what drives deregulation economics and politics of the relaxation of bank branching restrictions this paper investigates private interest public interest and political institutional theories of regulatory change to analyze state level deregulation of bank branching restrictions using a hazard model we find that interest group factors related to the relative strength of potential winners large banks and small bank dependent firms and losers small banks and the rival insurance firms can explain the timing of branching deregulation across states during the last quarter century the same factors also explain congressional voting on interstate branching deregulation while we find some support for each theory the private interest approach provides the most compelling overall explanation of our results

the dynamics of individuals fat consumption consumers are increasingly aware of the link between their lifestyle choices and the risk of noncommunicable diseases a dynamic approach incorporating this linkage in food demand is developed where consumers maximize utility over time by choosing fat intake to control their cumulative fat level the resulting dynamic indirect utility function and household data on meat fish and dairy consumption are used to estimate a censored demand system results show that consumers consciously adjust but not instantaneously their cumulative fat level highly educated households have a faster rate of adjustment of cumulative fat when cumulative fat level increases consumers shift to dairy or white meat from red meat products

banking for the poor evidence from india state led credit and savings programs have been implemented in numerous low income countries but their success in reaching the poor remains widely debated we report on research which exploits the policy features of the indian social banking program to provide evidence on this issue state led branch expansion into rural unbanked locations reduced poverty across indian states in addition the enforcement of directed bank lending requirements was associated with increased bank borrowing among the poor in particular low caste and tribal groups

the finance growth nexus evidence from bank branch deregulation this paper provides evidence that financial markets can directly affect economic growth by studying the relaxation of bank branch restrictions in the united states we find that the rates of real per capita growth in income and output increase significantly following intrastate branch reform we also argue that the observed changes in growth are the result of changes in the banking system improvements in the quality of bank lending not increased volume of bank lending appear to be responsible for faster growth

thinking inside the box a closer look at financial inclusion and household income using national representative household finance survey data covering more than 6200 chinese households we first construct a new multidimensional indicator for financial inclusion then we examine the effect of financial inclusion on household income our results elicit several findings first financial inclusion has a strong positive effect on household income this effect can be found across all households with different levels of income second low income households are found to benefit more from financial inclusion than high and mid level income ones we argue that in this sense financial inclusion helps reduce income inequality

financial inclusion and poverty a tale of forty five thousand households abstractusing a new nationally representative survey data covering approximately 45 000 indian households we examine the effects of financial inclusion on poverty we construct a multidimensional

the absorption of financial services in an islamic environment abstract this study examines the determinants of access to finance by firms residing in 42 islamic countries firm specific characteristics such as size sector legal status and export status are found to be robust predictors of financing constraints of firms small size firms appear to face more binding financing constraints whilst firms operating in manufacturing and focusing on exports appear to face lower constraints the auditing of accounts the location of operations and ownership structure appear significant with a varying effect on direction differences are documented on the role of firm specific characteristics between islamic and non islamic countries both the absolute and relative size of islamic bank assets is a significant predictor of firms financing constraints the results add new insights on the role of non economic institutions social and cultural factors across regions in predicting financing constraints of firms in islamic countries effective financial inclusion reform must focus on small size introverted and services oriented firms operating in some distance from the center as well as understand the divergent role of institutions social structures and culture within the islamic world

industry growth and capital allocation does having a market or bank based system matter are market based or bank based financial systems better at financing the expansion of industries that depend heavily on external finance facilitating the formation of new establishments and improving the efficiency of capital allocation across industries we find evidence for neither the market based nor the bank based hypothesis while legal system efficiency and overall financial development boost industry growth new establishment formation and efficient capital allocation having a bank based or market based system per se does not seem to matter much

habit formation in consumer preferences evidence from panel data this paper tests for the presence of habit formation using household data a simple model of habit formation implies a condition relating the strength of habits to the evolution of consumption over time when the condition is estimated with food consumption data from the panel study on income dynamics the results yield no evidence of habit formation at the annual frequency this finding is robust to a number of changes in the specification it also holds for several proxies for nondurables and services consumption created by combining psid variables with weights estimated from consumer expenditure survey data

information health risk beliefs and the demand for fats and oils mean and variance measures of health information about cholesterol and saturated fat are included in a demand system for fats and oils a bayesian model of health risk belief and consumer awareness surveys are the basis for computing these measures the empirical demand model shows that health information has resulted in significant increases in consumption for corn cottonseed and soybean oils and decreased consumption for butter and lard the predicted demand effects based on the bayesian information model are more reasonable than predictions from using either a time trend or a simple cumulative cholesterol information index copyright 1995 by mit press

demand systems estimation with microdata a censored regression approach demand systems estimation increasingly makes use of household level microdata mainly to measure the effects of demographic variables data based on these household expenditure surveys present a major estimation problem for any given household many of the goods have zero consumption implying a censored dependent variable techniques which do not take this censored dependent variable into account will yield biased results we utilize a censored regression approach that is computationally simple consistent and asymptotically efficient the results are then presented and compared with those obtained using an uncensored technique

can unemployment insurance spur entrepreneurial activity evidence from france we evaluate the effect of downside insurance on self employment we exploit a large scale reform of french unemployment benefits that insured unemployed workers starting businesses the reform significantly increased firm creation without decreasing the quality of new entrants firms started postreform were initially smaller but their employment growth productivity and survival rates are similar to those prereform new entrepreneurs characteristics and expectations are also similar finally jobs created by new entrants crowd out employment in incumbent firms almost one for one but have a higher productivity than incumbents these results highlight the benefits of encouraging experimentation by lowering barriers to entry

resistance to reform status quo bias in the presence of individual specific uncertainty comment why do governments so often fail to adopt policies which economists consider to be efficiency enhancing our answer to this question relies on uncertainty regarding the distribution of gains and losses from reform we show that there is a bias towards the status quo and hence against efficiency enhancing reforms whenever some of the individual gainers and losers from reform cannot be identified beforehand there are reforms which once adopted will receive adequate political support but would have failed to carry the day ex ante the argument does not rely on risk aversion irrationality or hysteresis due to sunk costs jel d72 f13 why do governments so often fail to adopt policies that economists consider to be efficiency enhancing this is one of the fundamental questions of political economy the answer usually relies on what may be

the competitive effects of a new product introduction a case study this paper analyzes the competitive effect of a new product introduction we break the overall competitive effect into two parts the effect on the prices of existing products due to increased competition and the effect of having additional product variety using data from both before and after the introduction we directly estimate the price effects and the additional variety effect then using only the estimated post introduction demand structure along with an assumed model of competition we estimate the price effects indirectly by comparing the indirect and direct estimates we assess the validity of alternative models of competition for the industry

are food choices really habitual integrating habits variety seeking and compensatory choice in a utility maximizing framework given the large number of food choices that consumers make each day it seems likely that they will adopt decision strategies that minimize cognitive effort to examine this issue we develop a conceptual and empirical model of habitual choice and the factors that result in transitions to two strategies other than habitual selection utility maximizing choice and a variety seeking strategy our approach provides an alternative to traditional state dependence methods used in this type of panel data we apply this framework to the choice of two food products that illustrate the heterogeneity across types of products in decision strategies and routine choice patterns copyright 2013 oxford university press

financial development bank ownership and growth or does quantity imply quality abstract in 1980 india nationalized its large private banks this induced different bank ownership patterns across different towns allowing credible identification of the effects of bank ownership on financial development lending rates and the quality of intermediation as well as employment and investment credit markets with nationalized banks experienced faster credit growth during a period of financial repression nationalization led to lower interest rates and lower quality intermediation and may have slowed employment gains in trade and services development lending goals were met but these had no impact on the real economy

takeovers improve firm performance evidence from the banking industry the hypothesis that takeovers provide managers with the incentive to maximize firm value is tested by examining the relationship between profitability and state statutes governing takeover activity among banks the evidence indicates that firms in states with an active takeover market are more profitable when takeover activity is restricted increased use of other mechanisms that provide an incentive to maximize firm value such as concentration of equity ownership and management ownership of stock is observed however these alternative methods have a smaller effect on profitability and do not completely compensate for the absence of an active takeover market

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

financialisation institutions and financing constraints in developing countries the paper uses a consistent firm level data from the world banks enterprise surveys to explore the impact of financialisation in the economy on firms access to finance in 138 developing countries access to finance reflects survey based firms perceptions of external financing constraints financialisation is proxied by consistent cross country measures of financial depth these proxies capture separately the role of bank based versus market based financing firm sector and country level information is jointly used for the analysis firm specific characteristics and economic and non economic national factors are included as controls the results show that the proxies of financialisation are broadly robust predictors of financing constraints of firms in developing countries however the magnitude of the financialisation effect varies between bank based and market based channels of financing as well as between low and high income countries and it is influenced by social institutional and religious factors

opaque bank assets and optimal equity capital abstract banks assets are opaque and therefore we model their true accounting asset values as partially observed variables we derive a stochastic control model to optimize banks dividend and recapitalization policies in this situation and calibrate that to a sample of u s banks by the calibrated model the noise in reported accounting asset values hides about one third of the true asset return volatility and raises the banks market equity value by 7 8 particularly those banks with a high level of loan loss provisions nonperforming assets and real estate loans and with a low volatility of reported total assets have noisy accounting asset values because of the substantial shock on the true asset values the banks assets were more opaque during the recent financial crisis

why are stabilizations delayed when a stabilization has significant distributional implications e g tax increases to eliminate a large budget deficit socioeconomic groups may attempt to shift the burden of stabilization onto other groups the process leading to stabilization becomes a war of attrition each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden the authors solve for the expected time of stabilization in a model of rational delay and relate it to several political and economic variables they motivate this approach and its results by comparison to historical and current episodes copyright 1991 by american economic association

does deposit insurance increase banking system stability an empirical investigation based on evidence of 61 countries in 1980 97 the authors find that explicit deposit insurance tends to be detrimental to bank stability the more so where bank interest rates are deregulated and the institutional environment is weak the adverse impact of deposit insurance on bank stability tends to be stronger the more extensive is the coverage offered to depositors and where the scheme is funded and run by the government rather than the private sector

dueling policies why systemic risk taxation can fail abstract two policy instruments for the banking sector are investigated namely systemic risk taxation and constructive ambiguity about bailout policy bailout expectations can induce moral hazard in the form of excessive risk taking by banks systemic risk taxation induces banks to prefer uncorrelated investments leading to lower systemic risk formation constructive ambiguity generates uncertainty about bailout prospects however systemic risk taxation also may inform banks about the regulator s concern for financial stability and thereby its bailout policy this result leads to a trade off between systemic risk taxation and constructive ambiguity and highlights the need to consider interdependence across policies when evaluating their effectiveness

inertia and variety seeking in a model of brand purchase timing previous research on state dependence indicates that a brand s purchase probabilities vary over time and depend on the levels of inertia and variety seeking and on the identity of the previously purchased brand brand choice probabilities obtained from models such as the logit and the probit are however fixed over time conditional on the previous brand purchased and on the levels of marketing variables consequently state dependence has largely been studied as a time invariant phenomenon in brand choice models with the levels of inertia and variety seeking assumed to be constant over time to account for the time varying nature of state dependence would require a model in which brand switching probabilities depend upon interpurchase times one modeling framework that can account for this dependence is based on the hazard function approach the proposed approach works as follows all other factors being equal an inertial household purchasing a brand on a particular occasion is most likely to repurchase that brand on the next occasion if the household switches it will be to a brand located perceptually close in attribute space to the previously purchased brand in other words an inertial household has the highest switching hazard for the same origin and destination brands with a progressively lower hazard rate for brands perceptually located farther and farther away from the origin brand the amount by which the hazard is lowered depends upon the perceptual distance and the inertia level of the household on the other hand if the household is variety seeking the most likely brand purchased would be a brand located farthest away from the previously purchased brand in attribute space in other words the hazard rate of repurchase is the lowest with the rate increasing with the distance of the destination brand from the origin brand and the level of that household s variety seeking tendency the effects of inertia and variety seeking are therefore incorporated at the attribute level into a brand purchase timing model in doing so we attempt to provide greater insight into the nature of state dependence in models of purchase timing our model and estimation procedure will enable us to distinguish between households that are inertial and those that are variety prone in addition to accounting for state dependence the model also accounts for the effects of unobserved heterogeneity among households in their brand preferences and in their sensitivities to marketing activities a majority of studies in marketing using the hazard function approach to investigate purchase timing have not accounted for heterogeneity in marketing mix effects the study integrates recent methods that incorporate the effects of inertia and variety seeking in brand choice models with a semi markov model of purchase timing and brand switching the proposed model enables us to 1 infer market structure via a perceptual map for the sample households and 2 investigate implications for the introduction of a line extension we provide empirical applications of the proposed method using three different household level scanner panel data sets we find that differing levels of inertia and variety seeking characterize the three data sets the findings are consistent with prior beliefs regarding these categories in addition our results indicate that the nature of interbrand purchase timing behavior depends upon the extent of inertia or variety seeking in the data we are also able to characterize the structure of the three product markets studied this provides implications for interbrand rivalry in the market further we demonstrate how the model and results can be used to predict the location of a line extension in the perceptual space of households finally we obtain implications for the timing of brand promotions

pedagogic comment and the supply of land for a particular use this article continues the recent debate in urban studies on the supply of land it specifies the analytical framework corrects misinterpretations of wiltshaw 1985 emphasises the possibility of the individual possessing a powerful welfare effect and a backward bending land supply curve and stresses the need to consider the distributions of non land income and landownership as well as the form of the utility function when aggregating supply for a particular use

modeling multiple sources of state dependence in random utility models a distributed lag approach we propose a utility theoretic brand choice model that accounts for four different sources of state dependence 1 effects of lagged choices structural state dependence 2 effects of serially correlated error terms in the random utility function habit persistence type 1 3 effects of serial correlations between utility maximizing alternatives on successive purchase occasions of a household habit persistence type 2 and 4 effects of lagged marketing variables carryover effects our proposed model also allows habit persistence to be a function of lagged marketing variables while accommodating the effects of unobserved heterogeneity in household choice parameters this model is more flexible than existing state dependence models in marketing and labor econometrics using scanner panel data we find structural state dependence to be the most important source of state dependence marketing mix elasticities are systematically understated if state dependence effects are incompletely accounted for the seetharaman and chintagunta 1998 model is shown to recover spurious variety seeking effects while overstating habit persistence effects ignoring habit persistence type 1 leads to an underestimation while ignoring habit persistence type 2 leads to an overestimation of structural state dependence effects we find lagged promotions to have carryover effects on habit persistence ignoring one or more sources of state dependence underestimates the total incremental impact of a sales promotion we draw implications for manufacturer pricing

habit formation and demand for sugar sweetened beverages using scanner data we estimated demand for nine nonalcoholic beverages under habit formation we found strong evidence for habit formation although demand for sugar sweetened beverages by low income households is less elastic to own price changes compared with high income households there is evidence that high income households consider beverages to be more substitutable than low income households do a half cent per ounce tax on store purchased sugar sweetened beverages will result in a moderate reduction in consumption of sugar sweetened beverages for both income strata because of habit formation long run national tax revenue from a sugar sweetened beverage tax is about 15 to 20 lower than short run revenue

does access to formal agricultural credit depend on caste summary this paper analyzes whether caste impedes access to formal agricultural credit in india credit is provided mainly through cooperative and commercial banks using national data we find that cooperative banks discriminate against lower caste borrowers and find weak evidence that commercial banks instead bias lending in their favor in accordance with affirmative action policies we compare the organizational structures of the two types of bank and explain discrimination by cooperative banks in terms of interest group capture at the district level by showing that discrimination takes place in those districts where higher castes dominate

value functions for infinite period planning cost benefit and risk analysis studies that model tradeoffs between the present and the distant future by means of present value discounting have been criticized for according the future and thus future generations far too little importance this paper presents an alternative means of modeling tradeoffs between different periods that accords the future far more importance than present value discounting and that is no more difficult to apply the paper also presents a means of modeling the preference issue of concern for equity or stability between different periods

how access to credit affects self employment differences by gender during india s rural banking reform abstract household survey data for 1983 2000 from india s national sample survey organisation are used to examine the impact of credit on self employment among men and women in rural labour households results indicate that credit access encourages women s self employment as own account workers and employers while it discourages men s self employment as unpaid family workers ownership of land a key form of collateral also serves as a strong predictor of self employment among the lower castes in india self employment is less likely for scheduled castes prone to wage activity but more likely for scheduled tribes prone to entrepreneurial work

optimal bank interest margin and default risk in equity returns under the return to domestic retail with structural breaks a retrenchment in crossborder credit is under way the product of both market forces and political pressure on international banks to lend at home economist 2009 in addition banks particularly the largest have also dramatically expanded their retail banking operations over the past few years hirtle and stiroh 2007 our goal in this article is to study the effects of default risk on equity returns through bank interest margin management under a renewed focus on domestic retail banking a trend often attributed to the stability of banking activities specifically this article explores the determinants of optimal bank interest margins based on an option based firm theoretical model with multiple sources of structural breaks due to political pressure the model demonstrates how capital regulation and political pressure on foreign lending return and risk conditions jointly determine the optimal bank interest margin decision we show that a more stringent capital requirement is linked with lower eq

an empirical analysis of personal bankruptcy and delinquency this article uses a new dataset of credit card accounts to analyze credit card delinquency personal bankruptcy and the stability of credit risk models we estimate duration models for default and assess the relative importance of different variables in predicting default we investigate how the propensity to default has changed over time disentangling the two leading explanations for the recent increase in default rates a deterioration in the risk composition of borrowers versus an increase in borrowers willingness to default due to declines in default costs even after controlling for risk composition and economic fundamentals the propensity to default significantly increased between 1995 and 1997 standard default models missed an important time varying default factor consistent with a decline in default costs debt issued by consumers is an understudied asset class there has been particularly little academic study of recent trends in default on this debt between 1994 and 1997 the number of personal bankruptcy filings in the united states rose by about 75 the 1 35 million filings in 1997 represented well over 1 of u s households delinquency rates on credit cards rose almost as sharply federal reserve bank of cleveland 1998 the resulting losses to lenders amounted to a sizable fraction of the interest payments they collect potentially raising the average cost of credit these trends in default both in bankruptcy and delinquency are especially surprising in light of the strong economy over the period they provide an unusually rich source of variation to test the stability of models that forecast personal default and of credit risk models more generally there are two leading explanations for these trends first the risk composition of borrowers might have worsened under the risk effect less

consumption and habits evidence from panel data the purpose of this paper is to test for the presence of habit formation in consumption decisions using household panel data we use the test proposed by meghir and weber 1996 and estimate the within period marginal rate of substitution between commodities which is robust to the presence of liquidity constraints to that end we use a spanish panel data set in which households are observed up to eight consecutive quarters this temporal dimension is crucial since it allows us to take into account time invariant unobserved heterogeneity across households fixed effects and therefore to investigate if the relationship between current and past consumption reflects habits or heterogeneity our results confirm the importance of accounting for fixed effects when analyzing intertemporal consumption decisions allowing for time non separabilities once fixed effects are controlled for and a proper set of instruments is used the results yield supporting evidence of habit formation in the demand system of food at home transport and services

de jure interstate banking why only now this paper tackles three tasks it reviews the history of restrictions on interstate banking it summarizes the provisions of the interstate banking and branching efficiency act of 1994 underscoring the opt in and opt out lobbying pressure this act assigns to state legislatures finally the paper develops a lobbying pressure model designed to explain statutory changes in the framework of financial regulation the model implies that de facto liberalization of a regulatory regime precedes its de jure liberalization once adopted statutory restrictions on banks remain in place until technology and competitive regulatory enforcement have fashioned loopholes wide enough to reverse the statute sponsoring balance of lobbying pressure copyright 1996 by ohio state university press

why is consumption so smooth for thirty years it has been accepted that consumption is smooth because permanent income is smoother than measured income this paper considers the evidence for the contrary position that permanent income is in fact less smooth than measured income so that the smoothness of consumption cannot be straightforwardly explained by permanent income theory the paper argues that in postwar u s quarterly data consumption is smooth because it responds with a lag to changes in income

coupon redemption and its effect on household cheese purchases by endogenizing unit value and coupon redemption we estimate u s household cheese purchase quality choice and coupon redemption equations simultaneously zero purchases and missing values on coupons and unit values are taken into account in the model to correct for selectivity bias correlations among the three equations are found to be significant empirical findings show that high quality choice significantly decreases cheese purchases while cheese coupon usage significantly increases purchases we find that higher income households select higher quality cheese while larger households choose lower quality cheese for coupon redemption we find that african american and hispanic households redeem less while asian households have no significant difference compared to caucasian households

do lenders favor politically connected firms rent provision in an emerging financial market corruption by the politically connected is often blamed for economic ills particularly in less developed economies using a loan level data set of more than 90 000 rms that represents the universe of corporate lending in pakistan between 1996 and 2002 we investigate rents to politically connected rms in banking classifying a rm as political if its director participates in an election we examine the extent nature and economic costs of political rent provision we nd that political rms borrow 45 percent more and have 50 percent higher default rates such preferential treatment occurs exclusively in government banks private banks provide no

unfair credit allocations this article investigates the impact of credit allocation on heterogeneous wealth entrepreneurs we show that with decreasing risk aversion and unobservable wealth poorer borrowers exert more effort as a consequence of endogenous adverse selection they are either excluded from the market or necessarily subsidize richer borrowers in a pooling equilibrium resulting in a paradoxical and inequitable redistribution alternatively a less likely separating equilibrium may occur in which poor types bear the entire weight of separation in the form of excess risk taking

impact of financial reforms on efficiency of state owned private and foreign banks in pakistan this article uses a unique bank level data from 1991 to 2000 and evaluates how financial reforms affect banking efficiency of domestic and foreign banks in pakistan the results suggest that banking efficiency falls during initial reform period when banks adjust to enhanced competition but increases in more advanced stages of reform while in general foreign and private banks show superior efficiency and factor productivity than do state owned banks the relative performance of foreign banks worsens after the consolidation stage of the financial reforms is over we show the importance of link between bank size asset quality and bank branches with efficiency indexes and also note that every 10 increase in share of nonperforming to total loans decreases banking efficiency by 6 to 10

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

foreign banks trends and impact over the past two decades foreign banks have become much more important in domestic financial intermediation heightening the need to understand their behavior we introduce a new comprehensive database made publicly available on bank ownership including the home country of foreign banks for 5 324 banks in 137 countries over the period 1995 2009 we document large increases in foreign bank presence in many countries but with substantial heterogeneity in terms of host and banks home countries bilateral investment patterns and bank characteristics in terms of impact we document that the relation between private credit and foreign bank presence importantly depends on host country and banks characteristics specifically foreign banks only seem to have a negative impact on credit in low income countries in countries where they have a limited market share where enforcing contracts is costly and where credit information is limited available and when they come from distant home countries this shows that accounting for heterogeneity including bilateral ownership is crucial to better understand the implications of foreign bank ownership

rents producers surplus and the long run industry supply curve the term producer surplus conventionally has been used to refer to the area above the competitive industry supply curve for output and below the equilibrium price for the short run there is general agreement as to the meaning of this area in the short run this area equals the payments to the firm in excess of the firm s total variable costs such payments are often referred to as quasirents for the long run there is no general agreement as to the meaning of this area some claim that this area has no particular meaning except under very special circumstances for example see mishan 7 221 22 225 30 and formby 1 316 323 24 others argue that this area is equal to the rents paid to factors of production for example see shepherd 9 and helmberger and rosine 2 helmberger and rosine 2 were the only ones to present an analytical example to support their position they demonstrated that producer surplus will in fact equal rents if i an aggregate production function is used ii the production function has four inputs is of the cobb douglas variety and exhibits constant returns to scale and iii two of the industry input supply functions are log linear and two are perfectly elastic the current paper brings the analysis down to the level of the individual firm and significantly extends the result of helmberger and rosine 2 it is demonstrated that producer surplus equals rents whenever the individual firm has a u shaped long run average cost curve regardless of i the form of the industry input supply functions and ii the number of inputs throughout the paper the analysis is general that is no specific functional forms are used

the real impact of improved access to finance evidence from mexico this paper provides new evidence on the impact of access to finance on poverty it highlights an important channel through which access affects poverty the labor market the paper exploits the opening of banco azteca in mexico a unique natural experiment in which over 800 bank branches opened almost simultaneously in preexisting elektra stores importantly the bank has focused on previously underserved low income clients our key finding is a sizeable effect of access to finance on labor market activity and income levels especially among low income individuals and those located in areas with lower preexisting bank penetration

political influence and declarations of bank insolvency in japan this paper investigates how politics affects bank supervision by examining determinants of bank failures in japan during 1999 2002 a period during which bank regulators were called upon to resolve insolvent banks in preparation for the lifting of a blanket deposit guarantee the empirical results suggest that japan s bank regulators had tendency to delay declarations of insolvency in prefectures that supported senior politicians of the ruling liberal democratic party ldp this result which is robust to a host of bank level and prefecture level controls suggests that bank supervision is prone to political influence that delays efficient resolution of insolvency

transaction costs of alternative greenhouse gas policies in the australian transport energy sector abstract this study employs a comparative analysis of the transaction costs of alternative policy instruments the institutional approach to the allocation of resources is emerging to supplement traditional analyses of market and government failures the causes of these failures are many but often point to high transaction costs that result largely from institutional impediments effective institutions can help reduce transaction costs through more effective signals and incentives including information generation to help markets function more efficiently and policies to be delivered more successfully the study which contributes to transaction costs measurement finds that the magnitudes and types of transaction costs associated with setting up and implementing three greenhouse gas reduction policy programs in australia are substantial and different the estimated transaction costs of the tradable permit and fee system are relatively high compared to those of the mandatory fuel label program and the voluntary fuel efficiency program which supports the view that market based policies can also be costly to deliver notwithstanding transaction costs have frequently been ignored in cost benefit analyses it is concluded that transaction costs need to be considered alongside other costs and benefits in the assessment of policies

brand inertia in u s household cheese consumption to analyze u s consumers brand choices for cheese purchases we derive a set of discrete choice models from dynamic utility maximization acnielsen homescan survey data on u s households is used to estimate a dynamic probit model for each of the top brands for cheddar shredded and sliced cheese in four u s regions we find that households have strong brand inertia a result robust across alternative specifications predicted probabilities confirm greater inertia in the top brands and consumers are more likely to switch into them brand inertia is relatively larger in cheddar and sliced cheese especially in the central and southeast regions copyright 2008 oxford university press

bank ownership and lending patterns during the 2008 2009 financial crisis evidence from latin america and eastern europe this paper examines the impact of bank ownership on credit growth in developing countries before and during the 2008 2009 crisis using bank level data for countries in eastern europe and latin america it analyzes the growth of banks total gross loans as well as the growth of corporate consumer and residential mortgage loans although domestic private banks in eastern europe and latin america contracted their loan growth rates during the crisis there are differences in foreign and government owned bank credit growth across regions in eastern europe foreign bank total lending fell by more than domestic private bank credit these results are primarily driven by reductions in corporate loans furthermore government owned banks in eastern europe did not act counter cyclically the opposite was true in latin america where the growth of government owned banks corporate and consumer loans during the crisis exceeded that of domestic and foreign banks contrary to the case of foreign banks in eastern europe those in latin america did not fuel loan growth prior to the crisis and did not contract lending at a faster pace than domestic banks during the crisis

an aggregate measure for benefit cost analysis the kaldor hicks kh criterion has long been the standard for benefit cost analyses but it has also been widely criticized as ignoring equity and arguably moral sentiments in general we suggest the use of an aggregate measure khm instead of kh where m stands for moral sentiments khm simply adds to the traditional kh criterion the requirement that all goods for which there is a willingness to pay or accept count as economic goods this addition however runs up against objections to counting moral sentiments in general and non paternalistic altruism in particular we show these concerns are unwarranted and suggest that the khm criterion is superior to kh because it provides better information

local financial development and growth using a unique sample of net domestic product data for districts in india i investigate the connection between banking sector development human capital and economic growth at the sub national level using disaggregate data avoids many of the omitted variable problems that plague cross country studies of the finance growth connection and facilitates an instrumentation strategy the findings show that the growth of many districts in india is financially constrained due to lack of banking sector development and that the relationship between finance and growth may be non linear for the districts in the sample moving from the 75th percentile of credit net domestic product to the 25th percentile implies an average loss of 4 percent in growth over the 1990s this indicates that the gains from increased banking sector outreach may be large the analysis shows that human capital deepening can reduce the effect of the financial constraint and help decouple growth from financial development in a district at the 25th literacy percentile the implied growth loss due to a constrained banking sector is twice as large as in a district at the 75th literacy percentile thus higher levels of human capital may activate alternative growth and production channels that are less finance intensive

caste and credit a woeful tale this paper examines caste based differences in farmers access to bank loans in rural india we investigate whether banks practice taste based discrimination on the basis of caste in order to identify potential discrimination we consider loan applications and approval decisions separately we find significant inter caste differences in application rates and evidence of discrimination against scheduled tribe borrowers at the approval stage to rule out the role of statistical discrimination we simulate unobserved credit histories with various distributions evidence for taste based discrimination persists despite accounting for unobservables however we find that this discrimination does not affect small farmers

women in politics evidence from the indian states abstract this paper uses panel data from the 16 larger states in india during the period 1967 2000 to study the effects of female political representation in the state legislatures on public goods policy and expenditure it finds that politicians gender affects policy but that their social position i e their caste should be taken into account as well female legislators in seats reserved for lower castes and disadvantaged tribes invest more in health and early education and favor women friendly laws such as amendments to the hindu succession act which was designed to give women the same inheritance rights as men they also favor redistributive policies such as land reforms in contrast female legislators from higher castes do not have any impact on women friendly laws oppose land reforms invest in higher tiers of education and reduce social expenditure the causal effect of female legislators is estimated using close elections between women and men

bank privatization finance and growth abstract this paper examines whether privatizing state owned banks improves finance and economic growth to do so we exploit regional banking variations in russia induced by the idiosyncratic creation of specialized banks in the last years of the soviet union 1988 91 that were subsequently privatized starting in 1999 private banks including surviving spetsbanks emerged as an important source of external finance for private firms and households we document that the regional concentration of spetsbanks in the early years of the russian federation is orthogonal to economic fundamentals that are related to growth after the emergence of bank finance results indicate that while privatized banking increased lending significantly it did not increase economic growth however privatization did increase growth when banks retained fewer political connections and when regional property rights were better protected highlighting the importance of both factors

the implications of heterogeneous habit in consumer beverage purchases on soda and sin taxes abstract in this article we study the heterogeneity of habit strength in households demand for regular carbonated sweetened beverages csbs and beer in the united states a demand model that nests a smooth transition function is used to describe habit based consumption patterns revealing heterogeneous strengths of habits among households we find that more habitual consumers those with a strong preference for a particular product are not as sensitive to price or expenditure as the aggregate population this finding is further supported by simulations of the potential effects of soda and beer taxes we find the aggregate response to soda and beer taxes is smaller than when the influence of habit is assumed to be homogeneous

how good is the market at assessing bank fragility a horse race between different indicators abstract we explore for individual banks active in the east asian countries during the years 1996 1998 the performance of three sets of indicators of bank fragility that can be computed from publicly available information accounting data stock market prices and credit ratings we find significantly different patterns among the three groups of indicators in their ability of forecasting financial distress at a specific point in time and over time more specifically in the east asia crisis episode the information based on stock prices or on judgmental assessments of credit rating agencies did not outpace backward looking information contained in balance sheet data stock market based information though has responded more quickly to changing financial conditions than ratings of credit risk agencies overall the evidence supports the policy conclusion that where the information processing is quite costly as in most developing countries it is important to use simultaneously a plurality of indicators to assess bank fragility

the politics of bank failures evidence from emerging markets this paper studies large private banks in 21 major emerging markets in the 1990s it first demonstrates that bank failures are very common in these countries about 25 percent of these banks failed during the seven year sample period the paper also shows that political concerns play a significant role in delaying government interventions to failing banks failing banks are much less likely to be taken over by the government or to lose their licenses before elections than after this result is robust to controlling for macroeconomic and bank specific factors a new party in power early elections outstanding loans from the imf as well as country specific time independent factors this finding implies that much of the within country clustering in emerging market bank failures is directly due to political concerns

the supply of land the supply of land to a use may result from individual suppliers maximizing utility as a consequence the slope of the supply curve cannot be determined a priori supply will be influenced by the distribution of non land income different tenure categories will behave according to the balance of substitution and welfare effects compulsory purchase may be necessary to surmount individual preferences and the effect of a development gains tax on change of use will depend upon the relation between the rate of tax the tax base and the supplier s compensating variation

on the welfare effects of regulating price discrimination in a model with linear demands and constant variable costs it is shown that a welfare gain is made by restricting the relative rather than absolute prices that a monopolist can charge for a range of products the nature of this class of restrictions is considered one application might occur if cost levels are unknown to the regulatory authority but costs are known to be linear functions of product characteristics copyright 1992 by blackwell publishing ltd

destructive effects of constructive ambiguity in risky times unclear bailout policy underinvestment and calls for greater responsibility by bankers are some of the observations from the recent financial crisis the paper explains underinvestment as an inefficient equilibrium under ambiguous bailout policy agents suffer from a lack of information about the insolvency resolution methods the beliefs of bankers regarding whether an insolvent bank is liquidated may differ from those of depositors even if bankers and depositors possess absolutely symmetric information about the economy this disrupts the flow of funds through the banking channel if the investment climate is characterized by high aggregate risk the paper suggests policy implications aimed at a reduction of the anxiety of agents and at aligning their beliefs to restore efficiency

reducing conflict in global warming policy the potential of equity as a unifying principle abstract international agreement on global warming mitigation is likely to prove difficult efficiency based policies will result in disparate costs and benefits among nations and thus hinder cooperation this paper suggests that consideration be given to an equitable sharing of the economic impacts of global warming policy acknowledging that there is no universally held concept of equity the policy implications of several alternatives are explored because there is considerable variation in these implications it will be important for decision makers to clarify their preferred concepts of equity during the course of their negotiations on policies to address global warming

politicians and banks political influences on government owned banks in emerging markets abstract government ownership of banks is very common in countries other than the united states this paper provides cross country bank level empirical evidence about political influences on these banks it shows that government owned banks increase their lending in election years relative to private banks this effect is robust to controlling for country specific macroeconomic and institutional factors as well as bank specific factors the increase in lending is about 11 of a government owned bank s total loan portfolio or about 0 5 of the median country s gdp per election per government owned bank

do rural banks matter evidence from the indian social banking experiment lack of access to finance is often cited as a key reason why poor people remain poor this paper uses data on the indian rural branch expansion program to provide empirial evidence on this issue between 1977 and 1990 the indian central bank mandated that a commercial bank can open a branch in a location with one or more bank branches only if it opens four in locations with no bank branches we show that between 1977 and 1990 this rule caused banks to open relatively more rural branches in indian states with lower initial financial development the reverse is true outside this period we exploit this fact to identify the impact of opening a rural bank on poverty and output our estimates suggest that the indian rural branch expansion program significantly lowered rural poverty and increased non agricultural output

elections political competition and bank failure abstract we exploit exogenous variation in the scheduling of gubernatorial elections to study the timing of bank failure in the us using hazard analysis we show that bank failure is about 45 less likely in the year leading up to an election political control i e lack of competition can explain all of this average election year fall in the hazard rate in particular we show that the reduction in hazard rate doubles in magnitude for banks operating in states where the governor has simultaneous control of the upper and lower houses of the state legislature i e complete control heading into an election

bank bailouts and moral hazard evidence from germany we use a structural econometric model to provide empirical evidence that safety nets in the banking industry lead to additional risk taking to identify the moral hazard effect of bailout expectations on bank risk we exploit the fact that regional political factors explain bank bailouts but not bank risk the sample includes all observed capital preservation measures and distressed exits in the german banking industry during 1995 2006 a change of bailout expectations by two standard deviations increases the probability of official distress from 6 6 to 9 4 which is economically significant

too many to fail evidence of regulatory forbearance when the banking sector is weak this paper studies bank failures in 21 emerging market countries in the 1990s by using a competing risk hazard model for bank survival we show that a government is less likely to take over or close a failing bank if the banking system is weak this too many to fail effect is robust to controlling for macroeconomic factors financial crises the too big to fail effect domestic financial development and concerns due to systemic risk and information spillovers the paper also shows that the too many to fail effect is stronger for larger banks and when there is a large government budget deficit

regulatory incentives and the thrift crisis dividends mutual to stock conversions and financial distress during the 1980s insolvency of individual thrifts and the thrift deposit insurer created severe incentive problems lacking cash to close insolvent thrifts regulators induced nearly 10 billion of private capital to flow into the industry through mutual to stock conversions we test a theory of how regulators encouraged capitalimpaired mutual thrifts to convert by permitting them to pay dividends rather than rebuild capital we estimate the costs of this policy and interpret the 1991 federal deposit insurance corporation improvement act as requiring regulators to impose restraints on depository institutions parallel to debt covenants that prevent capital distributions by nonfinancial firms experiencing distress