export market performance of oecd countries an empirical examination of the role of cost competitiveness we investigate the relationship between export market shares and relative unit labour costs using a long panel of 12 manufacturing industries across 14 oecd countries we ask how sensitive are export market shares to changes in relative costs and what determines this sensitivity both costs and embodied technology are important but neither can fully explain changing export positions we explore whether residual country specific trends might be linked to deep structural features of economies sensitivity to labour costs is lower in high tech industries and core erm countries industry elasticities have increased especially in industries subject to increasing product market competition

the economic impact of social ties evidence from german reunification we use the fall of the berlin wall in 1989 to show that personal relationships which individuals maintain for noneconomic reasons can be an important determinant of regional economic growth we show that west german households who had social ties to east germany in 1989 experienced a persistent rise in their personal incomes after the fall of the berlin wall moreover the presence of these households significantly affects economic performance at the regional level it increases the returns to entrepreneurial activity the share of households who become entrepreneurs and the likelihood that firms based within a given west german region invest in east germany as a result west german regions that for idiosyncratic reasons have a high concentration of households with social ties to the east exhibit substantially higher growth in income per capita in the early 1990s a one standard deviation rise in the share of households with social ties to east germany in 1989 is associated with a 4 7 percentage point rise in income per capita over six years we interpret our findings as evidence of a causal link between social ties and regional economic

social networks and the process of globalization we propose a stylised dynamic model to understand the role of social networks in the phenomenon we call globalization this term refers to the process by which even agents who are geographically far apart come to interact thus being able to overcome what would otherwise be a fast saturation of local opportunities a key feature of our model is that the social network is the main channel through which agents exploit new opportunities therefore only if the social network becomes global heuristically it reaches far in few steps can global interaction be steadily sustained to shed light on the conditions under which such a transformation may or may not take place is the main objective of the paper one of the main insights arising from the model is that in order for the social network to turn global the economy needs to display a degree of geographical cohesion that is neither too high for then global opportunities simply do not arise nor too low then the meeting mechanism displays too little structure for the process to take off but if globalization does materialize we show that it is a robust state of affairs that often arises abruptly as key parameters change this occurs in particular as the rate of arrival of ideas rises or when there is a high enough increase in the range at which the network transmits information

a theory of disagreement in repeated games with bargaining this paper proposes a new approach to equilibrium selection in repeated games with transfers supposing that in each period the players bargain over how to play although the bargaining phase is cheap talk following a generalized alternating offer protocol sharp predictions arise from three axioms two axioms allow the players to meaningfully discuss whether to deviate from their plan the third embodies a theory of disagreement that play under disagreement should not vary with the manner in which bargaining broke down equilibria that satisfy these axioms exist for all discount factors and are simple to construct all equilibria generate the same welfare optimal play under agreement generally requires suboptimal play under disagreement whether patient players attain efficiency depends on both the stage game and the bargaining protocol the theory extends naturally to games with imperfect public monitoring and heterogeneous discount factors and yields new insights into classic relational contracting questions

market structure and borrower welfare in microfinance motivated by recent controversies surrounding the role of commercial lenders in microfinance we analyze borrower welfare under different market structures considering a benevolent non profit lender a for profit monopolist and a competitive credit market to understand the magnitude of the effects analyzed we simulate the model with parameters estimated from the mix market database our results suggest that market power can have severe implications for borrower welfare while despite possible information frictions competition typically delivers similar borrower welfare to non profit lending in addition for profit lenders are less likely to use joint liability than non profits

altruism and risk sharing in networks we provide the first analysis of the risk sharing implications of altruism networks agents are embedded in a fixed network and care about each other we study whether altruistic transfers help smooth consumption and how this depends on the shape of the network we identify two benchmarks where altruism networks generate efficient insurance for any shock when the network of perfect altruism is strongly connected and for any small shock when the network of transfers is weakly connected we show that the extent of informal insurance depends on the average path length of the altruism network and that small shocks are partially insured by endogenous risk sharing communities we uncover complex structural effects under iid incomes central agents tend to be better insured the consumption correlation between two agents is positive and tends to decrease with network distance and a new link can decrease or increase the consumption variance of indirect neighbors overall we show that altruism in networks has a first order impact on risk and generates specific patterns of consumption smoothing

equilibrium homophily in networks abstract i look at the equilibrium effects of homophily in network formation games having positive externalities i show that very weak preferences for network effects such as a preference for being part of a clique may result in very high levels of homophily at equilibrium i present an empirical procedure that allows an evaluation of the role of network effects on the observed level of homophily in the data i apply my method to the formation of friendship networks in the usa i show that network effects are small and have a negligible contribution to the observed racial homophily in friendship networks

renegotiation and symmetry in repeated games abstract the paper derives a theory of renegotiation proofness in symmetric repeated games based on a notion of equal bargaining power according to consistent bargaining equilibrium a player can mount a credible objection to a continuation equilibrium in which he receives a particular expected present discounted value if there are other self enforcing agreements that never give any player such a low continuation value after any history the definition does not imply strongly symmetric solutions but under modest assumptions consistent bargaining equilibria of infinitely repeated games with perfect monitoring are strongly symmetric such solutions have an unusually elementary characterization journal of economic literature classification numbers c7 c72

risk sharing networks and insurance against illness most risk sharing tests on developing country data are conducted at the level of the village generally the full risk sharing hypothesis is rejected this paper uses detailed data on all insurance networks within a village in tanzania networks are not clustered but largely overlapping we test whether full risk sharing occurs within these networks while village level full insurance cannot be rejected for food consumption we find evidence consistent with at least partial insurance of non food consumption via networks

time consistent taxation by a government with redistributive goals abstract in a dynamic economy whose government is interested in both equity and efficiency time consistency problems arise even if the government has access to nondistortionary tax instruments moral hazard in production leads to a nondegenerate distribution of income which the government would like to flatten ex post self enforcing social agreements can mitigate the tendency toward excessive redistribution we investigate the nature of the distortions caused by the time consistency problem and show that in the constrained optimal equilibrium usually a linear tax schedule is imposed this remains true if renegotiation of the social agreement is possible journal of economic literature classification numbers c7 c73 e6 h21

exchange rate volatility and exports new empirical evidence from the emerging east asian economies this paper examines the impact of bilateral real exchange rate volatility on real exports of five emerging east asian countries among themselves as well as to 13 industrialised countries we recognise the specificity of the exports between the emerging east asian and industrialised countries and employ a generalised gravity model in the empirical analysis we use a panel comprising 25 years of quarterly data and perform unit root and cointegration tests to verify the long run relationship among the variables the results provide strong evidence that exchange rate volatility has a negative impact on the exports of emerging east asian countries in addition the results suggest that the pattern of bilateral exports is influenced by third country variables an increase in the price competitiveness of other emerging east asian countries has a negative impact on a country s exports to a destination market but the magnitude of the impact is relatively small these results are robust across different estimation techniques and do not depend on the variable chosen to proxy exchange rate uncertainty the results of the gmm iv estimation also confirm the negative impact of exchange rate volatility on exports and suggest that this negative relationship is not driven by simultaneous causality bias

commitment mechanisms and compliance with health protecting behavior preliminary evidence from orissa india this paper presents results that are part of a larger study carried out in five districts of the eastern indian state of orissa where endemic malaria represents one of the most serious public health concerns one of the study s objectives designed in collaboration with the micro lender bharat integrated social welfare agency was to evaluate the possibility of using specifically designed consumer loan contracts to increase ownership and retreatment rates for insecticide treated bednets

meeting strangers and friends of friends how random are social networks we present a dynamic model of network formation where nodes find other nodes with whom to form links in two ways some are found uniformly at random while others are found by searching locally through the current structure of the network e g meeting friends of friends this combination of meeting processes results in a spectrum of features exhibited by large social networks including the presence of more high and low degree nodes than when links are formed independently at random having low distances between nodes in the network and having high clustering of links on a local level we fit the model to data from six networks and impute the relative ratio of random to network based meetings in link formation which turns out to vary dramatically across applications we show that as the random network based meeting ratio varies the resulting degree distributions can be ordered in the sense of stochastic dominance which allows us to infer how the formation process affects average utility in the network

cooperation punishment and immigration abstract we study the incentive to cooperate in a society comprised of citizens and immigrants the level of cooperation is governed by a steady state under population dynamics along with the behavior of individual citizens and immigrants we provide an equilibrium characterization exhibiting a uniquely determined positive level of cooperation in society we then use this framework to study the impact of government programs aimed at punishing immigrants who defect when agents produce offspring we show that a consequence of such punishment is that while the incentive for immigrants to defect decreases there is an equilibrium substitution effect whereby citizens realize an increased incentive to defect

credibly identifying social effects accounting for network formation and measurement error understanding whether and how connections between agents networks such as declared friendships in classrooms transactions between firms and extended family connections influence their socio economic outcomes has been a growing area of research within economics early methods developed to identify these social effects assumed that networks had formed exogenously and were perfectly observed both of which are unlikely to hold in practice a more recent literature both within economics and in other disciplines develops methods that relax these assumptions this paper reviews that literature it starts by providing a general econometric framework for linear models of social effects and illustrates how network endogeneity and missing data on the network complicate identification of social effects thereafter it discusses methods for overcoming the problems caused by endogenous formation of networks finally it outlines the stark consequences of missing data on measures of the network and regression parameters before describing potential solutions

politician family networks and electoral outcomes evidence from the philippines we demonstrate the electoral importance of politician family networks and provide evidence of the mechanisms behind the relationship we use a 20 million person dataset allowing us to reconstruct intermarriage networks for over 15 000 villages in 709 municipalities in the philippines we show that politicians are disproportionately drawn from more central families and that controlling for candidate fixed e ects candidates receive a higher vote share in villages where their families are more central we present evidence that centrality confers organizational and logistical advantages that facilitate clientelistic transactions such as vote buying and do not operate through popularity name recognition or through the choice of policies more aligned with their constituents preferences

unilateral climate policy and competitiveness economic implications of differential emission pricing unilateral emission reduction commitments raise concerns on international competitiveness and emission leakage that result in preferential regulatory treatment of domestic energy intensive and trade exposed industries our analysis illustrates the potential pitfalls of climate policy design which narrowly focuses on competitiveness concerns about energy intensive and trade exposed eite branches the sector specific gains of preferential regulation in favour of these branches must be traded off against the additional burden imposed on other industries beyond burden shifting between industries differential emission pricing bears the risk for substantial excess cost in emission reduction as policy concedes too low carbon prices to eite industries and thereby foregoes relatively cheap abatement options in these sectors from the perspective of global cost effectiveness we find that differential emission pricing of eite industries hardly reduces emission leakage since the latter is driven through robust international energy market responses to emission constraints as a consequence the scope for efficiency compared to uniform pricing is very limited only towards stringent emission reduction targets will a moderate price differentiation achieve sufficient gains from leakage reduction to offset the losses of diverging marginal abatement cost

asean and china export rivals or partners in regional growth hina s initial opening to the world economy in the late 1980s followed by its relatively rapid trade liberalisation in the second half of the 1990s and its recent wto accession has prompted extensive debate amongst the policy community in many countries 1 governments of the asean group in particular have been extremely concerned at the prospect of fdi diversion and the loss of export market share in oecd economies to china this paper summarises detailed empirical research by the authors intended to strengthen the basis of evidence on the important issue of export rivalry in particular we seek to elucidate the underlying properties of comparative advantage and export competition in the countries concerned synthesising detailed trade flow and econometric analysis our econometric results indicate that in the short run at least asean and china are experiencing intensified export competition in prominent third markets such as japan and the us more extensive trade flow analysis reveals however that in the long run globalisation can accommodate export growth by all the economies of east asia if aggregate growth can be sustained to facilitate the structural adjustments necessary for an optimal regional division of labour more specifically the path forward is not without potential rivalry but wellinformed policy makers can anticipate emergent challenges and take the steps necessary to mitigate adjustment costs and promote longer term efficiency whatever the ultimate course of development in east asia it is clear that the forces at work are complex and in many cases unprecedented policy makers relying on

social norms and random matching games abstract nash equilibrium has been tremendously useful in understanding economic problems in which strategic behavior is important the theoretical foundations of the solution concept often include the assumption that the game to be played is common knowledge an unrealistic assumption in games with many players we introduce the concept of norm equilibrium for random matching games a norm equilibrium is a nash equilibrium that relies on substantially less information than common knowledge of the game we use norm equilibria to provide a folk theorem for random matching games and to analyze increasing numbers of players in a random matching game journal of economic literature classification numbers c70 c72

ostracism and forgiveness many communities rely upon ostracism to enforce cooperation if an individual shirks in one relationship her innocent neighbors share information about her guilt in order to shun her while continuing to cooperate among themselves however a strategic victim may herself prefer to shirk rather than report her victimization truthfully if guilty players are to be permanently ostracized then such deviations are so tempting that cooperation in any relationship is bounded by what the partners could obtain through bilateral enforcement ostracism can improve upon bilateral enforcement if tempered by forgiveness through which guilty players are eventually readmitted to cooperative society

group size and the efficiency of informal risk sharing this paper seeks to understand and test empirically the relationship between group size and informal risk sharing models of informal risk sharing with limited commitment and grim trigger punishments upon deviation imply that larger groups provide better insurance however when subgroups of households can credibly deviate so that sustainable informal arrangements ought to be coalition proof the relationship between group size and the amount of insurance is unclear building on genicot and ray 2003 we show that this relationship is theoretically ambiguous we then investigate it empirically using data on the size of the sibships of the household head and spouse in rural malawi to identify the relevant potential risk sharing group we exploit a social norm among the main ethnic group in our sample that the wife s brothers play a key role in ensuring her household s wellbeing we find that households where the wife has many brothers are poorly insured against crop loss events we fail to uncover a similar relationship for the wife s sisters ruling out that our findings are driven by wives with many siblings e g brothers simply having poorer extended family networks a simple calibration exercise indicates that the threat of coalitional deviations can explain our empirical findings

an economic approach to social capital a standard optimal investment model can be used to analyse an individual s decision to accumulate social capital we analyse six facts that support the predictions of this individual based approach 1 social capital first rises and then falls with age 2 social capital declines with expected mobility 3 social capital rises in occupations with greater returns to social skills 4 social capital is higher among homeowners 5 social connections fall sharply with physical distance 6 people who invest in human capital also invest in social capital we fail to find robust evidence that social capital investments fall with the value of time or that geographic religious groups generate social capital complementarities

asymmetric network monitoring and punishment in public goods experiments abstract we extend the recent experimental literature on incomplete punishment networks in linear public goods games in these games we use an exogenous network to restrict both monitoring and the set of feasible punishment flows in addition to two baseline structures the complete network and the circle network we examine a novel asymmetric network in which both punishment responsibility and exposure differ across players average contributions are significantly lower in the asymmetric network driven entirely by the under monitored player who faces only one potential punisher we formulate and examine the hypothesis that asymmetry among a player s potential punishment targets may lead to discriminatory patterns of punishment in particular players might wish to punish targets for whom they are solely responsible discriminately more than targets for whom they share responsibility the experimental data do not support this hypothesis although they do suggest a compelling explanation as to why specifically we find that the under monitored player in the network retaliates against previous punishment significantly more often than others in the group which deters their only potential punisher from issuing stronger sanctions thus an additional complication of asymmetry in the network is that it may lead to more instances of anti social retaliation inhibiting the effectiveness of the decentralized punishment institution

china s growing influence in southeast asia monetary policy and equity markets this study analyses the potential transmission of china s monetary policy shocks to equity markets in southeast asia impulse response functions indicate that the impact of a monetary expansion in china is significant and positive for four of the five southeast asian equity markets one explanation for this result is that monetary policy shocks in china lead to an increase in demand for goods and services in both china and abroad which then shows up in the foreign equity market the results in this paper provide evidence of china s influence in southeast asia and its financial markets the transmission effect is small and very short lived but can be expected to increase if the current trends of a deepening economic integration between china and southeast asia and a maturing chinese central bank continue

the economic consequences of social network structure we survey the literature on the economic consequences of the structure of social networks we develop a taxonomy of macro and micro characteristics of social interaction networks and discuss both the theoretical and empirical findings concerning the role of those characteristics in determining learning diffusion decisions and resulting behaviors we also discuss the challenges of accounting for the endogeneity of networks in assessing the relationship between the patterns of interactions and behaviors

kinship and financial networks formal financial access and risk reduction kinship networks are beneficial for smoothing consumption and investment but the channels are not well understood we study the financing devices used for consumption and investment by thai households households that are connected to banks achieve significantly better consumption smoothing than unconnected households indirect connections via inter household borrowing are as effective as direct borrowing investment appears to be facilitated by kinship households with kin in the village display reduced sensitivity of investment to income while connections to banks do not significantly reduce sensitivity kin may act as implicit collateral permitting borrowing that would violate repayment constraints in its absence

the illusion of sustainability this brief summarizes the results of a gender impact evaluation study entitled the illusion of sustainability conducted during the time period 1998 to 2001 in kenya the study observed that deworming is a public good since much of its social benefit comes through reduced disease transmission people were less likely to take deworming if their direct first order or indirect second order social contacts were exposed to deworming the introduction of a small fee for deworming drugs led to an 80 percent reduction in treatment rates take up was not sensitive to the exact price level suggesting that it is particularly counter productive to charge small positive prices for the treatment of infectious diseases an intensive school health education had no impact on worm prevention funding for the study derived from world bank nih fogarty international center berkeley center for health research

the role of social capital in financial development to identify the effect of social capital on financial development we exploit social capital differences within italy in high social capital areas households are more likely to use checks invest less in cash and more in stock have higher access to institutional credit and make less use of informal credit the effect of social capital is stronger where legal enforcement is weaker and among less educated people these results are not driven by omitted environmental variables since we show that the behavior of movers is still affected by the level of social capital of the province where they were born

cooperation with network monitoring this paper studies the maximum level of cooperation that can be sustained in perfect bayesian equilibrium in repeated games with network monitoring where players observe each other s actions either perfectly or not at all the foundational result is that the maximum level of cooperation can be robustly sustained in grim trigger strategies if players are equally well monitored comparative statics on the maximum level of cooperation are highly tractable

sanctions in networks the most unkindest cut of all the extensive literature on sanctions has mainly focused on a dyadic interaction between sender and target in contrast this paper examines sanctions when the sender and target are embedded in a network of linkages to other agents the sender can assemble a sanctioning coalition of neighbors to sever their links execute multi link cuts to the target and her allies efficacy of sanctions is now crucially dependent on the network architecture we characterize the structural properties of networks in which a sender can effectively sanction a target in the short run when links can only be deleted and the long run when links can be both deleted and added

recurrent trade agreements and the value of external enforcement abstract this paper presents a theory of dynamic trade agreements in which external institutions such as the wto play a central role in supporting credible enforcement in our model countries engage in ongoing negotiations and as a consequence cooperative agreements become unsustainable in the absence of external enforcement institutions by using mechanisms such as delays in dispute resolution and direct penalties enforcement institutions can restore incentives for cooperation despite the lack of coercive power the occurrence of costly trade disputes and the feasibility of mechanisms such as escape clauses depend on the degree to which enforcement institutions can verify and condition on events that may lead to trade disputes

social capital and social quilts network patterns of favor exchange we examine the informal exchange of favors in societies such that any two individuals interact too infrequently to sustain exchange but such that the social pressure of the possible loss of multiple relationships can sustain exchange patterns of exchange that are locally enforceable and renegotiation proof necessitate that all links are supported any two individuals exchanging favors have a common friend in symmetric settings such robust networks are social quilts tree like unions of completely connected subnetworks examining favor exchange networks in 75 villages in rural india we find high levels of support and identify characteristics that correlate with support

network structure and the aggregation of information theory and evidence from indonesia abstract we use unique data from over 600 indonesian communities on what individuals know about the poverty status of others to study how network structure influences information aggregation we develop a model of semi bayesian learning on networks which we structurally estimate using within village data the model generates qualitative predictions about how cross village patterns of learning relate to network structure which we show are borne out in the data we apply our findings to a community based targeting program where citizens chose households to receive aid and show that the networks that the model predicts to be more diffusive differentially benefit from community targeting jel d14 d83 d85 i32 o12 z13

micro loans insecticide treated bednets and malaria evidence from a randomized controlled trial in orissa india we describe findings from the first large scale cluster randomized controlled trial in a developing country that evaluates the uptake of a health protecting technology insecticide treated bednets itns through micro consumer loans as compared to free distribution and control conditions despite a relatively high price 52 percent of sample households purchased itns highlighting the role of liquidity constraints in explaining earlier low adoption rates we find mixed evidence of improvements in malaria indices we interpret the results and their implications within the debate about cost sharing sustainability and liquidity constraints in public health initiatives in developing countries

trust and social collateral this paper builds a theory of trust based on informal contract enforcement in social networks in our model network connections between individuals can be used as social collateral to secure informal borrowing we define network based trust as the largest amount one agent can borrow from another agent and derive a reduced form expression for this quantity which we then use in three applications 1 we predict that dense networks generate bonding social capital that allows transacting valuable assets whereas loose networks create bridging social capital that improves access to cheap favors such as information 2 for job recommendation networks we show that strong ties between employers and trusted recommenders reduce asymmetric information about the quality of job candidates 3 using data from peru we show empirically that network based trust predicts informal borrowing and we structurally estimate and test our model

justifiable punishments in repeated games abstract in repeated games subgame perfection requires all continuation strategy profiles must be effective to enforce the equilibrium they serve as punishments should deviations occur it does not require whether a punishment can be justified for the deviation which creates a great deal of freedom in constructing equilibrium strategies resulting the well known folk theorem we introduce justifiable punishments in repeated games after one player deviates the corresponding continuation or punishment is justifiable if either the deviation is bad to the other player or the continuation itself is good to the other player we characterize the set of payoff vectors that can be supported by subgame perfect equilibria with justifiable punishments as the discount factor goes to one this limiting set of equilibrium payoffs can be quite different from the set of subgame perfect equilibrium payoffs any efficient feasible and strictly individually rational payoff can be supported by equilibrium with justifiable punishments

costly bargaining and renegotiation we identify the inefficiencies that arise when negotiation between two parties takes place in the presence of transaction costs first for some values of these costs it is efficient to reach an agreement but the unique equilibrium outcome is one in which agreement is never reached secondly even when there are equilibria in which an agreement is reached we find that the model always has an equilibrium in which agreement is never reached as well as equilibria in which agreement is delayed for an arbitrary length of time finally the only way in which the parties can reach an agreement in equilibrium is by using inefficient punishments for some of the opponent s deviations we argue that this implies that when the parties are given the opportunity to renegotiate out of these inefficiencies the only equilibrium outcome which survives is the one in which agreement is never reached regardless of the value of the transaction costs

barriers to formal saving micro and macroeconomic effects this paper examines different barriers to formal saving considering various interventions and their possible effects at microeconomic and macroeconomic levels it presents a comprehensive review of the literature based on a detailed classification of the barriers associated with supply side factors related to access to financial products and demand side barriers related to the use and frequency of use of those products the paper concludes that this classification and analysis contributes to a fuller understanding of the question of financial inclusion and how to achieve it

why the west became wild informal governance with incomplete networks settlers flocking to boomtowns on the american western frontier were faced with the same task that communities in weak states across the globe face in contemporary times self governance peer sanctions can enforce cooperation in these environments but their efficacy depends on the social networks that transmit information from peer to peer the author uses a game theoretic model to show that peripheral network positions can generate such strong incentives to misbehave that persistent cheating occurs in equilibrium the model reveals that groups maintaining high levels of cooperation that face shocks to their strategic environment or to their network can ratchet down into less cooperative equilibria in which the most peripheral become ostracized furthermore population change that features rapid growth high turnover and enclave settlements can undermine cooperation the insights from this article help to explain the trajectory of cooperation in the mining towns of the wild west in which high levels of cooperation deteriorated as the population surged and help to make sense of why only certain nonwhite settlers were targets of hostility and racism

networks in economic development this chapter surveys the implications of some studies in network economics research for economic development we focus on information flow and risk sharing two topics where work in theory empirics and policy analysis have been especially intensive and complementary in analysing information we distinguish models of information diffusion and aggregation highlight how different models imply very different guidance regarding the right way to seed information in discussing risk sharing we look at the key frictions that impede efficient informal insurance and some potential unintended consequences when policymakers intervene to help throughout we stress practical insights that can be used with limited measurement of the details of networks

a strategic model of social and economic networks we study the stability and efficiency of social and economic networks when self interested individuals can form or sever links first for two stylized models we characterize the stable and efficient networks there does not always exist a stable network that is efficient next we show that this tension persists generally to assure that there exists a stable network that is efficient one is forced to allocate resources to nodes that are not responsible for any of the production we characterize one such allocation rule the equal split rule and another rule that arises naturally from bargaining of the players

reciprocity in groups and the limits to social capital robert putnam defines social capital as features of social organization such as networks norms and social trust that facilitate coordination and cooperation putnam 1995 67 such networks are typically associated with norms that promote coordination cooperation and reciprocity for the mutual benefit of network members these norms coupled with the appropriate use of sanctions in case of noncompliance are often thought to enable these groups to deal smoothly and effectively with multiple social and economic issues at the same time some authors have noted that strongly bonded groups may have adverse consequences for others see for instance alejandro portes and patricia landolt 1996 or even for themselves see for instance george akerlof 1976 or kaushik basu 1986 it is this latter aspect that we wish to emphasize in these notes

renegotiation in repeated games with side payments abstract we consider repeated games with side payments players have an endowment of wealth in each period in which transfers can be made we show that if endowments are large enough and the common discount factor high enough then a strongly renegotiation proof equilibrium srp in the sense of farrell and maskin exists as the discount factor goes to 1 the set of srp payoffs converges to the set of efficient individually rational payoffs these results provide a justification for the efficiency principle when agreements are not enforceable journal of economic literature classification numbers c73 d23 l14

sanctions in networks abstract in this paper we contribute to the sender target models of sanctions by explicitly incorporating the linkages social political or economic that bind the sender and target to other agents given any network model and architecture we draw attention to two factors that play a key role in determining the efficacy of sanctions in reducing the frequency of violations these are respectively strategic complementaritiesbetween the sanctioning action deleting link with target and number of direct links of the sender and the externalities imposed on the sender by third parties we examine the role played by these factors both in the short run when links can only be deleted and the long run when links can also be added as well as when sanctions are unilateral the sender can only delete own links or multilateral the sender can impose on common allies to sever links to the target our analysis allows an active role to the target to build an opposing coalition to deflect sanctions and to third parties to engage in sanction busting it also extends to multiple senders and targets existence of interest groups within sender and target with dissimilar objectives and signed networks allowing both antagonistic and cordial bilateral relationships

social division with endogenous hierarchy many societies are divided into multiple smaller groups certain kinds of interaction are more likely to take place within a group than across groups i model a reputation effect that enforces these divisions people who are observed to interact with members of different groups are believed to be less trustworthy by members of their own group a hierarchical relationship between groups appears endogenously in equilibrium the information requirements for my equilibrium to exist are much less demanding than the information requirements in related models these different information requirements correspond to concrete differences between the institutions of different indian castes

economic shocks and labor market flexibility we test how labor markets adjust to large but temporary economic shocks in a context in which such shocks are common using an individual level panel from 1 140 philippine municipalities over 26 quarters we find that workers in areas affected by strong typhoons experience reductions in hours worked and hourly wages without evidence of layoffs the results are strongest for formal wage paying jobs we argue that those results are best explained by implicit contracts where workers and firms share risks we provide extensive qualitative data suggesting that employment contracts in the philippines allow for such flexibility abstract from author

clean money dirty system connected landowners capture beneficial land rezoning we use a unique regulatory event that occurred in queensland australia from 2007 to 2012 to examine the predictive power of landowner relationship networks and lobbying behaviour on successfully gaining value enhancing rezoning a state authority the urban land development authority ulda took planning control away from local councils in selected areas in order to increase the speed and scale of development in those areas in the process increasing land values using micro level relationship data from multiple sources we compare the relationship network characteristics of landowners of comparable sites inside and outside the ulda areas finding that connected landowners owned 75 of land inside the rezoned areas and only 12 outside capturing 410 million in land value gains out of the total 710 million from rezoning we also find that engaging a professional lobbyist is a substitute for having one s own connections scaling up from our sample of six rezoned areas to the hundreds of rezoning decisions across queensland and australia in the last few decades suggests that many billions of dollars of economic rent are being regularly transferred from the general population to connected landowners through political rezoning decisions

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

measuring the impact of china s export growth on its asian neighbours the rise of china as an economic power has led to concern in many countries especially among asian countries that this development poses a serious threat to their own economic performance and in particular their ability to export the empirical support for this view remains inconsistent however with mixed evidence for the view that chinese exports has harmed or helped exports by other asian economies and which countries are more or less affected one explanation for these inconsistencies might include the various biases that follow from the use of a gravity model that is specified in an a theoretical manner in this paper we study the effect of the chinese exports growth on those by other asian countries using the empirical framework outlined by baldwin and taglioni 2006 the disadvantage of this approach is that we capture the relative effect rather than its direction that is when using the theoretically robust gravity model we are able to identify which countries are more or less harmed by chinese exports and not whether the effect is positive or negative to identify that we use instead trade on parts and components and final goods taken together we evidence of a positive relation between chinese and its asian neighbours exports with countries with greater endowments of human capital and capital labour ratio benefiting most from this growth

the effect of decisions under uncertainty on imperfect monitoring games abstract the study of repeated games with imperfect public information began with abreu d pearce d stacchetti e 1986 optimal cartel equilibria with imperfect monitoring journal of economic theory 39 251 269 using dynamic decomposition and was settled in fudenberg d levine d maskin e 1994 the folk theorem with imperfect public information econometrica 62 997 1039 however we suggest that if the effect of uncertainty and irreversibility are considered when punishment is exercised the set of perfect public equilibria and their payoffs would change

social norms and the enforcement of laws we examine the interplay between social norms and the enforcement of laws agents choose a behavior e g tax evasion production of low quality products corruption harassing behavior substance abuse etc and then are randomly matched with another agent there are complementarities in behaviors so that an agent s payoff decreases with the mismatch between her behavior and her partner s and with overall negative externalities created by the behavior of others a law is an upper bound cap on behavior a law breaker when detected pays a fine and has her behavior forced down to the level of the law equilibrium law breaking depends on social norms because detection relies at least in part on whistle blowing law abiding agents have an incentive to whistle blow on a law breaking partner because this reduces the mismatch with their partners behaviors as well as the negative externalities when laws are in conflict with norms and many agents are breaking the law each agent anticipates little whistle blowing and is more likely to also break the law tighter laws banning more behaviors greater fines and better public enforcement all have counteracting effects reducing behavior among law abiding individuals but increasing it among law breakers we show that laws that are in strong conflict with prevailing social norms may backfire whereas gradual tightening of laws can be more effective in influencing social norms and behavior

optimal incentives for teams much of the existing theory of incentives describes a static relationship that lasts for just one transaction this static assumption is not only unrealistic but the resulting predictions appear to be at odds with many work organizations the current paper introduces possible long term interaction among agents and studies how the design of explicit incentives and work organizations can exploit and interact with the implicit incentives generated by the repeated interaction of the agents the optimal incentive scheme is shown to display observed features of the increasingly popular teams such as the use of low powered group incentives