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

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

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

beauty and the labor market the authors examine the impact of looks on earnings using interviewers ratings of respondents physical appearance plain people earn less than average looking people who earn less than the good looking the plainness penalty is 5 to 10 percent slightly larger than the beauty premium effects for men are at least as great as for women unattractive women have lower labor force participation rates and marry men with less human capital better looking people sort into occupations where beauty may be more productive but the impact of individuals looks is mostly independent of occupation suggesting the existence of pure employer discrimination copyright 1994 by american economic association

better monetary control may increase the inflationary bias of policy textabstractexplores the implications of imperfect monetary control and uncertainty about the trade off between output and inflation to discretionary policy impact of imperfect control of money growth on policymakers incentive to create surprises consequences of imperfect control of money growth for optimal monetary policy welfare effects of uncertainty about the extent to which inflation affect output

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

ec 1992 from a north american perspective completion of the european community s internal market will force important changes in the economies of member countries and the effects of those changes will spill over into the rest of the world within the ec the prevailing view has been steadfast in the expectation that the benefits of further integration will exceed the costs this has been especially the case among european businessmen who have been in the lead in this phase of economic integration 1 as the target date of i992 draws closer however the level of anxiety especially about the costs of adjustment appears to be rising in some sectors and some 2 countries attitudes in non member countries in both private and official circles have varied the initial response from the executive branch in the united states was favourable there has however been considerable fear among u s business and labour leaders that completion of the internal market would be accompanied by a conversion of europe into an economic fortress with sharply reduced access to foreigners in some european non member countries notably austria and sweden the prevailing view favours membership the insider outside issue is still being debated in switzerland and elsewhere and is likely to play a role in the trade strategies of a number of eastern european countries in north america the united states has entered into a free trade agreement with canada and is poised for negotiations with mexico some have suggested that american interest in regional trading pacts has been motivated in part at least by a strategic desire to strengthen the united states bargaining hand with the ec while regionalism thus thrives the trade talks of the uruguay round lie moribund if completed as planned the current process of economic integration in europe will replace a group of national markets segmented in various degrees by a proliferation of non tariff barriers with a single regional market if plans for monetary integration also reach fruition they will replace a system of multiple currency areas with a single regional currency domain from the perspective of the outsider there are three broad areas of concern about the external effects of the ongoing process of real and monetary integration in europe the first which is discussed in section ii deals with the implications of goods and resource market integration for outside industries and firms and for outside welfare generally this includes the direct effects of internal liberalisation and the effects of possible changes in the level of

the impact of obesity on wages abstract previous studies of the relationship between body weight and wages have found mixed results this paper uses a larger data set and several regres sion strategies in an attempt to generate more consistent estimates of the effect of weight on wages differences across gender race and ethnicity are explored this paperjnds that weight lowers wages for white females ols esti mates indicate that a difference in weight of two standard deviations roughly 65 pounds is associated with a difference in wages of 9 percent in absolute value this is equivalent to the wage effect of roughly one and a half years of education or three years of work experience negative cor relations between weight and wages observed for other gender ethnic groups appear to be due to unobserved heterogeneity i introduction several previous studies have found among females a negative cor relation between body weight and wages there exist three broad categories of ex planations for this finding the first explanation is that obesity lowers wages for example by lowering productivity or because of workplace discrimination the sec ond is that low wages cause obesity this would be true if poorer people consume

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

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

stature and the standard of living research on the standard of living now emphasizes alternatives or supplements to the national income accounts this paper reviews the results of two decades of research using stature as a measure of health aspects of human welfare after comparing and contrasting stature with per capita income i consider height patterns discovered by economic historians that challenge traditional beliefs about the past including long term trends cycles in heights and the dreadfully small stature of slave children that was followed by catch up growth the paper concludes with comparisons to work in development economics and suggestions for research

expanding the life cycle model precautionary saving and public policy one of the key puzzles in understanding saving behavior is not so much why people save the title of this session but why people don t save according to the familiar life cycle model households should accumulate wealth to provide for their retirement consumption the surprising result from the data is the sizable fraction of the population who have accumulated so little even among those nearing retirement given that earnings will almost surely decline when households retire such behavior can imply poor living standards for the elderly some might interpret the low wealth accumulation as being evidence of myopia irrationality or a failure of households to enforce mental accounting richard thaler 1994 while others might view the low level of wealth accumulation as evidence of high individual rates of time preference determining the underlying causes of low wealth is crucial for public policies that seek to alleviate low aggregate saving rates in the united states as well as policies that seek to buttress the adequacy of financial resources for the elderly in this paper we outline what we believe to be the causes of why many people do not save we conclude by speculating about government policies that may be most effective at encouraging saving much of the research examining levels of consumption saving and wealth as well as their responsiveness to policy has been done using a life cycle model with the simplifying assumption of perfect certainty alan auerbach and laurence kotlikoff 1987 for example developed a model with 55 overlapping generations of individual lifecycle households each with empirically plausible age earnings profiles and utility parameters and used the model to address tax policy and demographic issues in a regime in which all households are identical within a generation and all generations know future earnings and interest rates more recently a line of inquiry has examined the effects of uncertainty on saving generally in the context of highly stylized models this research has shown that in these models uninsured earnings uncertainty can alter optimal saving behavior in a variety of important ways for a partial review of this precautionary saving literature see hubbard et al 1994 in two recent papers hubbard et al 1993 1994 we have combined these two strands of the literature by examining the implications of a life cycle model of consumption saving and wealth accumulation subject to what we think are the three most important sources of uninsured idiosyncratic risk facing households uncertainty about earnings medical expenses and length of life our intent has been to create a realistic model in which families live for many periods working for part of their lives and retiring later in life to parameterize the uncertainty facing families we estimate tdiscussants christopher carroll federal reserve board john b shoven stanford university laurence kotlikoff boston university

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

model uncertainty learning and the gains from coordination this paper considers gains from international economic policy coordination when there is uncertainty concerning the functioning of the world economy but also learning about the true model on the part of policymakers the paper reports estimates of plausible alternative versions of a standard two country model activist policy either coordinated or uncoordinated may produce large welfare losses in the absence of learning if policymakers behave in the wrong model hence exogenous money targets and freely flexible exchange rates may be best however model learning from observations on macroeconomic variables causes coordinated policies to dominate activist uncoordinated policies or exogenous money targets copyright 1991 by american economic association

the labour market impact of body weight in china a semiparametric analysis while a positive wage effect of body mass index bmi is widely observed in low income developing countries a negative wage effect of bmi is often observed in high income developed countries to fill the gap between these previous findings we investigate the relationship between body weight and wages in transition economies we focus on china whose rapid economic growth of the 1990s was followed by a rapid increase in overweight and obesity while still experiencing significant food insecurity and underweight we first use several parametric regression strategies to obtain a consistent estimate of the wage effects of weight second we adopt a semiparametric partially linear model that allows for endogeneity of weight parametric regressions provide mixed results and the sign and magnitude of their estimates are sensitive to the choice of samples and regression strategies semiparametric estimates provide evidence of a wage penalty for very heavy and thin persons among both men and women the wage pena

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

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

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

central bank secrecy in the foreign exchange market abstract this paper argues that with sticky goods prices and a forward looking exchange rate the central bank will only want a partial dissemination of its information about shocks to the economy it is shown that in such a model the central bank may prefer to intervene secretly in the foreign exchange markets when responding in anticipation of future shocks but openly when reacting to current shocks the model thus provides a rationale for secrecy in central bank foreign exchange operations the model also elucidates the relationship between the signaling and portfolio balance channels of sterilized intervention

marriage specialization and the gender division of labor we consider why the gender division of labor is so often enforced by custom and why customary gender divisions of labor generally involve both direction and prohibition in our formal model agents first learn skills and then enter the marriage market we show that wasteful behavior may emerge due to strategic incentives in specialization choice and human capital acquisition and that both problems may be mitigated through a customary gender division of labor this division is not pareto improving both the distributional effects and welfare gains of a customary gender division of labor decrease as opportunities for market exchange increase

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

on the performance of nominal income targeting as a strategy for monetary policy in a small open economy abstract there is a great deal of support for nominal income targeting in the literature on strategies for monetary policy in a closed economy framework is nominal income targeting equally attractive in a small open economy this paper compares nominal income targeting to alternative monetary policy rules in a stochastic macro model for a small open economy we find that both the weighting in the overall price level of the exchange rate and foreign prices and the elasticity of output supplied with respect to the real exchange rate are important factors in assessing the attractiveness of nominal income targeting in a small open economy where the size of both parameters is not negligible a rule targeting the overall price level may actually be preferred to nominal income targeting

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

policy bargains and the problem of model selection abstract parameter uncertainty and disagreements about model specification pose a particular difficulty for economic policy design frankel and rockett argue that if model uncertainty is not explicitly taken into account policy coordination is as likely to decrease welfare as increase it this paper therefore looks at the scope for reducing errors by making strategic model choices part of the overall policy selection procedure it shows that alternative definitions of the policy bargain produces decisions which are robust against disagreements about the correct model while alternative choices of model produce policies which are robust against model uncertainty hence fixed i e model free policy rules are no substitute for making strategic model choices

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

partisan views on the economy in this paper it is argued that political parties may have incentives to adopt a partisan view on the working of the economic system our approach is based on a dynamical spatial voting model in which political parties are policy oriented this model revolves around two interrelated issues x and y the policy maker sets x directly there exist two views on the relationship between x and y model uncertainty confronts policy makers with the problem of the selection of a model to base their actions on we show that if voters have imperfect information about the working of the economic system that model selection contains a strategic element policy makers are inclined to adopt a view on the working of the economic system which fits in with their preferences

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

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

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

health human capital height and wages in china abstract we estimate the returns to height using data from 12 chinese cities we present both ordinary least squares ols and two stage least squares tsls estimates in the latter height is instrumented using proxies for health human capital accumulated in childhood and adolescence which influence adult height the tsls estimates are much higher reflecting the fact that the ols estimates are determined by the random genetic factors influencing height while the tsls estimates also take into account returns from investment in health human capital during childhood and adolescence these results imply considerable returns to investment in health human capital

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

structural uncertainty and subsidy removal for economies in transition abstract economies in transition are faced with a high degree of structural uncertainty i e uncertainty about which it is possible to learn through experience we study structural uncertainty s effects on a subsidy removal program subsidy removal causes unemployment but yields fiscal benefits and facilitates private sector growth when the policymaker does not know the speed with which the private sector absorbs the unemployed he will be driven toward a more decisive and therefore more informative policy the model also rationalizes policy reversals and implies that irreversibility constraints and political instability dampen the learning effect making policy more gradualist

beauty productivity and discrimination lawyers looks and lucre we propose models with an ascriptive characteristic generating earnings differentials and causing sectoral sorting allowing us to distinguish among sources producing such differentials we use longitudinal data on a large sample of graduates from one law school and measure beauty by rating matriculation photographs 1 betterlooking attorneys who graduated in the 1970s earned more than others after 5 years of practice an effect that grew with experience 2 attorneys in the private sector are better looking than those in the public sector differences that rise with age these results support theories of dynamic sorting and customer behavior

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

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

a note on the height wage differential in the uk cross sectional evidence from the bhps abstract using bhps data for the first time evidence for the height earnings relationship is updated for the uk in contrast to prior findings baseline height differentials mainly vanish once individuals occupation and non linear height gradients are accounted for

making sense of the labor market height premium evidence from the british household panel survey we use data from the british household panel survey to examine the labor market premium in height most of the premium is explained by higher average educational attainment and sorting into higher status occupations and industries by those who are taller

height health and cognitive function at older ages research across a number of disciplines has highlighted the role of early life health and circumstance in determining health and economic outcomes at older ages nutrition in utero and in infancy may set the stage for the chronic disease burden that an individual will face in middle age david j barker 1998 barker et al 1989 johann eriksson et al 2001 childhood health may also have significant effects on economic outcomes in adulthood collectively a set of childhood health measures can account for a large fraction of the explained variance in employment and social status observed among a british cohort followed from birth into adulthood anne case angela fertig and christina paxson 2005

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

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

health nutrition and economic development the relationship between health and economic development is explored focusing on nutrition based health indicators the spotlight is placed on the inter related feedbacks between the influence of health on productivity on one hand and the influence of income on health status on the other disentangling causality in these relationships has preoccupied much of the literature we evaluate different empirical strategies that have been adopted and assess the results there is now a body of evidence based on careful empirical studies that demonstrates a causal relationship between health and labor productivity there is also evidence that at least among the very poor additional income is spent on improved nutrition there are two issues that have received little attention although we argue they are likely to be very important first measurement of health is discussed in detail evidence is presented on how taking into account differences in the extent of measurement error is critical for interpreting the impact of health on wages the same theme emerges in studies of the effect of income on health specifically calorie intake the key role of non linearities in these relationships is highlighted and we demonstrate that a good deal of the variation in estimates of income elasticities of demand for calories can be ascribed to the role of measurement and functional form authors

wage gains associated with height as a form of health human capital height is consulted as a latent indicator of early nutrition and lifetime health status height is observed to increase in recent decades in populations where per capita national income has increased and public health activities have grown height is determined by genetic make up and realized in part through satisfactory nutrition and health related care and conditions alternative instrumental variables iv are explored which proxy price and income constraints which are expected to influence the latter reproducible human capital investments in height i report ols and iv estimates of the partial effect of height on log hourly wages in recent national surveys from three countries ghana brazil and the united states i conclude that the human capital productivity effect of height estimated by parent education ivs in the us and ghana are many times larger than the ols estimates and in ghana and brazil the regional price ivs estimates also imply a substantially larger human capital wage effects of height compared with the ols estimates the ols estimates of height effects on wages are dominated by the genetic variation in height and appear to understate substantially the human capital returns to health and nutrition inputs which increase adult height this abstract was borrowed from another version of this item

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 effect of adolescent experience on labor market outcomes the case of height taller workers receive a wage premium net of differences in family background the disparity is similar in magnitude to the race and gender gaps we exploit variation in an individual s height over time to explore how height affects wages controlling for teen height essentially eliminates the effect of adult height on wages for white men the teen height premium is not explained by differences in resources or endowments the teen height premium is partially mediated through participation in high school sports and clubs we estimate the monetary benefits of a medical treatment for children that increases height

liberalization and rent seeking in china s labor market communist party membership can generate labor market benefits in at least two ways first the party may hand out direct benefits to favored groups in the form of higher earnings alternatively the party may function in much the same way as education in western countries screening workers for talent and motivation we find very little evidence of earnings premiums to party membership or to cadre status prior to chinese market liberalization with liberalization comes less emphasis on being red and a greater capacity to earn wages that reflect ability both observed through schooling and identified by the party we find that party premiums are inversely related to education modest premiums to cadre status appear in 1995

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

returns to education in china we were fortunate in having access to a survey of 800 adults in nanjing that was conducted by the international wool secretariate in 1986 the survey was intended for market research e g brand recognition but questions were asked about the respondent s age occupation income and education level these questions though not ideally worded were sufficient for the undertaking of a returns to education study we believe the data to be unique and of course the issue of interest is whether a member of the workforce in china faces investment decisions on education similar to those faced elsewhere the influence of sex and marital status on the level of income achieved by an individual was also examined the basic equation modeled personal income as a nonlinear function of schooling and experience but multicollinearity problems were encountered as a result a production function approach was successfully adapted to the returns toeducation model the collinearity problem was overcome and this approach allowed the ease of substitution of education for experience in income generation to be examined more formally an additional problem of errors in variables arose from a failing in questionnaire design and was handled statistically

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

sorting by height education and economic outcomes of women in less developed countries abstracttaller height is commonly found to correlate with educational and economic outcomes most studies focus on a relationship to earnings and consider samples from individual countries this p

market opportunities genetic endowments and intrafamily resource distribution child survival in rural india the authors examine how intrafamily resource allocations respond to changes in economic conditions and to genetic differences in children by estimating the determinants of variations in the sex specific survival differentials of rural indian children based on standard census and household survey data they explore in particular the hypothesis that such differences are related to the relative returns to survival with households selectively allocating resources to children in response to variation in sex differences in their expected earnings opportunities as adults data are from the 1961 census and a 1971 household survey excerpt

the earnings effects of health and health related activities a panel data approach we investigate the effects of health and health related habits on earnings in china using panel data to control for unobserved heterogeneity related to individual traits and job characteristics health related habits include smoking cigarettes drinking tea frequency of drinking alcohol and physical exercising we find a significant and large impact of health status on earnings controlling for schooling experience and the unobserved individual heterogeneity and job heterogeneity we also find that smoking has a strong negative effect on earnings net of health status while the estimated effects of other health related activities are statistically insignificant

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

absolute income relative income income inequality and mortality we test whether mortality is related to individual income mean community income and community income inequality controlling for initial health status and personal characteristics the analysis is based on a random sample from the adult swedish population of more than 40 000 individuals who were followed up for 10 17 years we find that mortality decreases significantly as individual income increases for mean community income and community income inequality we cannot however reject the null hypothesis of no effect on mortality this result is stable with respect to a number of measurement and specification issues explored in an extensive sensitivity analysis

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

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