occupational choice and the process of development this paper models economic development as a process of institutional transformation by focusing on the interplay between agents occupational decisions and the distribution of wealth because of capital market imperfections poor agents choose working for a wage over self employment and wealthy agents become entrepreneurs who monitor workers only with sufficient inequality however will there be employment contracts otherwise there is either subsistence or self employment thus in static equilibrium the occupational structure depends on distribution since the latter is itself endogenous we demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long run effects in one case the economy develops either widespread cottage industry self employment or factory production employment contracts depending on the initial distribution in the other example it develops into prosperity or stagnation

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

moneylenders and informal financial markets in malawi abstract after a background review of the institutional financial srvices available to small and medium enterprises in malawi and a survey of the literature on malawi s informal financial markets ifms this paper presents a detailed report on the character and operations of a katapila moneylender in lilongwe malai the moneylender market is then analyzed in terms of several themes from the literature on ifms in less developed countries for example calculations show that the interest charges on katapila loans are not justified by economic costs of doing business finally policy implications for promoting more efficient finance are discussed

an empirical investigation of rationing constraints in rural credit markets in india abstract the literature on rural credit markets has generally assumed that households are rationed in their access to subsidized formal credit the validity of this assumption depends on the level of effective demand for formal credit in turn a function of the demand for credit and its availability from informal sources this paper estimates the demand and the sector specific costs of credit and hence the extent of formal sector rationing through an analysis of household participation in both the formal and the informal credit sectors the results show that the extent of rationing is considerably less than what is conventionally assumed

interaction between the formal and informal financial sectors the asian experience abstract the nature of the interaction between the formal and informal financial sectors in developing countries is a subject with important policy implications it has implications for the future of informal finance as the formal sector expands in the long term will the informal sector wither away as the traditional view of financial dualism assumes or will it continue to play an important complementary role perhaps even growing in absolute size second the pattern of two major policy approaches often advocated toward the informal sector offering it stronger competition so as to induce it to improve its terms and promoting linkages with it so as to take advantage of its lower transactions costs in reaching smaller and poorer borrowers third the existence of a large informal sector has implications for the efficacy of monetary and credit policy in achieving stabilization objectives fourth the interaction between the formal and informal financial sectors also has implications for the effects of financial liberalization through removing restrictions on the deposit rate of interest this paper draws on the experience of asian countries to address these issues

strategic interaction in undeveloped credit markets abstract this paper studies the strategic interaction between informal and formal lenders in undeveloped credit markets in a model with adverse selection loan seniority market power and differences in the cost of lending it is shown that under general conditions a co funding equilibrium will be a nash outcome of the game we demonstrate that a collateral requirement in connection with formal loans always generates a new co funding equilibrium in which both lenders earn higher profits a government subsidy to the formal lender may have the opposite effect we relate our results to existing empirical evidence and the emerging discussion of how to best ensure financial viability and outreach of microfinance institutions

capture and ideology in the economic theory of politics the economic theory of regulation long ago put public interest theories of politics to rest these theories have correctly been viewed as normative wishings rather than explanations of real world phenomena they have been replaced by models of political behavior that are consistent with the rest of microeconomics anthony downs 1957 james buchanan and gordon tullock 1965 george stigler 1971 sam peltzman 1976 recently however debate has arisen over whether some version of a public interest theory of regulation will have to be readmitted to our thinking about actions and results in the political arena what is at issue is the empirical importance of the altruistic publicly interested goals of rational actors in determining legislative and regulatory outcomes james kau and paul rubin 1979 kalt 1981 peltzman 1982 this study assesses the nature and significance of publicly interested objectives in a particular instance of economic policymaking u s senate voting on coal strip mining regulations the existence of such objectives is of course no contradiction of the economic view of human behavior kenneth arrow 1972 gary becker 1974 and may well be rooted in genetic biological history becker 1976 jack hirshleifer 1978 generally however individuals altruistic publicly interested goals have been given little attention this reflects the judgment that such goals are so empirically unimportant as to allow the use of occam s razor in positive models or well founded apprehensions that these goals are unusually difficult to identify measure and analyze notwithstanding the latter problem we find that approaches which confine themselves to a view of political actors as narrowly egocentric maximizers explain and predict legislative outcomes poorly the tracking and dissecting of the determinants of voting on coal strip mining policy suggest that the economic theory of politics has been prematurely closed to a broader conception of political behavior

symbiosis vs crowding out the interaction of formal and informal credit markets in developing countries abstract it is a common observation in many developing countries that enterprises are active borrowers in both formal and informal credit markets we propose a model in which the formal sector s superior ability in deposit mobilization is traded off against the informational advantage that lenders in the informal sector enjoy the formal sector can screen borrowers by providing only partial financing for projects thereby forcing borrowers to resort to the informal sector for the remainder of the loan we use the model to predict how the market structure responds to changes in the environment and we consider the policy implications of various forms of government intervention

informal credit markets in india informal financial markets those which are not regulated or monitored by the banking authorities account for much of business credit in developing countries these unregulated informal credit markets icm are important both in their own right as part of each country s financial system and because of their reciprocal relations with growing enterprises and the regulated financial sector in order to study the operations of some of these markets in detail in urban commercial settings we conducted an extended survey of some of the informal credit markets of india 2 based in some cases on centuries of operation these markets proved to be important in the functioning of the contemporary economy indigenous style bankers belonging to particular ethnic communities and castes formerly provided the full range of banking services to their clients 3 with the rise of modern western style banking the indigenous bankers either have transformed themselves to serve sectors such as wholesale trade not well served by the modern sector or provide services which the modern bankers cannot provide though any estimate is very approximate it seems that informal credit markets account for as much as 20 of commercial credit outstanding in the various markets surveyed we began by surveying the gujeratis some of whom still practice their traditional form of full service banking in their homeland of gujerat and adjoining bombay the shikarpuris or multanis originally full service bankers in sind who now provide commercial credit in various other centers the chettiars in south india the rastogis in uttar pradesh and the marwaris especially in eastern india 4 but our surveys revealed that a wide range of ethnic groups were now involved in informal credit markets and the more meaningful differentiations

government debt income distribution and growth this paper takes up the question of whether government debt worsens the distribution of income as tax revenues from workers are used to pay for the interest on the debt held by the rich in so doing we develop a post keynesian model in which growth is determined by aggregate demand rather than by the supply of resources and income is distributed between workers who earn wages and capitalists who receive profit and interest income our analysis highlights the possible expansionary effect of a rise in government debt which may raise the income of the workers and it shows that its precise effect on income inequality depends on the circumstances under which government debt rises c 1996 academic press limited copyright 1996 by oxford university press

credit markets in northern nigeria credit as insurance in a rural economy this article addresses the issues of imcomplete markets and imperfect information in the context of credit markets in rural northern nigeria in much recent theoretical literature the problems of moral hazard and adverse selection are assumed to be decisive for the organization of agrarian institutions in contrast it is found that in the four villages surveyed credit transactions take advantage of the free flow of information within rural communities information asymmetries between borrower and lender are unimportant and their institutional consequences the use of collateral and interlinked contracts are absent credit transactions play a direct role in pooling risk between households through the use of contracts in which the repayment owed by the borrower depends on the realization of random production shocks by both the borrower and the lender

demographic growth harrodian in stability and the supermultiplier a basic kaleckian model is enriched by three simple intuitive assumptions first there is a redistributive system of the wage bill between employed and unemployed workers the latter receiving subsistence income second only individuals with an income above the subsistence level build savings the combination of these two assumptions gives rise to an autonomous consumption component whose rate of growth depends on population growth consequently the rate of capital accumulation spontaneously converges towards the rate of population growth the supermultiplier effect a dynamic that offers a solution to one of the two harrodian instability problems the third assumption corresponds to entrepreneurs attempts to adjust investments to restore the normal rate of capacity utilisation although this assumption usually generates knife edge instability we show here that the stabilising properties of the supermultiplier provided that the accelerator effect is not overly strong help overcome this instability and realise the normal rate of capacity utilisation therefore the model may offer a simple simultaneous solution to the two harrodian instability problems

parallel fragmented or black defining market structure in developing economies abstract in describing market structure development economists employ such terms as fragmented informal parallel and segmented to account for the observed distributions of prices of both goods and factors although these terms are used interchangeably do they mean the same thing focusing on the parallel markets approach the paper identifies government policies which create excess demand or supply in particular markets as the core determinant of the emergence of an official unofficial market structure the legality of unofficial transactions proves critical in assessing the consequences of the parallel market situation contrasting alternative characterizations of market structure the paper concludes that the parallel market is a distinct analytical concept

entrepreneurship social mobility and income redistribution in south india development economists have been preoccupied with the problem of increasing the size of the gnp pie to the relative neglect of its distribution despite the recent disenchantment with the viewpoint that all classes share in the benefits of industrial growth empirical data on the distribution of income business opportunity and economic power are in short supply many of the studies on entrepreneurship and economic development when they are not apologetics for ruthless capitalist exploitation as paul baran suggests extol the achievements of the capitalist entrepreneur without examining class origins and monopoly advantage joseph schumpeter sees entrepreneurs irrespective of class origin as heroic figures with the dream and will to found a private kingdom to conquer adversity to achieve success for its own sake and to experience the joy of creation for gustav papanek 1967 the private entrepreneur who is frugal diligent far sighted remarkably able and willing to take political risks is in large part responsible for the success of pakistan in achieving rapid industrialization

exclusion competition and regulation in the retail loan market abstract exclusion of borrowers from credit markets became a primary concern for regulators during the recovery from the recent recession the paper analyzes loan making institutions that set both interest rates and minimum credit requirements we propose analytical measures of the degree of borrower exclusion from receiving loans we analyze five market structures single lender regulated interest rate entry interest rate discrimination and highly competitive lenders interest rate regulation improves total welfare relative to a single lender market however entry of a second lender reduces exclusion and generates higher total welfare in the absence of fixed costs perfect and bertrand competition are optimal

group utility in the micro motivation of collective action the case of membership in the aarp abstract the fundamental assumption of human rationality in neo classical economic analysis is the maximization of individual utility as economic analyses are being widely used in political science under the broad rubric of public choice one cannot escape the logical inconsistency between theory and reality arising from the free rider problem in the preference for collective goods recent literature argues that a way out of this dilemma is to recognize the existence of motivations other than self interest this paper demonstrates the need to enlarge the assumption of economic rationality by explicitly taking into account the factors of group utility with the help of survey data on the preference for membership in the american association of retired people aarp this study adds to the mounting empirical evidence for the fact that for a proper understanding of collective action the existence of a collective identity should be recognized

heterodox theories of economic growth and income distribution a partial survey heterodox theories of economic growth and income distribution are surveyed focusing on major theories and recent contributions first a general framework for examining growth and distribution is discussed in terms of which classical marxian and post keynesian kaleckian and other theories are presented since this framework examines how variables are determined in equilibrium second dynamics behind equilibria are examined focusing on goods market and labor market changes third the framework is extended in a variety of ways to examine additional models addressing productivity growth and technical change money and inflation finance and debt additional distributional considerations multisector issues open economy questions and the environment it is concluded that the literature on heterodox theories of growth and distribution is vibrant large and growing and addresses many issues that are ignored or neglected in orthodox theories including power unemployment and aggregate demand

rational choice and rebellious collective action a basic problem for a rational choice theory of rebellious collective action is to explain why average citizens would participate in such behavior since they have nothing to gain they will receive benefits of successful rebellion in terms of public goods regardless of whether they take part or not but much to lose rebellious behavior may be quite costly according to the conventional private interest or by product theory the incentive to participate must come from the expectation of receiving selective benefits but since average citizens in a general case cannot expect substantial private material rewards the relevant selective benefits must be psychological in nature in contrast to the model of private interest theory a public goods model is proposed stipulating that the value of rebellion in terms of public goods can be a relevant incentive for participation using data from surveys conducted in new york city and hamburg west germany we investigate the relationship between participation in rebellious political behavior and measures of the incentives of public goods and private interest the results do not support predictions of the private interest model in regard to nonmaterial selective incentives hypotheses of the public goods model are supported

gender biases in bank lending lessons from microcredit in france the evidence on gender discrimination in lending remains controversial to capture gender biases in banks loan allocations we observe the impact on the applicants of a microfinance institution mfi and exploit the natural experiment of a regulatory change imposing a strict eur 10 000 loan ceiling on microcredit descriptive statistics indicate that the presence of the ceiling is associated both with bank mfi co financing and with harsher treatment of female borrowers to investigate causal links we develop an econometric approach that addresses the concerns of selection biases multicollinearity and endogeneity our empirical findings suggest that the change in the mfi s gender related attitude was triggered by banks through co financing hence we speculate that co financing pushes ceiling constrained mfis to import whatever biases in loan granting that the banks are prone to overall this paper stresses that apparently benign regulations such as loan ceilings can significantly harm the women s empowerment efforts made by mfis

the use of village agents in rural credit delivery using a simple principal agent model this article examines the incentive problems that arise when a formal financial institution such as a rural bank utilises a member of the rural community to act as an agent in screening potential borrowers and collecting repayment optimal compensation schemes are derived for the agent and their implications are discussed in addition i show that the norms and rules that govern village life may aid the financial institution by helping to constrain possible strategic behaviour by the agent

moral hazard and nonmarket institutions dysfunctional crowding out or peer monitoring the authors examine a situation in which insurance is characterized by moral hazard when market insurance is provided supplementary mutual assistance between family and friends unobservable to market insurers will occur when nonmarket insurers have no better information than market insurers the mutual assistance not only crowds out market insurance but is also harmful and therefore dysfunctional alternatively when nonmarket insurers can observe each other s effort perfectly mutual assistance is beneficial these results point to the potential importance of peer monitoring mechanisms in mitigating moral hazard copyright 1991 by american economic association

demand led growth and accommodating supply we model of demand led growth with endogenous adjustment of labour supply and productivity an approach that reconciles harrod s warranted rate of demand growth with supply the model delivers a range of growth paths and unemployment rates rather than a single natural rate theoretically the steady state growth path may be dynamically stable or unstable but empirical calibration favours stability we show analytically that if demand dynamics are stable supply will converge to the demand determined growth path while a minimum unemployment rate ultimately imposes a supply constraint on growth empirical results show that a wide range of growth rates are feasible across different demand regimes the results explain how economies can become trapped with low growth due to weak demand or fiscal austerity and suggest policy responses to stagnant demand

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

a theory of interactions between mfis and informal lenders abstract we provide a theoretical analysis of effects of entry of a microfinance institution mfi into an informal credit market which is segmented whereby informal lenders derive some market power owing to privileged information concerning borrower specific default risks relative to informal lenders the mfi has a cost advantage and an informational disadvantage regarding borrower risk borrowers differ along another dimension landholding which is observable to all lenders mfi entry is shown to induce selection effects across risk and landownership dimensions in shifts of borrowers from informal lenders to the mfi which could raise informal interest rates as observed in many ldcs the model is consistent with evidence from bangladesh and west bengal in contrast to hypotheses based on cream skimming scale diseconomy inducing collusion facilitating or crowding in effects of mfis on informal credit the model implies that mfi entry is pareto improving for borrowers irrespective of effects on informal interest rates

access to capital in rural thailand an estimated model of formal versus informal credit the aim of this paper is to understand the mechanism underlying access to credit the author focuses on two important aspects of rural credit markets in thailand first moneylenders and other informal lenders coexist with formal lending institutions such as government or commercial banks and more recently micro lending institutions second potential borrowers presumably face sizable transaction costs obtaining external credit the author develops and estimates a model based on limited enforcement and transaction costs that provides a unified view of those facts the results show that the limited ability of banks to enforce contracts more than transaction costs is crucial in understanding the observed diversity of lenders

the impact of formal finance on the rural economy of india india has systematically pursued a supply led approach to increasing agricultural credit its objectives have been to replace moneylenders to relieve farmers of indebtedness and to achieve higher levels of agricultural credit investment and output india s success in replacing moneylenders has been outstanding between 1951 and 1971 their share of rural credit appears to have dropped from more than 80 percent to 36 percent it may have dropped to as low as 16 percent by 1981 but that estimate is disputed still institutional credit is far from reaching all farmers only about a quarter of cultivators borrow and no more than 2 percent take out long term loans most small farmers have little access to credit and long term credit goes mostly to large farmers overall farm debt has probably not increased sharply in real terms as formal credit has primarily substituted for credit from other sources moreover with the rapid growth of commercial banks in the 1970s the system mobilized more deposits than it lent in rural areas in 1981 of course enhanced deposit services are a useful service of the rural population but one must ask what has been the impact of heavy rural credit and better financial services on agricultural investment production and rural incomes the authors econometric results suggest that the rapid expansion of commercial banks in rural areas has had a substantially positive effect on rural nonfarm employment and output the availability of better banking facilities appears to have overcome one of the obstacles to locating nonfarm activities in rural areas expanded rural finance has had less of an effect on output and employment in agriculture than in the nonfarm sector the effect on crop output has not been great despite the fact that credit to agricluture has greatly increased the use of fertilizer and private investment in machines and livestock there has been more impact on inputs than on output so the additional capital investment has been more important in substituting for agriclutural labor than in increasing crop output but overall rural credit and expansion of the rural financial system have had a positive effect on rural wages creating nonfarm jobs has apparently added more to total employment than the substitution of capital for labor has subtracted it in agriculture so wages have risen even for agricultural workers albeit modestly the supply led approach to agricultural credit that has been pursued for three decades has clearly benefited current borrowers and farm households formerly indebted to moneylenders it has also spurred fertilizer use and investment in agriculture it has been less successful in generating viable institutions and has failed to generate agricultural employment the policy s costs to india s government have been high as portfolio losses associated with poor repayment ultimately have to be borne by the government or one of its institutions under optimistic assumptions the benefits of the agricultural income are at best no more than 13 percent higher than the cost to the government of the extra agricultural credit if assumptions about the cost of supplying the credit and about repayment rates are less optimistic the social costs and the costs to the government of providing the credit would have exceeded the benefits in agricultural income the expansion of commercial banks to rural areas paid off in nonfarm growth employment and rural wages the question is could these benefits have been achieved without imposing agricultural credit targets on the commercial banks and credit cooperatives or did the commercial banks expand only because they were forced to lend to agriculture the authors could not answer these questions with the data at hand

giving women credit the strengths and limitations of credit as a tool for alleviating poverty abstract poor women in developing countries often turn to self employment as a way to support themselves and their families but these small scale activities rarely yield enough income to lift them out of poverty recently ngos and donor agencies have sought to assist these women by providing credit which is otherwise largely unavailable to them the broad aims of these programs vary as do the strategies which range from simply offering credit a minimalist approach to providing training and technical assistance as part of the credit package a credit plus approach the channels used bank schemes intermediary programs parallel programs or poverty focused development banks also vary so far the last three channels have been more effective than the first in improving women s access to credit however not enough is known about which strategies have the greatest economic impact for particular groups of women and further evaluation is needed

a supermultiplier stock flow consistent model the return of the paradoxes of thrift and costs in the long run supermultiplier models have been recently brought to the post keynesian debate yet these models still rely on quite simple economic assumptions being mostly ow models which omit the nancial determinants of autonomous expenditures since the output growth rate converges in the long run to the exogenously given growth rate of non capacity creating autonomous expenditure and the utilization rate moves towards the normal utilization rate the paradoxes of thrift and costs remain valid only as level e ects average growth rates this paper investigates whether the core conclusions of supermultiplier models hold in a more complex economic framework described by means of a supermultiplier sfc model in which private business investment is assumed to be completely induced by income while the autonomous expenditure component in this case consumption out of wealth becomes endogenous the results of the numerical simulation experiments suggest that the paradox of thrift can remain valid in terms of growth e ects and that a lower pro t share can also be associated to a higher accumulation rate though with a lower pro t rate

a little at a time the use of regularly scheduled repayments in microfinance programs abstract informal lenders appear to be thriving even in regions where microfinance institutions mfis such as the grameen bank have established lending programs we suggest that an explanation for this well documented observation lies in the ubiquitous use of regularly scheduled repayments by mfis borrowers are typically required to repay their loans in tightly structured installments beginning soon after loan disbursement this little remarked aspect of the repayment schedule is usually explained as inculcating fiscal discipline among borrowers we argue that an alternative rationale for this loan repayment structure lies in the difficulty of monitoring borrowers actions the potential for moral hazard leads mfis to use innovative mechanisms such as regularly scheduled repayments which indirectly coopt the better informed informal lenders conversely this installment repayment structure allows informal lenders to survive further we show that this linkage can not only expand the volume of informal lending but may also raise the interest rate in the informal sector

tackling the instability of growth a kaleckian harrodian model with an autonomous expenditure component this article presents a basic kaleckian model enriched by the simultaneous addition of an harrodian investment function and an autonomous expenditure component that grows at an exogenous rate the model shows that the usual short run properties wage led growth are only transient since the long run growth rate converges towards that of autonomous expenditures however the impact on the level of variables output capital stock labour etc is permanent the model also provides a conditional solution to the second harrod knife edge problem the destabilising behaviour of firms as they adjust their investment decisions to the discrepancy between the actual and the normal rates of capacity utilisation is now required to achieve the normal rate of capacity utilisation

credit layering in informal financial markets abstract informal lenders with access to markets or capital often find it attractive to delegate loan provision to downstream lenders who have an information or enforcement advantage in dealing with particular borrowers in this paper we examine the conditions under which such an arrangement is preferred by two informal lenders a landlord and a merchant who compete in loan provision to tenant farmers differentiated by wealth we show that credit layering is preferred only when tenants are sufficiently poor in this case the trader lends to tenant farmers via a contract with their landlord otherwise only the trader lends as a consequence a pattern of borrowing emerges in which relatively wealthy tenants borrow from merchants while poor tenants borrow mainly from their landlords interlinkage between land and credit thus arises only for a subset of tenants and purely as a consequence of credit layering this pattern is shown to be supported empirically

microfinance and investment a comparison with bank and informal lending summary comparing the impact of different types of credit on households investment in bangladesh we find that loans from microfinance institutions are likely to be channeled toward non agricultural activities while both informal and bank lending are associated to a higher expenditure in agricultural inputs estimated effects are net of the differences in the amount borrowed interest rates and collateral results suggest that features which are specific to microfinance such as tight repayment schedules and land based eligibility rules may reduce the suitability of this source of funds for the farming sector

on financial innovations and credit market evolution abstract this paper examines the role of financial innovations in the economic development process it discusses the place of policy intervention in the financial development of developing countries and through a case study of an innovative bank illustrates the nature and characteristics of the financial innovations necessary for financing small enterprises and mobilizing resources from low and middle income groups such financial innovations are shown to reduce transaction costs and risk and as a result to bring about widening deeping and intergration of capital markets this process accelerates economic development through a favorable impact on savings investment and output

collateral guaranties and rural credit in developing countries evidence from asia abstract the paper reviews the theory of the impact of loan collateral and in particular land collateral in institutional and non institutional rural credit markets evidence from three asian developing countries is presented showing extensive use of land collateral among institutional lenders in countries where such collateral is legal the use of land collateral is more common than other forms of security except in places where legal inhibitions on mortgaging agricultural land exist non institutional lenders are less inclined to use land collateral however lenders who do not have links to borrowers in matters other than finance are more likely to use loan securities estimates of instutional credit supply and demand in rural thailand confirm that the pledging of land collateral affects the supply of credit more than group guaranty it is also shown that larger farmers are more likely to utilize land collateral the conclusion is that land collateral is preferred by institutional lenders as it reduces creditworthiness assessment costs attempts to ban or limit collateral use by decree are motivated by equity cinsiderations but they will cause loss of efficiency simplification of ownership verification and other policies reducing the transaction cost of collateral pledging will mitigate the negative equity implications of collateral

moneylenders and bankers price increasing subsidies in a monopolistically competitive market abstract in many areas of the world a significant part of the cost of obtaining a good or service is the cost of enforcing the contracts entailed in its provision we present models of markets with endogenous enforcement costs motivated by studies of rural credit markets we show that subsidies may have perverse effects under monopolistic competition increasing prices or inducing exit higher prices interest rates result from the loss of scale economies or from negative externalities among suppliers the models are consistent with the puzzling evidence that infusions of government subsidized formal credit have not improved the terms offered by moneylenders

the effects of income distribution and fiscal policy on aggregate demand investment and the budget balance the case of europe this paper develops a multi country post kaleckian model that incorporates the role of the government one key novelty of the model is that it integrates cross country effects of both changes in income distribution and fiscal policy the model is used to estimate econometrically the effects of income distribution and fiscal policy on the components of aggregate demand and the budget balance in eu15 countries the results show that a simultaneous increase in the wage share in all eu15 countries would increase demand and the primary budget balance in all countries a simultaneous increase in government spending turns out to boost economic activity in all the eu15 countries indicating the positive economic effects of expansionary fiscal policy moreover a progressive tax policy that would be implemented simultaneously at the eu level would lead to an increase in output in all countries

signaling in credit markets in this paper we show that under a variety of alternative assumptions about the private information of loan applicants a competitive market for loans is characterized by screening banks separate out loan risks by offering higher loans at higher interest rates depending on the nature of the informational asymmetry it may be that applicants with less risky projects select larger rather than smaller loans comparative statics implications are also examined in particular we explore the effects of an increase in banks cost of funds on average loan quality

economics of philanthropy a comment in seeking a way out of the maze problems of associated with philanthropy sugden i 982 suggests that kantian behaviour is the most promising avenue to explore and kindly refers to collard i978 however he seems to believe that kantianism supplants altruism whereas the two are really complementary according to kant a rule is morally acceptable only if it may be universalised act on a maxim which can also hold good as a universal law every maxim which is not capable of being so is contrary to morality kant 1909 p 282 thus moral actions appear to follow from a rational conception of duty not from inclination which goes its own secret way indeed it can do no other because it has no principle kant i930 p 197 in economics we may say that an individual s strategy follows the kantian rule if when also adopted by others in the relevant group it may be expected to lead to a preferred social state consider a prisoner s dilemma type of model

some instability puzzles in kaleckian models of growth and distribution a critical survey we tackle the issue of the possible instability of the kaleckian distribution and growth model distinguishing between keynesian and harrodian instability we review various mechanisms that have been proposed by critics of the kaleckian model to tame harrodian instability while bringing back the rate of utilisation to its normal rate we find that the mechanisms that have been suggested are far from convincing therefore we conclude that it may be premature for the critics of the kaleckian model to dismiss the endogeneity of the rate of capacity utilisation in long run growth equilibrium copyright the author 2010 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

the financial power of the powerless socio economic status and interest rates under partial rule of law in advanced economies interest rates vary inversely with the borrower s socio economic status which itself depends inversely on default risk these relationships depend on the impartiality of the law where the law is markedly biased in favour of certain groups the latter will pay a surcharge for capital legal power as measured by privileges before the law thus undermines financial power the capacity to borrow cheaply developing this argument this paper also tests it through judicial records from ottoman istanbul 1602 1799 three privileged ottoman groups men muslims and titled elites all paid relatively high interest rates conditional on various loan characteristics this article is protected by copyright all rights reserved

an alternative model to the open economy new consensus for the analysis of inflation targeting abstract in this paper we will discuss a demand led growth model which is constrained by economic policy in this way we will incorporate an inflation targeting regime in the sraffian supermultiplier model in order to analyze how economic policy can influence the growth rate of productive capacity we will analyze an open economy were inflation is a cost push phenomenon and the monetary authority can manage the nominal exchange rate through changes in interest rate differentials as functional income distribution will depend on the evolution of nominal wages exchange rate and interest rate we will show that inflation target system in addition of not being neutral in terms of long run growth also can lead to different outcomes in terms of functional income distribution

monetary policy and bank lending in developing countries loan applications rates and real effects abstract recent studies of monetary policy in developing countries document a weak bank lending channel based on aggregate data in this paper we bring new evidence using uganda s supervisory credit register with microdata on loan applications volumes and rates coupled with unanticipated variation in monetary policy we show that a monetary contraction reduces bank credit supply increasing loan application rejections and tightening loan volume and rates especially for banks with more leverage and sovereign debt exposure there are associated spillovers on inflation and economic activity including construction permits and trade and even social unrest

interactions between institutional and informal credit agencies in rural india in an attempt to expand rural credit and displace the village moneylender india created a system of rural cooperatives in the 1950s and expanded branch banking into rural areas in the 1970s this article examines how these measures affected the rural market it begins with the question of how large the expansion of institutional credit has been and the extent to which it has dislodged the village and nonresident moneylenders a detailed comparison of three major surveys of the indian rural credit market suggests that in various guises the moneylender is still a major source of loans the article also examines the weak evidence on intermediation between the formal and informal sectors a formal model of the interaction between the informal moneylender and institutional lender is constructed under a variety of assumptions about the exclusivity of loan contracts and the competitive structure of the informal sector the conclusions are drawn together in the form of five proposals for public policy