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rotating and accumulating savings and credit associations or roscas and ascras in the ascra funds are not immediately withdrawn but are left to grow for loan making comparing the two groups the author finds similarities and differences efforts to rectify the rosca s shortcomings have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

the role of personality traits in pension decisions findings and policy recommendations many countries need to stimulate pension participation and contribution to ensure their citizens are prepared adequately for retirement identifying at risk groups with tendencies of not joining pe

the effect of physician advice on alcohol consumption count regression with an endogenous treatment effect although there are encouraging trends alcohol abuse continues to be a significant public health problem econometric studies of alcohol demand have yielded a great deal of information for alcohol abuse prevention policy these studies suggest that higher alcohol taxes and stricter drunk driving policies can reduce heavy drinking and drunk driving in this paper we explore the role physician advice plays in the campaign to prevent alcohol related problems compared to alcohol taxation physician advice is a more precisely targeted intervention that does not impose extra costs on responsible drinkers compared to the resource costs of arresting processing and punishing drunk drivers physician advice may be a lower cost intervention to provide a basis for alcohol policy analysis we use an alcohol demand framework to test whether physician provided information about the adverse consequences of alcohol abuse shifts demand to more moderate levels there are three aspects of our alcohol demand model that complicate the estimation 1 the dependent variable is non negative it is a count variable number of drinks consumed 2 a non trivial number of sample observations have zero values for the dependent variable and 3 because the data we use is non experimental the treatment variable indicating receipt of advice from a physician may be endogenous we implement an estimation method that is specifically designed to deal with these three complicating factors our results show that advice has a substantial and significant impact on alcohol consumption by males with hypertension and that failing to account for the endogeneity of advice masks this result copyright 2001 john wiley sons ltd

inter vivos transfers and exchange most parents divide their bequests equally among their children whereas inter vivos transfers are usually unequal we propose that exchange is better for inducing inter vivos transfers than bequests inter vivos transfers can be adjusted quickly to the amount of care are less costly than writing a will and can be kept secret from other family members and the public the results from national longitudinal data show that as expected if a parent gives any inter vivos transfers she is more likely to give to children who provide informal care informal care has no effect on the equality of intended bequests

reap what you sow agricultural technology urbanization and structural change abstract this paper studies how productivity enhancing agricultural technology affects urbanization by provoking structural change we investigate these issues using a natural experiment in the united states the results show that technologies which improve crop productivity lead to a less urbanized economy as economic activity relocates from manufacturing and services towards agriculture the effects are highly persistent and are driven by the technology increasing agricultural labor demand our findings highlight the potentially unintended disruptive force of innovative technologies

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

targeting maps an asset based approach to geographic targeting summary proper targeting of policy interventions requires reasonable estimates of the benefits of the alternative options to inform such decisions we develop an integrated approach stemming from the small area estimation literature that estimates the marginal returns to a range of assets across geographically defined subpopulations we create a series of maps that can be overlaid with traditional poverty maps to identify strong candidate areas for intervention though an efficiency equity tradeoff sometimes exists we apply our method using recent ugandan data results are consistent with independent empirical findings and suggest asset specific transfer schemes would improve with a spatially targeted strategy

two stage residual inclusion estimation addressing endogeneity in health econometric modeling the paper focuses on two estimation methods that have been widely used to address endogeneity in empirical research in health economics and health services research two stage predictor substitution 2sps and two stage residual inclusion 2sri 2sps is the rote extension to nonlinear models of the popular linear two stage least squares estimator the 2sri estimator is similar except that in the second stage regression the endogenous variables are not replaced by first stage predictors instead first stage residuals are included as additional regressors in a generic parametric framework we show that 2sri is consistent and 2sps is not results from a simulation study and an illustrative example also recommend against 2sps and favor 2sri our findings are important given that there are many prominent examples of the application of inconsistent 2sps in the recent literature this study can be used as a guide by future researchers in health economics who are confronted with endogeneity in their empirical work

retirement effects on health in europe what are the health impacts of retirement as talk of raising retirement ages in pensions and social security schemes continues around the world it is important to know both the costs and benefits for the individual as well as the governments budgets in this paper we use the survey of health ageing and retirement in europe share dataset to address this question in a multi country setting we use country specific early and full retirement ages as instruments for retirement behavior these statutory retirement ages clearly induce retirement but are not related to an individual s health exploiting the discontinuities in retirement behavior across countries we find significant evidence that retirement has a health preserving effect on overall general health our estimates indicate that retirement leads to a 35 percent decrease in the probability of reporting to be in fair bad or very bad health and an almost one standard deviation improvement in the health index while the self reported health seems to be a temporary impact the health index indicates there are long lasting health differences

information and participation in social programs participation in social programs such as clubs and other social organizations results from a process in which an agent learns about the requirements benefits and likelihood of acceptance related to a program applies to be a participant and finally is accepted or rejected we propose a model of this participation process and provide an application of the model using data from a social program in mexico our empirical analysis illustrates that decision at each stage of the process are responsive to expectations about the decisions and outcomes at the subsequent stages and that knowledge about the program can have a significant impact on participation outcomes

do depositors punish banks for bad behavior market discipline deposit insurance and banking crises this paper empirically investigates two issues largely unexplored by the literature on market discipline we evaluate the interaction between market discipline and deposit insurance and the impact of banking crises on market discipline we focus on the experiences of argentina chile and mexico during the 1980s and 1990s we find that depositors discipline banks by withdrawing deposits and by requiring higher interest rates deposit insurance does not appear to diminish the extent of market discipline aggregate shocks affect deposits and interest rates during crises regardless of bank fundamentals and investors responsiveness to bank risk taking increases in the aftermath of crises

microcredit and the poorest of the poor theory and evidence from bolivia abstract we construct a theoretical framework that describes the social worth of a microfinance organization in terms of the depth worth to users cost to users breadth length and scope of its output we then analyze evidence of depth of outreach for five microfinance organizations in bolivia most of the poor households reached by the microfinance organizations were near the poverty line they were the richest of the poor group lenders had more depth of outreach than individual lenders the urban poorest were more likely to be borrowers but rural borrowers were more likely to be among the poorest

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

targeting the poor evidence from a field experiment in indonesia the brief summarizes the targeting the poor evidence from a field experiment in indonesia for the period december 2008 january 2009 this paper reports an experiment in 640 indonesian villages on three approaches to target the poor proxy means tests pmt where assets are used to predict consumption community targeting where villagers rank everyone from richest to poorest and a hybrid defining poverty based on ppp 2 per capita consumption community targeting and the hybrid perform somewhat worse in identifying the poor than pmt though not by enough to significantly affect poverty outcomes for a typical program elite capture does not explain these results instead communities appear to apply a different concept of poverty

in the same boat but not equals the heterogeneous effects of parental income on child labour this paper examines the impact of parental income on child labour the empirical literature has found conflicting results regarding whether poverty leads parents to send their children to work mos

counting and multidimensional poverty measurement this paper proposes a new methodology for multidimensional poverty measurement consisting of an identification method k that extends the traditional intersection and union approaches and a class of poverty measures m our identification step employs two forms of cutoff one within each dimension to determine whether a person is deprived in that dimension and a second across dimensions that identifies the poor by counting the dimensions in which a person is deprived the aggregation step employs the fgt measures appropriately adjusted to account for multidimensionality the axioms are presented as joint restrictions on identification and the measures and the methodology satisfies a range of desirable properties including decomposability the identification method is particularly well suited for use with ordinal data as is the first of our measures the adjusted headcount ratio we present some dominance results and an interpretation of the adjusted headcount ratio as a measure of unfreedom examples from the us and indonesia illustrate our methodology

the s l debacle public policy lessons for bank and thrift regulation this book describes the period of failures of savings and loan associations and sets out a program of policies to prevent future debacles it explains the regulatory actions and inactions that created the incentives for large numbers of thrifts to make excessively risky and ill conceived and in some cases fraudulent and criminal investments it describes the failure of the accounting system to provide adequate information to regulators and in many cases even to the managers of the thrifts themselves concerning the health and riskiness of individual thrifts it also discusses how the regulatory system that had been conceived in an earlier and highly regulated era was overwhelmed in the deregulated environment of the early 1980s it shows how the reforms that were made in response to the growing crisis were too little and too late and finally it offers a set of policy reforms that could prevent future crises in the savings and loan industry this work should be of interest to political and financial economists

covenants and collateral as incentives to monitor although monitoring borrowers is thought to be a major function of financial institutions the presence of other claimants reduces an institutional lender s incentives to do this thus loan contracts must be structured to enhance the lender s incentives to monitor covenants make a loan s effective maturity and the ability to collateralize makes a loan s effective priority contingent on monitoring by the lender thus both covenants and collateral can be motivated as contractual devices that increase a lender s incentive to monitor these results are consistent with a number of stylized facts about the use of covenants and collateral in institutional lending modern finance theory suggests that financial intermediaries such as commercial banks insurance companies and finance companies monitor and control their borrowers on behalf of other investors 1 this article investigates how the loans made by these institutions can be structured so as to best enhance the institutions role as delegated monitors covenants and collateral are common features of loans made by financial institutions but these features are somewhat difficult to justify consider loan covenants clauses in a loan contract that require the borrower to take or refrain from various actions berlin and mester 1992 magee and sridhar 1994 and park 1994 show that by giving institutions the right to renegotiate or call loans when covenants are violated covenants serve as tripwires that enhance the flexibility and efficiency of financial contracting also as documented in smith and warner 1979 control rights from covenants reduce borrower adverse selection or moral hazard nevertheless by allowing institutions to demand repayment based on any information contractible or not

personality and economic choices abstract there is substantial variation in individual preferences for public goods yet much of that variation remains poorly understood however simple measures of personality can help to explain economic values and choices in a systematic way in this paper we examine the effects of personality on individual economic choices over public environmental goods based on three datasets from three separate stated preference studies we use a hybrid choice econometric framework to examine the effects of personality on preferences for the status quo changes in environmental quality and costs of investing in environmental improvements we find effects that are consistent across all datasets personality a stable feature of an individual s character that is simple to measure enriches explanations of why the demand for environmental goods varies across people provides an indication of how different people are likely to react to the introduction of environmental policies and explains substantial differences in willingness to pay

evidence of bank market discipline in subordinated debenture yields 1983 1991 we examine debenture yields over the period 1983 1991 to evaluate the market s sensitivity to bank specific risks and conclude that investors have rationally reflected changes in the government s policy toward absorbing private losses in the event of a bank failure although this evidence does not establish that market discipline can effectively control banking firms it soundly rejects the hypothesis that investors cannot rationally differentiate among the risks undertaken by the major u s banking firms an increasingly important issue in the regulation of financial institutions concerns the extent to which market investors can will recognize and control the risks of banking firms although the banking act of 1933 replaced some private risk bearing with federal deposit insurance legislators were reluctant to displace market discipline very extensively flood 1992 by the early 1980s however u s regulators had come to protect virtually all bank liability holders from credit losses most visibly at large banks which were deemed too big to fail sprague 1986 o hara and shaw 1990 this extension of the government safety net largely reflects a skepticism on the part of regulators that normal market forces could adequately identify and control bank risks while u s regulators have recently shown an increased willingness to let some bank investors bear default losses an official suspicion of the efficacy of market discipline remains widespread by contrast some prominent academic economists argue that market investors in bank debentures could provide timely and effective control over banking firms risk exposures and that the social cost of supervising banks would be lower if regulators ceded greater

the developing world is poorer than we thought but no less successful in the fight against poverty a new data set on national poverty lines is combined with new price data and almost 700 household surveys to estimate absolute poverty measures for the developing world we find that 25 of the population lived in poverty in 2005 as judged by what poverty typically means in the world s poorest countries this is higher than past estimates substantial overall progress is still indicated the corresponding poverty rate was 52 in 1981 but progress was very uneven across regions the trends over time and regional profile are robust to various changes in methodology though precise counts are more sensitive

income smoothing and consumption smoothing one way that risk averse households protect consumption levels is to borrow and use insurance mechanisms another way common in low income economies is to diversify economic activities and make conservative production and employment choices households thus tend toward limiting exposure only to shocks that can be handled with available credit and insurance typically both types of mechanisms are studied independently but much more can be learned by studying them together first we obtain a more complete picture of risks costs and insurance possibilities second it opens the way to considering biases in standard tests of credit and insurance

estimating the moral hazard effect of supplemental medical insurance in the demand for prescription drugs by the elderly almost all persons over the age of 65 are insured under the medicare program for inpatient drug consumption this national insurance plan does not however generally cover the purchase of outpatient prescription drugs rx in 1992 more than onethird of all outpatient drug expenditures in the united states were incurred by medicare enrollees yet approximately 50 percent of the elderly did not have any coverage for this type of treatment daniel waldo 1994 in response to this and other gaps in medicare coverage private firms have offered insurance instruments specifically designed to fill such voids commonly known as medigap policies in addition to this form of financial protection contingent upon state of residency and economic status elderly persons may qualify and obtain coverage for rx through medicaid or a state sponsored drug program however even with these incomeand wealth sensitive options many relatively poor elderly are faced with significant outof pocket drug expenditures coverage is concentrated among those elderly with income over 200 percent of poverty and those below the poverty line stephen long 1994 the most vulnerable elderly seem to be protected from the financial hardship of excessive rx expenses through medicaid coverage but private supplemental insurance is potentially too expensive for seniors near the poverty line to alleviate this burden 11 states currently offer some form of rx insurance that is targeted at those elderly or disabled persons who are relatively poor but do not qualify for medicaid at the national level policymakers and interest groups have advocated adding coverage to the medicare program to assess such programmatic changes an accurate forecast of the potential change in rx usage is needed in this paper we use a 1990 sample of medicare enrolled pennsylvanians who may have private medigap insurance or coverage under the state s rx program to estimate the amount by which the rx demand of the average individual would change in the presence of insurance coverage ceteris paribus such a residual increase in the consumption of a medical commodity has been labeled the moralhazard effect of health insurance the estimation of this effect requires a nonstandard regression technique because insurance coverage for rx and those types of treatments that are complementary or substitutable for prescriptions may be endogenously determined those persons with a higher demand for drugs are more likely to demand supplemental insurance for rx coulson and terza department of economics pennsylvania state university university park pa 16802 neslusan division of economic research at the social security administration 4301 connecticut avenue n w washington dc 20008 stuart department of health policy and administration pennsylvania state university university park pa 16802 funding for survey design and implementation used in this research was supported by grants from the pew charitable trusts and the health care financing administration grant no 88 01439 001 the views expressed herein are not necessarily endorsed by either these agencies or the social security administration 1the now repealed medicare catastrophic coverage act of 1988 as well as many of the recent healthcare reform proposals would have provided for outpatient rx coverage for the elderly 122

child income appropriations as a disease coping mechanism consequences for the health education relationship this paper analyses the relationships between hiv aids and education taking into account the appropriative nature of child income using a theoretical model we show that considering remittances from one s child as an insurance asset can reverse the usual negative relationship between disease prevalence and educational investment this prediction confirms the results of an empirical study conducted on data compiled from the demographic and health survey dhs database for 12 sub sahara african countries for children aged between 7 and 22 years old using regional hiv prevalence as a measure of health risk we find that the sign of the slope between health risk and the enrolment of children is not constant splitting the data based on expected remittance patterns for example rural versus urban we obtain that the effect is most likely driven by household characteristics related to child income appropriation

bankruptcy priority for bank deposits a contract theoretic explanation over the past decade several countries including the us have introduced or redesigned legislation that confers priority in bankruptcy upon all or some bank deposits we argue that in the presence of contracting costs such rules can increase efficiency we first show in a private information model that a borrower can reduce overall costs of finance by letting informationally heterogeneous lenders choose between junior and senior debt in particular we find that debt priorities reduce socially wasteful information gathering by investors we then argue why particularly in banking legal standardization of debt priorities may be superior to bilateral private arrangements article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

debt priority structure market discipline and bank conduct we examine how debt priority structure affects bank funding costs and soundness leveraging an unexplored natural experiment that changes the priority of claims on banks assets we document asymmetric effects that are consistent with changes in monitoring intensity by various creditors depending on whether creditors move up or down the priority ladder the enactment of depositor preference laws which confer priority on depositors reduces deposit rates but increases non deposit rates importantly subordinating non depositor claims reduces bank risk taking consistent with market discipline this insight highlights a role for debt priority structure in the regulatory framework

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

financial performance and outreach a global analysis of leading microbanks microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries but high repayment rates have not translated easily into profits for most microbanks profitability though is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy the authors examine why this promise remains unmet for most institutions using a data set with unusually high quality financial information on 124 institutions in 49 countries they explore the patterns of profitability loan repayment and cost reduction the authors find that institutional design and orientation matter substantially lenders that do not use group based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially for these individual based lenders one key to achieving profitability is investing more heavily in staff costs a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost

regional poverty targeting in china we evaluate the effectiveness of regional targeting in china s large scale poverty alleviation program begun in 1986 by analyzing a panel data set of all counties in china for the period 1981 1995 estimates of models of poor county designation and poverty fund allocation and newly defined targeting gap and targeting error measures show that political factors have affected targeting and that leakage has increased while coverage has improved only one of the three main programs is progressive growth model estimates find that poor county designation increased incomes per capita by 2 28 per year during 1985 1992 and 0 91 during 1992 1995 these results are relatively robust to redefining control groups using propensity score matching methods

illegal drug use and employment this article investigates the relationship between employment and the use of marijuana and cocaine for males in national longitudinal survey of youth data from 1984 and 1988 previous studies yielding mixed evidence may have inadequately accounted for the simultaneity between drug consumption and employment i implement an instrumental variable procedure that identifies drug use with variables that are empirically unrelated to employment including the regional cocaine price and a state marijuana decriminalization indicator results indicate that the use of each drug substantially reduces the likelihood of employment exogeneity tests reveal that standard probit estimates are severely biased toward zero

growth inequality and poverty looking beyond averages the evidence is compelling that the poor in developing countries do typically share in the gains from rising aggregate affluence and in the losses from aggregate contraction but how much do poor people share in growth do they gain more in some settings than others do some gain while others lose does pro poor growth mean more or less aggregate growth recent theories and evidence suggest some answers but deeper microeconomic empirical work is needed on growth and distributed change only then will we have a firm basis for identifying the specific policies and programs needed to complement and possibly modify growth oriented policies

retirement and health behaviour this article investigates whether and to what extent retirement changes health behaviour for identification we use an instrumental variable approach that exploits exogenous variations in the early

retirement personality and well being this study investigates how two sources of individual heterogeneity personality and gender impact the well being effects of retirement using data on older men and women from the british household panel survey and its continuation understanding society we estimate the causal effect of retirement on satisfaction with overall life and domains of life in the presence of personality characteristics as retirement is often considered to be a choice and thus may be endogenous to individual level characteristics we use the eligibility ages for basic state pension in the united kingdom as instruments for retirement we find that retirement increases leisure satisfaction of both males and females but not necessarily life satisfaction and income satisfaction we further show that certain personality characteristics affect the well being of female retirees for males however personality does not seem to matter in how they cope with retirement jel i31 j26 a12 c23

labor market effects of marijuana and cocaine use among young men using data on marijuana and cocaine use from the 1984 national longitudinal survey of youth the authors examine the hypothesis that drug use reduces labor market productivity as measured by wages from an analysis that controls for the probability of employment and the endogeneity of drug use they find that although long term and on the job use of marijuana negatively affected wages the net productivity effect for all marijuana users both those who engaged in long term or on the job use and those who did not was positive no statistically significant association was found between cocaine use and productivity

forecasting bankruptcy more accurately a simple hazard model i argue that hazard models are more appropriate than single period models for forecasting bankruptcy single period models are inconsistent while hazard models produce consistent estimates i describe a simple technique for estimating a discrete time hazard model i find that about half of the accounting ratios that have been used in previous models are not statistically significant moreover market size past stock returns and idiosyncratic returns variability are all strongly related to bankruptcy i propose a model that uses both accounting ratios and market driven variables to produce out of sample forecasts that are more accurate than those of alternative models copyright 2001 by university of chicago press

monitoring and structure of debt contracts this paper presents a theory of optimal debt structure when the moral hazard problem is severe the main idea is that the optimal debt contract delegates monitoring to a single senior lender and that seniority allows the monitoring senior lender to appropriate the full return from his monitoring activities the theory explains i why debt contracts are prioritized ii why short term debt is senior to long term debt and iii why financial intermediaries usually hold short term senior debt whereas long term junior debt is widely held another implication of the theory is that covenant and maturity structures will be set to conform to the seniority structure

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 challenge of rural financial inclusion evidence from microfinance financial inclusion is said to foster development and growth however progress in financial inclusion has been slow in rural areas where poverty is most pronounced this is often attributed to hig

banking market structure and financial stability evidence from the texas real estate crisis in the 1980s abstract this paper examines the relationship between banking market structure and financial stability using data on thrifts a type of banking institution specializing in residential mortgage lending i test two related hypotheses first competition reduces franchise value second reduced franchise value induces risk taking testing the second hypothesis exploits predictions that when hit by an exogenous shock the slope of risk with respect to franchise value becomes more negative because thrifts adopt bang bang strategies and choose minimal or maximal risk using the texas real estate collapse in the 1980s as a natural experiment i find evidence supporting both hypotheses

to target or not to target the costs benefits and impacts of indicator based targeting abstract this paper assesses the cost effectiveness of indicator based targeting using household survey data from malawi we examine whether an indicator based system is more target and cost efficient in reaching the poor than universal systems and the currently used mechanisms for targeting agricultural subsidies in the country estimation results suggest that targeting malawi s poor and smallholder farmers with indicator based systems may be worth the extra effort and may improve program targeting and cost efficiency even though under the proposed system administrative costs increase simulation results indicate that it does not make a targeted program cost ineffective more importantly the proposed system appears to be more target and cost efficient than the 2000 2001 targeted input program tip and the 2006 2007 agricultural input support program aisp both of which were administered through community based targeting systems while tip and aisp transferred about 50 of total transfer under the proposed system about 73 of transfers are delivered to the poor and smallholder farmers additionally the costs of leakage to the non poor are cut by more than 50 under the proposed system we conclude from the above findings that the newly proposed system can potentially improve the targeting and cost efficiency of malawi s development programs however such improvements depend on actual implementation of targeted programs a critical issue that should not be set aside

the dynamic effects of retirement on well being in this paper we examine whether and to what extent people anticipate their retirement and adapt to it over time for identification we use an instrumental variable approach that exploits the eligi

market discipline and bank subordinated debt note a lengthy literature in banking has addressed the question of whether the market prices of liabilities respond to individual bank risk taking activity that is whether any market disciplines exists however despite the obvious importance of this question the current record has led to no consensus on the issue results have been contradictory in this journal alone hannan and hanweck 1988 conclude that the market does extract at least some price for risk taking while avery belton and goldberg 1988 find no such evidence in this study we argue that this line of inquiry has a serious f law in that it fails to use theoretical models of bank instrument valuation to determine the appropriate testing of market discipline therefore the empirical models have lacked the necessary exactness to isolate the appropriate null hypotheses to redress this shortcoming and advance the methodology of this area of the literature we use a pricing model which comes to the banking area from the options pricing literature to look at the yield spread on bank liabilities using this model it is clear that the value of large uninsured bank liabilities cannot be described as a linear monotonic function of risk moreover current bank regulation affects the assumed role risk measures play in the pricing of such debt instruments both of these complications mean that simple regressions are not likely to adequately address the relationship between the value of debt and underlying risk in the final section we empirically investigate the presence of market discipline using contingent claims pricing we find that accounting measures of bank risk still have little predictive value in explaining yield spreads and therefore offer little evidence of meaningful market discipline

estimation in a class of simultaneous equation limited dependent variable models estimation in a class of simultaneous equation limited dependent variable models is considered the minimum chi squared method is used to compare the asymptotic relative efficiency of marginal and new conditional maximum likelihood estimators for this class of models efficient minimum chi squared estimation procedures are described a two step algorithm based on a conditional maximum likelihood estimator provides a natural framework for both computing a linearized and locating the joint maximum likelihood estimator the unimodality of the simultaneous equation tobit likelihood function is proved and this model is used to illustrate the empirical application of some of the estimators considered in the paper the relative efficiency of these estimators in the simultaneous equation tobit model is examined in a set of monte carlo experiments many applications of microeconomic theory to individual data face the joint problems of censoring and simultaneity in particular the dependent variable under investigation may not be continuously observed and some of the conditioning variables representing the outcome of other decisions by the individual may be simultaneously determined smith and blundell 1986 developed an asymptotically efficient test for exogeneity or simultaneity in the simultaneous equation tobit model as a byproduct a conditional maximum likelihood estimator was obtained which is consistent under the alternative hypothesis of simultaneity nelson and olsen 1978 amemiya 1978 1979 and heckman 1978 consider a number of consistent marginal maximum likelihood estimators based on marginal maximum likelihood estimators of the reduced form parameters for the probit and tobit models in contrast the estimator derived from smith and blundell 1986 is based on the corresponding conditional maximum likelihood estimators this paper is concerned with estimation in a class of simultaneous limited dependent variable regression models which includes the simultaneous probit and tobit models as special cases analogous marginal and conditional maximum likelihood estimators to those of nelson and olsen 1978 amemiya 1978 1979 heckman 1978 and smith and blundell 1986 are derived and other new estimators are suggested the minimum chi squared approach discussed by ferguson 1958 malinvaud 1970 and rothenberg 1973 is used to compare the asymptotic relative efficiency of various estimators considered a simple two step algorithm based on the conditional maximum likelihood

building an incentive compatible safety net abstract bank safety nets originally proposed as a means of stabilizing financial systems have become an important destabilizing influence government protection of bank debts encourages banks to undertake excessive risk particularly in response to adverse shocks to asset values reforms that would remove the destabilizing moral hazard consequences of government protection are considered both from the perspective of economic desirability and political feasibility requiring banks to maintain a minimal proportion of subordinated debt finance and restricting the means by which government recapitalization of insolvent banks occurs are the central features of promising reforms to the safety net

do hmo plans reduce health care expenditure in the private sector i introduction since the hmo act was passed in 1973 health maintenance organizations hmos have become one of the most popular types of managed care plans in the u s health delivery system faced with a dramatic increase in health care costs hmos are designed to implement a tight utilization review and authorization process along with restricted choice of providers as a means of managing utilization and quality by comparing health care expenditure patterns of hmo members with those of non hmo members among the privately insured nonelderly population this study seeks to understand the impact that hmos have on health care expenditure in the private insurance sector our data come from the 2000 medical expenditure panel survey meps a nationally representative survey of the u s civilian noninstitutionalized population despite the dramatic growth in the number and proportion of individuals enrolled in private hmo plans much of existing research on this issue has focused on the relationship between hmo enrollment and use of health care services miller and luft 1994 2002 whereas only a limited number of studies have been conducted on the role of prevalent hmo enrollment in saving health care expenditure kralewski et al 2000 analyses on expenditure performance are mostly carried out on the performance of the medicaid or medicare managed care plans buchanan et al 1996 mello et al 2002 this study extends previous research in several ways first rather than using localized or insurance group wise data johnson and aquilina 1986 kralewski et al 2000 mclaughlin et al 1983 mclaughlin 1987 robinson 1996 or employer data baker and corts 1996 feldman et al 1993 we use data provided directly by hmo members through nationally representative surveys second by using decomposed expenditure data we are able to ascertain whether the provision of financial incentives to both consumers and providers in hmo plans makes any differences in medical care expenditure by each party compared with traditional plans furthermore by testing the hypothesis of selectivity in health insurance choice we try to avoid the biased findings that often find in favor of hmo plans trends and relevance during the past two decades the number of hmo enrollees has proliferated from 9 1 million 4 of the total population in 1980 to 76 1 million 26 4 in 2001 health united states 2003 between 1977 and 2001 the percentage of the u s population under age 65 that joined private insurance hmos increased dramatically from 3 7 to 27 9 table 1 over the same time period per capita national health expenditure increased from 1 980 to 4 773 in 1995 constant dollars and total national health expenditure as a percentage of gross domestic product rose from 8 8 to 14 1 out of total national health expenditure the share of private expenditure decreased from 57 3 to 54 1 motivated by the prevalence of hmos in the private insurance market and the insufficiency in understanding its cost containment performance we investigate the patterns of health care expenditure among hmo members to understand whether hmos contribute to limiting medical expenditure relative to non hmo arrangement there are two main complications to our empirical analysis the first is selection bias due to endogenous health plan choice decisions previous studies buchanan and cretin 1986 jackson beeck and kleinman 1983 suggest that the utilization reduction effect of hmos may be a consequence of the selective enrollment of a healthier population in hmo plans rather than the more efficient medical care delivery management of hmos thus we first estimate the probit model of health insurance plan choice decisions and test this hypothesis in line with the analysis of taylor et al 1995 the second complication is that the dependent variables are nonnegative with a high frequency of zero observations

men women and competition an experimental test of behavior this study reports a series of experiments that examine outcomes when agents are able to choose between a payment scheme that rewards based on absolute performance i e piece rate and a scheme that rewards based on relative performance i e a tournament we test for the presence and persistence of gender differences in performance and the rate of entry into the tournament option and whether these differences are sensitive to the structure of the tournament rewards in the winner take all wta condition only the best performer in the tournament for each round received a payment 4 50 in the graduated tournament condition the same payment 4 50 was divided among the first second and third finishers in the tournament in the wta condition men showed significantly lower forecast errors than women in addition a clear sorting effect occurs in the wta condition in early rounds of the wta condition male entrants into the tournament show significantly lower forecast errors than female tournament entrants however the difference disappears over time after controlling for forecasting skill gender did not predict entry into the tournament for the wta condition however lower forecasting skill reduced the probability of entry in the graduated tournament the situation was reversed men entered the tournament at significantly higher rates even after controlling for skill forecasting skill had no impact on the decision to enter the tournament while the average male entrant to the tournament had lower forecast errors than the average female entrant the men entered at much higher rates as a consequence men were much more likely than women to enter the tournament too frequently

personality and the marginal utility of income personality interacts with increases in household income to determine life satisfaction abstract economics implicitly assumes that the marginal utility of income is independent of an individual s personality we show that this is wrong this is the first demonstration that there are strong personality income interactions in an analysis of 13 615 individuals over 4 years we show that individuals who have high levels of conscientiousness obtain more satisfaction to their lives from increases to their household income there are strong gender differences and women that are open to experiences introverted or neurotic get lower satisfaction from household income increases our findings have important implications for the use of financial incentives to influence behavior in the future public policy may benefit from being personality specific

depositor discipline and changing strategies for regulating thrift institutions abstract this paper examines the role of uninsured deposits as a source of thrift funding from 1984 to 1994 and tests whether uninsured depositors have adjusted their holdings at thrifts in response to market forces such as indications of impending institutional failure it also examines how the reactions have changed over time as new legislation has been implemented the study finds that failed institutions exhibit declining proportions of uninsured deposits to total deposits prior to failure and that failing institutions attract fewer deposits from uninsured depositors prior to failure than do solvent institutions though there are some differences between the periods the empirical results indicate that uninsured deposits will be governed by market discipline and that reducing the insurance limits on deposits will increase market discipline on thrifts

incentive enhancing preferences personality behavior and earnings suppose there is a principal agent relationship between employer and employee in which effort is not contractible but is elicited through employer incentive mechanisms we term preferences that allow the employer to elicit effort at lower cost incentive enhancing we analyze how such preferences affect earnings nd then provide evidence that one of the relevant behavioral traits efficacy as well as other psychological aspects of individuals are significant influences on earnings we conclude that measures of cognitive performance are not sufficient indicators of the effectiveness of schools in promoting student labor market success incentive enhancing preferences are irreducibly heterogeneous incentive enhancing preferences help explain the persistence of poverty over generations within families and unlike cognitive skills incentive enhancing traits need not be welfare increasing for their bearers

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

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

how does contract design affect the uptake of microcredit among the ultra poor experimental evidence from the river islands of northern bangladesh abstractthis study examines the demand of microcredit among ultra poor households in northern bangladesh we implemented a field experiment to identify what type of credit is best suited to their demand we found that the uptake rate by the ultra poor is the lowest for regular small cash credit followed by in kind credit we also found that the ultra poor are significantly more likely to join a microcredit programme than the moderately poor if a grace period with longer maturity is attached to a large amount of credit irrespective of whether the credit is provided in cash or in kind

can microfinance reach the poorest evidence from a community managed microfinance intervention summary reaching the poorest is an important objective in many development interventions and microfinance is no exception we review performance indicators for effectiveness of targeting described in the literature and suggest a new metric in order to account for extent and severity of poverty as well as the income distribution among the poor when applying this to a panel dataset from a community managed microfinance intervention in northern malawi we find regressive targeting participants are less poor than the general population in the area in addition we provide suggestions as to when and why the poor exit the project

a theory of debt and equity diversity of securities and manager shareholder congruence this paper shows how the optimal financial structure of a firm complements incentive schemes to discipline managers and how the securities return streams determine the claim holders incentives to intervene in management the theory rationalizes 1 the multipucity of securities 2 the observed correlation between return streams and control rights of securities and 3 the partial congruence between managerial and equity holder preferences over policy choices and monetary rewards as well as the low level of interference of equity in management the theory also offers new prospects for a reappraisal of the earlier corporate finance literature

why don t we see poverty convergence average living standards are converging among developing countries and faster growing economies see more progress against poverty yet we do not find poverty convergence countries starting with higher poverty rates do not see higher proportionate rates of poverty reduction the paper tries to explain why analysis of a new dataset suggests that at given mean consumption high initial poverty has an adverse effect on consumption growth and also makes growth less poverty reducing thus for many poor countries the growth advantage of starting out with a low mean is lost due to a high incidence of poverty jel d63 i31 i32 o15

an exogeneity test for a simultaneous equation tobit model with an application to labor supply a test of weak exogeneity in the simultaneous equation tobit model is proposed and illustrated using a female labour supply model estimated using cross section data the test statistic can be simply output from any standard tobit maximum likelihood package and is asymptotically efficient the procedure provides consistent estimators for the simultaneous tobit model whose asymptotic covariance matrix is a simple extension of the usual tobit formula we also provide the lagrange multiplier test of weak exogeneity this abstract was borrowed from another version of this item

impact of village savings and loan associations evidence from a cluster randomized trial the vast majority of the world s poor live in rural areas of developing countries with little access to financial services setting up village savings and loan associations vslas has become an increasingly widespread intervention aimed at improving local financial intermediation using a cluster randomized trial we investigate the impact of vslas in northern malawi over a two year period we find evidence of positive and significant intention to treat effects on several outcomes including the number of meals consumed per day household expenditure as measured by the usaid poverty assessment tool and the number of rooms in the dwelling this effect is linked to an increase in savings and credit obtained through the vslas which has increased agricultural investments and income from small businesses