landlords tenants and technological innovations abstract there is a long standing belief that landlords and capitalists have used their control over the means of production to direct the development and adoption of technologies which have increased their welfare at the expense of workers there is also a wide spread belief that the interlinkage between credit and tenancy markets which seems so prevalent in ldcs provides further impetus to the resistance of innovations innovations which make tenants better off reduce their demand for loans and thus make landlords qua creditors worse off these contentions have typically been dismissed out of hand by standard welfare economics arguments the rural environment of most ldcs may not however be adequately described by the standard economic model on which this welfare analysis is based in particular in many ldcs sharecropping contracts are widely employed there is evidence of widespread unemployment and there is not the full set of risk and capital markets required by the competitive paradigm the objective of this paper is to show under quite general conditions that the institutional structure of the economy may indeed be an important determinant of whether a particular innovation will or will not be adopted we show that 1 i landlords may wish to and can resist innovations which unambiguously increase production whenever sharecropping contracts are employed 2 ii conversely landlords may adopt innovations which not only lower the welfare of workers but even lower net national product 3 iii the presence of interlinkage may indeed affect the adoption of a new technology however the reason for this is only partly related to the effect of innovations on tenants borrowing indeed we show that innovations may increase as well as decrease the tenants demand for borrowing

asymmetric bidding in second price common value auctions abstract two comparative static characterizations for common value auctions under second price rules are extended to heterogeneous bidders the willingness to pay of the two highest bidders is enhanced on average by the release of public information and best responses are less aggressive when facing more rival bidders

what went wrong with the recent reforms in the southern cone this paper describes and interprets the outcome of the reform packages in chile argentina and uruguay during 1974 83 it is shown that all three countries experienced initial success with the rescue operation from the severe macroeconomic disequilibrium at the inception of the reforms the paper then discusses the areas in which the reforms were successful and why the countries experienced boom bust cycles resulting in large increases in external indebtedness and internal financial crises the paper attributes the failure of the reforms to a combination of policy inconsistencies implementation difficulties and market frictions jointly these factors generated a sustained appreciation of the real exchange rate and a large spread between the cost of dollar denominated and peso denominated loans in turn the appreciation and interest rate difference created protracted opportunities for arbitrage that distracted firms from the business of production

the origins and development of the northeast asian political economy industrial sectors product cycles and political consequences theories of the product cycle hegemony and the world system are used to analyze the creation and development of the northeast asian political economy in this century japan south korea and taiwan have each developed in a particular relationship with the others the three taken together form a hierarchical constantly interacting political economic unit during the period of colonial rule japan was unique in building an imperial economic unit marked by a strong role for the state whether in tokyo or taipei by a tight integral unking of all three nations into a communications and transport network running toward the metropole and by a strategy of both using the colonies for agricultural surpluses and then locating industries there after 1945 a diffuse american hegemony replaced japan s unilateral system but elements of the prewar model have survived strong states direct economic development in south korea and taiwan here termed bureaucratic authoritarian industrializing regimes both countries are receptacles for japan s declining industries and both countries develop in tandem if in competition with each other the most recent export led competition has seen taiwan succeed where south korea has temporarily failed leaving seoul in an export led trap burdened with rapidly increasing external debt taiwan furthermore has industrialized relatively free of social disruption whereas korean society resisted its transformation at japanese hands and remains more rebellious today there can be one japan and one taiwan but not two or many of either in the world economy

introduction imperfect information and rural credit markets puzzles and policy perspectives rural credit markets have been at the center of policy intervention in developing countries over the past forty years many governments supported by multilateral and bilateral aid agencies have devoted considerable resources to supplying cheap credit to farmers in a myriad of institutional settings the results of many of these interventions have been disappointing and one explanation for this must be that they were based on an inadequate understanding of the workings of rural credit markets the articles in this symposium issue are devoted to empirical and theoretical investigations of rural credit markets in the framework of the imperfect information paradigm the authors show how this framework is useful not only in explaining puzzling features of these markets but also in providing a policy perspective to assess the successes and failures of specific interventions

why are informal loans still a big deal evidence from north east thailand abstractthis article examines the use and benefit of informal loans for different income groups of rural households in north east thailand using a difference in differences estimation approach which is later complemented by propensity score matching the article shows that different household groups profit from informal loans in different ways poor households increase their asset endowment and in particular farming assets whereas rich households food consumption rises especially if households borrow due to a shock by showing that informal loans serve different households for different purposes this article provides an explanation why they still play an important role

from technological catch up to innovation based economic growth south korea and taiwan compared abstract this paper sets out to analyse the divergent models pursued by south korea and taiwan in regard to technological catching up and their ongoing transition towards innovation based economies it is found that south korea s former high debt and chaebol dominated model inclined it to pursue a schumpeterian scale based technological development while taiwan s former pro stability small and medium sized enterprise sme based model tended to favour its emphasis on a neo marshallian network based technological development it will be argued that the state s approach to economic liberalisation and firms demand for capital for technological upgrading are the major factors that have underpinned the adjustment efforts of these two countries

technological capabilities and industrialization abstract this paper reviews the implications for industrial strategy of recent research on technological capabilities at the firm and national levels after exploring the nature and determinants of microlevel technological development a simple framework for explaining the growth of national capabilities is set out based on the interplay of incentives capabilities and institutions each may suffer market failure and so require corrective intervention the experience of some industrializing countries is described to assess the validity of this framework it is concluded that interventions carefully and selectively applied are necessary for industrial success

the potential for using excise taxes to reduce smoking we examine the potential for reducing cigarette smoking through increases in cigarette excise taxes by estimating the price elasticity of demand for cigarettes using information on individual smoking behavior from the 1976 health interview survey we estimate the adult price elasticity of demand for cigarettes to be 0 42 we find that price has its greatest effect on the smoking behavior of young males and that it operates primarily on the decision to smoke rather than via adjustments in the quantity of cigarettes smoked an excise tax increase would discourage smoking by successive cohorts of young adults and those reduced smoking levels would be reflected in aggregate smoking as these cohorts mature

formal microlending and adverse or nonexistent selection a case study of shrimp farmers in bangladesh microcredit schemes have become a popular means of improving smallholders access to credit and making long term investment possible however it remains to be explored whether the current microcre

the argentine stabilization plan of december 20th abstract in this paper an analytical model is developed to incorporate the essential characteristics of the stabilization plan implemented in argentina in january 1979 the model is based upon a set of simplifying assumptions that only approximate the complexity of the real world it is assumed that the expectations of inflation and the degree of excess demand or supply in the non traded goods market are the main intermediate determinants of the rate of inflation in that market the rate of change of prices of traded goods being determined by the external inflation together with the rate of devaluation treating thus the external rate of inflation as exogenous the only instrument available for influencing the rate of inflation in the long run is the rate of devaluation since the model assumes a fixed exchange rate regime the money supply is endogenous and hence unsuitable as an instrument of economic policy

experiments in islamic microfinance abstract microfinance has been identified as an important tool in increasing the productivity of the poor and in aiding economic development however a large proportion of the poor are practicing muslims and are thus unable to take advantage of traditional microfinance contracts which involve the payment of interest this paper describes and experimentally tests islamic compliant microfinance products in the context of information asymmetry and costly state verification we find significantly higher compliance rates for the islamic compliant contracts profit sharing and joint venture than for the traditional contract interest based we believe that there is great promise for these types of loans in the microfinance context for both muslims and non muslims

do expenditures on tobacco control decrease smoking prevalence effectiveness of tobacco control programmes in reducing smoking prevalence during 2001 to 2005 is examined tobacco control spending is found to exert no significant effects on smoking prevalence across the 50 states cigarette prices are found to lower prevalence of daily smokers but exert no effect on nondaily smoking prevalence several reasons are suggested for why these results might conflict with previous research these include that most previous studies examined two states california and massachusetts with long standing tobacco control programmes and that most studies examined periods in which many of the states in their samples did not actively fund their programmes another reason may be that unlike most previous studies this study controls for the possibility that tobacco control spending is endogenous when for example states exhibiting relatively low smoking prevalence are also states with relatively high distaste for smoking and accordingly fund tobacco control programmes more generous

the expectations management approach to stabilization in argentina during 1976 1982 abstract the main goals of the economic authorities in argentina during 1976 1982 were to open the economy to foreign trade and to reduce inflation the stabilization plan relied first on the control of money and wages later on a preannounced schedule of a declining future exchange rate actions that were supposed to be accompanied by a fiscal policy to reduce the public sector deficit the stabilization plan was abandoned in the first quarter of 1981 for two reasons an important financial crisis during the second quarter of 1980 and a deterioration of fiscal discipline that could no longer assure coherence between the deficit and the preannouncement schedule the paper also argues that the political situation in argentina undermined the credibility of the reforms and particularly the stabilization attempts with the abandonment of the stabilization schedule new commercial and exchange rate measures were gradually introduced reversing the policy of opening the economy to foreign trade the financial reform was reversed in 1982 with the virtual nationalization of deposits the experience of argentina suggests that capital inflows responding to interest rate arbitrage play a fundamental role in the short run dynamics of real exchange rates they can promote the adjustment or they can precipitate a run on the foreign exchange market the lesson is that a stabilization plan based on the preannouncement of future exchange rates is highly risky for an economy like argentina s

promoting the role of farmer based organizations for value chain integration the tension between a program s targeting and an organization s investment strategy we use new data on 500 farmer based organizations fbos in ghana and regression analysis to reveal determinants of collective investments and the case of the millennium development authority s mida agricultural program in ghana to demonstrate that development programs offering hard incentives may be counterproductive in promoting collective action we show that when a program sets criteria for participation and offers in cash and in kind support to selected fbos it may promote rent seeking and crowd out equity capital formation this is so because fbos may have formed for the sole purpose of benefitting from incentives offered by the program and thus lack an economic justification which is an important condition for progression through the cooperative life cycle further by setting stringent participation criteria the program may end up selecting younger organizations while it is the more consolidated organizations that are able to connect to business development services bds and engage in more offensive collective action

will a special tax on tobacco reduce lung cancer mortality evidence for eu countries this article carrys out a quantitative evaluation of the effects on the health of smokers of increasing a special tobacco tax using the mortality rate from lung cancer as an indicator to that end it estimates two models that relate tobacco consumption the mortality rate and this special tax employing data drawn from a sample made up of 12 eu countries and covering the years 1983 1993 the results show that increasing the special tax is a useful tool for reducing lung cancer mortality specifically it finds that a 10 increase will reduce the lung cancer mortality rate by 1 21 in the first year with such a reduction implying the avoidance of 1707 deaths in the sample countries

the role of expectations in stabilization policy abstract this paper develops and tests a theory of the process by which private agents in an economy form expectations about government policy agents form and update their beliefs about the true state of government policy in a bayesian fashion the credibility of a policy is defined to be the subjective probability that the government is pursuing a reform policy rule the credibility of a reform of monetary or exchange rate policies is a function of the parameters of both monetary and fiscal policies the theory is applied to the chilean and argentine exchange reforms of the late 1970 s

optimal bidding in auctions from a game theory perspective abstract the game theoretic perspective in auction bidding has provided a powerful normative framework for the analysis of auctions and it has generated an impressive volume of research contributions tracing this research we review key recent advances which have greatly expanded our understanding of the operation of auctions and produced a more accurate analysis of mechanism design and optimal bidding we follow various experimental studies which have shown that the predictive power of auction theory remains in many cases limited for this reason we concentrate on research themes which enhance the applicability of auction theory leading to more realistic descriptions of bidding behaviors we identify important innovations which expand the environment of auction bidding and carry us beyond rational decision making we conclude providing directions of future research and discussing their implications

flexibility and economic progress we start with a paradox that while its value and the penalties imposed by its absence are casually acknowledged in discussions of economic development there is a near total absence of explicit analytical treatment of the flexibility of economies in the academic literature at the same time there appears a strong prima facie expectation that the flexibility of an economy will strongly influence its long term economic performance and that this attribute is of increasing importance

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

optimal bidding in auctions of mixed populations of bidders abstract a mixed population of bidders consists of two asymmetric groups members of the first group are game theoretic players who maximize their expected profit and incorrectly believe that their opponents act similarly the second group of bidders adopts an irrational strategy they either choose their bids randomly following a given probability distribution in a naive form of bidding or follow a decision theoretic approach maximizing their expected profit under the assumption that all other bids are random in a sealed bid private value procurement auction we examine the optimal strategy of a new player who has perfect knowledge of the structure of the mixed bidder population and enters the auction the optimal bid of the new bidder is derived when the cost and mark up follow a uniform distribution in 0 1 the effect of the relative size of the group of game theoretic bidders and the population size on the optimal bid price is established

risk wealth and sectoral choice in rural credit markets we model the role of the informal credit sector in developing countries the informational advantage of informal lenders is portrayed as the ability to monitor borrowers monitoring reduces the incentive problem and allows for contracts with lower collateral this enables informal lenders to serve both individuals who cannot post the collateral required by the formal sector and those who are able but do not want to post collateral the model is consistent with the conventional view of the informal sector as recipient of spillover demand from the formal sector it also shows that the informal sector may provide partial insurance as the lower collateral requirement implies greater consumption smoothing for borrowers

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

informal financial markets under liberalization in four african countries abstract this paper presents survey evidence from four countries on how informal financial agents serve market niches that banks cannot readily reach their methodologies are effective in keeping down transaction costs and default risk relative to banks although informal agents exercise monopoly power in dualistic markets liberalization of repressive financial policies has had little effect on formal financial deepening while informal finance has continued to grow the paper concludes that informal financial institutions are an important vehicle for mobilizing household savings and financing small businesses and it recommends that informal finance be better integrated into financial development strategies

social networks and factor markets panel data evidence from ethiopia we investigate the role of an indigenous social network in ethiopia the iddir in facilitating factor market transactions among smallholder farmers we use detailed longitudinal household survey data and employ fixed effects estimation approaches to identify the effect of iddir membership on factor market transactions among farmers we find that joining an iddir network improves households access to land labour and credit transactions our findings also hint that iddir networks may crowd out borrowing from local moneylenders locally referred as arata abedari a relatively expensive credit source these results suggest that non market institutions can play crucial roles in facilitating market transactions

a theory of interactions between mfis and informal lenders abstract we provide a theoretical analysis of effects of entry of a microfinance institution mfi into an informal credit market which is segmented whereby informal lenders derive some market power owing to privileged information concerning borrower specific default risks relative to informal lenders the mfi has a cost advantage and an informational disadvantage regarding borrower risk borrowers differ along another dimension landholding which is observable to all lenders mfi entry is shown to induce selection effects across risk and landownership dimensions in shifts of borrowers from informal lenders to the mfi which could raise informal interest rates as observed in many ldcs the model is consistent with evidence from bangladesh and west bengal in contrast to hypotheses based on cream skimming scale diseconomy inducing collusion facilitating or crowding in effects of mfis on informal credit the model implies that mfi entry is pareto improving for borrowers irrespective of effects on informal interest rates

credibility and the dynamics of disinflation in open economies a note on the southern cone experiments abstract when people lack confidence in the ability of politicians to carry out a newly announced disinflationary policy disinflation becomes more difficult to achieve numerous writers have emphasized the importance of policy consistency for establishing credibility this essay suggests in addition that policies with a quicker disinflationary impact become more credible sooner and thus have a better chance of succeeding with that proposition in mind the objective is to examine and compare the initial impacts of alternative disinflationary strategies in an open economy with capital mobility using evidence from the southern cone experience with preannounced exchange rates for illustrative purposes

access to capital in rural thailand an estimated model of formal versus informal credit the aim of this paper is to understand the mechanism underlying access to credit the author focuses on two important aspects of rural credit markets in thailand first moneylenders and other informal lenders coexist with formal lending institutions such as government or commercial banks and more recently micro lending institutions second potential borrowers presumably face sizable transaction costs obtaining external credit the author develops and estimates a model based on limited enforcement and transaction costs that provides a unified view of those facts the results show that the limited ability of banks to enforce contracts more than transaction costs is crucial in understanding the observed diversity of lenders

experimental identification of asymmetric information evidence on crop insurance in the philippines abstract i study asymmetric information in crop insurance in the philippines using a two level randomized field experiment and incentivized preference elicitation in this first experimental study of moral hazard in non health insurance preventable damages double on randomly insured plots among farmers with high trust in the insurance provider farmers prefer insurance on plots that are at risk of floods and crop diseases a sign of classic adverse selection and plots that are far away from home a sign of selection on anticipated moral hazard behavior resulting in 72 higher payouts on preferred plots overcoming these challenges requires leveraging new technologies

household sectoral choice and effective demand for rural credit in india an analysis of the icrisat data from three indian villages raises concern about the extent of rationing mechanism inhibiting the spread of formal credit in rural india where a significant proportion of households do not have any outstanding loan or borrow from the informal sector only a limited dependent econometric analysis of the factors jointly determining household sectoral choice and effective demand for informal loan conditional on whether a formal loan is available suggests that compared to formal loan easy and adequate access and prompt recovery are significant determinants of the popularity and viability of informal rural credit among sample households also some households substitute labour income to ease the extent of credit thus rationing of the formal credit is not the only factor inhibiting the spread of formal credit in the study villages

rational expectations information acquisition and competitive bidding most rational expectations market equilibrium models are not models of price formation and naive mechanisms leading to such equilibria can be severely manipulable in this paper a bidding model is developed which has the market like features that bidders act as price takers and that prices convey information higher equilibrium prices convey more favorable information about the quality of the objects being sold than do lower prices bidders can benefit from trading only if they have a transactions motive or if they have access to inside information apart from exceptional cases prices are not fully revealing a two stage model is developed in which bidders may acquire information at a cost before bidding and for which the equilibrium price is fully revealing resolving a well known paradox

agency problem institutions and technology policy explaining taiwan s semiconductor industry development abstract taiwan has made significant progress in the semiconductor industry with government agencies and bureaucrats as the driving forces over the past 30 years taiwan s impressive achievement in the semiconductor industry clearly indicates that the government failures and agency problem usually associated with deep government involvement did not occur in taiwan why is that the case this paper proposes a principal agent framework for technology policy and applies the framework to discuss the institutional arrangements through which bureaucrats were controlled effectively in executing the semiconductor industry policies in taiwan by analyzing the institutional and organizational arrangements taiwanese leaders made to mitigate the agency problem this paper brings bureaucrats into the popular developmental state theory and emphasizes that the success of state intervention should not be taken for granted and it also brings politics into technology policy analysis and stresses the importance and complexity of agency problem in technology policy

6 revenue effects and information processing in english common value auctions an experiment analyzing behavior in english common value auctions is reported english auctions raise more revenue than first price auctions only when bidders do not suffer from a strong winner s curse agents employ other bidders dropout prices along with their private information as nash bidding theory predicts however a simple and natural signal averaging rule which does not require recognizing the adverse selection effect of winning the auction better characterizes the data than the nash rule monte carlo simulations using fiml estimates of the signal averaging rule predict a number of data characteristics not directly employed in the estimation procedure copyright 1996 by american economic association

irrationality in english auctions abstract this paper explores the effects of a particular form of irrational behaviour by participating bidders in a common value english auction we allow bidders to update their expected valuation of the good as the current price increases assuming that their opponents always play the symmetric nash equilibrium when only one bidder adopts this type of behaviour it is ambiguous whether the final auction price is higher or lower than at the symmetric equilibrium however when both bidders behave irrationally the final auction price is never lower than the symmetric equilibrium provided bidders match their strategies

equilibria in open common value auctions abstract a sufficient condition for uniqueness of nash equilibrium in second price common value auctions is identified we establish that there exists a continuum of equilibria in irrevocable exit common value auctions for the case of two bidders we provide plausible sufficient conditions under which the expected seller revenue is maximized at the symmetric equilibrium an example in which the auctioneer s revenue at the symmetric equilibrium in a second price auction is strictly greater than the revenue at many asymmetric equilibria in the corresponding irrevocable exit auction is provided

externalities in economies with imperfect information and incomplete markets this paper presents a simple general framework for analyzing externalities in economies with incomplete markets and imperfect infonnation by identifying the pecuniary effects of these externalities that net out the paper simplifies the problem of determining when tax interventions are pareto improving the approach indicates that such tax interventions almost always exist and that equilibria in situations of imperfect information are rarely constrained pareto optima it can also lead to simple tests based on readily observable indicators of the efficacy of particular tax policies in situations involving adverse selection signaling moral hazard incomplete contingent claims markets and queue rationing equilibria traditional discussions of externalities have emphasized the distinction between technological externalities in which the action of one individual or firm directly affects the utility or profit ofanother and pecuniary externalities in which one individual s or firm s actions affect another only through effects on prices while the presence of technological externalities imply in general that a competitive equilibrium may not be pareto efficient pecuniary externalities hy themselves are not a source of inefficiency the fact that prices change has of course important consequences there are both distributional and allocational effects but the distribution effects net out gains for example hy firms whose prices increase are precisely offset by losses e g to individuals who must pay higher prices and there are no welfare losses from the allocation effects as long as the price changes involved are small if firms are maximizing profits and individuals are maximizing utility both facing prices that correctly refiect opportunity costs then standard envelope theorem arguments imply that changes in profits or utility induced by changes in allocations resulting from any small change in prices are negligible

the determinants of moneylender interest rates evidence from rural india this study examines the determinants of moneylender interest rates in rural india in the context of two major developments of the 1960s a the incidence of agricultural technical change in the process popularly denoted by the term green revolution and b the spread of government sponsored subsidised credit through rural banks and co operative credit agencies it finds that farmers residing in areas characterised by the use of green revolution technology face lower moneylender interest rates it also finds evidence of the reduction of moneylender monopoly power as a result of increased competition from formal lending agencies it concludes that informal rural credit markets are sensitive mechanisms which respond to environmental as well as borrower characteristics

stabilization policies in developing countries what have we learned abstract the paper reviews the recent experience with stabilization programmes in latin america in the light of traditional and monetarist models of inflation and the exchange rate the traditional model links both inflation and payments problems to budget deficits the monetarist model too believes that inflation is caused by fiscal deficits but it takes a more optimistic view of stabilization full purchasing power parity and perfect capital mobility make stabilization just a question of the appropriate exchange rate policy and the proper rate of domestic credit creation the traditional view is substantially right as a long run model but it fails in the dynamics the monetarist model is as we know now fundamentally wrong as a short run description of the possibilities of inflation control there is need and room for a paradigm that places emphasis on the debt money mix in financing the budget on the stickiness of inflation rates and on the place of short run real exchange rate and real interest rate variations that these are key features of the transition phase is amply borne out by the devasting and unsuccessful experiences with monetarist stabilization in argentina chile and brazil

reforms and macroeconomic adjustments in chile during 1974 1984 abstract this paper provides a background on the main macroeconomic developments of the reform period after a review of the macroeconomic disequilibrium before the reforms the paper interprets the macroadjustments the interpretation covers two distinct periods 1973 1976 when policy was based on a closed economy view and 1977 1982 when macropolicy was increasingly guided by an open economy model the paper argues that the setback that chile suffered during 1982 1983 and the large external debt that was accumulated were the result of two major errors the first was the use of the exchange rate to stabilize prices without due regard for the incentives for large capital inflows that arose from this policy at a time when international capital markets were very liquid the second major error was in the second half of 1981 after a large drop in capital inflows the authorities relied on an automatic adjustment mechanism by which the monetary squeeze from the reduction in capital inflows would improve the real exchange rate because wages were indexed to prior inflation the adjustment mechanism was bound to create substantial unemployment as indeed was the case the paper concludes with the assessment that most of the micro reforms were in the right direction and had the expected result and the errors were mostly in the design of macroeconomic policies

credibility disinflation and gradualism abstract the following conundrum is examined success or failure of a disinflation policy depends largely on expectations of maintained lower money growth this suggests two equilibria a a policy is expected to be maintained and succeeds policy makers are re elected maintaining the policy and validating initial expectations b a policy is not expected to be maintained and fails policy makers are not re elected the policy is not maintained validating initial expectations

debt poverty and resource management in a rural smallholder economy this paper develops a model to capture the key features of poverty credit constraints and resource management faced by poor rural households we assume that due to the existence of asymmetric information and moral hazard the household faces an increasing cost of credit as its debt equity ratio rises a household exploiting a natural resource may fall into a poverty trap but only if it is unable to afford the increasing borrowing costs implied by increasing debt to allow it to avoid such a trap or if it discounts future utility so much that a balanced growth path cannot be financed at any level of long run borrowing in contrast along an optimal balanced growth path the household s asset wealth purchased inputs resource stock and consumption increase at the same constant rate however over the long run there may be carrying capacity limits that prevent the resource from improving further the household may then direct its savings to accumulating financial assets and eventually under certain conditions may become a net creditor with resource exploitation becoming a less and less important source of its income

an analysis of the disaggregated manufacturing exports of the asian nies to eec usa and japan this paper examines the export performance of the four asian newly industrialized economics nies by modelling their bilateral export flows to three main oecd blocks the usa japan and the european community our estimated export demand models reveal interesting asymmetries between these three areas of destination which do not emerge from previous aggregate empirical studies of nie export performance

external shocks financial reforms and stabilization attempts in uruguay during 1974 1983 abstract this paper interprets and evaluates uruguay s reforms emphasizing the outcome of financial reforms and attempts to bring down inflation it is shown that domestic interest rate deregulation and the removal of prohibition towards holding dollar denominated assets led to a rise in the ratio of financial assets in gdp and to a shift towards dollar denominated assets causes of the persistent and large spread between peso and dollar interest rates adjusted for the preannounced rate of devaluation tablita are examined the discussion of the stabilization program during 1979 1982 and its aftermath in 1983 shows that setting the tablita at less than the difference between internal and external inflation led to severe imbalances because of remaining redundant protection and price stickness the real exchange rate appreciated sharply for a prolonged period and the trade balance widened until the stabilization episode ended with capital flight when doubts set in about the sustainability of the tablita

formal informal sector interaction in rural credit markets abstract the majority of small cultivators in the less developed countries are not regarded as credit worthy by the formal sector financial institutions and are forced to borrow from the moneylenders in the informal credit market this paper shows that when such borrowers differ in their likelihood of default and the moneylenders are asymmetrically informed about the client specific degree of risk the policy of providing cheap credit through the formal sector can generate adverse composition effects which worsen the terms of credit and the availability of loans in the informal sector

the co evolution of technology and institutions in the catch up process the case of the semiconductor industry in korea and taiwan abstractthis paper explores the industrial specialisation of latecomer countries particularly korea and taiwan which are often referred to as successful catch up cases the traditional wisdom is that the developmental state resource leverage and technological sophistication in an export oriented strategy have been the factors for success however firm strategies and a supportive government are not sufficient to explain the different features of catch up patterns in this paper we propose that differences in industrial specialisation of catch up countries are attributable to the interaction between technological characteristics and institutional settings including corporate organisation industrial structure and the role of the public sector

bank firm relationships and allocative efficiency in northeastern and central italy and in the south abstract we make two contributions on the extent and impact of relationship banking based on close and long lasting bank firm customer relationships in the three sub systems in which italy may be subdivided first we show that relationship banking is more extensive in both sub systems where small businesses prevail the fast growing northeast and center nec and the south the marginal area of dependent development second we demonstrate that relationship banking improves the allocation of credit in the nec but worsens it in the south this evidence suggests that relationship banking may be beneficial or detrimental depending on the socio economic structure

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

sharecropping and the interlinking of agrarian markets one of the often noted features of less developed agrarian economies is the existence of interlinkages among the land labor credit and product markets the landlord is often the supplier of credit he frequently purchases and markets the output of the tenant farmers and often sells raw materials and even consumption goods to his tenant farmers how can this phenomenon be explained what are the welfare consequences of attempts to restrict these practices which often seem to constitute restraints on free trade these are the questions to which this paper is addressed a general set of arguments applicable to both competitive and noncompetitive environments are presented to situations where all the terms of the contract are determined in an optimal way as well as to situations where many of the terms are specified institutionally section i examines interlinked credit and tenancy contracts section ii examines interlinked marketing and tenancy contracts section iii points out the possible interlinking between labor contracts and consumption goods markets and section iv presents the different equilibrium frameworks discussed in the paper such as monopoly monopsony competition and equilibria with surplus labor

obstacles to disinflation what is the role of fiscal expectations persistently high expected inflation often makes it difficult for policy makers to recover from inflationary episodes without substantial output losses using survey data from eleven disinflation episodes we can assess whether the more or less sluggish decline of inflation rates towards lower target levels is related to backward looking pricing behavior or to imperfect credibility of the stabilization efforts we find that expectations of future inflation play a much more important role than past inflation in shaping the inflation process second we find that an improvement in various measures of fiscal balances significantly reduces inflation expectations this evidence suggests that when attempting to stabilize inflation priority should be given to building fiscal credibility oya celasun r gaston gelos and alessandro prati

endogenous emergence of credit markets contracting in response to a new technology in ghana abstract access to credit is important for the productivity and overall welfare of farmers in developing countries we present a theoretical framework which shows that a change in the mode of shipping from air to sea in the ghanaian pineapple industry made it profitable for pineapple exporters to provide myopic farmers with both in kind loans to improve productivity and cash loans for consumption smoothing despite being unable to monitor farmers or enforce repayment the innovative theoretical result is that providing farmers with additional cash loans can enforce greater input use without compromising repayment we provide evidence in the form of a case study documenting the dramatic rise of informal credit through contract farming after the switch to sea freight between 1996 and 2001 using this anecdote we argue that credit arrangements can arise spontaneously absent non market interventions to meet market needs even in the absence of proper legal protections for creditors

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

demystifying nonparticipation in microcredit a population based analysis abstract given the current popularity of microcredit schemes as a means of poverty alleviation their accessibility to the poorest is of obvious concern this paper examines a targeted microcredit program in bangladesh to assess its coverage among the poor and to identify program and client related barriers impeding participation a population survey of over 24 000 households reveals that although three quarters are eligible for microcredit less than one quarter participate rates of participation in microcredit are higher among poorer households multivariate analysis identifies lack of female education small household size and landlessness as risk factors for nonparticipation based on a 7 random sample of this population the implications of these findings for poverty alleviation policies and programs are discussed

credit access human capital and class structure mobility this article examines the impact of microenterprise credit programmes on class structure mobility in developing countries it develops a model that endogenously generates an eight fold class structure class membership is determined by optimal choice of labour activity which is a function of access to credit and human capital endowments predictions from the model suggest that better access to credit will foster upward class mobility among self employed entrepreneurs and that this upward class mobility will be accentuated among entrepreneurs with high levels of human capital theoretical predictions from the model are compared with data on class structure mobility collected first hand in western guatemala empirical results show that upward class structure mobility increases substantially with access to credit and also suggest that the combined effect of innate entrepreneurial ability and credit access has a greater impact on upward class structure mobility than the interaction between formal schooling

understanding the coexistence of formal and informal credit markets in piura peru summary this paper examines why farm households seek informal loans in piura peru where formal lenders offer loans at lower interest rates a panel data econometric analysis reveals that the informal sector serves various types of clients households excluded from the formal sector but also households that prefer informal loans because of lower transaction costs or lower risk an in depth examination of contract terms and loan technologies permits an accurate comparison of effective loan costs and contractual risk across sectors and reveals that proximity and economies of scope enjoyed by informal lenders enable them to substitute information intensive screening and monitoring for contractual risk and supply these various types of clients

limits of state strength toward an institutionalist view of economic development nomic development attempted to explain why growth did not occur occurred slowly or occurred in a distorted dependent form the impressive economic performances of the east asian newly industrialized countries nics have changed this many noneconomists as well as some economists are now focusing on the political bases of development rather than underdevelopment there are differences among these analysts some distance themselves from neoclassical economics by emphasizing the importance of getting the prices wrong others acknowledge the utility of market conforming policies but common to recent studies of nics is the belief that growthpromoting economic policies require certain types of domestic political institutions analysts have emphasized the utility of strong states in this regard 2 through an analysis of efforts to promote local auto manufacturing in southeast as well as east asia this article argues for an institutionalist approach to development that goes beyond statism the resolution of collective action problems is central to statist writings development requires that private returns to individual activities be brought in line with the broader needs of national development 3 two factors are presumed to obstruct such harmonization in developing

institutions and dynamic comparative advantage the electronics industry in south korea and taiwan if development proceeds by stages then taiwan as a more developed economy should have preceded south korea into high technology capital and knowledge intensive production in fact korea has overtaken taiwan in many respects the resolution of the paradox is traced principally to differences in industrial and firm structures in the two countries the conglomerate organizational mode in korea has permitted entry into many markets the smaller taiwanese firms have been unable to sustain themselves in these markets as there firms head onto the 1990s the limitations of their present industrial structures presage a possible convergence with each moving towards the other this paper suggests the importance of studying flexible institutional response and particularly the inner workings of a firm as an integral element of a theory of dynamic comparative advantage copyright 1990 by oxford university press

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