microcredit what can we learn from the past abstract six microcredit organizations of 19th century europe are compared to identify what institutional designs were conducive to success and sustainability organizations that depended on charitable funding were more fragile and tended to lose their focus more quickly than those that obtained funds from depositors an ability to adjust interest rates also appears important in sustainability examining historical microcredit is particularly useful since it offers an opportunity to explore the characteristics of organizations which were sustained over many decades a perspective which is rare in modern microcredit banks and programs most of which are less than 15 years old

monitoring and pay the shirking model of efficiency wages has been thought to imply that monitoring and pay are substitute instruments for motivating workers we demonstrate that this result is not generally true as monitoring becomes cheaper a given effort level will be implemented with more monitoring and less pay but it is typically also optimal to implement a higher effort the article provides conditions under which the latter scale effect dominates the former substitution effect and vice versa if the ease of monitoring varies across occupations the model predicts a nonmonotonic relationship between the wage level and workers rents

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

monetary integration and economic reform recent research in contract theory views ownership as a substitute for complete contracts here this approach is applied to monetary integration countries face a coordination problem conducting monetary policy negative spillovers ensure uncoordinated policy generates too high inflation ex ante policy makers can undertake politically costly economic reform this has a positive spillover because it improves the outcome of the monetary policy game ex post contracting over policy may be possible but it supposed that ex ante contracting over reform and monetary policy is not this paper analyses when monetary union is a good substitute for this inability to commit

agents with and without principals who sets ceo pay our standard answer to this question has been shaped by principal agent theory shareholders set ceo pay they use pay to limit the moral hazard problem caused by the low ownership stakes of ceos through bonuses options or long term contracts shareholders can motivate the ceo to maximize firm wealth in other words shareholders use pay to provide incentives a view we refer to as the contracting view an alternative view championed by practitioners such as crystal 1991 argues that ceos set their own pay they manipulate the compensation committee and hence the pay process itself to pay themselves what they can the only constraints they face may be the availability of funds or more general fears such as not wanting to be singled out in the wall street journal as being overpaid we refer to this second view as the skimming view in this paper we investigate the relevance of these two views

nonlinear dynamics in deviations from the law of one price a broad based empirical study abstract in this paper we test empirically the validity of the law of one price using data for five major bilateral us dollar exchange rates and nine goods sectors during the recent floating exchange rate regime since the early 1970s using threshold autoregressive models we find strong evidence of nonlinear mean reversion in deviations from the law of one price with plausible convergence speeds consistent with theoretical arguments on international goods markets arbitrage under transactions costs and with an emerging strand of empirical literature these results contribute towards forming a consensus view in favor of discrete regime switching in deviations from the law of one price and the presence of differing nonzero transactions costs across a broad range of goods and countries

stationarity of asian pacific real exchange rates abstract using a nonlinear unit root test we reject the null hypothesis of nonstationarity for most of the asian pacific real exchange rates but not for the japanese yen based rates there is more evidence for level stationarity in the singapore dollar based rates than in other currency based rates

are asian real exchange rates stationary by applying the newly developed nonlinear stationary test advanced by kapetanios et al journal of econometrics 112 2003 359 in examining the stationary property of 11 asian real exchange rates this paper rejects unit root in 8 us dollar based and 6 japanese yen based rates whereas the augmented dickey fuller adf test has led to no rejection at all

monetary union and labor market reform abstract policy makers incentives to undertake costly labor market reform depend on the international monetary system a regime of noncooperative monetary policy is compared with monetary union we find that noncooperative policy leads to more reform of factors that affect the inflation bias which regime leads to more reform of factors affecting labor market flexibility depends on the size of monetary policy spillovers and the degree of correlation of supply shocks we show that monetary union produces higher expected inflation but a lower variance of inflation welfare can be higher or lower with monetary union

regional debt in monetary unions is it inflationary this paper studies the inflationary implications of interest bearing regional debt in a monetary union is this debt simply backed by future taxation with non inflationary consequences or will the circulation of region debt induce monetization by a central bank we argue here that both outcomes can arise in equilibrium in the model economy there are multiple equilibria which reflect the perceptions of agents regarding the manner in which the debt obligations will be met in one equilibrium termed ricardian the future obligations are met with taxation by a regional government while in the other termed monetization the central bank is induced to print money to finance the region s obligations the multiplicity of equilibria reflects a commitment problem of the central bank a key indicator of the selected equilibrium is the distribution of the holdings of the regional debt we show that regional governments anticipating central bank financing of their debt obligations have an incentive to create excessively large deficits we use the model to assess the impact of policy measures within a monetary union

pro competitive effects of trade reform results from a cge model of cameroon abstract how likely is trade liberalization to produce efficiency gains in the presence of imperfect competition scale economies and higher than average wages in the modern sectors all common features in developing economies these features create a potential conflict to the extent that traditional notions of comparative advantage lead us to expect that the modern sectors will be squeezed with liberalization in this paper we investigate this issue by using an applied general equilibrium model calibrated to cameroonian data under perfect competition we find that the welfare effect is a wash since the beneficial consequence of expanded imports is offset by the reduction in employment in the modern high wage sectors under imperfect competition by contrast trade liberalization produces welfare gains of the order of 1 to 2 percent of income the key is the pro competitive effect of liberalization domestic firms in the modern sectors now perceive themselves as facing a higher elasticity of demand which spurs them to increase production

unemployment labor market reform and monetary union monetary union such as the economic and monetary union in europe emu may affect incentives for labor market reform and thus equilibrium unemployment through several mechanisms if an inflation bias exists there is usually a stronger incentive to reduce equilibrium unemployment through national reform outside rather than inside the emu absent such a bias emu membership could lead to more reform one reason is that reform may increase wage flexibility which can substitute for monetary policy in the emu another reason could be a precautionary motive for low equilibrium unemployment to reduce the utility cost of increased macroeconomic variability in the emu

agricultural household models extensions applications and policy this book presents the basic model of an agricultural household that underlies most of the case studies undertaken so far the model assumes that households are price takers and is therefore recursive the decisions modeled include those affecting production and the demand for inputs and those affecting consumption and the supply of labor comparative results on selected elasticities are presented for a number of economies the empirical significance of the approach is demonstrated in a comparison of models that treat production and consumption decisions separately and those in which the decisionmaking process is recursive the book summarizes the implications of agricultural pricing policy for the welfare of farm households marketed surplus the demand for nonagricultural goods and services the rural labor market budget revenues and foreign exchange earnings in addition it is shown that the basic model can be extended in order to explore the effects of government policy on crop composition nutritional status health saving and investment and to provide a more comprehensive analysis of the effects on budget revenues and foreign exchange earnings methodological topics primarily the data requirements of the basic model and its extensions along with aggregation market interaction uncertainty and market imperfections are discussed the most important methodological issues the question of the recursive property of these models is also discussed

a note on the empirical effectiveness of formal fiscal restraints abstract an important agrument in the current debate over european monetary integration is that a monetary union requires formal fiscal restraints limiting individual member states budgetary powers to reduce the common monetary authority s risk of having to bail out insolvent member governments this note presents empirical evidence on the effectiveness of fiscal restraints on state budgets in the united states nonparametric tests reveal that fiscal restraints significantly affect the probability of fiscal choices and performance without however preventing extreme outcomes fiscal restraints induce substitution of nonrestricted for restricted debt instruments

confidence intervals for half life deviations from purchasing power parity existing point estimates of half life deviations from purchasing power parity ppp around 3 5 years suggest that the speed of convergence is extremely slow this article assesses the degree of uncertainty around these point estimates by using local to unity asymptotic theory to construct confidence intervals that are robust to high persistence in small samples the empirical evidence suggests that the lower bound of the confidence interval is between four and eight quarters for most currencies which is not inconsistent with traditional price stickiness explanations however the upper bounds are infinity for all currencies so we cannot provide conclusive evidence in favor of ppp either

smooth breaks and non linear mean reversion post bretton woods real exchange rates the recent literature on purchasing power parity ppp has emphasized the role of two phenomena that may lead to the rejection of the ppp hypothesis structural breaks and non linear adjustment induced by transaction costs these two hypotheses are analyzed separately in the literature we develop tests for unit roots that account jointly for structural breaks and non linear adjustment structural breaks are modeled by means of a fourier function that allows for infrequent smooth temporary mean changes and is hence compatible with long run ppp nonlinear adjustment is modeled by means of an estar model our tests present good finite sample properties the tests are applied to a set of 15 oecd countries rers and are able to reject the null of a unit root in 14 cases the breaks are usually associated with the great appreciation and later depreciation of the dollar in the 1980s and the estar adjustment appears to play an important role

how to reform europeâ s fiscal policy framework the current budgetary problems of some eu member states have intensified the debate on europe s fiscal policy framework it is not enough to change the interpretation of the stability and growth pact more fundamental revisions of the eu treaty are needed in order to strike a reasonable balance between longrun sustainability and short run flexibility the ceiling on budget deficits should be conditioned on the government debt level such that the scope for stabilisation policy in downswings is increased in low debt countries in addition the enforcement of the rules should be depoliticised decisions on sanctions against states violating the rules should be transferred from the political level of the council of ministers to the judicial level of the european court of justice

u s agriculture in a general equilibrium framework analysis with a social accounting matrix traditionally the analysis of u s agricultural policy has been carried out in a partial equilibrium framework it has thus ignored the linkages of the agricultural sector with the rest of the economy it is only recently that the importance of various economic linkages has started being recognized in work on u s agriculture the importance to the agricultural sector of exchange rates and other instruments of monetary and fiscal policies was first emphasized by schuh his seminal work sparked other studies of the interaction between agricultural production and incomes and traditional instruments of macroeconomic policy see also shei chambers and just freebairn rausser and de gorter the partial equilibrium analysis of u s agriculture stands in sharp contrast to traditional approaches to the formulation of agricultural policy in developing countries development economists have long been sensitive to the importance of leakages from policies aimed at the agricultural sector to the rest of the economy and vice versa in this paper we discuss how multisectoral models of the sort often used in developing countries can be used to analyze such issues in the united states we construct a u s social accounting matrix sam for 1982 and use a variety of multiplier models to analyze the impact of different exogenous shocks on agriculture focusing on the links between the agricultural and nonagricultural sectors a longer version of this article is provided by adelman and robinson soci accounting matrices

does ppp hold in african countries further evidence based on a highly dynamic non linear logistic unit root test with a view to investigating whether the purchasing power parity ppp theory holds true for selected african countries during the january 1980 december 2003 period we employ a rigorous highly dynamic non linear logistic unit root test as first advanced by leybourne et al 1998 which is considerably more powerful than those tests traditionally used compared with the rejection of the null of the unit root process for only one of the 22 countries under study when we use the traditional adf pp kpss np and the df gls unit root tests with the leybourne et al 1998 test we strongly reject the null of the unit root process for a surprising six of the 22 countries these empirical results clearly indicate that ppp holds true for these six countries namely the central african republic the cote d ivoire kenya madagascar uganda and lesotho

transforming rural economies migration income generation and inequality in rural mexico abstract we analyse how migration shapes the distribution and sources of rural income using nationally representative panel data from mexico income source gini decompositions provide some support for the migration diffusion hypothesis nevertheless migration s influence on other income sources and household re ranking substantially alter distributional impacts we find significant impacts of migration on non remittance income as well as changes in the effects of non migration activities on inequality over time we conclude that migration is transforming rural economies in ways that go beyond the scope of most past research on migration and inequality

will u s agriculture really benefit from global warming accounting for irrigation in the hedonic approach will u s agriculture really benefit from global warming accounting for irrigation in the hedonic approach wolfram schlenker w michael hanemann and anthony c fisher there has been a lively debate about the potential impact of global climate change on u s agriculture most of the early agro economic studies predict large damages see for example richard m adams 1989 harry m kaiser et al 1993 and adams et al 1995 in an innovative paper robert mendelsohn william d nordhaus and daigee shaw 1994 hereafter mns propose a new approach using the variation in temperature and precipitation across u s counties to estimate a reduced form hedonic equation with the value of farmland as the dependent variable a change in temperature and or precipitation is then associated with a change in farmland value which can be interpreted as the impact of climate change adams et al 1998 characterize the hedonic approach as a spatial analogue approach and acknowledge that the strength of the spatial analogue approach is that structural changes and farm responses are implicit in the analysis freeing the analyst from the burden of estimating the e ects of climate change on particular region speci c crops and farmer responses on the other hand one of the potential disadvantages of the hedonic approach is that it is a partial equilibrium analysis i e agricultural prices are assumed to remain constant 1 while year to year uctuations in annual weather conditions certainly have the potential to impact current commodity prices especially for crops produced only in a relatively localized area such as citrus fruits which are grown mainly in california and florida changes in long run weather patterns i e changes in climate might have a smaller e ect on commodity prices because of the greater potential for economic adaptation particularly shifts in growing regions 2 the hedonic approach as implemented by mns predicts that existing agricultural land on average might be more productive and hence result in bene ts for u s farmers 3 the hedonic approach has received considerable attention in our judgment in part because the conclusions are at variance with those of some other studies

purchasing power parity in less developed and transition economies a review paper abstract the concept of purchasing power parity ppp has been the subject of numerous studies many of which have been unable to prove conclusively this core principle of international finance although industrialized countries have received most of the attention studies that focus on less developed and transition economies have also attained mixed results this study surveys trends in this branch of the literature highlighting the econometric advances that have sought to solve this puzzle while pointing out that more needs to be done to address the reasons that might cause ppp not to hold

long memory and nonlinear mean reversion in japanese yen based real exchange rates abstract the extraordinary difficulty in uncovering parity reversion in yen based real exchange rates has often been ascribed to a missing trend variable this study identifies an alternative explanation and shows that the puzzling behavior of real yen rates may stem from long memory dynamics which undermine unit root tests in their ability to detect mean reversion the long memory findings are consistent with the long swings in yen exchange rates during the current float further analysis also reveals evidence of non monotonic reversion toward parity

deposit insurance regulation and moral hazard in the thrift industry evidence from the 1930 s this paper compares risk taking of insured and uninsured thrifts operating under strict and less strict regulatory regimes during the 1930 s analysis of balance sheet data indicates that while newly insured thrifts undertook less risk than their uninsured counterparts possibly because of screening by deposit insurance authorities moral hazard emerged gradually insured institutions operating under relatively permissive regulatory regimes were more prone to undertake risky lending activities than their more tightly regulated counterparts possibly because of screening by deposit insurance authorities moral hazard emerged gradually insured institutions operating under relatively premissive regulatory regimes were more prone to undertake risky lending activities than their more tightly regulated counterparts given the current system of deposit insurance the results suggest that effective regulation and supervision will play a key role in maintaining thrift stability in the 1990s copyright 1992 by american economic association

trade liberalisation the peso and mexico s commodity trade flows with the united states abstract we assess the effects of real peso devaluations as well as the effects of gatt and nafta on mexico s in payments and out payments with the united states for 102 industries we find that relatively few trade flows are sensitive to changes in the real exchange rate probably due to production sharing and intra industry trade but devaluations affect mexican imports more than exports trade liberalisation has had a larger impact particularly on imports of intermediate goods and exports of certain manufactures many affected export industries are ones that have previously been shown to have economies of scale

growth friendly fiscal rules safeguarding public investment from budget cuts through fiscal rule design abstract we study patterns of public investment behavior during fiscal consolidations in seventy five advanced and emerging economies during 1990 2018 and find that results differ significantly depending on fiscal rule design fiscal rules can be flexible meaning that they include mechanisms to accommodate exogenous shocks e g cyclically adjusted fiscal targets well defined escape clauses and differential treatment of investment expenditures or rigid meaning they establish numerical limits on fiscal targets without taking into account flexible features we find that in countries with either no fiscal rule or with a rigid fiscal rule a fiscal consolidation of at least 2 percent of gdp is associated with an average 10 percent reduction in public investment instead in countries with flexible fiscal rules the negative effect of fiscal adjustments on public investment vanishes which implies that flexible rules protect public investment during consolidation episodes the corollary is that the design of fiscal rules can add a growth friendliness dimension to the fiscal sustainability objective that has typically been the focus of fiscal rules in the past provided public investment is productive

cge models and development policy analysis problems pitfalls and challenges the purpose of this paper is to specify characteristics of computable general equilibrium cge models that are most likely to be useful for policy analysis in developing countries in the first part of the paper alternative criteria for distinguishing cge models are assessed we suggest that cge models with clear microeconomic structure contribute the most to sound policy formulation by helping analysts to understand essential relationships relevant to particular policy configurations the second part of the paper describes how a neoclassical economic model can be extended to address a variety of policy issues in developing countries

is the evidence for ppp reliable a sustainability examination of the stationarity of real exchange rates abstract some recent time series studies testing the stationarity of real exchange rates rers produce conflicting results using nonlinear unit root tests and recursive analysis this paper tests whether the evidence on the stationarity of rers is sensitive to different numeraire currencies different sample periods covering regional and global crises and the inclusion of countries with different levels of economic or regional integration the results indicate that evidence for a stationary rer could be substantially sensitive to sample period changes but not so for the currencies of the countries involved in forming the euro area we also find that financial crises have a notable impact on testing the stationarity of rers depending on the numeraire currency used we discuss the policy implications of the findings

real and nominal effective exchange rates for developing countries 1973 1 1997 3 the international monetary fund construct and publish real and nominal effective exchange rate data mostly for developed countries in this paper real and nominal effective rate data for developing countries are constructed application of the kpss test to real effective rate data reveals that ppp holds in most countries

good bad or ugly on the effects of fiscal rules with creative accounting abstract do fiscal rules lead to fiscal adjustment or do they encourage the use of creative accounting this question is studied with a model in which fiscal rules are imposed on measured fiscal variables which can differ from true variables because there is a margin for creative accounting the probability of detecting creative accounting depends on its size and the transparency of the budget the model studies the effects on fiscal policy of a budget rule separating structural from cyclical effects and examines how these effects depend on the underlying fiscal distortion and on the degree of transparency of the budget

transition problems in economic reform agriculture in the north american free trade agreement investigates the effecto of the north american free trade agreement on agriculture in mexico implications on policy design for the absence of efficient capital markets on the welfare costs of reforming gradually on incentive problems created by trade adjustement policies and on the redistribution aspects of policy reform

price and quantity elasticities in u s foreign trade abstract a gnp function for the united states 1948 1987 is estimated output is disaggregated between consumption investment government purchases exports and imports the 1987 price elasticities of the demand for imports and supply of exports are 0 8 and 1 4 respectively

voting on the budget deficit comment textabstractin this comment it is argued that a balanced budget rule may cause underinvestment as a consequence such a rule is not ex ante efficient in order to achieve the ex ante optimal outcome it would be necessary to add an extra rule for the level of public investment unfortunately however such an investment rule is likely to be very difficult to implement in practice when there are no rules to prevent underinvestment it is no longer clear whether a balanced budget rule is beneficial or not in some cases the cost of low levels of investment outweigh the benefits of a balanced budget

a positive theory of fiscal deficits and government debt this paper considers an economy in which policymakers with different preferences alternate in office as a result of elections government debt is used strategically by each policymaker to influence the choices of his successors if different policymakers disagree about the desired composition of government spending between two public goods the economy exhibits a deficits bias that is debt accumulation is higher than it would be with a social planner the equilibrium level of debt is larger the larger is the degree of polarization between alternating governments and the less likely it is that the current government will be re elected

research and productivity in mexican agriculture partial and total factor productivity tfp measures of mexican agriculture are calculated for 1960 90 the long run effects of research and international transfer of technology on tfp are examined over the 1940 90 period using cointegration procedures tfp increased at an average annual rate of 2 5 exceeding the corresponding growth in the united states 2 1 tfp grew particularly fast in the 1960s and 1970s a 1 rise in research investment increased tfp by 0 13 and a 1 increase in u s tfp translated into a 1 11 increase in mexican tfp the average annual rate of return to research investment is about 64

do real exchange rates follow a nonlinear mean reverting process in developing countries in an effort to fight relatively high inflation many developing countries try to manage their nominal exchange rates through official intervention in addition developing countries tend to have high transportation costs tariffs and nontariff barriers these factors are among the sources of generating nonlinearity in real exchange rates and hence some nonlinear adjustment toward purchasing power parity ppp in developing countries in this paper we employ monthly real effective exchange rate reer data of 88 developing countries and test the null of nonstationarity versus an alternative of linear stationarity by the means of a conventional unit root test and compare the results with those obtained from a new test in which the null is the same but the alternative hypothesis is nonlinear stationarity the latter test supports the ppp theory in more developing countries compared with the former test suggesting that nonlinear adjustment toward ppp in developing countries is an important phenomenon reported country characterizations indicate that reversion in reer occurs more often for high inflation countries and for countries with high flexibility in their exchange rates

an analysis of the stability and growth pact we use a stylised model to analyse the stability and growth pact for countries that have formed the european monetary union emu in our model shortsighted governments fail to internalise the consequences of their debt policies for the common inflation rate fully therefore while governments have no incentive to sign a stability pact in the absence of a monetary union they do so with monetary union to restrain this externality with uncertainty a monetary union combined with an appropriately designed pact will be strictly preferred to autonomy with differences in initial conditions conflicts of interest arise we study the nash bargaining solution

disaggregated rural economywide models for policy analysis summary this paper presents a disaggregated rural economywide modeling drem approach to explore how agricultural and trade policy reforms play out within rural economies of less developed countries ldcs drems combine the strengths of aggregate computable general equilibrium cge and microagricultural household models we calibrate our model with new microsurvey data from central mexico and we use the model to explore the impacts of policy changes on individual rural household groups as well as on the rural economy as a whole simulations highlight how rural market constraints and heterogeneous household responses shape the outcomes of policy reforms

independent fiscal agencies abstract there has been a considerable literature regarding the incentives of policymakers as a prime reason for persistent fiscal deficits and a variety of fiscal rules have been proposed as a remedy however the often inadequate flexibility of rules and the success of policy delegation in the monetary realm have motivated a small but growing number of studies that suggest delegating some aspects of fiscal policy to what will here be called independent fiscal agencies this paper surveys the related literature with a focus on three aspects the motivation for the establishment of such agencies their potential design and the experience with these types of institutions

aggregation of data and profit maximization in mexican agriculture nonparametric support for two important hypotheses relevant to econometric model specification is examined results of various nonparametric tests for behavioural objective and aggregation level of mexican agricultural production data are reported the evidence does not refute the hypothesis that producers behave collectively as though they are a price taking profit maximizing firm the empirical results also support exhaustive aggregation of input categories aggregation possibilities among outputs are fewer and are highly sensitive to the rejection criterion

mexican agricultural trade under the gatt expected effects from partially lifting tariff barriers on the mexican agricultural sector are investigated using a restricted profit function rpf approach short run and intermediate run effects of the implementation of gatt minimum tariff provisions on mexican agricultural trade are examined specification tests reveal the appropriateness of the rpf approach that exports should not be aggregated with non traded production into a single output and that the farm sector behaves as an almost price taking profit maximizing firm policy simulations suggest important short run changes in agricultural trade and chemical use and intermediate run changes in agricultural trade labour wage chemical use capital investments and net farm income

expected poverty under risk induced welfare variability two of the most widely accepted stylised facts about agriculture in south asia sub saharan africa and elsewhere are that income is highly uncertain from one year to another and that deep and widespread poverty exists and yet there has been very little analysis of the joint problems of poverty and risk this paper offers a methodological approach to the issue of how risk affects poverty and applies it to household level data for dry areas of rural india the following questions are addressed under what conditions can one expect an increase in the riskiness of an income or consumption stream to increase poverty how should one measure the contribution of risk to poverty and what long term benefits in terms of reduced poverty can be expected from policies aimed at stabilising incomes of the poor such policies have been widely discussed in the indian subcontinent of late and their effect on rural

thy neighbor s keeper the design of a credit cooperative with theory and a test economists now appreciate that resource allocation in less economically developed economies is profoundly influenced by non firm economic institutions however our theories of non firm institutions often suggest different answers to many questions including those of policy this paper illustrates a method for discriminating between alternative theories using data from german credit cooperatives from the nineteenth and early twentieth century germany we build a model of credit cooperatives designed to provide monitoring incentives and test this using nineteenth century data authors

is there discretion in wage setting a test using takeover legislation anecdotal evidence suggests that uncontrolled managers let wages rise above competitive levels testing this popular perception has proven difficult however because independent variation in the extent of managerial discretion is needed in this paper we use states passage of anti takeover legislation as a source of such independent variation passed in the 1980s these laws seriously limited takeovers of firms incorporated in legislating states since many view hostile takeovers as an important disciplining device these laws potentially raised managerial discretion in affected firms if uncontrolled managers pay higher wages we expect wages to rise following these laws using firm level data we find that relative to a control group annual wages for firms incorporated in states passing laws did indeed rise by 1 to 2 or about 500 per year the findings are robust to a battery of specification checks and do not appear to be contaminated by the political economy of the laws or other sources of bias our results suggest that discretion significantly affects wages they challenge standard theories of wage determination which ignore the role of managerial preferences

determinants of the performance of microfinance institutions a systematic review microfinance institutions mfis generally aim at improving the access of the poor to financial services while at the same time being financially sustainable but what do we know about how mfis reach and combine these two goals we carry out a systematic review of close to 170 papers discussing the determinants of the financial and social performance of mfis the review shows that the most important determinants addressed in the literature are mfi characteristics size age and type of organization their funding sources the quality of organizational governance and the mfis external context such as macro economic institutional and political conditions the evidence on these issues is rather mixed moreover the direction of the relationship between these drivers and mfi performance depends on the context particularly the country specific context finally there is a lack of consensus in the literature on the measurement of financial and social performance due to the complexity of the concept we argue that social performance should only be assessed by using a multidimensional perspective this can be done either by applying recent and holistic social performance measures such as the spi4 or at least by using a combination of proxies such as outreach gender and rural measures

the new stability and growth pact a first assessment abstract the paper proposes a theoretical model of fiscal policy offering new insights on some of the key policy trade offs involved in the recent reform of the stability and growth pact as suggested by the proponents of the reform greater room for case specific economic judgment in the implementation of the pact may improve welfare in our model these gains occur because the consolidation path implied by the implementation of the pact does not discourage high quality measures in practice however the difficulty to extract true policy intent from budget figures may hinder the qualitative assessment of fiscal policy hence reforming a rules based fiscal framework with a view to enhance its economic rationale would also require closer monitoring a better grasp of the policies underlying the budget and ultimately stricter enforcement in that sense recent reforms are at best unhelpful

threshold cointegration and purchasing power parity in the pacific nations the paper uses a threshold cointegration methodology to explore the properties of long run purchasing power parity ppp in the pacific nations using japan and the usa as base countries it is shown that long run ppp holds for most asian countries but that the adjustment mechanism is asymmetric in contrast to symmetric error correction models it is found that asymmetric adjustments of nominal exchange rates play an important role in eliminating deviations from long run ppp

migration incentives migration types the role of relative deprivation the authors explore the role of relative deprivation versus absolute income as an incentive for migration in developing countries in section i of this paper we outline the relative deprivation model of migration and present an illustration of the divergent policy implications of a relative deprivation model versus an absolute income model an attempt is made to identify distinct empirical implications of relative and absolute income motives for migrating in section ii a migration decision model is estimated and is used to explore absolute and relative income motives for internal and international migration in a sample of rural mexican households as well as to test the extent to which discontinuity in labour markets shapes the choice of migrant destination in section iii we present our conclusions excerpt

unemployment and labor market reform a contract theoretic approach why do many democracies fail to reform their labor market institutions to answer this question we study the feasibility of reforms that include compensation to insiders for the removal of labor market regulations under asymmetric information a reformer who wants to buy the approval of voters has to pay them an informational rent in addition to the pure costs of compensation that would arise under symmetric information in this setting unemployment may be constrained pareto efficient labor market reforms may fail politically because none of the reform packages proposed wins the approval of a majority of voters we also discuss the role of capital taxation in a reform program jel classification d70 e61 j68

the role of local depositors in controlling expenses in small scale financial intermediation an empirical analysis using data on irish loan funds a nineteenth century quasi bank system we explore how the capital structure affects managerial agency to impact non interest expenses these organizations had no equity holders and were financed by deposits and capital comprising donations and accumulated profits creating problems of managerial moral hazard higher net income before non interest expenses is associated with higher salaries and other non interest expenses more surprisingly higher capital deposit ratios led to higher expenses even after controlling for net income while this institution is unique the findings suggest that depositors could assist in controlling expenses in microfinance organizations

econometric analysis of aggregation in the context of linear prediction models this paper deals with the problem of aggregation where the focus of the analysis is whether to predict aggregate variables using macro or micro equations the grunfeldgriliches prediction criterion for choosing between aggregate and disaggregate equations is generalized to allow for contemporaneous covariances between the disturbances of micro equations and the possibility of different parametric restrictions on the equations of the disaggregate model a new test is proposed of the hypothesis of perfect aggregation which tests the validity of aggregation either through coefficient equality or through the stability over time of the composition of the regressors across the micro units the tools developed in the paper are then applied to employment demand functions for the uk economy disaggregated by 40 industries firstly a set of unrestricted log linear dynamic specifications are estimated for the disaggregate equations and then linear parameter restrictions are imposed as appropriate corresponding unrestricted and restricted aggregate equations are estimated two different levels of aggregation are considered aggregation over the 23 manufacturing industries and aggregation over all 40 industries of the economy in both cases the hypothesis of perfect aggregation is firmly rejected for the manufacturing industries the prediction criterion marginally favors the aggregate equation but over all industries the disaggregated equations are strongly preferred

risk financial markets and human capital in a developing country this paper explores the link between financial market incompleteness and human capital accumulation we examine how child school attendance responds to seasonal fluctuations in the income of agrarian households using panel data from rural india to pinpoint market imperfections we study responses to aggregate and idiosyncratic as well as to anticipated and unanticipated income shocks our main finding is that seasonal fluctuations in school attendance are a form of self insurance but one which does not result in a substantial loss of human capital on average

agricultural trade liberalization and low income countries a general equilibrium multimarket approach integrated multimarket general equilibrium models are constructed to analyze the impact on poor cereal importers of rising world prices following oecd trade liberalization archetypes contrast african countries in which cereal imports are not competitive with domestic production africa i to african and asian countries where they are competitive results show rising food import bills and exchange rate depreciation in africa i and the opposite in the other two regions policy implications include promoting agricultural exports from africa i and promoting food crops for import substitution in the other regions food aid needed to shelter the poor during the transition period is calculated

a symmetric normalized quadratic gnp function and the u s demand for imports and supply of exports this paper reports estimates of a gnp function for the united states using data covering most of the postwar period and it introduces a new functional form the symmetric normalized quadratic variable profit function which is a natural extension of recent work by diewert and wales this functional form allows convexity in prices and concavity in fixed inputs to be imposed globally empirical results indicate that the demand for imports is less price elastic than the supply exports that an increase in labor endowment favors trade and that a deterioration of the terms of trade mostly hurts labor

cointegration and tests of purchasing power parity nonstationarity in the levels of spot exchange rates and domestic and foreign price indices makes the use of conventional tests of the absolute version of purchasing power parity ppp inappropriate if ppp is true inter country commodity arbitrage ensures that deviations from a linear combination of spot exchange rates and domestic and foreign price levels should be stationary under these conditions exchange rates and price levels should form a cointegrated system we find the null hypothesis of no cointegration cannot be rejected for all five countries thus violating the long run absolute version of ppp

voting on the budget deficit this paper analyzes a model in which a group of rational individuals votes over the composition and time profile of public spending all voters agree that a balanced budget is ex ante optimal however if there is disagreement between current and future majorities a balanced budget is not a political equilibrium under majority rule under certain conditions a majority of the voters favors a budget deficit and the equilibrium deficit is larger the greater is the polarization among voters copyright 1990 by american economic association

climate change and labour allocation in rural mexico evidence from annual fluctuations in weather this paper evaluates the effects of annual fluctuations in weather on employment in rural mexico to gain insight into the potential labour market implications of climate change using a 28 year panel on individual employment we find that years with a high occurrence of heat lead to a reduction in local employment particularly for wage work and non farm labour extreme heat also increases migration domestically from rural to urban areas and internationally to the u s a medium emissions scenario implies that increases in extreme heat may decrease local employment by up to 1 4 and climate change may increase migration by 1 4 this article is protected by copyright all rights reserved

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

what do deficits tell us about debt empirical evidence on creative accounting with fiscal rules in the eu fiscal rules such as the excessive deficit procedure and the stability and growth pact sgp aim at constraining government behavior milesi ferretti 2003 develops a model in which governments circumvent such rules by reverting to creative accounting the amount of this depends on the reputation cost for the government and the economic cost of sticking to the rule we provide empirical evidence of creative accounting in the european union we find that the sgp rules have induced governments to use stock flow adjustments a form of creative accounting to hide deficits the tendency to substitute stock flow adjustments for budget deficits is especially strong for the cyclical component of the deficit as in times of recession the cost of reducing the deficit is particularly large

smooth structural breaks and the stationarity of the yen real exchange rates this article examines and solves an interesting paradox in the literature that the tests for purchasing power parity ppp based on the yen real exchange rates rers refute the ppp hypothesis more often than those with other major currency based rers and the evidence is sensitive to the sample period used using a new empirical methodology accounting for both nonlinearity and multiple smooth temporary breaks in the data we show that the puzzling finding is due to the failure to take into account the long but temporary large rise and fall in the yen rers the results illustrate that the yen rers in the post bretton woods period are likely mean reverting with linear or nonlinear adjustment toward large long swing type of infrequent smooth temporary changes around constant equilibrium values supporting the validity of ppp and resolving the paradox

consumption smoothing migration and marriage evidence from rural india a significant proportion of migration in low income countries particularly in rural areas is composed of moves by women for the purpose of marriage we seek to explain these mobility patterns by examining marital arrangements among indian households in particular we hypothesize that the marriage of daughters to locationally distant dispersed yet kinship related households is a manifestation of implicit interhousehold contractual arrangements aimed at mitigating income risks and facilitating consumption smoothing in an environment characterized by information costs and spatially covariant risks analysis of longitudinal south indian village data lends support to the hypothesis marriage cum migration contributes significantly to a reduction in the variability of household food consumption farm households afflicted with more variable profits tend to engage in longer distance marriage cum migration the hypothesized and observed marriage cum migration patterns are in dissonance with standard models of marriage or migration that are concerned primarily with search costs and static income gains

testing the relative purchasing power parity hypothesis the case of korea abstractthis study examines the relative purchasing power parity ppp hypothesis using the data from the korean won us dollar and the korean won japanese yen foreign exchange markets we extract proxies for inflation from stock market returns of korea the united states and japan based on the method used by chowdhry roll and xia in 2005 we explicitly test the relative ppp hypothesis in light of the short run price volatility using monthly bimonthly and quarterly data from 1 january 1998 to 31 december 2012 our findings suggest that the empirical test results from the entire sample period do not support the relative ppp hypothesis however the results from the sample period excluding the asian financial crisis period show that the relative ppp hypothesis holds for the korean won us dollar market with a moderate magnitude of inflation impact but not for the korean won japanese yen market abrupt changes in exchange rates during the crisis period may have affected the relationship between inflation an

testing ppp in the non linear star framework abstract we apply the standard adf test and a new test that incorporates non linearity in time series to the real effective exchange rates of 23 industrial countries the new test provides support for ppp in more countries than the adf test