you can t save alone commitment in rotating savings and credit associations in kenya abstract this article examines one reason why individuals develop and maintain local level financial savings organizations known as rotating savings and credit organizations or roscas economic theories suggest that individuals form roscas to finance the purchase of a lumpy durable good in response to intrahousehold conflict over savings or to provide themselves with insurance the article proposes an additional hypothesis for rosca participation saving requires discipline and some roscas may be formed to provide a collective mechanism for commitment in the presence of time inconsistent preferences data from 70 roscas located in western kenya indicate that the commitment hypothesis is plausible and broadly consistent with the design and patterns of participation in these roscas as many rosca participants put it you can t save alone

group lending with endogenous group size this paper focuses on the size of the borrower group in group lending we show that when social ties in a community enhance borrowers incentives to exert eort a pro t maximizing nancier chooses a group of limited size borrowers that would be fundable under moral hazard but have insu cient social ties do not receive funding the result arises because there is a trade obetween raising pro ts through increased group size and providing incentives for borrowers with less social ties the result may explain why many micro lending institutions and rural credit cooperatives lend to groups of small size

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

crime deterrence and the business cycle in new york city a var approach a bstract we apply a var vector autoregressive technique to estimate the interrelationships between unemployment arrests police demographics and property related felony crimes in new york city from 1970 to 1984 despite the limitations of using a var the technique provides a useful alternative to more standard models in analyzing what causes crime the study concludes that arrests provide a strong deterrent to crimes but the reverse effect of crime on arrests is extremely small we find a brief and relatively weak effect of changes in unemployment rates on crime changes in demographics are associated with relatively stronger changes in crime rates

labour migration and social networks participation in southern mozambique this paper investigates how social networks in poor developing settings are affected by migration using a unique household survey from southern mozambique we test the role of labour mobility in shaping participation in groups and interhousehold cooperation by migrant sending households in village economies at origin we find that migration cum remittances boosts household engagement in community based social networks our findings are robust to alternative definitions of social interaction and to endogeneity concerns suggesting that stable migration ties and higher income stability through remittances may decrease participation constraints and increase household commitment in cooperative arrangements in migrant sending communities

ethnic parties and public spending new theory and evidence from the indian states social scientists largely see ethnic politics as inhibiting public goods provisioning within developing democracies such parties are thought to uniformly rely on distributing excludable benefits t

environmental tax policy and intergenerational distribution abstract we study the effects of environmental taxation within the context of an overlapping generations model the quality of the environment is modelled as a durable consumption good introduction of the environmental tax harms old existing generations and benefits young existing generations as well as all future generations increasing the tax in a pareto improving manner is easier the higher the pre existing tax the reverse holds if tax policy is decided by majority rule a suitably designed bond policy can be used to redistribute the efficiency gains due to the internalisation of environmental externalities across the generations

rotating savings and credit associations credit markets and efficiency this paper examines the allocative performance of rotating savings and credit associations roscas a financial institution which is observed world wide we develop a model in which individuals save for an indivisible good and study roscas which distribute funds using random allocation and bidding the allocations achieved by the two types of rosca are compared with that achieved by a credit market and with efficient allocations more generally we find that neither type of rosca is efficient and that individuals are better off with a credit market than a bidding rosca nonetheless a random rosca may sometimes yield a higher level of ex ante expected utility to prospective participants than would a credit market i introduction rotating savings and credit associations roscas are a widely observed institution for financial intermediation they are found all over the world particularly in developing countries and have heretofore received scant attention from economists this paper and its companion piece besley coate and loury 1993 constitute a first attempt to analyse their economic role and performance roscas come in two main forms the first type allocates funds randomly in a random rosca members commit to putting a fixed sum of money into a pot for each period of the rosca s life lots are drawn and the pot is randomly allocated to one of the members in the next period the process repeats itself with each previous winner excluded from the draw the process continues until each rosca member has received the pot once at this point the rosca is either disbanded or begins over again individuals may also form a bidding rosca in which the pot is allocated via a bidding procedure the individual who

do informal risk sharing networks crowd out public voluntary health insurance evidence from vietnam many governments in low income countries have promoted voluntary health insurance schemes in recent years with the principal aim of improving access to services amongst those working in the informal economy few attempts to understand demand for such schemes exist particularly in light of the importance of informal social security arrangements for many households a model of demand for health insurance is developed reflecting this context and estimated using data from vietnam the results show that informal financial networks may crowd out government promoted health insurance implications for theory and policy are discussed

rotating savings and credit associations the choice between random and bidding allocation of funds abstract the performance and efficiency of random and bidding rotating savings and credit associations roscas are compared within a game theoretic model information about individuals return from investing the rosca pool is assumed to be asymmetric and imperfect and rosca members are allowed to use funds raised outside the rosca to supplement the funds raised in the rosca the conclusion is that although both types of roscas can improve individual welfare the bidding rosca is preferred to the random rosca except when credit from other sources is costly and types of rosca members are not widely dispersed

does industrialization build or destroy social networks abstract this article estimates the relationship between changes in industrialization and changes in social networks measures in indonesia during 1985 97 using repeated cross sections of nationally representative surveys we analyze a rich set of social interaction measures including various measures of voluntary associational activity levels of trust and informal cooperation districts that experienced rapid industrialization showed significant increases in most measures of social interaction however districts that neighbor rapidly industrializing areas exhibited high rates of out migration significantly fewer community credit cooperatives and a reduction in mutual cooperation as assessed by village elders manufacturing growth can be thought of as a proxy for income growth here the findings are contrary to several recent claims regarding the role of social capital in economic development

the economics of roscas and intrahousehold resource allocation this paper investigates individual motives to participate in rotating savings and credit associations roscas detailed evidence from roscas in a kenyan slum nairobi suggests that most roscas are predominantly composed of women particularly those living in a couple and earning an independent income to explain this phenomenon we propose an argument based on conflictual interactions within the household participation in a rosca is a strategy a wife employs to protect her savings against claims by her husband for immediate consumption the empirical implications of the model are then tested using the data collected in kenya

time series homicide and the deterrent effect of capital punishment erlich 5 6 presents regression results showing that the u s time series data supports the deterrent effect of capital punishment the deterrence hypothesis other researchers 9 10 16 criticize erlich s findings on a number of grounds including the possibility of simultaneity bias and the sensitivity of the results to the choice of sample period control variables and functional form layson 11 extends erlich s u s sample to the 1936 1977 period and taking account of these criticisms concludes that the u s time series evidence provides robust support for the deterrence hypothesis this paper contributes to the debate on the deterrence hypothesis by analyzing the time series properties of the homicide rate the u s homicide rate is a nonstationary time series it is well known that the use of nonstationary series in regression analysis leads to inconsistent coefficient estimators biases estimators of coefficient standard errors toward zero and invalidates standard statistical inference procedures 2 8 13 14 15 17 18 nonstationarity may be due to a linear trend trend nonstationarity or may be a property of the underlying stochastic process difference nonstationarity if the time series is difference nonstationary then use of a linear trend does not correct these problems and may be misleading 13 14 15 we explicitly test for the source of the nonstationarity of the homicide rate difference or trend nonstationarity using the tests recently developed by dickey and fuller 3 4 7 we find that the homicide rate is difference nonstationary this implies that the data must be first differenced to achieve stationarity and that use of a linear trend as in 5 6 9 10 11 16 is inappropriate the regression results obtained using the first differenced stationary data do not provide robust support for a deterrence effect of capital punishment

lessons from the kibbutz on the equality incentives trade off the first kibbutz was established southwest of the sea of galilee in 1910 but the vast majority of kibbutzim were established in the 1930s and 1940s shortly before the creation of the state of israel in 1948 founders aimed to create a new human being who cared about the group more than about himself a homo sociologicus who would challenge the selfish homo economicus this idealistic view can explain many of the key features of kibbutzim equal sharing in the distribution of income no private property a noncash economy communal dining halls where members ate their meals together high provision of local public goods for use by kibbutz members separate communal residences for children outside their parents homes which were supposed to free women from their traditional role in society and allow them to be treated equally with men collective education to instill socialist and zionist values communal production whereby kibbutz members worked inside their kibbutzim in agriculture or in one of the kibbutz plants and no use of hired labor from outside kibbutzim because hiring labor was considered exploitation under the reigning socialist ideology to an economist steeped in thinking about incentives that self interested individuals face there are three reasons why an equal sharing arrangement of this sort seems unlikely to last first high ability members have an incentive to exit equal sharing arrangements to earn a wage premium so called brain drain second low ability individuals have an incentive to enter equal sharing arrangements so that they can be subsidized by more able individuals so called adverse selection third in context of equal sharing shirking and free riding are likely to be prevalent however kibbutzim have survived successfully for the past century and currently consist of 120 000 members living in 268 kibbutzim in a number of ways the kibbutzim offer an exceptional environment to examine the potential trade off between equality and incentives

volunteerism after the tsunami the effects of democratization using three waves of survey data from fishing villages in aceh indonesia for 2005 09 the paper examines the determinants of local volunteer labor after the tsunami volunteer labor is the village public sector labor force for maintenance clean up and renovation of public capital while also examining the effects on volunteerism of village destruction and trauma pre existing social capital diversity and aid delivery the papers focuses on the effects of democratization the tsunami and massive international aid effort prompted the settlement of the insurgency movement in aceh which had led to suspension of local elections over the prior twenty or more years until 2006 village heads who call volunteer days were effectively selected by village elites who may highly value the public facilities maintained by volunteer labor with elections volunteer days fall under the new regime with democratically elected village heads calling fewer volunteer days which may appeal more to the typical villager identification comes from pseudo randomized differential timing of elections

using electoral cycles in police hiring to estimate the effect of police on crime comment previous empirical studies have uncovered little evidence that police reduce crime possibly due to simultaneity problems this paper uses the timing of mayoral and gubernatorial elections as an instrumental variable to identify a causal effect of police on crime increases in the size of police forces are shown to be disproportionately concentrated in mayoral and gubernatorial election years increases in police are shown to substantially reduce violent crime but have a smaller impact on property crime the null hypothesis that the marginal social benefit of reduced crime equals the costs of hiring additional police cannot be rejected

optimal credit rationing in not for profit financial institutions we examine the dynamic optimization problem for not for profit financial institutions nfps that maximize consumer surplus not profits we characterize the optimal dynamic policy and find that it involves credit rationing interest rates set by mature nfps will typically be more favorable to customers than market rates as any surplus is distributed in the form of interest rate subsidies with credit rationing being required to prevent these subsidies from distorting loan volumes from their optimal levels rationing overcomes a fundamental problem in nfps it allows them to distribute the surplus without distorting the volume of activity from the efficient level

participation rules for pareto optimal clubs abstract this paper presents a unifying framework for the club participation problem using compensating variation measures of willingness to pay for membership with more prospective club members than the equilibrium club population pareto efficient participation rules are derived which depend upon whether or not individuals are assured of club access sale of lottery tickets offering club membership is shown to be a socially superior club participation allocation mechanism to sale of vouchers guaranteeing membership the willingness to pay format readily encompasses the buchanan case where all prospective club members are assured of club participation

abortion and crime unwanted children and out of wedlock births legalizing abortion can either increase or decrease investments in children s human capital this article finds that abortion increases the number of out of wedlock births using data that more directly links the criminal with age when the crime was committed not age when arrested and fixing the assumption in previous research that no abortions took place prior to the roe v wade decision in the 45 states affected by that decision we find consistent significant evidence that legalizing abortions increased murders by over 7 linear estimates indicate that legalization increased total annual victimization costs by at least 3 2 billion jel k42 k14 j24

informal microfinance institutions and development led tourism entrepreneurship this paper explores how informal microfinance institutions imfis support development led tourism entrepreneurship through providing microcredit and development opportunities to small tourism firms stfs as well as undertaking communitarian projects and outreach activities that promote the business activities of stfs drawing on resilience and social capital as central concepts the paper argues that the form of collective action found in imfis can be examined to understand their impact on development led tourism entrepreneurship using cameroon as a case study important policy challenges in destinations where regulatory constrains cause many stfs to become dependent on imfis as opposed to formal regulated financial institutions in development led tourism are highlighted

informal groups and health insurance take up evidence from a field experiment summary this paper presents the results of 20 randomized experiments aimed at understanding the low take up of in patient health insurance observed in developing countries take up does not increase when participants receive information about the product or an assistance to register or small subsidies of 2 10 or 30 take up does not increase when the same information is provided by local respected community leaders when participants are offered an in kind gift a chicken if they register when participants are offered the possibility to contribute lower and more frequent payments or the possibility to pay by cellphone a full subsidy generates a mere 45 take up with no retention after one year in contrast to these low take up rates presenting the same information without any subsidies to existing informal groups raises take up to 12 still 7 after one year as well as trust and knowledge of the product social networks play a major role in the adoption of health insurance this paper provides a cost effective way to increase take up of health insurance while subsidies are found to be largely ineffective at raising take up in the long run

the determinants of credit access and its impacts on micro and small enterprises the case of garment producers in kenya abstract there are diverse sources of credit for micro and small manufacturing enterprises mses in developing countries ranging from relatives and friends rotating savings and credit associations roscas micro finance institutions and commercial banks using a unique set of data on mses in garment clusters in nairobi this study attempts to identify the determinants of access to different credit sources and their impacts on firm profitability and growth the results of the regression analysis demonstrate that factors determining access to credit are often different from those affecting enterprise performance indicating limited impacts of credit access on enterprise performance

women empowerment and economic development women empowerment and economic development are closely related in one direction development alone can play a major role in driving down inequality between men and women in the other direction empowering women may benefit development does this imply that pushing just one of these two levers would set a virtuous circle in motion this paper reviews the literature on both sides of the empowerment development nexus and argues that the interrelationships are probably too weak to be self sustaining and that continuous policy commitment to equality for its own sake may be needed to bring about equality between men and women

enforcement in informal saving groups abstract informal groups cannot rely on external enforcement to insure that members abide by their obligations it is generally assumed that these problems are solved by social sanctions and reputational effects the present paper focuses on roscas one of the most commonly found informal financial institutions in the developing world we first show that in the absence of an external social sanctioning mechanism roscas are never sustainable even if the defecting member is excluded from all future roscas we then argue that the organizational structure of the rosca itself can be designed so as to address enforcement issues the implications of our analysis are consistent with first hand evidence from rosca groups in a kenyan slum

shadow economies at times of banking crises empirics and theory this paper investigates the response of the shadow economy to banking crises our empirical analysis based on a large sample of countries suggests that the informal sector is a powerful buffer which expands at times of banking crises and absorbs a large proportion of the fall in official output to rationalise our evidence we build a dynamic stochastic general equilibrium model which accounts for financial and labour market frictions and for nominal rigidities in line with the empirical literature on the shadow economy we assume that in the informal sector access to external finance is limited and the production technology is relatively more labour intensive following a banking shock in the official sector the model predicts a large negative transmission to the unofficial economy that substantially dampens the overall effect of the shock

roscas as financial agreements to cope with self control problems abstract we consider a model in which people with limited self control can sign binding financial agreements among themselves thereby forming coalitions we show that these financial agreements may help them to alleviate their self control problems we then demonstrate that there exists a stable structure of coalitions in which people form rotating savings and credit associations roscas we therefore provide a behavioral rationale for one of the most prevalent and puzzling financial institutions in developing countries finally we derive and discuss some empirical predictions

rotating saving and credit associations in rural east africa abstract theoretical arguments suggest that rotating savings and credit associations roscas improve welfare by reducing the utility cost of saving for a consumer durable data from two communities in east africa reveal major differences in the incidence of roscas participation arising conjecturally from differences in the relative depths of market penetration and perceptions about the efficacy of alternative strategies for compensating for failures in the financial markets participation in roscas in these communities is partly driven by the need to raise school fees meet medical expenses and buy food roscas funds are also used to start or promote small businesses and acquire assets including livestock households owning smaller landholdings and those enjoying higher expenditures are more likely to participate in roscas the number of schemes in which a household participates is closely related to the main uses of roscas funds while contributions and value of receipts are determined by total expenditures and frequency of turns respectively

la crema a case study of mutual fire insurance we analyze a mutual fire insurance mechanism used in andorra which is called la crema in the local language this mechanism relies on households announced property values to determine how much a household is reimbursed in the case of a fire and how payments are apportioned among other households the only pareto efficient allocation reachable through the mechanism requires that all households honestly report the true value of their property however such honest reporting is not an equilibrium except in the extreme case in which the property values are identical for all households nevertheless as the size of the society becomes large the benefits from deviating from truthful reporting vanish and all the nondegenerate equilibria of the mechanism are nearly truthful and approximately pareto efficient

roscas in urban ethiopia are the characteristics of the institutions more important than those of members abstract using household data from urban ethiopia we provide an empirical test of the economic theory of rotating savings and credit associations roscas and identify the impact of roscas and member characteristics on participation and volume of saving unlike other studies we account for the endogeneity of all rosca variables muslims individuals who live in richer households the self employed private sector employees and households with large numbers of women are more likely to join roscas a robust finding is that the savings are significantly affected by the characteristics of the members but not that of the informal saving institution some policy implications are discussed

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

rosca composition and repayment evidence from taiwanese bidding roscas abstractrotating savings and credit associations roscas are widespread and remain a key financial management tool for poor individuals we analyse data from taiwanese bidding roscas and focus on how social relationships within the group influence contribution behaviour and rosca failure we find that less socially connected participants were more likely to receive the pot early in the cycle which increases their incentive to default yet contrary to accepted wisdom groups including more outsiders were not more likely to experience repayment problems our results highlights how bidding roscas can be a versatile device that provide profitable savings while allowing for emergency credit

nonmarket institutions for credit and risk sharing in low income countries the design credit and risk institutions in low income countries provides one of the most exciting testing grounds for theories of contracting with imperfect information and limited enforcement this paper reviews some of the recent literature with a special focus on nonmarket institutions that cope with risk and provide credit this literature attempts to bring together insights from economic theory especially information economics contract theory and mechanism design theory however it is also applied being motivated by the circumstance of the poor countries that their authors have visited and studied

what are the headwaters of formal savings experimental evidence from sri lanka the world s poor are seeing a rapid expansion in access to formal savings accounts what is the source of savings when households are connected to a formal account we combine a high frequency panel survey spanning two and a half years with an experiment in which a sri lankan bank used mobile point of service pos terminals to collect deposits directly from households each week we find that the headwaters of formal savings lie in sacrificed leisure time households work more and improved savings options generate an increase in labour effort in both self employment and in the wage market the results suggest that the labour allocation channel is an important mechanism linking savings opportunities to income

the design of successful rural financial intermediaries evidence from indonesia abstract the success outreach and sustainability of eight rural financial intermediation systems in indonesia in profitably reaching large numbers of small individual clients is explained in terms of organizational design networks of semiautonomous units use local information and contract enforcement mechanisms to lower transaction costs reflecting basic concerns with institutional and financial viability elements of mechanism design have included compatible incentives such as performance based compensations profit sharing collection fees efficiency wages equivalent to quasi equity and system monitoring managerial discretion over transactions conducted at market terms policies to protect portfolio value and no dependency creating subsidies are important interventions have been appropriate for the problem at hand

bank insured rosca for microfinance experimental evidence in poor egyptian villages abstract microfinance institutions mfis have continued to grow over the past few decades both in numbers of clients and portfolio sizes the growth of these mfis has enabled greater access to credit in many of the world s less developed nations however recent studies have shown that very many of the poor especially muslims remain unbanked confounding this problem in many muslim countries is the poor s propensity to reject microfinance when available on religious grounds in this paper we develop an alternative microfinance model which aims to establish credit unions for the poor in which the bank plays the role of a guarantor in the familiar rotating savings and credit association rosca we test the performance of this model against a stylized sequential grameen style microcredit provision in a laboratory experiment in the field conducted in poor egyptian villages our model of bank insured roscas is shown to solve coordination failure problems that may otherwise prevent the spontaneous development of informal roscas in practice empirically our bank insured rosca model generated significantly higher takeup and repayment rates than the grameen model this suggests that this model by overcoming the religious barriers to credit can be a useful alternative to grameen style microfinance

estimating deterrence effects a public choice perspective on the economics of crime literature following becker s path breaking theoretical work on the economics of crime a large econometric literature has developed to test his implications 3 this literature typically focuses on a supply of offenses in which per capita crimes are related to the probability and severity of punishment for that type of crime the expected income from the criminal activity returns from alternative legal activities and other socio economic factors however the economic theory of crime also implies that the supply of offenses is determined simultaneously with community s demand for enforcement services 24 25 theoretically the crime rate depends on police deterrence efforts police deterrence efforts depend upon the level of police resources and the level of police resources depends on the crime rate as a result the typical econometric model employees data on reported crimes index i crimes and a simultaneous equation estimating technique with at least two and generally three or more equations in which police deterrence efforts are proxied by the probability of arrest 14 1 a series of recent empirical studies of the economics of crime

violent crime a function of drug use or drug enforcement an assumption of many national drug control policies is the existence of a causal relationship between illegal drug use and violent crime however robust empirical findings supporting this relationship are scarce alternatively there is extensive research much of it in economics which suggests that there may actually be a stronger causal relationship between drug enforcement control prohibition and violent crime than drug use and criminal violence the paper presents some of the research pertaining to the relationship between illegal drugs and violent crime in addition a violent crime model is empirically tested using data from 24 metropolitan statistical areas msas in the united states to determine the nature and strength of this relationship

the role of informal finance in household capital accumulation evidence from taiwan economies that experience rapid growth also experience major changes in their consumption patterns particularly for consumer durables this paper studies the diffusion of durables in taiwan between 1977 and 1991 we focus on the link between household accumulation of durables and participation in informal financial institutions while growth in per capita income in taiwan had been great many households still reply on traditional forms of finance we test the idea that rotating savings and credit associations which are found worldwide exist to lower the cost of saving for durables our analysis finds evidence of that link

financial constraints and occupational choice in thai villages abstract financial constraints and entrepreneurship are key factors affecting economic performance in developing countries i formulate and solve a model of occupational choice with moral hazard under three alternative financial market environments savings only borrowing and lending with default and moral hazard constrained insurance i use computationally efficient techniques based on mechanism design genetic algorithms and maximum likelihood to estimate and statistically test these models of financial constraints using occupational choice data from thai villages i find evidence that the saving only regime is rejected in favor of regimes allowing for borrowing and or insurance especially in higher wealth data stratifications a direct test between the borrowing and insurance regimes reveals that neither can be rejected in favor of the other allowing ex ante lotteries over wealth improves the explanatory power of the model i also find evidence for differences in the best fitting regimes by region wealth and access to formal credit

externalities and optimal taxation this paper reexamines the optimal tax design problem income and commodities in the presence of externalities the nature of the second best and the choice of the tax instruments are motivated by the informational structure in the economy the main results are i environmental levies linear or nonlinear differ in formula from pigouvian taxes by the expressions for the optimal tax on private goods ii externalities do not affect commodity tax formulas linear and nonlinear for private goods iii externalities do not affect the income tax structure if commodity taxes are nonlinear and affect it if commodity taxes are linear and iv a general income tax plus strictly pigouvian taxes are sufficient for efficient taxation if individuals of different types have identical marginal rates of substitution at any given consumption bundle

community based risk management arrangements a review summary risk and its consequences pose a formidable threat to poverty reduction efforts this article reviews a plethora of community based risk management arrangements across the developing world these types of arrangements are garnering greater interest in light of the growing recognition of the relative prominence of household or individual specific idiosyncratic risk as well as the increasing shift towards community based development funding the article discusses potential advantages such as targeting cost and informational and disadvantages such as exclusion and inability to manage correlated risk of these arrangements and their implications for the design of community based social protection programs and policies

the effect of prison population size on crime rates evidence from prison overcrowding litigation simultaneity between prisoner populations and crime rates makes it difficult to isolate the causal effect of changes in prison populations on crime to break that simultaneity this paper uses prison overcrowding litigation in a state as an instrument for changes in the prison population the resulting elasticities are two to three times greater than those of previous studies a one prisoner reduction is associated with an increase of fifteen index i crimes per year while calculations of the costs of crime are inherently uncertain it appears that the social benefits associated with crime reduction equal or exceed the social costs of incarceration for the marginal prisoner

bank branch presence and access to credit in low to moderate income neighborhoods banks specialize in lending to informationally opaque borrowers by collecting soft information about them some researchers claim that this process requires a physical presence in the market to lower information collection costs the author provides evidence in support of this argument in the mortgage market for low income borrowers mortgage originations increase and interest spreads decline when there is a bank branch located in a low to moderate income neighborhood

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

the economics of rotating savings and credit associations supported by the center for energy policy studies m i t and the japanese corporate associates program at the kennedy school of government

informal capital sources and household investment evidence from taiwan abstract the purpose of this paper is to investigate the importance of informal financial channels in capital accumulation by household investors the focus is on the link between borrowing from informal financial institutions and households investment in capital stock the empirical evidence is drawn from micro data from taiwan for the period 1977 1992 during this period taiwan emerged rapidly as an industrialized economy despite of its relatively underdeveloped formal financial sector the data show that informal financial channels were heavily relied on by small business entrepreneurs in taiwan it is found that informal financial institutions as a source of funds are important for small investors capital accumulation

prompting microfinance borrowers to save a field experiment from guatemala abstractcan microfinance borrowers use the discipline of regular loan repayments in order to accumulate savings if prompted to do so in an experiment we offered commercial savings products to the microfinance borrowers of guatemala s largest public sector bank we find that giving these borrowers the opportunity to develop a savings plan and be reminded of saving at the time of loan repayment caused no increase in the opening of savings accounts but led to balances among savers that were two and a half times those in the control a second treatment arm that proposed a default savings contribution of 10 of the loan payment caused the fraction of clients using linked savings accounts to double as well as elevated deposits among savers leading to final savings balances that were more than five times the control the savings treatments also generate faster pay down of debt and weakly better overall repayment performance suggesting that simultaneous saving and borrowing can be complementary activities a

four factors that explain both the rise and fall of us crime 1970 2003 previous research has failed to explain the rise and fall of us crime since 1970 this study uses cointegration error correction and common long memory components analyses to demonstrate that four basic crime factors explaining both the increases in us violent and property crime between 1970 and 1991 and the dramatic declines in crime after 1991 the four factors include arrest rates income per capita the proportion of criminal justice resources devoted to drug crime and alcohol consumption error correction models and common long memory factors show an especially close link between crime rates and the percentage of prison resources devoted to drug offenders similar factors result in cointegrated models for murder rape robbery assault and larceny additional modelling shows that effective abortion rates computed along the lines of donohue and levitt 2001 do not help in explaining the rise and fall of us crime

the limits of equality insights from the israeli kibbutz what limits the capacity of society to redistribute what determines the structure of compensation in organizations striving for income equality this paper addresses these questions by investigating the economic and sociological forces underlying the persistence of the israeli kibbutzim communities based on the principle of income equality to do this i exploit newly assembled data on kibbutzim and a financial crisis in the late 1980s that affected them differentially the main findings are that 1 productive individuals are the most likely to exit and a kibbutz s wealth serves as a lock in device that increases the value of staying 2 higher wealth reduces exit and supports a high degree of income equality and 3 ideology facilitates income equality using a simple model i show that these findings are consistent with a view of the kibbutz as providing optimal insurance when members have the option of leaving more generally these findings contribute to an understanding of how mobility limits redistribution and to an understanding of the determinants of the sharing rule in other types of organizations such as professional partnerships cooperatives and labor managed firms

finance and growth for microenterprises evidence from rural china using a survey dataset of chinese rural households we find that access to external finance is positively associated with the decision to become entrepreneur and the initial investment for microenterprises also we find that use of informal finance especially financing from friends and family is positively associated with sales growth of microenterprises with employees but not of self employed we do not find any significant relationship between the use of formal finance and firm growth our findings underline the importance of finance for entrepreneurship and microenterprise growth and the role of informal finance in the absence of efficient formal financial institutions

can an islamic model of housing finance cooperative elevate the economic status of the underprivileged abstract a formal home loan is onerous to subprime borrowers in efficient markets this can deter home ownership for financially strapped individuals leading to a market failure this paper proposes a special form of cooperative mortgage financing practiced in oman to overcome this market failure we integrate the literature of mortgage design with that of informal savings schemes i e roscas ascras to illustrate that this mode of financing dissipates credit risk better than the

matching in informal financial institutions this paper analyzes an informal financial institution that brings heterogeneous agents together in groups we analyze decentralized matching into these groups and the equilibrium composition of participants that consequently arises we find that participants sort remarkably well across the competing groups and that they re sort immediately following an unexpected exogenous regulatory change these findings suggest that the competitive matching model might have applicability and bite in other settings where matching is an important equilibrium phenomenon jel o12 o17 g20 d40

is property crime caused by drug use or by drug enforcement policy the relationships among drug offenses prorperty crime and the allocation of police resources are investigated in a structural model using data from florida countries law enforcement resources are scarce and as efforts to combat drug crime increase the amount of these resources allocated to property crime is reduced this reallocation of police resources results in reduced deterrence for property crime and as a result an increase in these crimes the evidence presented suggests that rising property crimes in florida are at least partially the result of drug enforcement policy

interest rates in savings groups thrift or threat summary savings group sg models are praised for achieving financial inclusion for the poorest at a very low cost promoted by international ngos sg models are inspired by indigenous savings and credit associations roscas sg models however differ in that they prescribe lending the pooled savings to group members for an interest the interest rate aims to 1 boost capital accumulation 2 allocate scarce capital efficiently and 3 remunerate and incentivize savers this paper builds on a six month fieldwork conducted in dr congo consisting of direct observations of sg meetings and interviews with sg participants and practitioners we study the gaps between sg practitioners objectives and sg participants perceptions and practices related to the interest rate our research pays particular attention to the local context and local norms that interfere with sg practitioners objectives our analysis highlights three gaps first sg participants turn savings into credit for security purposes rather for rapid capital accumulation second credit allocation decisions are guided by fairness and security concerns rather than efficiency third sg participants often regard the accumulated interest as belonging to the group and to active borrowers rather than to passive savers our results invite development actors to pay greater attention to the potential risks of the sg approach for its participants despite the common appellation savings groups this microfinance innovation builds upon credit and strongly encourages its members to go into debt

development and the interaction of enforcement institutions we examine how formal and informal contract enforcing institutions interact in a competitive market with asymmetric information where consumers do not observe quality before purchase firm level incentives for producing high quality can be achieved with an informal enforcement mechanism reputation the efficacy of which is enhanced by consumers investing in connectedness or with a formal mechanism legal enforcement the effectiveness of which can be reduced by means of bribes we show that formal and informal enforcement mechanisms do not necessarily substitute each other while high levels of judicial efficiency decrease consumers incentives to connect higher consumers connectedness leads to higher levels of judicial efficiency we then look at how the equilibrium institutional mix evolves with the level of development in doing so we show the presence of a new physical channel that can affect institutions i e the frequency of bad productivity shocks that in less developed settings can impact on firms incentives to cheat c 2010 elsevier b v all rights reserved

the urban rural divide regional disaggregation and the convergence of crime potential regional variation in crime rates has been recognized as an issue of clear importance given its implications for the development and evaluation of theories of criminal activity determining the appropriate level of disaggregation at which to undertake empirical analyses of crime and whether crime fighting policies should be constructed at a national or local level consequently a literature has evolved examining the similarities in us regional crime rates and whether a national trend exists or is emerging the present article extends the recent research into the emergence of a national trend by considering convergence in alternative classifications of crime using a data set subject to a higher degree of disaggregation than considered hitherto the results obtained overturn previous findings obtained using more highly aggregated data indicating the detection of convergence to be dependent upon the level of disaggregation considered in addition the extent of convergence detected is shown to va

risk matching behavior in microcredit group formation evidence from northern ethiopia theoretical models on group lending assume the formation of groups of homogenous risk types recent theoretical and empirical findings challenge this view arguing that when markets for insurance are missing risk homogeneity may not hold any more and risk heterogeneity can be the optimal outcome using data from an mfi in tigray ethiopia this article examines the homogeneity hypothesis and reflects on implications for repayment no evidence is found that supports risk homogeneity even accounting for matching frictions however we also do not find an explicit link between the presence of risk heterogeneity and side payments due to missing insurance as suggested in the literature instead other trust based social networks seem to underlie heterogeneity such social networks are often synchronized with credit groups and influence the probability of repayment under heterogeneity the implication is that successful repayment rates in group lending need not arise only under risk homogeneity but can also arise under risk heterogeneity heterogeneity may also serve to bridge missing insurance markets in poor rural environments mfis therefore need to consider such local conditions when designing their lending schemes

taxation by auction fund raising by 19th century indian guilds abstract we describe a unique institution used by 19th century indian guilds to raise funds on certain holidays only one shop was allowed to operate an auction would be held to sell this right and the winning bid would go to the guild fund we compare this taxation by auction mechanism with more conventional tax schemes and show that under certain conditions not only will a majority of guild members prefer to be taxed via an auction but that this form of taxation will be more equitable

rotating savings and credit associations when participants are risk averse we model rotating savings and credit associations roscas among risk averse participants who experience privately observed income shocks a random rosca is not advantageous whereas a bidding rosca is if temporal risk aversion is less pronounced than static risk aversion the payoff scheme of a bidding rosca facilitates risk sharing in the presence of information asymmetries the risk sharing performance of a simple arrangement where a group of homogenous individuals runs several bidding roscas simultaneously is as good as that of a linear risk sharing contract and is more enforceable because it carries a fixed rather than a variable contribution

the anatomy of an informal financial market rosca participation in taiwan abstract little is known about informal financial markets in developing countries this paper analyzes participation in rotating savings and credit associations using a national household survey from taiwan we find that participation is highest among high income households there is some evidence that income stability may play a role as well life cycle differences suggest a role in funding durables purchases our evidence indicates that roscas may be an alternative savings device to the formal financial sector

environmental taxation policy in the eu new methodology approach abstract main problem addressed in this paper is assessment of quality of current methodologies for expressing environmental tax revenue since measurements outcomes have significant influence on the future environmental policies and legislation the main goal of this paper is to analyze the existing way of measuring financial effects of environmental taxation in eu27 and propose new methodology approach based on use of ete environmental taxation efficiency as a new indicator suggested by authors the first phase of the study involves the analysis of quality of measuring two existing methodologies based on the use of gdp and total revenues in second research stage the authors apply the newly proposed methodology for determining a composite ete indicator that apart from existing indicators takes into account the environmental taxation effects per capita as an indicator unjustifiably neglected in previous methods of measuring measurement of environmental taxation by using a newly proposed composite indicator shows significant differences in ranking compared to two current methodologies in use only 6 countries showed a very similar rank regardless of the methodology applied differences by more than ten ranking positions were found in 12 countries the overall results showed significant differences in ranking of all eu 27 countries by using all four indicated methodologies which clearly points to the conclusion that further improvements are needed ete methodology limits predominant role of gdp and introduces a social component which should serve as a basis for further development of a unique methodology for establishing efficient environmental taxation implementation

distribution dynamics of property crime rates in the united states using crime data for the 48 continental and conterminous us states and the distribution dynamics approach this paper detects two distinct phases in the evolution of the property crime distribution a period of strong convergence 1971 1980 is followed by a tendency towards divergence and bimodality 1981 2010 moreover the analysis reveals that differences in income per capita and police can explain the emergence of a bimodal shape in the distribution of property crime in fact after conditioning on these variables the bimodality completely disappears this empirical evidence is consistent with the predictions of a two region model that stresses the importance of income inequality in determining the dynamics of the property crime distribution

financial liberalization and aggregate consumption the evidence from taiwan this paper considers the effect of financial liberalization on aggregate consumption with a special focus on taiwan which has sustained a high savings rate and a rapid rate of economic growth under financial dualism but has undertaken financial liberalization since the 1980s leading to an expansion of the formal financial sector the paper finds that because of an active informal financial sector consumers in taiwan are less credit constrained than in other developing countries however the expansion of the formal financial sector has contributed to some relaxation of consumer credit constraints and thereby changes in the income and interest elasticities of consumption it also has brought about a higher consumption growth rate offsetting at least partially the positive growth effect of financial liberalization which helps improve the efficiency in finanacial intermediation

why do increased arrest rates appear to reduce crime deterrence incapacitation or measurement error this paper attempts to discriminate between deterrence incapacitation and measurement error as explanations for the negative empirical relationship between arrest rates and crime measurement error cannot explain the observed patterns in the data incapacitation suggests that an increase in the arrest rate for one crime will reduces all crime rates deterrence predicts that an increase in the arrest rate for one crime will lead to a rise in other crimes as criminals substitute away from the first crime empirically deterrence appears to be the more important factor particularly for property crimes jel k42

the impact of formal financial inclusion on informal financial intermediation and cash preference evidence from africa this paper examines the effect of formal financial intermediation inclusion on informal financial intermediation and the use of cash for economic activities using data from the global findex 201

the impact of legalized abortion on crime we offer evidence that legalized abortion has contributed significantly to recent crime reductions crime began to fall roughly eighteen years after abortion legalization the five states that allowed abortion in 1970 experienced declines earlier than the rest of the nation which legalized in 1973 with roe v wade states with high abortion rates in the 1970s and 1980s experienced greater crime reductions in the 1990s in high abortion states only arrests of those born after abortion legalization fall relative to low abortion states legalized abortion appears to account for as much as 50 percent of the recent drop in crime

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