network based social capital and individual loan repayment performance abstract this study analyses the effects of social capital on the repayment behaviour of borrowers in thailand in the context of agricultural economics an innovative data collection approach is used that originates from the field of sociology a personal network survey is carried out to measure the individual social capital of borrowers social capital variables are defined according to tie strength bonding bridging and social distance linking between the respondent and his her network member bonding social capital has a significant and positive influence on repayment performance however we find no significant evidence for an effect of bridging and linking social capital

on the efficiency of law a public choice perspective economists have not yet developed a comprehensive theoretical framework incorporating transaction cost economics within a public choice perspective for predicting when there will be an efficiency problem with the law transaction cost reasoning and the rent seeking insight have not been applied systematically in a dynamic institutional context to evaluate when the law will be used to increase or not minimize problems of bounded rationality and opportunism this paper takes a first step at identifying and remedying this deficiency the paper first provides a critical review of relevant theoretical contributions made by becker 1983 1985 posner 1977 priest 1977 rubin 1977 1982 williamson 1975 1985 and others we then show how analysis of the efficiency of law can be synthesized into a broader whole by incorporating transaction cost economics more fully into existing understanding of rentseeking in the political realm thus within the public choice paradigm this paper develops a deeper transaction cost analysis of the efficiency of law building on prior research by the authors crew and rowley 1988a 1988b twight 1983 1988 the paper identifies variables that position legal rules on a spectrum that ranges from those that are predominantly transaction cost

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

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

savings and loan and finance industry pac contributions to incumbent members of the house banking committee this paper examines the relationship between campaign contributions from savings and loan and finance industry pacs and membership on the house banking committee the distinguishing features of this paper are that we focus on campaign contributions at an industry level and we use regression analysis to determine whether membership on the house banking committee the committee with oversight responsibility for the savings and loan industry influences the level of contributions received by an individual legislator we find that members of the house banking committee do receive significantly greater contributions from the savings and loan and finance pacs than do other members of congress and that being chairman of the house banking committee also pays a dividend

political cleavages and changing exposure to trade combining the classical theorem of stolper and samuelson with a model of politics derived from becker leads to the conclusion that exogenous changes in the risks or costs of countries external trade will stimulate domestic conflict between owners of locally scarce and locally abundant factors a traditional three factor model then predicts quite specific coalitions and cleavages among owners of land labor and capital depending only on the given country s level of economic development and its land labor ratio a preliminary survey of historical periods of expanding and contracting trade and of such specific cases as the german marriage of iron and rye u s and latin american populism and asian socialism suggests the accuracy of this hypothesis while the importance of such other factors as cultural divisions and political inheritance cannot be denied the role of exogenous changes in the risks and costs of trade deserves further investigation

capital budgets borrowing rules and state capital spending abstract this paper compares the level and composition of government spending in u s states that maintain separate budgets for capital and operating expenditures with that in states that employ unified budgets it also investigates the effects of pay as you go financing rules for capital projects the empirical findings suggest that states with separate capital budgets spend more on public capital projects than comparable states with unified budgets there is no evidence that the presence or absence of a capital budget affects the level of non capital spending pay as you go requirements for financing capital projects are associated with lower levels of both capital and non capital spending

black hole tariffs and endogenous policy theory political economy in general equilibrium preface acknowledgments list of results 1 a preview of the results 2 endogenous policy theory a diagrammatic approach part i endogenous policy theory with specific factors the theory of industry tariffs in partial equilibrium 3 the probabilistic voting model of political efficiency and powerless politicians 4 endogenous lobbying theory and the contribution specialization theorem 5 endogenous tariff theory 6 the power function model of endogenous industry lobbying 7 three simple tests of the stolper samuelson theorem 8 the invisible foot and the waste of nations lawyers as negative externalities part ii endogenous policy theory in general equilibrium a long run theory of national tariff levels 9 the 2 x 2 x 2 x 2 model of endogenous redistribution theory 10 a prisoner s dilemma theory of endogenous protection the leontief model 11 the compensation effect and the multiple equilibrium trap 12 increasing returns to politics and factor endowments economic development and brazilian vitality versus the indian disease 13 endogenous protection in the united states 1900 88 14 a cobb douglas model 15 black hole tariffs 16 the endowment effect cross national evidence on endogenous tariffs part ii postscript 17 the senile industry argument for protection 18 optimal obfuscation and the theory of the second worst the politically efficient policy mathematical appendices references author index subject index

an economic model of representative democracy this paper develops an approach to the study of democratic policy making where politicians are selected by the people from those citizens who present themselves as candidates for public office the approach has a number of attractive features first it is a conceptualization of a pure form of representative democracy in which government is by as well as of the people second the model is analytically tractable being able to handle multidimensional issue and policy spaces very naturally third it provides a vehicle for answering normative questions about the performance of representative democracy

a test of the structure of pac contracts an analysis of house gun control votes in the 1980s enactment of the bill was a major victory for the national rifle association which had worked for years to win relaxation of the landmark gun control act of 1968 congressional quarterly almanac 1986 p 82 i introduction every election the same political action committees pacs contribute millions of dollars to candidates for office well informed participants in the political process surely must get value for their money yet empirical research fails to provide systematic evidence that campaign contributions influence congressional roll call votes 1 a mischaracterization of the exchange between pacs and politicians may produce these contradictory results empirical studies of roll call voting typically use pac contributions from only one election cycle earlier studies generally assume prepayment in the prior congress while more contemporary studies assume a spot exchange recent empirical work however suggests another possibility interest groups may buy current influence with money spent over multiple election cycles stratmann 1995 shows that contributions from both the current and the previous election cycles influence floor votes on agricultural price supports snyder 1990 1992 presents evidence that interest groups make long term investments in politicians previous studies by arbitrarily imposing a payment structure may have produced erroneous estimates of the influence of pac money on legislative votes we examine roll call votes on gun control in the u s house of representatives during the 1980s to determine whether pacs make spot market purchases prepay for votes in the prior election cycle or make long term investments we investigate whether pac contributions have a durable long term investment effect as snyder 1992 suggests we consider two types of evidence concerning the campaign contribution contract first we examine the pattern of expenditures by the two dominant interest groups concerned with gun control the national rifle association nra and hand gun control hgc their expenditures provide strong evidence against the spot market exchange hypothesis both groups made significant expenditures in sessions of congress in which no floor vote occurred nor were these expenditures purchasing services such as committee work in a spot market exchange further 1986 nra expenditures are significantly higher for first term representatives which is consistent with long term investments but contradicts a spot exchange since freshmen have the least influence to sell second we include expenditures from both the current and the five previous election cycles as separate independent variables in a model of roll call voting to date no empirical paper tests whether pac money from more than two cycles influences roll call voting and only stratmann 1995 and grenzke 1989 use a model that specifies money from more than one cycle in an equation explaining roll call votes our probit estimates indicate that nra expenditures in the three most recent election cycles and hgc expenditures in the two most recent cycles buy votes the independent effect of expenditures from different cycles suggests that contributions are neither an unqualified one session prepayment nor a spot exchange the influence of nra expenditures two sessions prior to the roll call votes is evidence of a long term investment the literature on the determinants of roll call voting assumes that pac contributions alter representatives votes interest groups might instead simply provide campaign assistance to their supporters to affect the composition of congress stratmann 1991 bronars and lott 1997 if a difficult to quantify variable and thus omitted from regressions signals a representative s true position and interest groups make campaign contributions on the basis of this variable pac contributions might appear to influence votes the pattern of contributions and votes on gun control however indicates attempts by the nra and hgc to influence votes not merely the composition of congress

capture and ideology in the economic theory of politics the economic theory of regulation long ago put public interest theories of politics to rest these theories have correctly been viewed as normative wishings rather than explanations of real world phenomena they have been replaced by models of political behavior that are consistent with the rest of microeconomics anthony downs 1957 james buchanan and gordon tullock 1965 george stigler 1971 sam peltzman 1976 recently however debate has arisen over whether some version of a public interest theory of regulation will have to be readmitted to our thinking about actions and results in the political arena what is at issue is the empirical importance of the altruistic publicly interested goals of rational actors in determining legislative and regulatory outcomes james kau and paul rubin 1979 kalt 1981 peltzman 1982 this study assesses the nature and significance of publicly interested objectives in a particular instance of economic policymaking u s senate voting on coal strip mining regulations the existence of such objectives is of course no contradiction of the economic view of human behavior kenneth arrow 1972 gary becker 1974 and may well be rooted in genetic biological history becker 1976 jack hirshleifer 1978 generally however individuals altruistic publicly interested goals have been given little attention this reflects the judgment that such goals are so empirically unimportant as to allow the use of occam s razor in positive models or well founded apprehensions that these goals are unusually difficult to identify measure and analyze notwithstanding the latter problem we find that approaches which confine themselves to a view of political actors as narrowly egocentric maximizers explain and predict legislative outcomes poorly the tracking and dissecting of the determinants of voting on coal strip mining policy suggest that the economic theory of politics has been prematurely closed to a broader conception of political behavior

the competitive effects of resale price maintenance the competitive effects of resale price maintenance rpm are theoretically diverse rpm can cause allocation distortions or promote productive efficiencies in the distribution process moreover extant cross sectional empirical evidence is incapable of distinguishing among the potentially disparate effects of rpm this paper conducts hypothesis tests of the alternative theories of rpm the empirical framework relates estimates of the effects of rpm for a cross section of observations to necessary conditions of the alternative models this analysis indicates that rpm is used both to foster cartels and promote efficiencies in the distribution process this result is consistent with the growing body of case study analysis that suggests that rpm is used for a variety of reasons this result also questions the current per se illegal status of rpm in the antitrust laws evidence is also provided concerning the strategic interaction between manufacturers and dealers in the distribution process and the use of financial data in analyzing propositions in industrial organization

microfinance performance and social capital a cross country analysis in recent years the microfinance industry has received a substantial amount of cross border funding from both public and private sources this funding reflects the increasing interest in microfinance as part of a more general trend towards socially responsible investments in order to be able to secure sustained interest from these investors it is important that the microfinance industry can show evidence of its contribution to reducing poverty at the bottom of the pyramid for this it is crucial to understand under what conditions microfinance institutions mfis are able to reduce poverty this paper contributes to this discussion by investigating the relationship between the extent to which social capital formation is facilitated within different societies and the financial and social performance of mfis this focus on social capital formation is important because in many cases mfis use group loans with joint liability to incentivize asset poor borrowers to substitute the lack of physical collateral by their social capital hence the success of a large part of the loan relationship between mfis and their borrowers depends on the social capital those borrowers can bring into the contract we carry out a cross country analysis on a dataset containing 100 countries and identify different social dimensions as proxies for how easy social capital can be developed in different countries we hypothesize that microfinance is more successful both in terms of their financial and social aims in societies that are more conducive to the development of social capital our empirical results support our hypothesis

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

the effect of social capital on group loan repayment evidence from field experiments an important question to microfinance is the relevance of existing social capital in target communities to the performance of group lending this research presents evidence from field experiments in south africa and armenia in which subjects participate in trust and microfinance games we present evidence that personal trust between group members and social homogeneity are more important to group loan repayment than general societal trust or acquaintanceship between members we also find some evidence of reciprocity those who have been helped by other group members in the past are more likely to contribute in the future during the past decade exploring the role that social capital plays in economic behaviour has emerged as one of the most fascinating and fertile areas of economic research although precise definitions of social capital are notoriously difficult to pin down one of the early pioneers of the concept coleman 1988 defines social capital as social structure that facilitates certain actions of actors within the structure in his definition coleman specifically highlights the roles of mutual obligation expectations and trustworthiness social norms social sanctions and the transmission of information important studies in both developed and developing countries have analysed the impact of social capital in economic relationships putnam s celebrated work making democracy work civic traditions in modern italy 1993 and bowling alone america s declining social capital 1995 brought attention to the role that social capital plays in the development of the modern state udry s ground breaking 1994 work in nigeria illustrated how the social capital existing in traditional societies may allow for more efficient credit contracts than in developed economies with weaker social

politics and the rescue of insolvent savings and loans before 1989 the results presented in this paper are consistent with those predicted by public choice economists who believe that regulatory agencies represent the interests of their controlling congressional committees membership on committees is not random congressmen seek committee assignments where they can represent the interests of their constituency congressmen from states where financial institutions are significant will seek membership on their respective banking committees once on those committees congressmen will seek to protect and promote their own constituency in the case of the savings and loan industry insolvent savings and loans received benefits from staying in operation these savings and loans gained another chance to gamble for resurrection being shut down or placed in a management consignment program did not give this option the results presented in our paper indicate that participation in one of the rescue programs is not random savings and loans in states with political power representation on the senate banking committee are less likely to be resolved

firms and tariff regime change explaining the demand for protection although it is commonly argued that there is a connection between tariff levels and business conditions this hypothesis has not been subjected to systematic empirical analysis or given any theoretical basis the author presents two complementary theories of the movement of tariff levels in response to changing business conditions both explain tariff changes in terms of the changing political demands of business firms and both rely on the business cycle to drive these changing demands one theory is a conventional argument about changing opportunities for entry and exit the other treats firms as satisficers the theories yield similar predictions preliminary empirical analysis while consistent with both does not differentiate between them

the reductionist gamble open economy politics in the global economy international political economy ipe should transition to third wave scholarship because open economy politics oep which dominates current american ipe scholarship can generate inaccurate knowledge oep can produce inaccurate knowledge because it studies domestic politics in isolation from international or macro processes this methodological reductionism is often inappropriate for the phenomena ipe studies because governments inhabit a complex social system as a result the political choices that oep strives to explain are typically a product of the interplay between domestic politics and macro processes when oep omits causally significant macro processes from empirical models the models yield biased inferences about the domestic political relationships under investigation although scholars tolerated such errors when the gains from oep were large these errors are less tolerable now that oep has matured consequently the field should transition toward research that is nonreductionist problem driven and pluralistic

corporate cross ownership and market aggregates oslo stock exchange 1980 1990 abstract corporate cross ownership results in double counting of assets in the market s valuation of total equity this paper is the first to use firm specific data to measure the resulting bias in market capitalization market portfolio return capital structure and the p e ratio based on the population of firms on the oslo stock exchange we found substantial distortions of market aggregates the average size of the equity market was overstated by 20 financial leverage was underestimated by 7 and the market portfolio return was underestimated by 31 double counted earnings offset the bias in market capitalization leaving the p e almost undistorted

women and tariffs testing the gender gap hypothesis in a downs mayer political economy model i am convinced that at least two out of every three women have a grudge against the tariff and a grudge which is all too frequently increased to an indignation by the subtle suggestion on the part of importers and retailers that the tariff adds to the prices of the things they buy it is the women of the household who spend the husband s earnings she has to make them go around and anything which she is told adds to the prices of the things she buys naturally finds little excuse in her mind her attitude regardless of logic is a natural one she doesn t stop to consider the part the tariff may have played in making her husband s earnings what they are or in fact in making them possible at all nor does she stop to consider the relatively minor part the tariff plays in the retail prices of the things she buys she has never seen the tariff law and so she cannot know that with such commodities as coal coffee tea cocoa furs and shoes on the free list some explanation other than the tariff must account for the increased price of these things barbour 1928 1 the notion that women and men hold systematically differing political preferences that there is a gender gap is an old one in american politics even before the national enfranchisement of women in 1920 analysts and commentators attempted to identify issues on which such a gender gap would affect policy outcomes one such issue was the tariff with which we are concerned in this paper the above passage from the january 1928 issue of the tariff review serves as an excellent text for our sermon the logic of the argument is interesting american women prefer a low tariff because a high tariff raises the prices of the things they purchase our paper represents this hypothesis as an extension of the downs 1957 mayer 1984 political economy model and then presents a simple empirical test of the hypothesis we present our analysis in four major parts first we set the stage with a brief discussion of the political economy of the tariff during the period relevant to our analysis 18901934 this discussion provides motivation for the details of the more formal analysis in the following section next we develop the logic of the classic tariff system in the context of the downs mayer model the third section presents the testable proposition that the enfranchisement of women results in a lower equilibrium tariff as an implication of this model in the final section we present our methodology and results i the political economy of the classic tariff system it is not unreasonable to think of the period from the end of the civil war until 1934 as the era of classic tariff politics in the united states during this period the tariff was a significant partisan electoral issue republicans were the party of the protective tariff democrats were opposed to the tariff system while there was regional variation with respect to details at the level of specific products this characterization is quite accurate over the entire period with respect to overall commitment to the tariff system whether one studies political platforms or campaign speeches this split between republicans and democrats remains clear 2 furthermore there seems to be a fairly direct relationship between sectional economic interests and strength of partisan support the industrial northeast was the historical center of republicanism while the rural south and mid west was the center of democrat support another important aspect of the electoral politics during the era of classic tariff politics from the perspective of this paper was the essential one dimensionality of the tariff as an issue 3 that is partisan conflict revolved primarily around support for and opposition to the tariff system not the details of the tariff structure it is important to recall that during this period the tariff was one of the few instruments of industrial policy available to the national government and at least since the end of the civil war the tariff as an electoral issue was explicitly presented by both democrats and republicans as a system of support for american industry

the partisan paradox and the u s tariff 1877 1934 whereas historical accounts of u s tariff policy from 1877 to 1934 emphasize the pivotal role of parties previous quantitative studies have failed to identify significant partisan effects a formal model of policymaking in which strong parties aggregate voters preferences provides empirical equations to test for partisan effects subsequent time series analysis shows that even after controlling for interest group demands partisan control of government did significantly affect the tariff moreover during the period under study the two political parties enacted tariff policies that benefited different sets of producer groups at the expense of others thus political institutions did play a significant role in shaping the interests that influence u s foreign economic policy

bureaucratic discretion or congressional control regulatory policymaking by the federal trade commission this paper extends stigler and peltzman s approach to regulation by incorporating a legislature the model yields comparative statics results and hence testable implications the paper then tests between two opposing approaches about regulatory agency behavior the first assumes agencies operate independently of the legislature and hence exercise discretion the second assumes that congress controls agency decisions the recent behavior of the federal trade commission provides the empirical setting substantial evidence is found for the specific predictions of the model including the hypothesis of systematic congressional influence over ftc decisions

ideas institutions and american trade policy nowhere is america s hegemonic decline more evident than in changing trade patterns the united states trade balance a measure of the international demand for american goods is suffering historic deficits lowered demand for american goods has led to the under utilization of both labor and capital in a growing number of traditionally competitive american industries conversely americans taste for foreign goods has never been so great japanese cars european steel third world textiles to name a few are as well produced as their american counterparts and arrive on the u s market at a lower cost

the political economy of the tariff cycle how can protectionism and free trade succeed one another our answer focuses on the changing balance of private actors political demands these actors acquire interests in tariff policies because their assets are spatially concentrated and trade in these assets is subject to various limitations actors in regions experiencing no new investment in an established industry old regions have interests that sometimes differ from those in regions where there is new investment we show that old regions have no reason to be involved in tariff politics at business cycle peaks during troughs whether a state becomes more or less protectionist depends ceteris paribus on the relative political strength of old import competing and old exporting interests if old import competing industries outweigh the old exporters then protection will tend to increase at the trough and decrease at the peak of a business cycle the opposite result occurs when old exporters are more influential

the industrial organization of congress or why legislatures like firms are not organized as markets this paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions like market institutions legislative institutions reflect two key components the goals or preferences of individuals here representatives seeking reelection and the relevant transactions costs we present three conclusions first we show how the legislative institutions enforce bargains among legislators second we explain why given the peculiar form of bargaining problems found in legislatures specific forms of nonmarket exchange prove superior to market exchange third our approach shows how the committee system limits the types of coalitions that may form on a particular issue

what determines individual trade policy preferences abstract this article provides new evidence on the determinants of individual trade policy preferences using individual level survey data for the united states there are two main empirical results first we find that factor type dominates industry of employment in explaining support for trade barriers second we find that home ownership also matters for individuals trade policy preferences independent of factor type home ownership in counties with a manufacturing mix concentrated in comparative disadvantage industries is correlated with support for trade barriers this finding suggests that in addition to current factor incomes driving preferences as in standard trade models preferences also depend on asset values

capital constraints and the performance of entrepreneurial firms in vietnam entrepreneurship has been among the key driving forces of the emergence of a dynamic private sector during the recent decades in vietnam this article addresses for vietnam the questions how capital constraints affect the performance of family firms and how entrepreneurs human and social capital interact with capital constraints to leverage entrepreneurial income a panel of 1721 firms in 4 years is used results are consistent with the resource dependency approach indicating an adverse effect of capital constraints on firm performance firms suffering capital constraints perform substantially better suggesting that they need more capital simply to finance newly recognized profit opportunities human capital plays a vital role in relaxing capital constraints and improves the entrepreneurial performance whereas the effect of social capital stemming from strong ties and weak ties is limited strong ties bring emotional support and weak ties give nonfinancial benefits from regular and useful business contacts advanced econometric analysis tools to take into account the endogeneity of capital constraints are used to establish relationships among relevant variables

the inequality of social capital and the reproduction of chronic poverty summary this paper draws on ethnographic research in tanzania to question ideas inherent to mainstream development policy that building social capital can be readily created used or substituted for other missing assets and thereby overcome poverty the poorest experience clusters of interlocking disadvantage that make it highly unlikely that they can draw on social capital to ameliorate their poverty or that increased association and participation at community level is necessarily beneficial to them moreover social relationships collective action and local institutions may structurally reproduce the exclusion of the poorest as such a politically neutral and undersocialized policy focus on strengthening associational life and public participation of the poor is unlikely to lead to their greater inclusion nor to significant poverty alleviation

the new economics of organization over the last ten years or so an important new approach to the study of organizations has emerged within economics it is perhaps best characterized by three elements a contractual perspective on organizational relationships a theoretical focus on hierarchical control and formal analysis via principal agent models this paper provides political scientists with an overview of the new economics of organization and explores its implications for the study of public bureaucracy so far positive political theory has not contributed much to our understanding of public bureaucracy in part this is due to the unsympathetic treatment that rational modeling and most other modes of quantitative analysis have long received from students of public administration the other side of the coin however is that positive theorists have not made much of an effort to develop theories of bureaucracy their concerns have centered around two basic mechanisms of social choice voting and markets and they have devoted little systematic attention to a third mechanism that is clearly important for understanding how societies and other aggregates make collective decisions this third and relatively unexplored mechanism is hierarchy movement toward a positive theory of hierarchies would fill a serious gap in the social choice literature while at the same time making a theoretical contribution that strikes to the essence of public bureaucracy indeed of all organizations in fact significant steps toward a positive theory of hierarchies have very recently been taken but by economists not political scientists in small numbers of course economists made contributions to the study of public bureaucracy some time ago with the pioneering works of downs 1967 tullock 1965 and niskanen 1971 but this new wave of theoretical work is different it is already a large complex body of literature that is the focus of innovation and excitement among a growing number of economists and it reflects an unusual degree of theoretical coherence and cumulative effort work in this tradition tends to receive orientation from a distinctive economic approach to the analysis of organizations an approach perhaps best characterized by three elements a contractual perspective on organizational relationships a focus on hierarchical control and formal analysis via principal agent models this approach has emerged from recent attempts to move beyond the neoclassical theory of the firm which assumes away all organizational considerations to a theory of economic organizations that can explain why firms corporations and other enterprises behave as they do propo

social connections and group banking lending to the poor is expensive due to high screening monitoring and enforcement costs group lending advocates believe lenders overcome this by harnessing social connections using data from finca peru i exploit a quasi random group formation process to find evidence of peers successfully monitoring and enforcing joint liability loans individuals with stronger social connections to their fellow group members i e either living closer or being of a similar culture have higher repayment and higher savings furthermore i observe direct evidence that relationships deteriorate after default and that through successful monitoring individuals know who to punish and who not to punish after default

the socio cultural environment for entrepreneurship a comparison between east asian and anglo saxon countries this study uses a theory of face to identify predictors of interest in entrepreneurship in six east asian and four anglo saxon countries at the cultural level social status of entrepreneurship and shame from business failure predict interest in entrepreneurship better in east asian than anglo countries at the individual level social status predicts interest in entrepreneurship in the entire sample

risk capital financing and the separation of ownership and control in business groups abstract this paper analyses business groups composed of legally independent firms connected through a network of cross shareholdings a model which allows to calculate the value of the firms of a group and the integrated ownership shares held by an outside stockholder is described a taxonomy for the collection of risk capital generalizing the one which applies for a single firm is proposed the connection between the process of raising risk capital and the separation of ownership from control in business groups is demonstrated and given a formal mathematical description empirical evidence relating to the amount of risk capital collected by italian business groups in the 80s and to the extent of the divorce between ownership and control is also provided

using repayment data to test across models of joint liability lending theories rationalising joint liability lending are rich in implications for repayment rates we exploit this fact to test four diverse models we show that the models repayment implications do not always coincide for example higher correlation of output and borrowers ability to act cooperatively can raise or lower repayment depending on the model data from thai borrowing groups suggest that repayment is affected negatively by the joint liability rate ceteris paribus and social ties and positively by the strength of local sanctions and correlated returns further the relative fit of the adverse selection versus informal sanctions models varies by region

vertical coordination access to capital and producer loyalty in the polish dairy sector numerous studies have shown that processing and retail industries have actively assisted farmers in joining the modern food marketing systems data from the polish dairy sector show that assistance is provided not only for the traditional channel farmers wishing to modernize but also for farmers already included in the modern marketing channel two explanations can be provided to account for this phenomenon one even modern channel farmers may lack sufficient funds to maintain required quality quantity on their own two it may be the case that even after undertaking necessary adjustments modern channel farmers are more likely to quit their relationship with a processor and turn elsewhere in which case assistance is provided to prevent them from defecting using farm level data we investigate the impact of supply chain modernization on farmers access to credit and their loyalty toward processors our results do not provide compelling evidence to support either hypothesis suggesting at most a partial explanation for the existence of vertical linkages between processors and modern channel farmers in poland

subordination of american capital abstract to economists agency problems present challenges that can be resolved through optimal contracting or incentive mechanisms to politicians agency problems represent entitlements to be allocated among favored constituencies corporate management constitutes a powerful constituency independent of the interests of workers local communities and other corporate stakeholders the political process has for politically rational but economically dabatable reasons systematically subordinated investors desire to resolve agency problems to managers desire to be protected from capital market discipline politically explicit modes of analysis thus complement traditional tools of finance theory and improve our ability to explain capital market structure and behavior

trust in lending social capital and joint liability seed loans in southern zambia summary this paper identifies factors associated with high repayment performance by collectively liable groups of seed borrowers in southern zambia the results suggest that some factors facilitating collective action within seed groups such as their size are associated with a higher repayment performance in addition community based cognitive social capital proxied here by generalized trust is shown to be strongly associated with repayment performance this suggests that attitudes and values shared by community members create an environment in which seed borrowers honor their engagements although church participation and fear of witchcraft can weaken mutual monitoring of loan use and peer pressure for repayment

the congressional bureaucratic system a principal agent perspective with applications to the sec this paper provides the theoretical perspective and empirical support for congressional dominance of agency decisions my thesis is twofold first because much of the previous evidence on this question is not evidence at all many scholars intuition and conclusions are based on a logically flawed foundation second i have provided here and in previous work a look at a variety of different agencies and in each case have shown how the events can plausibly be interpreted as involving congress agency problems within the congressional bureaucratic system are real and substantial just as they are within corporations however as in the latter institutional forms develop within the congressional system to partially if not wholly mitigate these problems the logical perspective together with the evidence provide a strong case against the agency dominance hypothesis as typified by the early sections of niskanen 1971 and wilson 1980

were japanese stock prices too high abstract this paper asks whether market fundamentals can explain the recent run up and decline of japanese equity values and price earnings ratios accounting differences explain about half of the long run disparity between u s and japanese p e s for example if japanese firms used u s accounting rules the japanese p e ratio would have been 32 6 not 53 7 in 1989 accounting differences cannot however explain the doubling of this ratio in 1986 nor its decline in 1990 similarly we are unable to isolate changes in required stock returns or growth expectations that are large enough to explain recent japanese stock price movements

procedural choice in majoritarian organizations a puzzling feature of self governing organizations is persistent majority support for restrictive seemingly nonmajoritarian procedures e g chairs and committees this article provides a theory of self enforcing majoritarian commitment to restrictive procedures we ask 1 why majorities consent to restrictive procedures in the first place 2 why restrictive procedures survive challenges thereafter and 3 with what policy consequences in the model a risk averse majority allocates procedural rights to increase procedural efficiency i e reduce the procedural uncertainty of free for all bargaining an equilibrium procedure is generally asymmetric and restrictive generating nonmajoritarian policy bias still a majority may persist in endorsing it so as to avoid amplifying procedural and policy uncertainty

a political theory of regulation with some observations on railway abandonments one of the main themes of partisan dispute in the recent past and doubtless in the foreseeable future is whether or not the value of detailed governmental regulation of the economy exceeds the cost this is exactly the kind of dispute that might be resolved by raising it from the level of mere partisan interest to the level of economic and political science unfortunately however it has not been raised because we do not have the necessary intellectual apparatus namely a theory about the motivation for the operation of and the consequences of regulation as a result most of the discussion consists of biased ad hoc explanations of particular cases with little effort to formulate and test alternative generalizations we have therefore nothing but unresolved and unresolvable disputes about a more or less random collection of stories and some contradictory recipes about cause and effect

can social cohesion be harnessed to repair market failures evidence from group lending in guatemala the success of group lending in developing countries has been attributed to the ability of the institution to mitigate asymmetric information problems in credit markets previous research has offered a number of explanations for this phenomenon social ties between borrowing group members internal group pressure to repay loans and peer monitoring this research presents empirical tests on borrowing group data from guatemala which indicate that peer monitoring significantly effects borrowing group performance through stimulating intra group insurance group pressure is found to have a small effect in deterring moral hazard while the effect of social ties among members is statistically insignificant

transaction cost economics and cross national patterns of industrial conflict a comparative institutional analysis at the core of a capitalist system is an implied coalition between labor and capital built upon a system of exchange and compromise without capital the material condition upon which labor s interests are realized would be impossible likewise without labor s consent to exchange wages for future investment capital could not procure the profits and savings necessary for its reproduction and transformation organizing stable and cost efficient class coalitions has long been recognized as not merely an economic priority but a political challenge yet some democracies have met this challenge more successfully than others for the student of comparative political economy an enduring question remains why the present study is an attempt to provide an answer that complements and integrates the more common macroand microanalytic studies of industrial conflict it is argued here that a useful approach is to explicate some of the major microeconomic dynamics that condition exchanges between labor and capital and to demonstrate how institutional devices designed to accommodate political representation and conflict resolution facilitate or impede the process of class compromise by employing the logic of transaction cost economics the analysis highlights the comparative institutional elements fundamental to economizing on the costs of exchange shaping consensus within a political economy s industrial relations system the resulting transaction cost efficiency model of industrial conflict specifies the ex ante cost factors price margin of transaction and the institutional control of bounded rationality and the ex post cost factors legislative polarized pluralism executive hegemony and the frequency of general elections central to the process of building and sustaining class coalitions the model is tested on data drawn from 19 democracies covering the years 1965 83 use of simulation models reveals the relative trade offs associated with different patterns of ex ante and ex post cost structures

social capital and loan repayment performance in northern vietnam this study analyses the effects of social capital on the loan repayment behavior of borrowers in vietnam in the context of agricultural economics an innovative data collection approach is used that originates from the field of sociology a personal network survey is carried out to measure the individual social capital of borrowers social capital variables are defined according to tie strength bonding bridging and social distance linking between the respondent and his her network member social capital has a significant and positive influence on the rescheduling of loans however we find no significant evidence for an effect of social capital on late payment of principal or interest

voting for protection an electoral model of tariff policy politicians want to please their constituents and will attempt to manipulate trade policy to further this goal this article elaborates a model of the electoral incidence across congressional districts of the interindustry structure of tariff protection with an application to the mckinley tariff of 1890 it may contribute to a neglected area of research on the domestic politics of tariffs to the history of a period of tariff formation in which there has been little recent work and to the debate over legislative representation of constituency interests models of the domestic political market for trade policy endogenous tariff theory can be divided into four categories with classification based on whether they are formal or empirical and on whether they focus on the demand or the supply side of the political market many of the formal models are too abstract to produce readily testable propositions 1 wolfgang mayer s model for example assumes that tariffs are set by a national popular referendum and deduces tariff structures from median voter results 2 there is no government in this type of model the demanders and suppliers of policy are the same william brock and stephen magee s model assumes a singleissue election in which politicians bid for votes by offering tariff protection up to the point at which marginal gains votes plus campaign contributions equal marginal costs lost votes plus lost contributions 3

repayment performance in group based credit programs in bangladesh an empirical analysis abstract this paper analyzes the repayment rates of 128 credit groups belonging to three group based credit programs in bangladesh the association for social advancement asa the bangladesh rural advancement committee brac and the rangpur dinajpur rural service rdrs using tobit analysis specific tests are performed on the following hypothesized determinants group size size of loans degree of loan rationing enterprise mix within groups demographic characteristics social ties and status and occurrence of idiosyncratic shocks the paper concludes that if basic principles of prudential banking are adhered to repayment rates can be good even in poor and remote communities the important thing for financial institutions is to tailor services such that it becomes worthwhile for the poor to establish a profitable long term association in addition more freedom to members in the process of group formation is recommended

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

the contractual nature of the firm for their helpful comments i am grateful to armen a alchian yoram barzel keith leffler john s mcgee and dean worcester 1 ronald h coase the nature of the firm 4 economica 386 1937 the paper however was written several years earlier see note 3 infra 2 the social sciences citation index provides the following information breaking down the period of 1966 80 into three five year periods the total citations of coase s firm paper for each subperiod are 1966 70 17 citations 1971 75 47 citations and 1976 80 105 citations

immigrant self employment the family as social capital and the value of human capital we examine how self employment among asian and hispanic immigrants is affected by family composition and human capital class resources because of collective interests and strong personal ties the family facilitates the pooling of labor power and financial resources enterprising immigrants draw on these resources when establishing and operating small businesses our findings also show the importance of human capital class resources in accounting for immigrant self employment although foreign earned human capital is usually not highly valued in the host labor market immigrants successfully use this human capital to achieve business ownership interethnic variation in personal human capital and family composition accounts for a substantial portion of the observed interethnic variation in self employment the data are drawn from the 1980 five percent pums for greater new york city and los angeles excerpt

legislators and interest groups how unorganized interests get represented this paper derives a supply price for public policy using a constrained maximization model in the model three sets of agents each have preferences over outcomes organized interest groups offer campaign contributions to improve their own wealth voters offer votes to obtain outcomes closer to their most preferred outcomes and legislators seek both campaign contributions and votes to obtain reelection a given legislator s supply price for policy is shown to depend on the productivity of his effort as determined by committee assignments priority and ability and by the preferences of his unorganized constituency in the home district two extreme assumptions about the effectiveness of campaign spending in eliciting votes are used to illustrate the comparative statics properties of the model the prediction of the model is that interest groups will in general seek out legislators whose voters are indifferent to the policy the interest group seeks thus voters who do have preferences over policy are in effect represented even though they are not organized

centralized vote trading this paper presents a model of centralized vote trading in a legislature in this model legislators trade only with party leaders who set prices at which they will buy needed vote changes and sell promises to pass or defeat particular bills each legislator trades away votes on bills of little concern to him and of high concern to leaders and purchases promises from the leaders to pass or defeat particular bills of high concern to the legislator relative to the price the leguslator must pay

taxation and the political economy of the tariff traditional accounts of u s tariff policy emphasize trade strategies and interest group politics this article makes a departure it opens with an observation up until world war i the tariff was the largest single source of federal government revenues it then explores the significance of tariffs as taxes theoretically and empirically in its first part the article develops a theory of taxation politics and applies it to the tariff in its second part it submits the theory to an empirical test modeling changes in u s tariff rates from 1829 to 1940 the politics of tariff revision it argues followed from two characteristics of the tariff as tax from the extent of the treasury s dependence upon it and from the distributive pattern of its burdens and benefits taken together the article concludes revenue dependence and distributive incidence account for several diverse aspects of american tariff policy including the structure of its coalitions the shifts in its objectives and the timing of its innovations

estrutura politica como determinante dos gastos federais this paper analyses federal expending distribution between brazilian states the hypothesis is that there are variables other than social and geographic ones that explain federal expending decisions country s political structure is also important to determine these choices positive theories of budget allocation such as congressional partisan and electoral are used to ascertain the role performed by political arrangements on the allocation of federal budget a set of political and electoral variables was used to test the importance of these theories the test of the hypothesis utilized a panel data of 27 brazilian states from 1999 to 2003 and the dependent variables used were states voluntary federal transferences and federal investment on states the results confirm the hypothesis indicating that representatives party alignment and voter s behavior on past elections influence resources distribution among states

trading policy constituents and party in u s trade policy studies of us trade policy legislation focus on the effect of constituents on trade policy voting and give less weight to institutions such as political parties to demonstrate that political parties affect voting i compare the votes of politicians who share constituency characteristics but differ in political party affiliation this approach requires less reliance on assumptions about or empirical measures of constituents trade preferences the results demonstrate that political parties play a significant role in legislative voting on trade policy theories of political economy therefore should incorporate how constituency interests and partisan pressures affect legislative voting

interest group competition and the organization of congress theory and evidence from financial services political action committees we develop a positive theory of how interest group competition shapes the organization of congress and use it to explain campaign contribution patterns in financial services since interest groups cannot enforce fee for service contracts with legislators legislators have an incentive to create specialized standing committees which foster repeated dealing between interests and committee members the resulting reputational equilibrium supports high contributions and high legislative effort for the interests contribution patterns by competing interests in the congressional battle over whether banks can enter new businesses support the theory which also has implications for term limits and campaign reform

the estimation of prewar gross national product methodology and new evidence the paper develops new methodology for the estimation of prewar gnp taps previously unused data sources and develops new estimates for the periods 1869 1908 and 1869 1928 primary among the new data sources are direct measures of output in the transportation communications and construction sectors and estimates of the consumer price index new measures of real gnp nominal gnp and the gnp deflator are developed the new estimates of real gnp are as volatile on average over the business cycle as the traditional kuznets kendrick series but dampen the amplitude of some cycles while raising the amplitude of others the new estimates of the gnp deflator are distinctly less volatile than the traditional series and in fact no more volatile than those in the postwar period

electoral competition with informed and uninformed voters i present a model of electoral competition in which candidates raise campaign contributions by choosing policies that benefit interest groups and then expend those contributions to influence voters who are uninformed about the policies informed voters however vote based on those policies so candidates face a trade off between choosing a policy to generate funds to attract the uninformed vote and choosing a policy to attract the informed vote electoral equilibria are characterized for two categories of policies particularistic and collective in the case of particularistic policies the equilibrium policies of the candidates are separated if the proportion of uninformed voters is sufficiently high and the degree of separation is an increasing function of that proportion the model is extended to include the public financing of elections and incumbency advantages for the case of collective policies the candidates locate at the median of the ideal points of the informed voters and contributions are zero

earning through learning in legislatures this inquiry applies gary becker s theoretical notions of general and specific training to the experiential learning that occurs within political institutions in particular the u s congress in the process we isolate economic facets of these legislative experiences that influence the rental value of human capital derived from congressional training we identify four factors that structure legislators post elective wages pre congressional salary year of entry tenure and variables closely related to general training in congress specifically assignment to powerful legislative committees acquisition of broad skill packages investment in expanding skill set proficiencies and to a lesser extent life cycle driven declines in such investments

formal and informal rural credit in four provinces of vietnam abstract this paper uses a survey of 932 rural households to uncover how the rural credit market operates in vietnam households obtain credit through formal and informal lenders formal loans are almost entirely for production and asset accumulation while informal loans are used for consumption smoothening the determinants of formal and informal credit demand are distinct while credit rationing depends on education and credit history in particular regional differences in the demand for credit are striking a one size fits all approach to credit policy in vietnam would be inappropriate