital preferences this paper uses the exogenous variation in network disruption to identify a positive impact of networks on children s long term nutritional outcomes

semi nonparametric distribution free dichotomous choice contingent valuation abstract we apply a semi nonparametric distribution free estimator for binary discrete response data to the estimation of a dichotomous choice contingent valuation model using this estimator mean and median compensating and equivalent variation can be consistently estimated without making nontheoretically motivated assumptions on consumer preferences the approach is illustrated using a contingent valuation survey of willingness to pay for reduction of risk of premature death due to exposure to hazardous waste we find that a conventional parametric estimator and the proposed estimator give similar estimates of unconditional wtp but that conditional on explanatory variables the estimates are quite different

estimating the public good value of preserving a local historic landmark the role of non substitutability and citizen information this study applies stated preference methods to estimate the public good values of preservation and restoration of a local historic landmark in a medium sized us city the survey device centres on

valuing morbidity from wildfire smoke exposure a comparison of revealed and stated preference techniques estimating the economic benefits of reduced health damages due to improvements in environmental quality continues to challenge economists we review welfare measures associated with reduced wildfire smoke exposure and a unique dataset from california s station fire of 2009 allows for a comparison of cost of illness coi estimates with willingness to pay wtp measures the wtp for one less symptom day is estimated to be 87 and 95 using the defensive behavior and contingent valuation methods respectively these wtp estimates are not statistically different but do differ from a 3 traditional daily coi estimate and 17 comprehensive daily coi estimate jel q51 q53

testing for non linearity in an artificial financial market a recurrence quantification approach abstract in this paper earlier work on testing for non linear dynamics on realizations from an artificial financial market is extended in two ways on the one hand hinich s bispectral test and white s neural network test are computed on the other hand a recently developed methodology to test for hidden structures in data inherited from physics is successfully applied on the realizations of the artificial market results among alternative tests are compared

the hyperbolic consumption model calibration simulation and empirical evaluation ur preferences for the long run tend to conflict with our short run behavior when planning for the long run we intend to meet our deadlines exercise regularly and eat healthfully but in the short run we have little interest in revising manuscripts jogging on the stairmaster and skipping the chocolate souffleala mode delay of gratification is a nice long term goal but instant gratification is disconcertingly tempting this gap between long run intentions and short run actions is apparent across a wide range of behaviors including saving choices a 1997 survey found that 76 percent of respondents believe they should be saving more for retirement looking only at respondents who believed they were at an age where you should be seriously saving already the survey found that 55 percent reported being behind in their savings and only 6 percent reported being ahead farkas and johnson 1997 the report on the survey concluded t he gaps between people s atti tudes intentions and behavior are troubling and threaten increased insecurity and dissatisfaction for people when they retire americans are simply not doing what logic and their own reasoning suggests they should be doing a 1993 luntz webber merrill lynch survey found similar answers when baby boomers were asked what percentage of your annual household income do you think you should save for retirement and what percentage of your annual

in search of inclusion informal sector participation in a voluntary defined contribution pension system abstractthis paper examines who contributes and who persists in contributing in a national voluntary defined contributory pension programme where the government provides the incentive of matching contributions of a minimum amount usd 16 the paper uses proprietary data from a financial services firm where 12 per cent of customers 37 000 individuals chose to participate in this programme the evidence shows that only about 50 per cent of contributors reach the minimum amount for the co contribution but that participants persist in contributing even if they failed to contribute the minimum amount in a given year while this paper does not provide causal estimates it does present evidence of considerable interest among the informal sector in a state run voluntary pension programme in an emerging market where access to formal finance is otherwise poor

study on benefit transfer in an international setting how to improve welfare estimates in the case of the countries income heterogeneity abstract the paper aims at investigating the validity of benefit transfer in the case of transfers between countries highly heterogeneous in income and demonstrates relative performance of different benefit transfer methods under these conditions lake water quality valuation studies were conducted in two countries in transition poland and the czech republic they reflected two earlier studies carried out in norway we examine how income elasticity of wtp varies with the levels of income and find support for applying the income elasticity of 1 to adjust transferred welfare estimates in case of high differences in income between countries in addition we show that using site specific measures of income outperforms transfers based on gpd per capita the accuracy of benefit transfer is compared using equivalence testing following the tosc two one sided convolutions test a new more informative way of reporting equivalence is proposed based on computing minimum tolerance level rather than specifying it a priori

why don t the poor save more evidence from health savings experiments using data from a field experiment in kenya we document that providing individuals with simple informal savings technologies can substantially increase investment in preventative health and reduce vulnerability to health shocks simply providing a safe place to keep money was sufficient to increase health savings by 66 percent adding an earmarking feature was only helpful when funds were put toward emergencies or for individuals that are frequently taxed by friends and relatives group based savings and credit schemes had very large effects

a dynamic structural model for stock return volatility and trading volume an examination is made of an adaptive beliefs model that is able to roughly reproduce the following features seen in the data 1 the autocorrelation functions of the volatility of returns and trading volume are positive with slowly decaying tails 2 the cross correlation function of volatility is approximately zero for squared returns with past and future volumes and is positive for squared returns with current volumes 3 abrupt changes in prices and returns occur that are hard to attach to news the last feature is obtained because the law of large numbers can fail in the large economy limit

the economics of roscas and intrahousehold resource allocation this paper investigates individual motives to participate in rotating savings and credit associations roscas detailed evidence from roscas in a kenyan slum nairobi suggests that most roscas are predominantly composed of women particularly those living in a couple and earning an independent income to explain this phenomenon we propose an argument based on conflictual interactions within the household participation in a rosca is a strategy a wife employs to protect her savings against claims by her husband for immediate consumption the empirical implications of the model are then tested using the data collected in kenya

treatment of don t know responses in contingent valuation surveys a random valuation model abstract this paper provides a utility theoretic interpretation of don t know dk responses in contingent valuation surveys using a referendum elicitation procedure the random valuation model in this paper assumes that each respondent of a contingent valuation survey has an implicit valuation distribution rather than a single true value as traditionally assumed in his her mind if an offered referendum bid is not clearly different from the mean value of one s valuation distribution the respondent may give a dk answer to the cv referendum question based on this model a maximum likelihood procedure is proposed for estimating respondents willingness to pay for a nonmarket good with referendum contingent valuation data which include dk responses an empirical illustration of this estimation procedure is also provided

banking the poor via savings accounts evidence from a field experiment abstract in a setting with low penetration of bank accounts i randomly gave access to bank accounts with zero fees at local bank branches to a large sample of female household heads in nepal the zero fees and physical proximity of the bank led to high take up and usage rates compared to similar studies in other settings however impact on income aggregate expenditures and assets are too imprecisely estimated to draw a conclusion i do find reallocation of expenditures across categories e g more spending on education and meat and fish and less on health and dowries and higher ability to cope with shocks on qualitative outcomes i find households report that their overall financial situation has improved the lack of a clear story on mechanisms yet strong result on aggregate self perception of financial wellbeing is consistent with access to quality savings accounts leading to household improvements via multiple mechanisms

a comparison of willingness to pay estimation techniques from referendum questions referendum style willingness to pay questions have been used to estimatepassive use values this referendum question format method may beproblematic for many reasons including the statistical techniques used toestimate willingness to pay from discrete responses this paper comparesa number of parametric semi nonparametric and nonparametric estimationtechniques using data collected from us households regarding federalprotection of endangered fish species the advantages and disadvantagesof the various statistical models used are explored a hypothesis test forstatistical equality among estimation techniques is performed using ajackknife bootstrapping method when the equality test is applied themodeling techniques do show significant differences in some possiblecomparisons but only those that are nonparamentric this can lead toconflicting interpretations of what the data show resource managers andpolicy analysts need to use caution when interpreting results until anindustry standard can be developed for estimating willingness to pay fromclosed ended questions

portfolio manager behavior and global financial crises abstract i develop a two market agent based model to study how global portfolio managers affect global financial crises and stability first i create an agent based model where fund managers make their allocation decisions between two markets and a risk free asset based on the mean variance framework simulation results reveal that global managers do not create global financial crises second i extend the base model by incorporating insights from behavioral finance where risk is instead determined by fund manager losses simulation results reveal that slight global manager losses can trigger a widening of both markets risk premium accelerating the decline in asset prices worldwide statistical analysis reveals that global managers are a stabilizing force in smaller numbers however they become destabilizing in larger numbers the ability to reduce risk by diversifying across markets results in excessive risk taking if global managers exist in larger numbers systematic over leverage may result such that a deleveraging process can lead to the spreading of financial crises

testing for non linear structure in an artificial financial market abstract we present a stochastic simulation model of a prototype financial market our market is populated by both noise traders and fundamentalist speculators the dynamics covers switches in the prevailing mood among noise traders optimistic or pessimistic as well as switches of agents between the noise trader and fundamentalist group in response to observed differences in profits the particular behavioral variant adopted by an agent also determines his decision to enter on the long or short side of the market short run imbalances between demand and supply lead to price adjustments by a market maker or auctioneer in the usual walrasian manner our interest in this paper is in exploring the behavior of the model when testing for the presence of chaos or non linearity in the simulated data as it turns out attempts to determine the fractal dimension of the underlying process give unsatisfactory results in that we experience a lack of convergence of the estimate explicit tests for non linearity and dependence the bds and kaplan tests also give very unstable results in that both acceptance and strong rejection of iidness can be found in different realizations of our model all in all this behavior is very similar to experience collected with empirical data and our results may point towards an explanation of why robustness of inference in this area is low however when testing for dependence in second moments and estimating garch models the results appear much more robust and the chosen garch specification closely resembles the typical outcome of empirical studies

a satisfactory benefit cost indicator from contingent valuation abstract standard economic concepts are used to develop a model of individual behavior when subject to the constraints of the contingent valuation choice context the model yields refutable consequences that are consistent with previously reported empirical findings including some that have been thought to be anomalous the model is used to show that different contingent valuation formats have predictably different performance characteristics notably the hicksian compensating measures are satisfactory benefit cost indicators when elicited using any one of several formats identified in the text of the formats examined one form of a policy referendum appears to have the most satisfactory characteristics overall we conclude that contingent valuation is a progressing research program

testing preference formation in learning design contingent valuation using advance information and repetitive treatments policymakers have largely replaced single bounded discrete choice valuation by the more statistically efficient repetitive method double bounded discrete choice and discrete choice experiments repetitive valuation permits classification into rational and irrational preferences 1 a priori well formed 2 consistent nonarbitrary values discovered through repetition and experience 3 consistent but arbitrary values as shaped by preceding bid level and 4 inconsistent and arbitrary values policy valuations should demonstrate behaviorally rational preferences we outline novel methods for testing this in double bounded discrete choice experiments applied to renewable energy premiums in chile

anomalies in intertemporal choice evidence and an interpretation research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility eu anomalies behaviors that violate the expected utility axioms the relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility du anomalies we enumerate a set of du anomalies analogous to the eu anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with du we discuss implications for savings behavior estimation of discount rates and choice framing effects

specification of the logit model the case of valuation of nonmarket goods abstract we address the proper specification of the logit model for estimation of nonmarket commodity demand economic theory is used to show the conditions which must be met by the logit functional form if it is to yield valid estimates of welfare change measures and demand relationships an empirical example is used to illustrate the argument recreational boating data were collected using the contingent valuation method cvm in texas in one instance the demand curve is positively sloped due to the specific functional form chosen the estimated demand curve for the theoretically preferred functional form has the expected negative slope

women empowerment and economic development women empowerment and economic development are closely related in one direction development alone can play a major role in driving down inequality between men and women in the other direction empowering women may benefit development does this imply that pushing just one of these two levers would set a virtuous circle in motion this paper reviews the literature on both sides of the empowerment development nexus and argues that the interrelationships are probably too weak to be self sustaining and that continuous policy commitment to equality for its own sake may be needed to bring about equality between men and women

enforcement in informal saving groups abstract informal groups cannot rely on external enforcement to insure that members abide by their obligations it is generally assumed that these problems are solved by social sanctions and reputational effects the present paper focuses on roscas one of the most commonly found informal financial institutions in the developing world we first show that in the absence of an external social sanctioning mechanism roscas are never sustainable even if the defecting member is excluded from all future roscas we then argue that the organizational structure of the rosca itself can be designed so as to address enforcement issues the implications of our analysis are consistent with first hand evidence from rosca groups in a kenyan slum

confidence intervals for evaluating benefits estimates from dichotomous choice contingent valuation studies i evaluate the potential usefulness of nonmarket valuation concepts and techniques from environmental economics for improving wildlife conservation the concepts include distinguishing between on site recreation use value and off site passive use or

nonlinear dynamics and stock returns simple deterministic systems are capable of generating chaotic output that mimics the output of stochastic systems for this reason algorithms have been developed to distinguish between these two alternatives these algorithms and related statistical tests are also useful in detecting the presence of nonlinear dependence in time series in this article the authors apply these procedures to stock returns and find evidence that indicates the presence of nonlinear dependence on weekly returns from the center for research in security prices value weighted index copyright 1989 by the university of chicago

saving more in groups field experimental evidence from chile abstract we test the impact of a peer group program on savings in a sample of microcredit clients we conduct two randomized trials among these 2687 microcredit clients the first finds that a savings group treatment which combines public goal setting monitoring in the group and non financial rewards increases savings in a new savings account significantly the number of deposits grows 3 7 fold and the average balance almost doubles in contrast a more classical measure a substantially increased interest rate has no effect for most participants and raises the savings balance only for the very top of the distribution a second experiment conducted a year later tests an alternative delivery mechanism and shows that effects of similar size can be achieved through feedback text messages without meetings rewards or peer pressure given that participants are borrowing at 90 apr we discuss how and when saving more could be harmful or beneficial

rotating saving and credit associations in rural east africa abstract theoretical arguments suggest that rotating savings and credit associations roscas improve welfare by reducing the utility cost of saving for a consumer durable data from two communities in east africa reveal major differences in the incidence of roscas participation arising conjecturally from differences in the relative depths of market penetration and perceptions about the efficacy of alternative strategies for compensating for failures in the financial markets participation in roscas in these communities is partly driven by the need to raise school fees meet medical expenses and buy food roscas funds are also used to start or promote small businesses and acquire assets including livestock households owning smaller landholdings and those enjoying higher expenditures are more likely to participate in roscas the number of schemes in which a household participates is closely related to the main uses of roscas funds while contributions and value of receipts are determined by total expenditures and frequency of turns respectively

roscas in urban ethiopia are the characteristics of the institutions more important than those of members abstract using household data from urban ethiopia we provide an empirical test of the economic theory of rotating savings and credit associations roscas and identify the impact of roscas and member characteristics on participation and volume of saving unlike other studies we account for the endogeneity of all rosca variables muslims individuals who live in richer households the self employed private sector employees and households with large numbers of women are more likely to join roscas a robust finding is that the savings are significantly affected by the characteristics of the members but not that of the informal saving institution some policy implications are discussed

alternative approaches for incorporating respondent uncertainty when estimating willingness to pay the case of the mexican spotted owl abstract this paper explores the sources and patterns of respondents uncertainty regarding their willingness to pay wtp and presents alternative approaches for incorporating this uncertainty into estimation of the logit model recently proposed approaches are compared to methods proposed in this paper which allows for incorporation of uncertainty regarding both yes and no responses these approaches are evaluated by comparing the goodness of fit and variability of mean wtp extreme recoding of uncertain yes responses as no responses reduces the logit goodness of fit and the precision of the wtp estimate incorporating the degree of uncertainty of yes responses results in the highest goodness of fit and the smallest variability of mean wtp among the various models addressing uncertainty a regression model is used to determine the significant determinants of respondent uncertainty

ethnic diversity social sanctions and public goods in kenya abstract this paper examines ethnic diversity and local public goods in rural western kenya the identification strategy relies on the stable historically determined patterns of ethnic land settlement ethnic diversity is associated with lower primary school funding and worse school facilities and there is suggestive evidence that it leads to poor water well maintenance the theoretical model illustrates how inability to impose social sanctions in diverse communities leads to collective action failures and we find that school committees in diverse areas do impose fewer sanctions on defaulting parents we relate these results to the literature on social capital and economic development and discuss implications for decentralization in less developed countries

does africa need a rotten kin theorem experimental evidence from village economies this paper measures the economic impact of social pressure to share income with kin and neighbors in rural kenyan villages the authors conduct a lab experiment in which they randomly vary the observability of investment returns the goal is to test whether subjects reduce their income in order to keep it hidden the analysis finds that women adopt an investment strategy that conceals the size of their initial endowment in the experiment although that strategy reduces their expected earnings this effect is largest among women with relatives attending the experiment parameter estimates suggest that women behave as though they expect to be pressured to share four percent of their observable income with others and substantially more when close kin can observe income directly although this paper provides experimental evidence from a single african country observational studies suggest that similar pressure from kin may be prevalent in many rural areas throughout sub saharan africa

fat tails and truncated bids in contingent valuation an application to an endangered shorebird species a yes response function in a contingent valuation study is said to have fat tails if it has a high and slowly declining yes response rate at high bid levels truncated bids refer to the practice of dropping high bid offers before a yes response rate of near zero is reached this is a common practice in contingent valuation we explore the extent and implications of fat tails and truncated bids in a study of an endangered shorebird species we find among other things that mean willingness to pay is quite sensitive to the highest bid offered so much so that the choice of highest bid nearly dictates outcomes

now or later the allocation of the pot and the insurance motive in fixed roscas abstract we start from the observation that in fixed roscas in sub saharan african members often prefer to take the last turn we argue that when exchanges of turns are allowed during a cycle a late turn allows to request the pot when an urgent need arises survey data indicate that insurance needs are critical in determining the preferred position of rosca members we develop a theoretical model to formalize the argument and show that the preference for the last position requires that the probability of a shock is neither too low nor too high we test this prediction in a lab in the field experiment and confirm that the preference for being last is non monotonic in the risk of negative shocks

actual averting expenditure versus stated willingness to pay the purpose of this study is to perform a complete comparison of actual averting expenditure and stated willingness to pay measures and to determine if the averting expenditure is a lower bound of the willingness to pay measured from contingent valuation experiment as suggested by literature in addition to the single value comparison bootstrap krinsky and robb jackknife and cameron are four simulation methods used to calculate confidence intervals for response function sample sizes of 100 200 and 1000 are simulated 100 and 200 times respectively a set of data with 540 households from a contingent policy referendum survey is employed for our purpose under a specific level of bod improvement a one to one single mean value comparison of the actual averting expenditure is greater than the mean willingness to pay from utility difference model the empirical results are consistent with the theoretical expectation for expenditure difference that averting expenditure is a lower bound of willingness to

the role of roscas lumpy durables or event insurance abstract the stylised representation of roscas in recent theoretical work as a device driven by impatience for lumpy consumer durables misses the important insurance role of this pervasive informal financial institution in the developing world that insurance role explains why roscas with concurrent bidding are the dominant means of determining the sequence and pricing of allocations in roscas so structured the recipient and the implied interest rate for each period s allotment are determined by competitive bids at the time of distribution we use an example of an actual bidding rosca to demonstrate the extent of unpredictable needs for funds as reflected in the volatility of interest rates implicit in winning bids

exploring gendered behavior in the field with experiments why public goods are provided by women in a nairobi slum abstract women and particularly women in all female groups appear to be especially adept at providing public goods in developing countries we use a one shot public goods game to explore the effect of sex and a group s sex composition on the voluntary provision of public goods in a nairobi slum sex heterogeneity hurts the voluntary provision of public goods because women but not men contribute less in mixed sex than same sex groups women contribute as much as men in same sex groups this result is driven by women s pessimism and men s optimism about others contributions in mixed sex groups rather than by gendered social preferences

comparative analysis of non market valuation techniques for the eduardo avaroa reserve bolivia abstract ecological tourism has held up as a potentially important development alternative in relatively undeveloped regions and countries however tourism is a highly vulnerable activity where tourists display voluntary and discretionary behavior while tourism can serve as an income generating activity for the region uncontrolled tourism that is developed without consideration of the environmental impact can adversely affect the natural areas determining what to charge tourists to view a natural area is difficult since demand elasticities are not readily available from observable transactions in order to better gauge the value tourists place on the reserve and their sensitivity to changes in the costs of visiting eduardo avaroa non market valuation provides several valuable tools here we test the convergent validity between two popular non market valuation alternatives the contingent valuation method and the contingent behavior method tourists to the eduardo avaroa reserve in bolivia were asked their willingness to pay in visitor days or in dollars due to an improvement in tourism services at the reserve our models show that the traditionally important variables predict willingness to pay for improved services for the contingent behavior contingent valuation and the pooled model however we find statistically and empirically meaningful distinctions in the estimates derived from the two methods comparisons of the implications of adopting the entrance fee recommendations from the two non market valuation techniques are made based on the revenues predicted to accrue to eduardo avaroa reserve if park management techniques were improved this research highlights the challenges in using non market valuation techniques for policy formation particularly in a developing country setting

do risky microfinance borrowers really invest in risky projects experimental evidence from bolivia abstractthis paper reports the results of an experiment testing a fundamental assumption in stiglitz and weiss 1981 model of credit rationing that defaulting borrowers are associated with investment in risky projects through an artefactual field experiment with 200 bolivian microfinance borrowers we observe that subjects from real world delinquent borrowing groups do not prefer risky projects to safer ones significantly more than subjects from repaying groups instead our results support more recent behavioural theories of credit market failure implications are that defaulting microfinance borrowers may be those who take too little investment risk rather than those who take too much

rural financial markets in developing countries their use and abuse until recently the use of agricultural credit as a developmental tool seemed clear and straightforward most concerned people believed that increases in the volume of cheap credit were necessary to boost agricultural production and that the rural poor could be brought into the mainstream of development through supervised credit programs it seemed that certain ideal types of rural credit institutions offered the promise of meeting farmers credit needs and that experience in the industrialized countries with cooperatives and specialized agricultural finance institutions could be effectively transplanted to low income countries this collection of readings highlights facets of rural financial markets that have often been neglected in discussions of agricultural credit in developing countries it moves beyond a narrow concern with the simple provision of credit to a broad consideration of the performance of rural financial markets and of ways to improve the quality and range of financial services for low income farmers it reflects new thinking on the design administration evaluation and policy framework of rural finance and credit programs in developing countries

transactions costs and agricultural household supply response we develop and estimate a model of supply response when transactions costs create a situation where some producers buy others sell and others do not participate in markets we present two rationales for why producing households may have different relationships to the market proportional and fixed transactions costs using data on mexican corn producers we estimate an empirical model that allows for separate tests of the significance of both types of transactions costs revealing that both fixed and proportional transactions costs matter for the estimation the results provide consistent estimates of supply elasticity and measures of the relative importance of factors determining both proportional and fixed transactions costs

distribution free estimation with interval censored contingent valuation data troubles with turnbull contingent valuation cv surveys frequently employ elicitation procedures that return interval censored data on respondents willingness to pay wtp almost without exception cv practitioners have applied turnbull s self consistent algorithm to such data in order to obtain nonparametric maximum likelihood npml estimates of the wtp distribution this paper documents two failings of turnbull s algorithm 1 that it may not converge to npml estimates and 2 that it may be very slow to converge with regards to 1 we propose starting and stopping criteria for the algorithm that guarantee convergence to the npml estimates with regards to 2 we present a variety of alternative estimators and demonstrate through monte carlo simulations their performance advantages over turnbull s algorithm

poverty and self control we argue that poverty can perpetuate itself by undermining the capacity for self control in line with a distinguished psychological literature we consider modes of self control that involve the self imposed use of contingent punishments and rewards we study settings in which consumers with quasi hyperbolic preferences confront an otherwise standard intertemporal allocation problem with credit constraints our main result demonstrates that low initial assets can limit self control trapping people in poverty while individuals with high initial assets can accumulate indefinitely thus even temporary policies that initiate accumulation among the poor may be effective we examine implications concerning the effect of access to credit on saving the demand for commitment devices the design of financial accounts to promote accumulation and the variation of the marginal propensity to consume across income from different sources we also explore the nature of optimal self control demonstrating that it has a simple and behaviorally plausible structure that is immune to self renegotiation

heterogeneity in exchange rate expectations evidence on the chartist fundamentalist approach abstract this paper examines heterogeneity in exchange rate expectations whereas agents heterogeneity is key in modern exchange rate models evidence on determinants of heterogeneity is weak thus far our sample covering expectations from about 300 forecasters over 15 years shows remarkable time variation in dispersion determinants of dispersion are consistent with the chartist fundamentalist approach misalignments of the exchange rate and exchange rate changes explain heterogeneity the risk premium influences heterogeneity as well but possible impacts from macroeconomic variables and exchange rate s volatility are dominated by the other determinants

mutual insurance as an elusive concept in traditional rural communities during the last two decades economists have paid increasing attention to the role of informal risk sharing arrangements as a privileged way through which traditional rural communities can achieve a significant degree of protection against income fluctuations and other hazards beyond their control this article however argues that when they enter into such arrangements members of these communities are guided by a principle of balanced reciprocity they expect a return from any contribution or payment they make rather than by a true logic of mutual insurance more precisely they do not conceive of insurance as a game where there are winners and losers and where income is redistributed between lucky and unlucky individuals none the less traditional agrarian societies have proven able to develop a restricted range of sustainable forms of mutual insurance that avoid the aforementioned problem

the home economics of e money velocity cash management and discount rates of m pesa users m pesa a service operated by the mobile phone network safaricom in kenya allows users to deposit money onto their telephone handsets transfer e money to another user with a simple text message and withdraw cash at one of thousands of outlets throughout the country the system is safer cheaper and far faster than the money transfer systems that it replaced although only five years old m pesa has achieved remarkable penetration into the kenyan economy as of september 2011 there were 32 000 m pesa outlets at which individuals could exchange cash for e float or vice versa in a country that as of 2009 had 491 bank branches 500 postbank branches and 352 atms mas and ng weno 2009 in the six month period april september 2011 the volume of transfers was ksh 314 billion compared to nominal gdp of ksh 2 99 trillion that year for the period from which our data are drawn the market exchange rate was approximately 75 ksh dollar and the ppp exchange rate was approximately 35 ksh dollar at present m pesa is primarily a money transfer system however it has the potential to evolve in two exciting directions first as a gateway via which unbanked households can access financial services and second as a transaction medium with e money partially replacing cash 1 even in its current form however m pesa represents a dramatic change in the economic environment of kenyan households further data on how households use m pesa allows for insight into the objectives of and constraints on their money management choices and consumption more generally

the economics of rotating savings and credit associations supported by the center for energy policy studies m i t and the japanese corporate associates program at the kennedy school of government

behavioral foundations of microcredit experimental and survey evidence from rural india microcredit is an innovative financial tool designed to reduce poverty and fix credit market imperfections we use experimental measures of time discounting and risk aversion for villagers in south india to highlight behavioral features of microcredit conditional on borrowing from any source women with present biased preferences are more likely than others to borrow through microcredit institutions microcredit contracts require loan repayments in regular fixed installments and they harness peer pressure to encourage discipline these innovations mirror mechanisms highlighted in behavioral approaches to saving suggesting that microcredit s popularity stems partly from modes of encouragement and self discipline absent in typical lending mechanisms

reconsidering the use of hicks neutrality to recover total value abstract in this paper i reconsider the use of hicks neutrality for recovering total value for a change in an environmental good i clarify the need to adjust expenditures and explain how numerical techniques can be used in approximating these adjustments i show that the circumstance believed to support hicks neutrality weak neutrality at the choke price vector is a case of weak complementarity i mathematically demonstrate that the necessary degree of hicks neutrality is unlikely to be satisfied i derive the ensuing relative bias and show its usefulness in selecting goods which may approach hicks neutrality

two sides of the same rupee comparing demand for microcredit and microsaving in a framed field experiment in rural pakistan standard models often predict that people should either demand to save or demand to borrow but not both we hypothesise instead that saving and borrowing among microfinance clients are substitutes satisfying the same underlying demand for a regular schedule of deposits and a lump sum withdrawal we test this using a framed field experiment among women participating in group lending arrangements in rural pakistan the experiment inspired by the rotating structure of a rosca involves randomly offering credit products and savings products to the same subject pool we find high demand both for credit products and for savings products with the same individuals often accepting both a credit product and a savings product over the three experiment waves this behavior can be rationalised by a model in which individuals prefer lump sum payments for example to finance a lumpy investment and in which individuals struggle to hold savings over time we complement our experimental estimates with a structural analysis in which different types of participants face different kinds of constraints our structural framework rationalises the behaviour of 75 of participants of these rationalised participants we estimate that two thirds have high demand for lump sum payments coupled with savings difficulties these results imply that the distinction between microlending and microsaving may be largely illusory participants value a mechanism for regular deposits and lump sum payments whether that is structured in the credit or the debt domain

pretending to be poor borrowing to escape forced solidarity in cameroon abstractfrom field observations of credit cooperatives in cameroon we find that 19 of the loans taken are fully collateralized by savings held in the same institutions this behavior is costly to the borrower as it represents a net interest payment of about 24 per year while traditional explanations may partly explain this behavior interviews with members of the cooperatives suggest the following new rationale members resort to borrowing to signal to friends and relatives that they are poor and do not have savings available by doing so they can avoid requests for financial help we develop a signaling model to analyze the conditions under which this behavior is an equilibrium outcome

nonlinearities and nonstationarities in stock returns this article addresses the question of whether recent findings of nonlinearities in high frequency financial time series have been contaminated by possible shifts in the distribution of the data it applies a recursive version of the brock dechert scheinkman statistic to daily data on two stock market indexes between january 1980 and december 1990 it is shown that october 1987 is highly influential in the characterization of the stock market dynamics and appears to correspond to a shift in the distribution of stock returns sampling experiments show that simple linear processes with shifts in variance can replicate the behavior of the tests but autoregressive conditional heteroscedastic filters are unable to do so

peer monitoring and credit markets a major problem for institutional lenders is ensuring that borrowers exercise prudence in the use of the funds so that the likelihood of repayment is enhanced one partial solution is peer monitoring having neighbors who are in a good position to monitor the borrower be required to pay a penalty if the borrower goes bankrupt peer monitoring is largely responsible for the successful financial performance of the grameen bank of bangladesh and of similar group lending programs elsewhere but peer monitoring has a cost it transfers risk from the bank which is in a better position to bear risk to the cosigner in a simple model of peer monitoring in a competitive credit market this article demonstrates that the transfer of risk leads to an improvement in borrowers welfare

learning with misspecification in an artificial currency market abstract agents evolve their forecast rules over time via a modified genetic algorithm in a simple artificial currency market these forecast rules can be nonlinearly misspecified when the misspecification is suppressed learning tends to be complete when it is not suppressed learning can generate persistent exchange rate dynamics

commitment savings in informal banking markets abstract i study the provision of commitment savings by informal banks to sophisticated hyperbolic discounters since a consumer is subject to temptation in the period that he signs a contract banks might exploit his desire for instant gratification even as they help him to commit for the future without banking savings decisions and welfare are not monotonic in the degree of time inconsistency consequently commitment savings will lower welfare for moderately time inconsistent agents if loan contracts are enforceable pure commitment savings will disappear this will further lower welfare if the lender is a profit maximizing bank but raise welfare if the lender is a welfare maximizing ngo finally i consider the coexistence of a bank and ngo there will be zero takeup of ngo provided commitment savings if there is competition from a moneylender but the ngo s offer will raise the agent s reservation utility thus reducing the surplus that can be extracted by the moneylender

the effect of common sources of regression error on benefit estimates discussions of the sources of error in recreation demand analysis are common in the existing literature the most traditional line of thought e g gum and martin considers the error component in predicting the individual s recreation behavior to arise from unmeasured socioeconomic factors others e g hanemann attribute at least some of this error to fundamental randomness in human behavior applied statisticians e g hiett and worrall on the other hand suggest that recall of annual number of recreational trips i e the quantity demanded is subject to substantial error still others e g brown et al have argued that recall of explanatory variables such as travel expenses contains error despite the discussion of potential error sources there is no work which relates the sources of error in the demand relationship with benefit measurement 1 of practical importance in recreational demand estimation is whether error assumptions have an influence on welfare measures since it is for public policy decision purposes that recreational demand estimation is usually undertaken will the estimated consumer surplus derived from demand analysis be independent of the assumed source of the error in the regression the purpose of this paper is to explore how the assumptions about sources of error influence estimates of recreation benefits a discussion of the various sources of error in de

inference and optimal design for a welfare measure in dichotomous choice contingent valuation this paper considers the use of contingent valuation to estimate non market benefits from separately valued nested goods survey respondents were asked referendum wtp questions regarding either a scheme to protect the whole area of a wetland or a

rotating savings and credit associations when participants are risk averse we model rotating savings and credit associations roscas among risk averse participants who experience privately observed income shocks a random rosca is not advantageous whereas a bidding rosca is if temporal risk aversion is less pronounced than static risk aversion the payoff scheme of a bidding rosca facilitates risk sharing in the presence of information asymmetries the risk sharing performance of a simple arrangement where a group of homogenous individuals runs several bidding roscas simultaneously is as good as that of a linear risk sharing contract and is more enforceable because it carries a fixed rather than a variable contribution

tying odysseus to the mast evidence from a commitment savings product in the philippines we designed a commitment savings product for a philippine bank and implemented it using a randomized control methodology the savings product was intended for individuals who want to commit now to restrict access to their savings and who were sophisticated enough to engage in such a mechanism we conducted a baseline survey on 1777 existing or former clients of a bank one month later we offered the commitment product to a randomly chosen subset of 710 clients 202 28 4 percent accepted the offer and opened the account in the baseline survey we asked hypothetical time discounting questions women who exhibited a lower discount rate for future relative to current trade offs and hence potentially have a preference for commitment were indeed significantly more likely to open the commitment savings account after twelve months average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group we conclude that the savings response represents a lasting change in savings and not merely a short term response to a new product

liability structure in small scale finance evidence from a natural experiment microfinance the provision of small individual and business loans has witnessed dramatic growth reaching over 150 million borrowers worldwide much of its success has been attributed to overcoming the challenges of information asymmetries in uncollateralized lending yet very little is known about the optimal contract structure of such loans there is substantial variation across lenders even within a particular setting this paper exploits a plausibly exogenous change in the liability structure offered by a microfinance program in india which shifted from individual to group liability lending the analysis finds compelling evidence that contract structure matters for the same borrower required monthly loan installments are 6 percent less likely to be missed under the group liability setting relative to individual liability in addition compulsory savings deposits are 19 percent less likely to be missed under group liability contracts

the anatomy of an informal financial market rosca participation in taiwan abstract little is known about informal financial markets in developing countries this paper analyzes participation in rotating savings and credit associations using a national household survey from taiwan we find that participation is highest among high income households there is some evidence that income stability may play a role as well life cycle differences suggest a role in funding durables purchases our evidence indicates that roscas may be an alternative savings device to the formal financial sector

psychological characteristics and household savings behavior the importance of accounting for latent heterogeneity abstract we employ a finite mixture model with maximum likelihood ml estimation to analyze latent heterogeneity in the relationship between psychological characteristics and household savings behavior in a one step ml estimation approach we estimate a class membership model and a behavioral model of the classes jointly adopting this approach enables us to simultaneously assess how socio demographic characteristics affect class membership probabilities and estimate class specific regression coefficients to test whether psychological characteristics predict savings behavior differently across latent classes we apply this approach to a representative sample of uk households n 3382 and identify two different latent classes striving versus established households we find that the relationship between psychological characteristics and savings behavior differs across these two classes demonstrating the importance of accounting for latent heterogeneity when studying the drivers of savings behavior our results have implications for policymakers attempting to improve household savings behavior

producing woodfuel for urban centers in the democratic republic of congo a path out of poverty for rural households woodfuel is a renewable energy source with good potential for climate change mitigation in the democratic republic of congo drc the sector employs over 300 000 people for the supply of kinshasa alone but the benefits to the poor are often unknown this paper analyzes the contribution of commercial woodfuel production to livelihoods and poverty reduction in the drc woodfuel revenues especially those of charcoal contribute substantially to producers household income ranging from 12 for fuelwood producers around kisangani to 75 for charcoal producers around kinshasa it supports basic needs and investments in other livelihood activities for 82 of charcoal producers and 65 of fuelwood producers which helps to reduce poverty the contribution of woodfuel commercialization to poverty reduction should be part of energy and forestry policies

on the emergent properties of artificial stock markets the efficient market hypothesis and the rational expectations hypothesis abstract by studying two well known hypotheses in economics this paper illustrates how emergent properties can be shown in an agent based artificial stock market the two hypotheses considered are the efficient market hypothesis and the rational expectations hypothesis we inquire whether the macrobehavior depicted by these two hypotheses is consistent with our understanding of the microbehavior in this agent based model genetic programming is applied to evolving a population of traders learning over time we first apply a series of econometric tests to show that the emh and the reh can be satisfied with some portions of the artificial time series then by analyzing traders behavior we show that these aggregate results cannot be interpreted as a simple scaling up of individual behavior a conjecture based on sunspot like signals is proposed to explain why macrobehavior can be very different from microbehavior we assert that the huge search space attributable to genetic programming can induce sunspot like signals and we use simulated evolved complexity of forecasting rules and granger causality tests to examine this assertion

the impact of formal financial inclusion on informal financial intermediation and cash preference evidence from africa this paper examines the effect of formal financial intermediation inclusion on informal financial intermediation and the use of cash for economic activities using data from the global findex 201

rural amenity values and length of residency new residents of rural communities are often assumed to have preferences for development and conservation that differ from those of longer term residents however the literature offers little to quantify presumed preference heterogeneity this article assesses whether stated preferences differ according to length of residency results are based on a conjoint choice experiment survey of rhode island rural residents heterogeneity according to length of town residency is modeled using dummy variables multiplicative interactions and lagrangian interpolation polynomials results are compared across the three models and identify a range of attributes for which willingness to pay depends on length of residency