guarding the guardians good government requires some restraints on the powerful but how can those be impose if there is no one above them this paper studies the equilibrium allocation of power and resources established by self interested incumbents under the threat of rebellions from inside and outside the group in power commitment to uphold individuals rights can only be achieved if power is not as concentrated as incumbents would like it to be ex post power sharing endogenously enables incumbents to commit to otherwise time inconsistent laws by ensuring more people receive rents under the status quo and thus want to defend it

international coordination of trade and domestic policies the past half century has seen a dramatic multilateral reduction in tariff barriers under general agreement on tariffs and trade gatt negotiations however as tariff barriers have fallen attention has shifted to the use of domestic policies as secondary trade barriers a primary concern is that as countries sign trade agreements that constrain their ability to pursue trade goals through trade policy there will be unilateral incentives for governments to distort their domestic policies as a secondary means of protection 1 increasingly international trade disputes revolve around a country s use of internal regulations as a means of restricting trade the united states has successfully challenged the system of liquor taxes in both japan and korea as discriminating against imported liquor while venezuela and brazil have challenged american standards for reformulated and conventional gasoline as trade protection masquerading as environmentalism gatt contains several articles concerning the international regulation of domestic policies but the question of how to fully incorporate domestic policies within gatt negotiations and other international trade agreements remains contentious indeed at both the ministerial meeting in 1994 at the close of the uruguay round and the recent unsuccessful ministerial conference in seattle many gatt delegates renewed demands for the relationship between trade and various domestic policies e g environmental policy labor standards or competition policy to be examined despite the importance that has recently been placed on international cooperation over domestic policies no theoretical basis exists for considering how to cooperate over both trade and domestic policies within an international agreement previous papers on negotiation over two instruments of protection e g copeland 1989 1990 thomas l hungerford 1991 have assumed asymmetric limitations on cooperation i e they assume that one of the two instruments is either nonobservable or nonnegotiable this paper extends such work by investigating cooperation over two negotiable instruments of protection under symmetric limitations on cooperation and provides insight into the design of international trade agreements that incorporate cooperation over domestic policies i adopt the view that enforcement issues are central to the understanding of international cooperation one of the challenges of international cooperation is the absence of a central authority to enforce the terms of an agreement without access to an external enforcement mechanism international agreements are viable only as long as member countries view continued cooperation to be in their own self interest i e the benefits from cooperating outweigh the potential gains from cheating 2 while the gatt department of economics university of miami p o box 248126 coral gables fl 33124 e mail ederington miami edu i would like to thank bob staiger bob baldwin wolfgang keller phillip mccalman jenny minier seminar participants at the nber conference on trade the environment and natural resources and two anonymous referees for comments on earlier versions of this paper any remaining errors are of course my own for example brian r copeland 1990 examined negotiation over one trade barrier leaving a secondary trade barrier e g nontariff barriers domestic legislation etc to be set noncooperatively he shows that trade liberalization will induce substitution toward the less efficient nonnegotiable instrument of protection due to the unilateral incentives to maintain trade protection facing countries thus within a cooperative framework the two types of barriers serve as imperfect substitutes for each other 2 as stated by kenneth w dam in his review of the gatt institution the best guarantee that a commitment of any kind will be kept particularly in an international setting where courts are of limited importance and even more important marshals and jails are nonexistent is that the parties continue to view adherence to their agreement in their mutual interest thus the gatt system unlike most legal systems is not designed to exclude self help in the form of retaliation rather retaliation subjected to established procedures and kept within prescribed bounds is made the heart of the gatt system dam 1970 pp 80 81

the microfinance promise in the past decade microfinance programs have demonstrated that it is possible to lend to low income households while maintaining high repayment rates even without requiring collateral the programs promise a revolution in approaches to alleviating poverty and spreading financial services and millions of poor households are served globally a growing body of economic theory demonstrates how new contractual forms offer a key to microfinance success particularly the use of group lending contracts with joint liability for the most part however high repayment rates have not translated into profits and studies of impacts on poverty yield a mixed picture in describing emerging tensions the paper highlights the diversity of innovative mechanisms beyond group lending contracts the measurement of financial sustainability the estimation of economic and social impacts the costs and benefits of subsidization and the potential to reduce poverty through savings programs rather than just credit the promise of microfinance has pushed far ahead of the evidence and an agenda is put forward for addressing critical empirical gaps and sharpening the terms of policy discussion

foreign ownership and the theory of trade and welfare some standard topics in the theory of international trade are reconsidered in this paper by distinguishing between national and aggregate income when fixed supplies of foreign inputs are present within the home country under conditions that would ensure a national welfare gain if foreign ownership were absent international transfer economic growth or tariff policy might cause a national welfare loss in the presence of foreign ownership the techniques developed could be applied to other domestic distinctions such as those based on race sex age or ethnicity and to the theory of customs unions in a three country world

the role of multilateral institutions in international trade cooperation the world trade organization wfo lacks the power to directly enforce agreements it is therefore important to understand what role the wto can play to facilitate international cooperation and whether a multilateral institution can offer distinct advantages over a web of bilateral agreements this paper examines two potential benefits of a multilateral trade institution first verifying violations of the agreements and informing third parties thus facilitating multilateral reputation mechanisms second promoting multilateral trade negotiations rather than a web of bilateral negotiations the model suggests that a multilateral approach is particularly important when there are strong imbalances in bilateral trading relationships

tariff retaliation versus financial compensation in the enforcement of international trade agreements the authors analyze whether financial compensation is preferable to the current system of dispute settlement in the world trade organization that permits member countries to impose retaliatory tariffs in response to trade violations committed by other members they show that monetary fines are more efficient than tariffs in terms of granting compensation to injured parties when there are violations in equilibrium however fines suffer from an enforcement problem since they must be paid by the violating country if fines must ultimately be supported by the threat of retaliatory tariffs they fail to yield a more cooperative outcome than the current system the authors also consider the use of bonds as a means of settling disputes if bonds can be posted with a third party they do not have to be supported by retaliatory tariffs and can improve the negotiating position of countries that are too small to threaten tariff retaliation

enforcing international trade agreements with imperfect private monitoring to analyse the role that the world trade organization wto plays in enforcing international trade agreements this paper first explores what countries can achieve alone by characterizing optimal private trigger strategies pts under which each country triggers a punishment phase by imposing an explicit tariff based on privately observed imperfect signals of the other country s concealed trade barriers it identifies the condition under which countries can restrain the use of concealed barriers based on pts and establishes that countries will not reduce the cooperative protection level to its minimum attainable level under the optimal pts this paper then considers third party trigger strategies tts under which the wto allows each country to initiate a punishment phase based on the wto s judgement about potential violations by comparing the optimal pts and optimal tts it demonstrates that the wto facilitates a better cooperative equilibrium by changing the nature of punishment triggering signals from private to public which in turn enables countries to use a more efficient punishment such as an asymmetric and a minimum punishment

microfinance literature a sustainability level perspective survey abstract since the early microcredit programs up to the present microfinance has grown exponentially as it has the academic interest on it as a research subject considering that this sector has impact in terms of sustainability any research in the field requires an analysis with wide criteria which should include the economic environmental social and governance dimensions eesg as well as their interrelationships the objectives of this survey are to investigate the contributions of microfinance sectoral scholarly research to sustainability through a systematic literature review using content analysis method contextualizing the scientific production and studying its terminology according to the eesg criteria and under global reporting initiative framework and finally to identify research gaps and to propose future research paths

thomas schelling s contributions to game theory thomas schelling brings game theory to life and does so in two senses first instead of the abstract and austere beauty of mathematical theorems that we find in most of game theory going back to von neumann morgenstern and nash he gives us lively and memorable examples to explain and illustrate his ideas schelling s 1960a p 21 pictures of bargaining when two dynamite trucks meet on a road wide enough for one who backs up and of tacit coordination can two people who are told to meet each other in new york city on a specified day but are not told the place or time and are unable to contact each other successfully meet 1960a pp 55 56 are among the best known but my personal favorite is schelling s 1965 pp 66 67 example of the strategy of salami tactics for defeating threats by incremental escalation

discriminatory tariffs and international negotiations abstract recent research has highlighted the efficiency of the mfn principle within the gatt wto structure this paper analyzes the exception made to mfn within article xxiii that allows discriminatory punishment for deviations from the agreement we argue that in the absence of collusion the mfn exception reduces the severity of punishment and thus lowers the level of cooperation that can be achieved by the agreement however discriminatory punishment may still be beneficial as we show that it reduces the problems associated with the potential for renegotiation during the punishment phase finally we argue that our results are also applicable to the question of whether to use trade policy sanctions as a means of enforcing agreements covering domestic policies

self enforcing trade agreements and lobbying abstract in an environment where international trade agreements must be enforced via promises of future cooperation the presence of an import competing lobby has important implications for optimal punishments when lobbies work to disrupt trade agreements a nash reversion punishment scheme must balance two conflicting objectives longer punishments help to enforce cooperation by increasing the government s costs of defecting but because the lobby prefers the punishment outcome this also incentivizes lobbying effort and with it political pressure to break the agreement thus the model generates an optimal length for nash reversion punishments and it depends directly on the political influence of the lobbies trade agreement tariffs are shown to be increasing in the political influence of the lobbies as well as their patience levels

quantitative restrictions in the presence of cost based informational asymmetries this study introduces a cost based informational asymmetry into a two period model where a domestic incumbent firm s behavior in the first period affects the entry decision of a foreign firm in the second period the effects of import quota policy within this environment are examined and compared to the standard full information effects when quota quantities are set exogenously the standard effects of quota policy may be significantly altered depending on whether or not policy induces the domestic firm to signal cost structure for example higher quotas may discourage foreign entry because of the induced signaling effects of quota policy recognition that incomplete information is the rule rather than the exception when decisionmakers interact in an international setting has stimulated an emerging literature on the effects of trade policy in the presence of informational failures particularly germane to the present study are those papers that introduce an informational asymmetry into an international model of imperfect competition the majority of this literature examines the sensitivity of optimal strategic trade policy to information failures within a brander spencer 1985 model where the domestic and foreign firms compete for export sales to a third market and either the domestic or foreign government employs export subsidies collie and hviid 1993 qiu 1994 maggi 1995 brainard and martimort 1997 wright 1998 collie and hviid 1994 on the other hand allow for domestic consumption and consider optimal import policy in the presence of a foreign monopolist analysis that focuses on the positive effects of trade policy in the presence of informational failures is more limited one such example is a study by hartigan 1994 which considers the effects of antidumping duties to date however there has been no analysis of how and whether the introduction of an informational failure alters the effects of quantitative restrictions to trade the aim of the present study is to extend the existing literature by examining the effects of a quantitative restriction to trade in the presence of a cost based informational asymmetry within a standard two period entry model 2 during the initial time period a domestic firm supplies the home market and

impact assessment methodologies for microfinance theory experience and better practice abstract microfinance programs and institutions are increasingly important in development strategies but knowledge about their impacts is partial and contested this paper reviews the methodological options for the impact assessment ia of microfinance following a discussion of the varying objectives of ia it examines the choice of conceptual frameworks and presents three paradigms of impact assessment the scientific method the humanities tradition and participatory learning and action pla key issues and lessons in the practice of microfinance ias are then explored and it is argued that the central issue in ia design is how to combine different methodological approaches so that a fit is achieved between ia objectives program context and the constraints of ia costs human resources and timing the conclusion argues for a greater focus on internal impact monitoring by microfinance institutions

strategy subsets closed under rational behavior a set of strategy profiles is here said to be closed under rational behavior curb of it contains all its best replies each curb set contains the support of at least one nash equilibrium in mixed

mainstreaming microfinance social performance management or mission drift summary what scope is there for the pursuit of explicit development goals in the context of increasing integration of specialized microfinance and commercial banking sectors this question and the idea of mission drift is first analyzed using a model that distinguishes between institutions financial and social performance possibilities preferences and assessment systems the model is used to review findings from action research with an international sample of poverty oriented microfinance institutions that suggest some simple steps for improved social performance management it is then used to illustrate the relationship between social and financial performance more widely across the retail financial services sector and to offer pointers for more policy analysis at this level

tariffs with private information and reputation abstract several tariff games are examined in which the home country has private information about whether its government is a low or high tariff type if the foreign government is uncertain about this type in a one shot game its nash equilibrium tariff will be lower higher than if it knew the home government were a low high tariff type in two multistage games misleading behavior by the home government is an equilibrium strategy for sufficiently high discount factors whether or not uncertainty is persistent is important for welfare results tariff rules do not necessarily dominate discretionary policy in these models

microfinance and poverty in bolivia both in its institutional range and in its penetration of financial markets the microfinance sector in bolivia rivals any in the world and has played a major part in extracting the macro economy from meltdown since the mid 1980s we seek specifically to assess its impact on poverty and do this through small sample surveys on four microfinance institutions two urban and two rural using a range of poverty concepts income generated both through the borrower s enterprise and through the labour market asset holdings and diversity and various measures of vulnerability all the institutions studied had on balance positive impacts on income and asset levels with income impacts correlating negatively with income on account of poor households choosing to invest in low risk low return assets microfinance may however augment vulnerability average debt service ratios of microfinance clients are disturbingly high and if the coping mechanisms used by borrowers fail borrowers may be forced out of the

incentive compatible trade policies a two country trade model with production uncertainty is considered if complete contingent markets do not exist it is desirable for governments to adopt some trade policies to share the production risk a full information policy involves incomes transfers across countries which can be achieved by equal import tariffs and export subsidies with incomplete information we consider incentive compatible trade policies which are designed to be truth revealing while partially sharing the production risk in this case the tariff in one country may differ from the export subsidy abroad

trade and trade policy with imperfect competition the case of identical products and free entry abstract this paper analyses intra industry trade between economies containing an imperfectly competitive industry in which firms produce a homogeneous output production is subject to increasing returns to scale and there is free entry and exit of firms trade is shown to unambiguously increase welfare by reducing the degree of monopoly in each market and increasing firm size the effects of differences in technology and endowments on the pattern of trade and welfare are examined import tariffs are shown to raise welfare in the country employing the tariff and the welfare implications of various types of industry subsidy are examined

dea and sfa research on the efficiency of microfinance institutions a meta analysis microfinance has played a key role in the fight against exclusion and the promotion of entrepreneurship in developing countries an important question today is how to increase the reach and profitability of microfinance in a context where subsidies are withdrawing to promote the viability and sustainability of microfinance institutions mfis efficiency analysis has found favor in this context and has attracted growing interest among professionals partners and researchers abundant empirical work has been conducted over the last ten years on this subject in very different contexts and with different methodologies the purpose of this article is to provide a meta regression analysis on parametric and nonparametric estimations of mean technical efficiency mte in microfinance using a data set of 262 observations from 38 studies the results show that in the microfinance industry mte scores have increased over time however with an mte rate of approximately 61 1 there is room for improving efficiency mfis use more resources than necessary for the results achieved in terms of outreach and revenue generated our results show heterogeneity of mte according to the methodological approach of the studies studies with a larger number of variables inputs and outputs produced higher mte scores than did those with a smaller number of variables studies using the variable returns to scale assumption resulted in higher mte scores than those using constant returns to scale in addition those with a production approach had higher mtes than did those using the intermediation approach while studies of a large number of mfis had lower scores than did those involving a small sample size moreover research estimating social efficiency generated lower mtes compared to those estimating financial efficiency studies using data from african mfis obtained lower mtes than did those on mfis in latin america and mena which confirms the poor performance of african microfinance

a social and environmental approach to microfinance credit scoring microfinance institutions provide loans to low income individuals their credit scoring systems if they exist are strictly financial although many institutions consider the social and environmental impact of their loans they do not incorporate formal systems to estimate these social and environmental impacts this paper proposes that their creditworthiness evaluations should be coherent with their social mission and accordingly should estimate the social and environmental impact of microcredit thus a decision support system to facilitate microcredit granting is proposed using a multicriteria evaluation the assessment of social impact is performed by calculating the social net present value the system captures credit officers experience and addresses incomplete and intangible information the model has been tested in a microfinance institution the paper shows how a small institution can include social and environmental issues in its decision making systems to evaluate credit applications a gap in the preferences was found between members of the board who are socially driven and managers and credit officers who are financially drifted this mission drift was corrected the approach followed contributed to creating a culture of social and environmental assessment within the institution especially among credit officers thereby translating microfinance institutions social mission into numbers

do regulated microfinance institutions achieve better sustainability and outreach cross country evidence in spite of increasing pressure on microfinance institutions mfis operating in developing countries to transform into regulated financial intermediaries to date no study has investigated whether regulated mfis actually achieve better financial results and reach more poor clients than nonregulated mfis this article explores the impact of regulation on mfi performance using newly released data for 114 mfis from 62 countries in an empirical model where performance is specified as a function of mfi specific regulatory macroeconomic and institutional variables consistent with recent cross country evidence on the impact of banking regulations on bank performance barth et al 2004 this article finds that regulatory involvement does not directly affect performance either in terms of operational self sustainability or outreach the article also finds that less leveraged mfis have better sustainability the policy implication is that mfis transformation into regulated financial institutions is may not

gender and microfinance performance why does the institutional context matter summary this paper investigates why and under which institutional circumstances female membership in microfinance institutions mfi improves mfi performance in terms of debt repayment specifically this paper theorizes that female membership in mfis improves the mfi s performance through enhanced debt repayment especially under adverse cognitive and regulatory institutional conditions we draw upon unique qualitative and quantitative data covering 26 microfinance projects in 22 african eastern european latin american and asian countries this study has implications for the microfinance literature in that it challenges the widely held assumption that female participation has a positive effect on mfi performance under all institutional circumstances

performance and governance in microfinance institutions accepted version of article published in the journal journal of banking finance published version available on science direct http dx doi org 10 1016 j jbankfin 2008 11 009

on the role of retaliation in trade agreements this paper analyzes the role of retaliation in trade agreements it shows that in the presence of private information retaliation can always be used to increase the welfare derived from such agreements by the participating governments in particular it is shown that retaliation is a necessary feature of any efficient equilibrium we argue that retaliation would not be necessary if governments could resort to international transfers or export subsidies to compensate for terms of trade externalities within the current world trading system though in which transfers are seldom observed whereas export subsidies are prohibited the use of the remaining trade instruments in a retaliatory fashion might be optimal the model is used to interpret the retaliatory use of antidumping observed in the last decades and the proliferation of these measures relative to other trade remedies

microfinance and moneylender interest rate evidence from bangladesh summary the linkage between the formal and informal credit markets in developing countries has largely been unexplored this paper addresses one important aspect of the linkage by empirically investigating the impact of the intervention of microfinance programs on the moneylender interest rates in northern bangladesh and finds that moneylender interest rates increase with microfinance program coverage higher microfinance program coverage increases moneylender interest rates in the villages in which more loans are invested in productive economic activities than consumption borrowers resort to moneylenders for additional funds probably because of inadequate supply unavailability of seasonal working capital from mfis and tight repayment schedules which in turn increase demand for moneylender loans

departures from multilateralism regionalism and aggressive unilateralism multilateralism can mean many things to many people for instance it may mean balancing trade multilaterally at whatever level of payments deficit or surplus one desires as distinct from insisting on bilateral balancing with specific countries the latter constituting a folly and a temptation that few politicians can resist but most economists will run from but the two characteristics of the gatt based multilateral trading system that spring to mind most readily to scholars of international trade and which therefore i focus on here are first the principle of non discrimination which implies the extension of mfn mostfavoured nation treatment to all gatt members and second the principle that balanced mutual reciprocal concessions and acceptance of new disciplines amounting to first difference reciprocity bhagwati i988 be the method for achieving progressive movement toward free trade this would rule out the aggressive use of power to extract either unrequited trade concessions or acceptance of new disciplines therefore shielding the weak against the strong who would otherwise in bilateral one on one confrontations have an advantage constrained only by altruism or conscience these principles are stated in idealised form in reality however the gatt permits departures from mfn for i countervailing duties against foreign subsidies cvd and as anti dumping ad measures aimed only at the offending parties article vi 2 developing countries part iv who get special and differential treatment such as preferentially lower tariffs in developed countries that are gatt members and 3 customs unions and free trade areas article xxiv 2

gradualism in free trade agreements a theoretical justification a notable feature of many recent trade agreements is the gradual rather than immediate reduction of trade barriers in this paper we model trade liberalization as a cooperative relationship that evolves gradually in a non cooperative environment we show that specialization capacity irreversibility and the development of trade partner specific capital increase the benefit of continuing the liberalizing relationship and decrease over time the lowest obtainable self enforcing tariff by increasing the penalty of future defection sunk costs ensure that the self enforcing trading relationship starts slowly but once in progress the level of cooperation continues to improve

reciprocity in trade the utility of a bargaining strategy recent works in international relations theory have focused on the value of reciprocity as a means of achieving cooperation in international politics they argue that even in an anarchic setting in which self help typifies the behavior of sovereign nation states the strategy of matching comparable responses to the actions of other nations may educate them over time to cooperate this article empirically confirms that this assumption is correct it examines the use of flexible reciprocal bargaining strategies between the united states and its major trading partners in key sectors in which surplus capacity and domestic adjustment difficulties have made commercial conflicts apparent the outcomes of most of the disputes demonstrate that reciprocity is an effective means of eliciting cooperation from trading partners results also illustrate that this cooperation is usually consistent with the general agreement on tariffs and trade gatt norms of liberal trade and dispute settlement even when it is inconsistent with the gatt principle of nondiscrimination

does hidden information make trade liberalization more fragile this paper focuses on the impact of hidden information on strategic interaction in the context of trade agreements in the presence of informational asymmetry it is possible that a tradeoff between liberalization and sustainability of cooperation emerges it is shown that it may be optimal to agree on a degree of liberalization associated with a strictly positive ex ante probability of deviation occurring in that case cooperation will break down in finite time and the optimal degree of liberalization cannot be applied indefinitely ce memoire etudie l impact de l information cachee sur l interaction strategique dans le contexte des accords de commerce quand il y a asymetrie de l information il est possible qu emerge une relation d equivalence entre la liberalisation et la viabilite de la cooperation on montre qu il peut etre optimal de s entendre sur un degre de liberalisation associea une probabilite ex ante strictement positive qu une deviation va se produire dans ce cas la cooperation va s effriter dans une periode finie et le degre optimal de liberalisation ne tient pas indefiniment

the economics of corporate social responsibility a firm level perspective survey this paper analyzes the economics of corporate social responsibility csr as a private response to market imperfections in order to satisfy social preferences depending on whether they affect regulation competition or contracts market imperfections driving csr decisions are classified in three categories public goods and bads and altruism imperfect competition and incomplete contracts we successively present these drivers of csr decisions and highlight the nature of incentives external or internal at work and the testable and tested hypotheses in the reviewed studies we finally review the link between csr and financial performance as well as between csr and social and environmental performance a twofold discrepancy appears in the literature opening future research paths a disconnection between our understanding of csr drivers and csr impacts and a knowledge gap between csr financial and social consequences the latter having received little attention

politically realistic objective functions and trade policy profs and tariffs abstract this paper demonstrates a mathematical correspondence between the deus ex machina tariff formation approach and political economy approach the correspondence implies that the tariff chosen by lobbying influenced policy makers will be equivalent to a tariff chosen by a deus ex machina government that gives too much weight to profits this result allows many political economy issues to be addressed in the simple framework of a deus ex machina government which faces a politically realistic objective function prof

imperfect substitutes the local political economy of informal finance and microfinance in rural china and india abstract banking authorities in both china and india have attempted to limit most forms of informal finance by regulating them banning them and allowing certain types of microfinance institutions the latter policy aims to increase the availability of credit to low income entrepreneurs and eliminate their reliance on usurious financing nonetheless the intended clients of microfinance continue to draw on informal finance in both rural china and india this article argues that the persistence of informal finance may be traced to four complementary reasons the limited supply of formal credit limits in state capacity to implement its policies the political and economic segmentation of local markets and the institutional weaknesses of many microfinance programs

nash equilibrium and the history of economic theory john nash s formulation of noncooperative game theory was one of the great breakthroughs in the history of social science nash s work in this area is reviewed in its historical context to better understand how the fundamental ideas of noncooperative game theory were developed and how they changed the course of economic theory

bargaining enforcement and international cooperation neoliberals and their neorealist critics have debated the relative importance of two main obstacles to international cooperation problems of cheating and enforcement and problems of relative gains by contrast i argue that problems of international cooperation have a common strategic structure in which a third distinct obstacle plays a crucial role almost regardless of the issue area states must first resolve the bargaining problem of agreeing on terms before they can implement and begin to enforce an agreement furthermore the bargaining and enforcement problems interact using a game model i show that if states must bargain to determine the deal to be enforced the shadow of the future cuts two ways a high expectation of continued interactions may make enforcing the agreement easier but it can also give states an incentive to bargain harder delaying agreement in hopes of getting a better deal empirical evidence from trade and arms control negotiations suggests that this mechanism may help to explain the costly standoffs that are often observed in international politics and are problematic for received neoliberal theories

the choice of techniques and the optimality of market equilibrium with rational expectations this paper shows that in the absence of a complete set of risk markets prices provide incorrect signals for guiding production decisions even if all individuals have rational expectations concerning the distribution of prices which will prevail on the market next period the market allocation is in general not a constrained pareto optimum essentially the only conditions under which for all technologies the market equilibrium is a constrained pareto optimum are those in which risk markets are redundant we derive the necessary and sufficient conditions for redundancy of risk markets which turn out to be extremely restrictive

economic and social impacts of an innovative self help group model in india summary we assess the impact of an approach in the indian state of andhra pradesh that combines micro credit with efforts to target the poor address their specific needs and enhance their economic potential our results support the pro poor nature of the program and point toward benefits in terms of female empowerment and nutritional intake but not asset formation or income for program participants and other villagers while study of longer term effects is desirable this suggests that even in the short term the program helped improve consumption smoothing and income diversification

policy linkage and uncertainty in international agreements i introduction negotiations over the north american free trade agreement nafta brought issues concerning the environment and a country s environmental policies to the forefront of international trade negotiations as a result nafta includes several environmental provisions as well as an environmental side agreement the side agreement established a commission to review each country s environmental standards and environmental enforcement record in addition the side agreement includes an enforcement mechanism to ensure that each country upholds its standards by threatening the withdrawal of trade benefits for noncompliance thus nalfta ties the benefits of the trade policy portion of the agreement to compliance in a side agreement concerning domestic policies in this sense nafta appears to reflect a belief in the benefits of linking issues e g trade and domestic policy obligations within an integrated agreement the question of when issues should be linked will only grow in importance in coming years as issues of trade and the environment or other domestic policy issues like labor standards move to the forefront indeed at the ministerial meetings in 1994 at the close of the uruguay round many general agreement on tariffs and trade gatt delegates renewed demands for the relationship between trade and various domestic policies including environmental policy labor standards and competition policy to be examined the question of how to integrate environmental issues into the world trade organization wto will no doubt be accompanied by questions of whether to enforce environmental obligations with the threat of the suspension of trade concessions many free trade advocates have argued that environmental issues and other domestic concerns should be negotiated in separate international agreements that are divorced from the gatt wto framework in effect calling for two separate nonlinked agreements thei r primary concern is that disputes with respect to environmental policy will undermine the previous gains made in liberalizing trade barriers in contrast many environmentalists argue that environmental concerns should be more fully integrated into existing international agreements a linked agreement their main concern is that any environmental agreement that is separate from the gatt wto framework will be unenforceable without the threat of trade policy retaliation this article addresses these concerns with a theoretical analysis of the benefits and costs of linking issues like trade and domestic policy within a unified agreement under conditions of uncertainty the theory of self enforcing trade agreements has been well established by dixit 1987 bagwell and staiger 1990 and riezman 1991 who showed how countries can support low tariffs within a repeated relationship by configuring the tariff agreement so that each country fears that a decision to cheat on the agreement would trigger a costly retaliatory episode in the future ederington 2002 extended this repeated tariff game to include two policy instruments trade and domestic policy and showed that under conditions of perfect information cross retaliation e g enforcing cooperative domestic policies with the threat of trade policy retaliation does not help support a more efficient agreement intuitively even though trade policy sanctions are a stronger punishment to cheating they are not necessary because countries have less incentive to deviate from the agreement with their domestic policy thus with perfect information linked and nonlinked agreements are functionally equivalent however this leaves unanswered the question of whether or not cross retaliation may be beneficial or detrimental under conditions of imperfect monitoring it seems natural to relax the assumption of perfect information especially with respect to domestic policies and other nontariff trade barriers

when does tit for tat diplomacy in trade policy pay off in international relations short run incentives for non cooperation often dominate yet external institutions for enforcing cooperation are hampered by national sovereignty supposedly strengthening the role of selfenforcing mechanisms this paper examines their scope with a focus on contingent protection aka tit for tat in trade policy by highlighting various strategies in a linear partial equilibrium framework we show that retaliation of non cooperative behavior by limiting market access works as a disciplining device independently of supply and demand parameters our theoretical results are backed by empirical evidence that countries more frequently involved in wto mediated disputes entailing tit for tat strategies pursue on average more liberal trade regimes

wto tariff commitments and temporary protection complements or substitutes abstract there is a long held notion in the trade policy literature that traditional tariff instruments and temporary protection tp measures are substitutes despite this prediction there is only mixed empirical evidence for a link between tariff reductions and the usage pattern of antidumping safeguard and countervailing duties based on recent theoretical advances i argue in this paper that the relevant trade policy margin for implementing tp measures is instead tariff overhangs the difference between wto bound and applied tariffs lower tariff overhangs constrain countries to raise their mfn applied rates without legal repercussions independent of past tariff changes using detailed sectoral data for a sample of 30 wto member countries during the period 1996 2014 i find strong evidence for an inverse link between tariff overhangs and tp activity this result implies that tariff overhangs and tp measures are substitutes vindicating the importance of existing tariff commitments as a key determinant of alternative protection instruments

gatt a cooperative equilibrium in a noncooperative trading regime abstract as global tariff rates have fallen the use of nontariff barriers to trade have become more prevalent one incentive for a country to depart from free trade is to levy the optimal tariff in order to maximize domestic welfare the gatt was designed to maintain free trade through a system of managed retaliation as is well known in a game theoretic trade model of tariffs with no uncertainty free trade is an equilibrium outcome however with the introduction of uncertainty and asymmetric information it is shown that the equilibrium outcome s has each country imposing nontariff barriers to trade

optimal food price stabilization in a small open developing country in poor countries most governments implement policies aiming to stabilize the prices of staple foods which often include storage and trade measures insulating their domestic market from the world market it is of crucial importance to understand the precise motivations and efficiency of those interventions because they can have consequences worldwide this paper addresses those issues by analyzing the case of a small open developing country confronted by shocks to both the crop yield and foreign price in this model government interventions may be justified by the lack of an insurance market for food prices considering this market imperfection the authors design optimal public interventions through trade and storage policies they show that an optimal trade policy largely consists of subsidizing imports and taxing exports which benefits consumers at the expense of producers import subsidies alleviate the non negativity of food storage in other words when stocks are exhausted subsidizing imports prevents domestic price spikes one striking result an optimal storage policy on its own is detrimental to consumers since its stabilizing benefits leak into the world market and it raises the average domestic price by contrast an optimal combination of storage and trade policies results in a powerful stabilizing effect for domestic food prices

profit shifting and trade agreements in imperfectly competitive markets profit shifting and trade agreements in imperfectly competitive markets do new rationales for trade agreements arise once imperfectly competitive markets are allowed we consider several trade models that feature imperfectly competitive markets and argue that the basic rationale for a trade agreement is in fact the same rationale that arises in perfectly competitive markets in all of the models that we consider and whether or not governments have political economic objectives the only rationale for a trade agreement is to remedy the inefficient terms of trade driven restrictions in trade volume we also show that the principles of reciprocity and nondiscrimination continue to be efficiency enhancing in these settings

trade agreements with domestic policies as disguised protection abstract wto rules prohibit disguised protection in the form of domestic policies how then do governments cooperate over trade and domestic policies when none can verify whether a nation s domestic tax reduction is a protective measure or a reaction to a production externality in this paper each government privately observes whether a production externality associated with its import competing good is high or low this paper finds that in an optimal agreement disguised protection with domestic policies is never used by governments with a high externality and is never commonly realized moreover in an optimal agreement tariffs may be conditional on domestic policies

employment with asymmetric information in an economy without informational and other distortions entrepreneurs and workers can write labor contracts that support a pareto optimal allocation of resources this paper is an attempt to characterize contracts when enterpreneurs are better informed about the state of nature than are their workers asymmetric information generally results in a suboptimal allocation of both risk and worker effort in particular if consumption and leisure are perfect substitutes employment will be less than fully pareto optimal in all but the most favorable states of nature

recurrent trade agreements and the value of external enforcement abstract this paper presents a theory of dynamic trade agreements in which external institutions such as the wto play a central role in supporting credible enforcement in our model countries engage in ongoing negotiations and as a consequence cooperative agreements become unsustainable in the absence of external enforcement institutions by using mechanisms such as delays in dispute resolution and direct penalties enforcement institutions can restore incentives for cooperation despite the lack of coercive power the occurrence of costly trade disputes and the feasibility of mechanisms such as escape clauses depend on the degree to which enforcement institutions can verify and condition on events that may lead to trade disputes

optimal strategic trade policy under asymmetric information abstract when cost is private information in the brander spencer model the home government is confronted by a decision of choosing between two policy options a menu of policies and a uniform policy the former induces separation and so reveals the cost information to the foreign competitors the latter helps the weak firm by concealing the cost information the main result from this study is that policy menu is preferred to uniform policy under cournot competition while the opposite occurs under bertrand competition

reexamination of the international export quota game through the theory of social situations abstract it is well known in international trade that a unique nash equilibrium of a static quota game is no trade and the rodriguez tower alternating retaliation process yields the same outcome yet they fail to capture the notion of retaliation appropriately using the framework of the theory of social situation we construct a model of the quota retaliation as an individual contingent threats situation in a static non cooperative setting we show that every solution called a stable standard of behavior supports at least one pareto efficient combination of quotas and vice versa free trade can be rationalized by a solution journal of economic literature classification numbers c79 f13

should access to credit be a right discussion on financial ethics increasingly includes the problem of exclusion of the poorer segments of society from the financial system and access to credit this paper explores the ethical dimensions surrounding the concept of a human right to credit if access to credit is directly instrumental to economic development poverty reduction and the improved welfare of all citizens then one can proclaim as nobel prize laureate m yunus has done that it is a moral necessity to establish credit as a right arguments both supporting and opposing the concept of a right to credit are presented while there may be general agreement that access to financial services may provide a pathway out of poverty granting a universal right could induce perverse effects such as overindebtedness bearing in mind the ultimate goal of proponents of this right as well as the potential harmful consequences this paper offers a new perspective on the question of access to credit based on a goal right system

strategic interaction among nations negotiable and non negotiable trade barriers trade policy is modelled as a two stage game between governments governments choose a negotiable trade barrier in the first stage of the game which is co operative the level of this barrier is treated as a binding commitment in the second stage of the game where the non negotiable trade barrier is chosen non co operatively hence governments choose trade barriers during negotiations with a view to influencing the equilibrium of the non co operative game to follow this proves to be a convenient framework in which to analyse the idea that trade agreements contain loopholes which can be exploited by protectionist governments trade negotiations induce substitution toward less efficient instruments of protection but are nevertheless welfare improving as long as the negotiations are relevant i e the negotiable barrier is actually in use and the two instruments are not perfect substitutes

in or out standards discretion compliance and the wto self enforcement in international agreements in the presence of uncertainty in the form of shocks and imperfect information regarding the extent of compliance by other members is enhanced by the use of standards in performance of commitments standards are less precise than rules they must be sufficiently demanding that undercompliance is distinguishable from non compliance discretion permits undercompliance as an alternative to renegotiation of commitments safeguards and the filing of disputes undercompliance particularly when restrained is a lower cost and less confrontational resolution to addressing adverse shocks signatories are restrained in undercomplying so that the effects of their actions are imperfectly distinguishable from the effects of shocks compliance and evidentiary standards for formal disputes define the accomplishments of the agreement evidentiary standards serve as an important discipline to undercompliance even in the absence of formal disputes

u s trade policies in a changing world economy this collection of original essays focuses on issues of international trade and trade policy in a world that is undergoing structural adaptation and in the face of a serious increase in the us trade deficit they bring a new consolidation of analytical perspective to a wide variety of current trade policy issues in their overview chapter alan v deardorff and robert m stern discuss developments in trade and protectionism review the case for free trade and address the arguments in favor of trade intervention rudiger dornbusch and jeffrey frankel analyze the macroeconomic setting in which changes have been made in us tariffs and ntbs stephen p magee and leslie young develop a model of endogenous protection and use it to search for microeconomic and macroeconomic variables that may help to explain changes in tariff and nontariff protection in the us since 1900 paul krugman takes up the question of identifying strategic sectors and the extent to which international competition and national government policies may affect the returns to such sectors under conditions of imperfect competition or when externalities are present avinash dixit analyzes the responses that the us might make to other countries trade policies in terms of how these policies affect us real national income and national security he concludes that the us could use strategic advance responses to alter other countries trade policies in a mutually beneficial way richard n cooper evaluates trade policy as foreign policy by looking at changes through three periods of us history t n srinivasan scrutinizes the national defense argument for government intervention in foreign trade john h jackson in discussing alternative negotiation approaches for the conduct of us trade policies observes that the pursuit of multilateralism may be frustrating and that what may be needed instead is a minilateral approach to trade liberalization in conclusion w max corden offers a package of rules that he believes may be both desirable and possible for the international trading system to attain robert m stern is professor of economics at the university of michigan and director of the institute of public policy studies he is coauthor with allan v deardorff of the michigan model of world production and trade mit press 1985

u s trade threats rhetoric or war working paper 95 7 the international agricultural trade research consortium is an informal association of university and government economists interested in agricultural trade its purpose is to foster interaction improve research capacity and to focus on relevant trade policy issues it is financed by united states department of agriculture ers fas and csrs agriculture canada and the participating institutions

does microfinance reduce income inequality this study addresses the question whether participation of the poor in microfinance contributes to reducing a country s level of income inequality using data from 70 developing countries we show that higher levels of microfinance participation are indeed associated with a reduction of the income gap between rich and poor people we also show however that the effects of microfinance on reducing income inequality are relatively small the results of this study add to the discussion on the impact of microfinance on poverty by showing that although access to microfinance does seem to improve the relative income position of the poor this improvement is modest which is probably because the use of microfinance is generally small as compared to the size of the economy of the countries in our sample microfinance should therefore not be seen as a panacea for bringing down income inequality in a significant way

micro credit initiatives for equitable and sustainable development who pays abstract there is a growing acknowledgement that micro credit programs have potential for equitable and sustainable development however my anthropological research on the micro credit program of the grameen bank shows that bank workers are expected to increase disbursement of loans among their members and press for high recovery rates to earn profit necessary for economic viability of the institution to ensure timely repayment in the loan centers bank workers and borrowing peers inflict an intense pressure on women clients in the study community many borrowers maintain their regular payment schedules through a process of loan recycling that considerably increases the debt liability on the individual households increases tension and frustration among household members produces new forms of dominance over women and increases violence in society

is financial openness bad for education a political economy perspective on development abstract this paper presents a simple model of the links between education democratization and economic development in a context of imperfect capital markets we investigate the incentives for a capitalist oligarchy to subsidize the education of poor workers and to initiate a political transition it is shown that international financial liberalization while stimulating physical capital accumulation reduces the capitalist elite willingness to subsidize domestic human capital accumulation in the medium run it thus delays without necessarily impeding the process of democratization

the effects of religion on development efforts evidence from the microfinance industry and a research agenda author s version of an article in the journal world development also avaliable from the publisher at http dx doi org 10 1016 j worlddev 2012 05 030

self enforcing democracy author s fearon james abstract if democracy is to have any of the good effects said to justify it it must be self enforcing those who control the government must want to hold regular competitive elections for the highest offices and all parties must be willing to comply with the results i consider a model in which citizens can always protest or rebel against the current ruler but can unseat the ruler only if enough people rebel when individuals privately observe a signal of the government s performance e g their own welfare they face a difficult problem of how to coordinate to pose a credible threat of rebellion necessary to keep the ruler from stealing further if the signals are noisy inefficient rebellions must occur in equilibrium to keep the ruler honest allowing for the possibility of elections makes for equilibria that eliminate both problems the convention of holding elections at particular times provides a public signal for coordinating rebellion in the event that elections are suspended of blatantly rigged the electoral results themselves aggregate private information about the ruler s performance providing the ruler an incentive to stick to the terms int he case of noisy signals of government performance the electoral results act as a cheap talk signal that allows the public to commit to rebel if a losing ruler does not step down avoiding the need for costly rebellions these arguments pose an explanation for self enforcing democracy whereas the several models in the literature do not because they do not explain why anyone would want to use elections to allocate power

tariffs and quotas retaliation and negotiation with two instruments of protection abstract this paper examines the equilibrium level of trade barriers in a two country world when both tariffs and quotas are available as instruments of protection it is shown that the set of efficient equilibria is the same when either tariffs or quotas but not both may be negotiated furthermore it is shown that a trade eliminating quota war will not occur unless bargaining over tariffs is inefficient

practice what you preach microfinance business models and operational efficiency the microfinance sector has room for pure for profit microfinance institutions mfis non profit organizations and social for profit firms that aim to pursue a double bottom line depending on their business model these institutions target different types of borrowers change the size of their loans and adjust their loan pricing we introduce a simple approach that accommodates a wide range of business models and allows us to estimate the operational efficiency of mfis our empirical results show that mfis with a high depth of outreach are most efficient resulting in higher levels of outreach and profits for the same input mix

endogenous timing in the presence of non monotonicities the aim of this paper is to generalize the endogenous timing game proposed by hamilton and slutsky games and economic behavior 1990 2 pp 29 46 by allowing the payoff or the marginal payoff of a player to become non monotonic with respect to the strategy of the opponent we propose a taxonomy of the subgame perfect nash equilibria based on the characteristics of the payoff functions proposed by eaton canadian journal of economics 2004 37 pp 805 29 we determine under which conditions of the initial payoff functions commitment has a social value and when the simultaneous move nash equilibrium is commitment robust and discuss its pareto efficiency

women and repayment in microfinance a global analysis notice this is the author s version of a work that was accepted for publication in world development changes resulting from the publishing process such as peer review editing corrections structural formatting and other quality control mechanisms may not be reflected in this document changes may have been made to this work since it was submitted for publication a definitive version was subsequently published in world development 39 5 758 772 http dx doi org 10 1016 j worlddev 2010 10 008

learning from schelling s strategy of conflict thomas schelling s strategy of confl ict is a masterpiece that should be recognized as one of the most important and infl uential books in social theory this paper reviews some of the important ideas in strategy of confl ict and considers some of the broader impact that this book has had on game theory economics and social theory by his emphasis on the critical importance of information and commitment in strate gic dynamics schelling played a vital role in stimulating the development of non cooperative game theory more broadly schelling s analysis of games with multiple equilibria has redefi ned the scope of economics and its place in the social sciences jel d74 f51 h56

the extent of nontariff barriers to industrial countries imports this paper examines the extent of non tariff barriers to sixteen industrial countries visible imports using three alternative measures it shows that governmental commodity specific border measures affect over 27 of all imports and over 34 of imports from developing countries it also shows that during the period 1981 83 ntbs became significantly more extensive detailed statistics reveal considerable variations in ntb coverage by commodity type of barrier importer and exporter the data on which these conclusions are based are compiled from official information at the finest level of disaggregation they are described in the paper

do microfinance institutions accomplish their mission evidence from the relationship between traditional financial sector development and microfinance institutions outreach and performance this article analyses the relationship between outreach and performance of microfinance institutions mfis on the one hand and traditional financial sector development on the other the results indicate that mfis reach more clients and are more profitable in countries where access to the traditional financial system is low this finding is in line with the market failure hypothesis mfis respond to a need that banks do not fulfill and mfis flourish where the formal financial sector fails along the same line the results demonstrate that mfis serve poorer people in countries with well developed financial systems the results suggest that in countries with well developed financial systems the two sectors stand in more direct competition with each other this competition pushes mfis down the market and makes mission drift by mfis less likely

erratum to multilateral trade negotiations bilateral opportunism and the rules of gatt wto abstract trade negotiations occur through time and between the governments of many countries an important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party we identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation our main finding is that the two central principles of gatt wto nondiscrimination mfn and reciprocity preserve the welfare of nonparticipating governments and therefore offer a first line of defense against bilateral opportunism

the impact of microfinance in sub saharan africa a systematic review of the evidence microfinance is seen as a key development tool and despite the current deepening crisis within the industry it continues to grow in sub saharan africa we systematically reviewed the evidence of the impacts of micro credit and micro savings on poor people in sub saharan africa we considered impacts on income savings expenditure and the accumulation of assets as well as non financial outcomes including health nutrition food security education child labor women s empowerment housing job creation and social cohesion the available evidence shows that microfinance does harm as well as good to the livelihoods of the poor

tariff policy and entry with cost based informational asymmetries i introduction how does the presence of incomplete information alter the usual effects of trade policy recognition that incomplete information characterizes most decision making processes that take place within an international setting has stimulated an emerging body of literature which addresses this question particularly germane to the present study are those papers which introduce an informational asymmetry into an international model of imperfect competition the majority of this literature examines the sensitivity of optimal strategic trade policies to information failures within a brander spencer 1985 model where the domestic and foreign firm compete for export sales to a third market and either the domestic or foreign government employs export subsidies examples include works by brainard and martimort 1997 collie and hviid 1993 maggi 1995 and qiu 1994 another study collie and hviid 1994 allows for domestic consumption and considers optimal import tariff policy in the presence of a foreign monopolist in general optimal trade policy in the presence of informational failures is found to differ from that under complete information the emphasis of the present study is not on the conduct of optimal trade policy but rather on how the introduction of an informational asymmetry alters the realized impact of trade policy on quantities and welfare 1 specifically we examine the effects of import tariff policy within a standard two period model of entry where the costs of the domestic firm are proprietary information the incumbent domestic firm recognizes the threat of a potential foreign rival entering exporting to the domestic market where the latter is uninformed of the cost structure of the domestic firm as is well known from the industrial organization literature the incumbent domestic firm may have an incentive to change its time period one behavior so as to signal information on costs to the foreign firm in an effort to deter entry see milgrom and roberts 1982 in specifying the degree of knowledge possessed by domestic policymakers we adopt the premise that informational deficiencies on the part of policymakers are likely to be quite acute in trade policy formation indeed as brander 1995 notes it is reasonable to suppose that governments are less informed on market conditions and firm characteristics than firms themselves in contrast to previous studies however we also assume that policymakers either cannot acquire information or if they are able to cannot respond by altering policy here the formation of trade policy does not reflect or incorporate full information and thus cannot provide signals to the other uninformed party the foreign firm moreover because policymakers cannot alter policy the foreign firm perceives the tariff rate as credibly fixed the inability to incorporate information into trade policy is especially relevant for situations where policymakers are subject to previously negotiated trade agreements here even should uninformed policymakers subsequently acquire information on domestic cost structure they will be unable to respond our emphasis on the realized effects of tariff policy reflects this information structure to conduct optimal policy government must hold complete information on markets and firm characteristics at the time policy is set as in collie and hviid 1993 1994 or be able to acquire it through signaling or a screening mechanism as in qiu 1994 and brainard and martimort 1997 2 when policymakers lack the ability to acquire or respond to such information optimal policy is not a consideration what is of interest to policymakers in this situation is the response of domestic output and imports to a given tariff rate at the outset of the game then there is a tariff rate set previously by domestic policymakers who were uninformed of domestic costs since the foreign firm cannot infer domestic cost structure by merely observing the tariff rate set by uninformed policymakers any signaling that takes place is on the part of the domestic firm

stable multilateral trade agreements we analyse multilateral tariff negotiations as a game in coalition form in a model with three identical countries that produce and trade an homogeneous commodity and where countries aggregated welfare can weight differently their different components we analyse how changes in the countries objective affects the stability of coalitions in other words we characterize what tariff agreements if any are stable i e lie in the core

but who will guard the guardians a pre recorded version of leonid hurwicz prize lecture was presented on 8 december 2007 at aula magna stockholm university the lecture was introduced by professor jorgen weibull chairman of the economics prize committee this abstract was borrowed from another version of this item

microenterprise development programs in the united states and in the developing world abstract sparked by examples from bangladesh bolivia indonesia and other developing countries hundreds of microenterprise programs have been started in the united states will these us efforts be successful this paper reviews the evidence and concludes that microenterprise development is much more difficult in the united states than in the developing world the paper suggests some ways to address the challenges of us microenterprise development

institutionalizing ethics in institutional voids building positive ethical strength to serve women microfinance borrowers in negative contexts this study examines whether microfinance institutions mfis that serve women borrowers at the base of the economic pyramid are likely to adopt a written code of positive organizational ethics poe using econometric analysis of operational and economic data of a sample of mfis from across the world we find that two contextual factors poverty level and lack of women s empowerment moderate the influence of an mfi s percentage of women borrowers on the probability of the mfi having a poe code mfis that serve more women borrowers are more likely to adopt a poe code especially in negative contexts where women borrowers face poverty and disempowerment and are therefore susceptible to abuse this study provides evidence that mfis can build positive ethical strength in negative contexts

abiding by the vote between groups conflict in international collective action we analyze institutional solutions to international cooperation when actors have heterogeneous preferences over the desirability of the action and split into supporters and opponents all of whom can spend resources toward their preferred outcome we study how actors can communicate their preferences through voting when they are not bound either by their own vote or the outcome of the collective vote we identify two organizational types with endogenous coercive enforcement and find that neither is unambiguously preferable like the solutions to the traditional prisoners dilemma these forms require long shadows of the future to sustain we then show that cooperation can be sustained through a noncoercive organization where actors delegate execution to an agent even though this institution is costlier it does not require any expertise by the agent and is independent of the shadow of the future and thus is implementable when the others are not

group versus individual liability short and long term evidence from philippine microcredit lending groups abstract group liability in microcredit purports to improve repayment rates through peer screening monitoring and enforcement however it may create excessive pressure and discourage reliable clients from borrowing two randomized trials tested the overall effect as well as specific mechanisms the first removed group liability from pre existing groups and the second randomly assigned villages to either group or individual liability loans in both groups still held weekly meetings we find no increase in short run or long run default and larger groups after three years in pre existing areas and no change in default but fewer groups created after two years in the expansion areas