recent developments in consumer credit and default literature this survey discusses recent contributions to the quantitative literature on unsecured consumer debt and default and some ongoing challenges for the literature key topics include the sources of the rise in personal bankruptcies the importance of asymmetric information and the effects of developments in information technologies on consumer credit markets delinquency and informal bankruptcy debt collection and restructuring of distressed debt the cyclical behavior of consumer debt and default and the insurance role of household debt implications for welfare analysis and policy design are discussed several theoretical contributions and approaches to modeling the consumer credit markets are also highlighted

optimal bankruptcy code a fresh start for some abstract what is the optimal consumer bankruptcy law i answer this question using an incomplete markets life cycle model with a planner who can choose state contingent bankruptcy costs i develop two main theoretical characterizations first whenever debt discharge is allowed it should occur without cost second bankruptcy should always be allowed for highly indebted households quantitatively the optimal policy can generate a welfare gain as large as 11 6 however attractive informal default asymmetric information and moral hazard can reduce the welfare gain to as little as 0 7

wealth distribution in life cycle economies abstract this paper compares the age wealth distribution produced in life cycle economies to the corresponding distribution in the us economy the idea is to calibrate the model economies to match features of the us earnings distribution and then examine the wealth distribution implications of the model economies the findings are that the calibrated model economies with earnings and lifetime uncertainty can replicate measures of both aggregate wealth and transfer wealth in the us furthermore the model economies produce the us wealth gini and a significant fraction of the wealth inequality within age groups however the model economies produce less than half the fraction of wealth held by the top 1 percent of us households

the economic theory of agrarian institutions introduction alternative approaches to the theory of institutions in economic development pranab bardhan rational peasants efficient institutions and a theory of rural organization methodological remarks for development economics joseph e stiglitz part 1 land and labour theories of sharecropping nirvikar singh a comparison of principal agent and bargaining solutions the case of tenancy contracts clive bell contracts with eviction in infinitely repeated principal agent relationships bhaskar dutta et al production relations in semi arid african agriculture hans binswanger et al part 2 credit and interlinked transactions rural credit markets the structure of interest rates exploitation and efficiency kaushik basu credit and agrarian class structure mukesh eswaran and ashok kotwal credit rationing tenancy productivity and the dynamics of inequality avishay braverman and joseph e stiglitz on choice among creditors and bonded labour contracts t n srinivasan some aspects of linked product and credit market contracts among risk neutral agents clive bell and t n srinivasan a note on interlinked rural economic arrangements pranab bardhan interlinkages and the pattern of competition debraj ray and kunal sengupta part 3 marketing and insurance agricultural institutions for insurance and stabilization david m newbery peasants risk aversion and the choice of marketing intermediaries and contracts a bargaining theory of equilibrium marketing contracts pinhas zusman part 4 co operatives technology and the state agricultural producer co operatives louis putterman institutional analysis of credit co operatives avishay braverman and j luis guasch agrarian structure technological innovations and the state alain de janvry et al

co operatives and the poor a comparative perspective cooperatives have a universal appeal as an instrument of poverty alleviation and yet their record has been less than exemplary this paper highlights dilemmas faced in cooperative development between the objectives of growth and distribution and those of decentralization and equity the paper identifies the various internal and external prerequisites for a successful cooperative movement by examining the evidence with regard to marketing credit and production cooperatives it argues that in the absence of such prerequisites alternative forms of institutional arrangements may be at least as effective as cooperative institutions in any case a healthy movement that reaches the poor calls for institutional competition

unsecured credit markets are not insurance markets abstract we study the extent to which unsecured credit markets have altered the transmission of increased income risk to consumption variability over the past several decades we find that unsecured credit markets pass through increased income risk to consumption irrespective of bankruptcy policy and the information possessed by lenders if risk sharing has indeed improved over this period the reasons do not therefore lie in the unsecured credit market

cyclical dynamics in idiosyncratic labor market risk is individual labor income more risky in recessions this is a difficult question to answer because existing panel data sets are so short to address this problem we develop a generalized method of moments estimator that conditions on the macroeconomic history that each member of the panel has experienced variation in the cross sectional variance between households with differing macroeconomic histories allows us to incorporate business cycle information dating back to 1930 even though our data do not begin until 1968 we implement this estimator using household level labor earnings data from the panel study of income dynamics we estimate that idiosyncratic risk is i highly persistent with an annual autocorrelation coefficient of 0 95 and ii strongly countercyclical with a conditional standard deviation that increases by 75 percent from 0 12 to 0 21 as the macroeconomy moves from peak to trough

formal credit corruption and the informal credit market in agriculture a theoretical analysis the paper presents a theory of interest rate determination on informal credit in backward agriculture when there is a market for formal credit the farmer has to bribe the official of the formal credit agency in order to get formal credit the official and the moneylender play a non cooperative game in choosing the amount of formal credit and the informal interest rate respectively the informal sector interest rate and the effective formal sector interest rate incorporating the bribe are equal in equilibrium a reduction in the formal interest rate and or an increase in the price of the product may lead to an increase in the equilibrium bribing rate and the informal interest rate when the formal credit and the informal credit are complementary to each other

risk based pricing of interest rates for consumer loans abstract by focusing on observable default risk s role in loan terms and the subsequent consequences for household behavior this paper shows that lenders increasingly used risk based pricing of interest rates in consumer loan markets during the mid 1990s it tests three resulting predictions first the premium paid per unit of risk should have increased over this period second debt levels should have reacted accordingly third fewer high risk households should have been denied credit further contributing to the interest rate spread between the highest and lowest risk borrowers for people obtaining loans the premium paid per unit of risk did indeed become significantly larger after the mid 1990s for example for a 0 01 increase in the probability of bankruptcy the corresponding interest rate increase tripled for first mortgages doubled for automobile loans and rose nearly six fold for second mortgages additionally changes in borrowing levels and debt access reflected these new pricing practices particularly for secured debt borrowing increased most for the low risk households who saw their relative borrowing costs fall furthermore while very high risk households gained expanded access to credit the increases in their risk premiums implied that their borrowing as a whole either rose less or sometimes fell

default and punishment in general equilibrium we extend the standard model of general equilibrium with incomplete markets to allow for default and punishment by thinking of assets as pools the equilibrating variables include expected delivery rates along with the usual prices of assets and commodities by reinterpreting the variables our model encompasses a broad range of adverse selection and signalling phenomena in a perfectly competitive general equilibrium framework perfect competition eliminates the need for lenders to compute how the size of their loan or the price they quote might affect default rates it also makes for a simple equilibrium refinement which we propose in order to rule out irrational pessimism about deliveries of untraded assets we show that refined equilibrium always exists in our model and that default in conjunction with refinement opens the door to a theory of endogenous assets the market chooses the promises default penalties and quantity constraints of actively traded assets

the political economy of agricultural credit the case of bolivi a theoretical framework is established to show that agricultural credit programs in less developed countries can be used for political purposes because of a government controlled supply b implicit income transfers associated with concessionary interest rates delinquency and inflation that can be used as patronage for politically influential borrowers and c ease of implementation under guise of economic objectives the framework is applied to bolivia within that country s political context large income transfers to a few influential farmers strongly suggest the importance of political factors in credit allocation with consequent effects on income distribution development and debilitation of financial institutions

rural financial markets in low income countries recent controversies and lessons abstract recently some researchers have criticized traditional agricultural credit policies in low income countries this article identifies the major points of controversy between traditional views and these new views and also summarizes the primary lessons learned from these controversies savings mobilization more flexible interest rate policies less loan targeting and greater emphasis on improving the quality of financial services in rural areas are new views that are emphasized

credit limits and bankruptcy abstract credit cards offer a limit rather than a specific loan size at a pre approved interest rate this paper studies the determination of these credit limits jointly with default in the presence of one period debt i adapt the standard incomplete markets macroeconomic model of one period unsecured debt with the optimal choice of credit limit endogenous limits and positive default coexist a numerical exercise illustrates the consequences of various factors for indebtedness credit limits and bankruptcy

credit mismatch and breakdown abstract this paper studies the phenomenon of mismatch in a decentralized credit market where borrowers and lenders must engage in costly search to establish credit relationships our dynamic general equilibrium framework integrates incentive based informational frictions with a matching process highlighted by i borrowers endogenous market entry and exit decision entry frictions and ii time and resource costs necessary to locate credit opportunities search frictions a key feature of the incentive compatible loan contract negotiated between borrowers and lenders is the interaction of informational frictions in the form of moral hazard with entry and search frictions we find that the removal of entry barriers can eliminate incentive based equilibrium credit rationing more generally entry and incentive frictions are important in understanding the extent of credit rationing and credit mismatch while search and incentive frictions are important for understanding credit market breakdown

price policies and the sam abstract this article examines the historical development of mexico s foodgrain policies and the events that led to the sistema allmenticio mexicano sam government investment and support price policies are compared for the commercial and smallholder grain sectors analysis centres on the relatively favourable wheat policies in contrast to those for maize the prospects for success in developing the long ignored peasant sector through sam are assessed in the light of these past policies it is concluded that without profound structural change in mexico s grain sectors it will be consumers and commercial growers who will benefit most from sam

lessons from the eurocrisis for east asian monetary relations i analyse the sources of the eurozone crisis the major conclusion is that the eurozone is insufficiently embedded in a monetary union thereby making it fragile and prone to crises the lesson i draw for east asia is that despite the fact that this region appears to satisfy the traditional optimal currency area oca criteria to form a monetary union the complete absence of political unification makes the prospect of a monetary union in that region of the world both unrealistic and undesirable

consumer bankruptcy a fresh start consumer bankruptcy provides partial insurance against bad luck but by driving up interest rates makes life cycle smoothing more difficult we argue that to assess this trade off one needs a quantitative model of consumer bankruptcy with three key features life cycle component idiosyncratic earnings uncertainty and expense uncertainty exogenous negative shocks to household balance sheets we find that transitory and persistent earnings shocks have very different implications for evaluating bankruptcy rules more persistent shocks make the bankruptcy option more desirable larger transitory shocks have the opposite effect our findings suggest the current us bankruptcy system may be desirable for reasonable parameter values jel d14 d91 k35

two views of inequality over the life cycle data on the life cycle profiles of inequality in wages earnings hours worked and consumption contain precious information for answering questions about the ability of households to insure labor market risk and about the sources of this risk this paper demonstrates that the choice of whether to control for cohort effects or for time effects has a drastic impact on the estimated age profiles for inequality and thus on the answers to those questions it also shows that time effects are required to account of the observed trends in inequality in 30 years of u s data whereas there is no evidence that cohort effects have been important jel c13 d31 d91 j22 j31

welfare implications of the bankruptcy reform act of 1999 abstract in recent years personal bankruptcy has become an important issue to consumers creditors and legislators alike over 40 billion dollars of unsecured debt were discharged in 1998 by 1 44 million households these losses have led legislators to propose a variety of changes in bankruptcy law the most important and recent of which is the bankruptcy reform act of 1999 ba99 i develop a dynamic stochastic general equilibrium model of personal bankruptcy to investigate the trade off between the consumption smoothing role of bankruptcy and the interest rate and deadweight costs it imposes i find that stringent means tests would reduce filing rates only slightly and would have only modest welfare consequences on the other hand the elimination of bankruptcy altogether is found to have substantial benefits this result is robust to income shock persistence and to stringency in the application of means tests

trends in the transitory variance of earnings in the united states we decompose the rise in cross sectional variance of male annual earnings in the united states from 1969 to 1996 into permanent and transitory components we find that the variance of permanent earnings began rising in the the late 1970s and has continued to rise in the 1980s the variance of transitory earnings also rose in the 1980s but declined in the 1990s there are lags in the earnings process which require a structural model to pinpoint the exact calendar times at which the changes in trends occurred

extractive bribe and default in subsidized credit programs abstract we present a dynamic model of subsidized credit provision to examine how asymmetric information exacerbates inefficiency caused by corruption if a borrower and a corrupt official interact with symmetric information credit terms can be so designed that corruption will affect only the borrower s profit but not repayment with private information on the borrower s productivity this result changes because of dynamic information rents the official may induce one type of the borrower to default the government can improve the repayment rate but will have to under provide credit in contrast some allowance of default permits a greater supply of credit

measurement of market integration and arbitrage we develop a measurement theory of market integration based on two notions of integrated markets first two markets cannot be perfectly integrated in any sense if one can construct two portfolios one from each market that have identical payoffs but different prices in that case the law of one price is violated across the markets second they cannot be integrated in a stronger sense if there are cross market arbitrage opportunities two measures of market integration are developed respectively reflecting these notions the smaller the measures the more closely integrated in the respective senses the markets among other things they are interpreted as measuring pricing discrepancy between markets article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

a reconsideration of minsky s financial instability hypothesis the worst and longest depressions have tended to occur after periods of prolonged and reasonably stable prosperity this results in part from agents rationally updating their expectations during good times and hence becoming more optimistic about future economic prospects investors then increase their leverage and shift their portfolios towards projects that would previously have been considered too risky so when a downturn does eventually occur the financial crisis and the extent of default become more severe whereas a general appreciation of this syndrome dates back to minsky 1992 jerome levy economics institute wp 74 and even beyond to irving fisher 1933 econometrica 1 337 357 we model it formally in addition endogenous default introduces a pecuniary externality since investors do not factor in the impact of their decision to take risk and default on the borrowing cost we explore the relative advantages of alternative regulations in reducing financial fragility and suggest a novel criterion for improvement of aggregate welfare

national food strategies and food policy reform abstract national food strategies sponsored by the world food council are intended to produce policy blueprints for improving food production in poor countries international experience with agricultural development discloses wide agreement on national and local policy specifics which should have priority however the absence of research into the political attitudes and processes which foster consensus on goals and the reconciliation of competing desirable policies eg short term v long term equity v efficiency may impede the desired policy reform

borrowing during unemployment unsecured debt as a safety net this paper examines whether unsecured credit markets help disadvantaged households supplement temporary shortfalls in earnings by investigating how unsecured debt responds to unemployment induced earnings losses results indicate that very low asset households those in the bottom decile of total assets do not borrow in response to these shortfalls however other low asset households do borrow increasing unsecured debt by more than 11 cents per dollar of earnings lost in contrast wealthy households do not increase unsecured debt during unemployment the evidence suggests that very low asset households do not have sufficient access to unsecured credit to smooth consumption over transitory unemployment spells

the persistence of financial distress using recently available proprietary panel data we show that while many 35 us consumers experience financial distress at some point in the life cycle most of the events of financial distress are primarily concentrated in a much smaller proportion of consumers in persistent trouble roughly 10 of consumers are distressed for more than a quarter of the life cycle and less than 10 of borrowers account for half of all distress events these facts can be largely accounted for in a straightforward extension of a workhorse model of defaultable debt that accommodates a simple form of heterogeneity in time preference but not otherwise

learning and the dynamics of consumer unsecured debt and bankruptcies during the great moderation the consumer unsecured debt to income ratio nearly doubled and the personal bankruptcy filing rate more than quadrupled this historically tranquil period ended in 2008 with a severe recession and a protracted credit crunch we develop a theory of learning in which consumers and lenders adjust their beliefs about the riskiness of the economic environment over time in response to the realized sequence of aggregate shocks and then embed it into an otherwise standard quantitative model of consumer default simulations of the model suggest that learning can explain as much as half of the recent boom and bust cycle in consumer unsecured debt and a modest fraction of the rise in bankruptcy filings prior to 2005

delayed formal credit bribing and the informal credit market in agriculture a theoretical analysis abstract the paper presents a theory of interest rate determination in the informal credit market in backward agriculture the market for informal credit is created by the delay in disbursement of formal credit the delay is controlled by the official of the formal credit agency and he is bribed by the farmer to reduce the delay the official and the moneylender play a non cooperative game in choosing the bribing rate and the informal interest rate respectively the informal sector interest rate and the effective formal sector interest rate incorporating the bribe are equal in equilibrium agricultural price and credit subsidy policies may raise the interest rate in the informal credit market

household sectoral choice and effective demand for rural credit in india an analysis of the icrisat data from three indian villages raises concern about the extent of rationing mechanism inhibiting the spread of formal credit in rural india where a significant proportion of households do not have any outstanding loan or borrow from the informal sector only a limited dependent econometric analysis of the factors jointly determining household sectoral choice and effective demand for informal loan conditional on whether a formal loan is available suggests that compared to formal loan easy and adequate access and prompt recovery are significant determinants of the popularity and viability of informal rural credit among sample households also some households substitute labour income to ease the extent of credit thus rationing of the formal credit is not the only factor inhibiting the spread of formal credit in the study villages

insurance and opportunities a welfare analysis of labor market risk abstract using a model with constant relative risk aversion preferences endogenous labor supply and partial insurance against idiosyncratic wage risk this paper provides an analytical characterization of three welfare effects a the welfare effect of a rise in wage dispersion b the welfare gain from completing markets and c the welfare effect from eliminating risk the analysis reveals an important trade off for these welfare calculations on the one hand higher wage uncertainty increases the cost associated with missing insurance markets on the other hand greater wage dispersion presents opportunities to raise aggregate productivity by concentrating market work among more productive workers welfare effects can be expressed in terms of the underlying parameters defining preferences and wage risk or alternatively in terms of changes in observable second moments of the joint distribution over individual wages consumption and hours

aggregate consumption and saving in the postwar united states two commonly used sources of aggregate expenditure data are personal consumption expenditures in the national income and product accounts and the consumer expenditure surveys administered by the bureau of labor statistics we adjust both data sources to incorporate the service flows from owner occupied housing and other consumer durables a comparison of the two estimates of aggregate expenditure reveals that the differences between the two data sets have been growing over time by 1989 the level of aggregate expenditure in the national accounts exceeds that reported in the consumer expenditure surveys by 1224 billions less than half of this difference can be attributed to definitional differences in the two data sources

recent developments in consumer credit and default literature consumer credit and default literature this survey discusses recent contributions to the quantitative literature on unsecured consumer debt and default and some ongoing challenges for the literature key topics include the sources of the rise in personal bankruptcies the importance of asymmetric information and the effects of developments in information technologies on consumer credit markets delinquency and informal bankruptcy debt collection and restructuring of distressed debt the cyclical behavior of consumer debt and default and the insurance role of household debt implications for welfare analysis and policy design are discussed several theoretical contributions and approaches to modeling the consumer credit markets are also highlighted

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

disneyland monopoly interlinkage and usurious interest rates abstract interlinkage between labour and credit markets is interpreted as a consequence of a monopolistic moneylender s attempt to extract consumer s surplus from the borrower by levying a two part tariff this analogy enables us to draw on the literature on non linear pricing to high light issues in agrarian structure the consequence of policy interventions like taxes and minimum wage legislation is studied it is shown that the moneylender will charge usurious interest rates if wages are rigid downwards or there is a tax on agricultural income or borrowers have heterogeneous preferences some geometry for analysing interlinkage is developed and used for deriving some of the results

insurance and opportunities the welfare implications of rising wage dispersion this paper develops a series of heterogeneous agents economies in order to characterize analytically the welfare implications of changes in the uncertainty in individual labor productivity we perform two types of welfare calculations first we compute the welfare consequences of a rise in labor market risk given a particular asset market structure complete markets incomplete markets autarky second we compute the expected gain from completing markets starting from autarky or incomplete markets for a given level of wage dispersion we are able to derive intuitive closed form expressions for these welfare eects which depend only on preference parameters and the size of the change in wage dispersion a higher level of productivity dispersion has always two eects it tends to reduce welfare in presence of partial insurance but it also tends to improve production opportunities in presence of flexible labor supply we can separate analytically the insurance and the opportunity components we quantify the welfare consequences of the rise in wage inequality observed in the united states over the past three decades as roughly 3 of lifetime consumption moreover we calculate that completing the asset markets given the current level of inequality would lead to a welfare improvement equivalent to 35 of lifetime consumption

twenty years of rising inequality in u s lifetime labour income values in this paper we study the evolution of lifetime labour income inequality by constructing present value life cycle measures that incorporate both earnings and employment risk we find that even though lifetime income inequality is 40 less than earnings inequality the total increase in lifetime income inequality over the past 20 years is the same as earnings inequality while the total increase is the same the pathways there differ with earnings inequality experiencing a steady increase and lifetime income inequality increasing in spurts particularly in the latter half of the 1990s finally we find the changes in lifetime income inequality are primarily driven by changes in earnings mobility and changes in the earnings distribution itself changes in employment risk and the composition of the sample such as the shift toward attaining more education and the ageing population do not play a large role 2004 the review of economics studies limited

consumption inequality and income uncertainty this paper places the debate over using consumption or income in studies of inequality growth in a formal intertemporal setting it highlights the importance of permanent and transitory income uncertainty in the evaluation of growth in consumption inequality we derive conditions under which the growth of variances and covariances of income and consumption can be used to separately identify the growth in the variance of permanent and transitory income shocks household data from britain for the period 1968 1992 are used to show a strong growth in transitory inequality toward the end of this period while younger cohorts are shown to face significantly higher levels of permanent inequality

consumption over the life cycle facts from consumer expenditure survey data this paper uses consumer expenditure survey data and a seminonparametric statistical model to estimate life cycle profiles of consumption controlling for demographics cohort and time effects we construct age profiles for total and nondurable consumption as well as expenditure patterns for consumer durables special emphasis is placed on the comparison of different approaches to control for changes in demo graphics over the life cycle we find significant humps over the life cycle for total nondurable and durable expenditures changes in household size account for roughly half of these humps bootstrap simulations suggest that our empirical estimates are tight in that standard errors are small

agricultural price transmission across space and commodities during price bubbles this article investigates agricultural price transmission during price bubbles the empirical approach concerns the horizontal transmission of cereal prices both across different market places and across different commodities the trade policy intervention put forward to mitigate the impact of price exuberance is considered the analysis is performed using italian and international weekly spot cash price data over years 2006 2010 a period of generalized turbulence of agricultural markets firstly the properties of price time series are explored then interdependence across prices is specified and estimated by adopting appropriate cointegration techniques results suggest that the bubble had only a slight impact on the price spread and the temporary trade policy measure when effective has limited this impact

forms of business organization and rural enterprise development some examples from anglophone africa abstract for rural enterprises in transition from the informal to the formal sector the legal form of business organization adopted can significantly affect the management of the firm partnerships are simple and flexible but may be too loosely structured for some commercial ventures cooperative societies are more formally structured than partnerships and are subject to less complicated statutory requirements than companies although they are vulnerable to far reaching government intervention companies are generally more attractive to institutional lenders and passive investors however their complexity makes them better suited to entrepreneurs with substantial business experience

the green revolution revisited as i left the united states in may 1979 for 3 months of field study in india i wondered whether my article the green revolution and rural social structure in india then being published would be consistent with what i was about to observe from a home based vantage point working with data published up to 1976 covering the period to 1972 or 1973 i had found first that small as well as large farmers had gained economically from the new high yield varieties hyv smaller farms were becoming more viable because of greater productivity of land second that agricultural labor tended to gain from the much greater volume of crop activity but this might have been offset by mechanization to shed light on the latter question there were wage rate data but income data for agricultural laborers were virtually nonexistent i concluded from my findings that hyv should be further supported by government policies promoting water and fertilizer use but that mechanization should be limited to necessary support for hyv such as pump sets for irrigation but not tractorization of farm processes further i thought that resumption of tenanted lands by owners should not be impeded but that a fixed land ceiling of 10 acres should be implemented so that mechanization would be discouraged and the owner cultivator class enlarged while tenantry and agricultural labor would be decreased bold views would they be supported by what i was to observe

efficiency and the role of default when security markets are incomplete this paper argues that default plays an important positive role in the economy if markets are incomplete and traders are only able to enter into contracts that they will be able to execute regardless of future events contingent contracting may be severely restricted moreover opening new markets may not relieve these restrictions default promotes efficiency in a way that opening new markets does not by making it possible for traders to enter into contracts that they will be able to execute with high probability but not with certainty copyright 1993 by american economic association

sharecropping and the interlinking of agrarian markets one of the often noted features of less developed agrarian economies is the existence of interlinkages among the land labor credit and product markets the landlord is often the supplier of credit he frequently purchases and markets the output of the tenant farmers and often sells raw materials and even consumption goods to his tenant farmers how can this phenomenon be explained what are the welfare consequences of attempts to restrict these practices which often seem to constitute restraints on free trade these are the questions to which this paper is addressed a general set of arguments applicable to both competitive and noncompetitive environments are presented to situations where all the terms of the contract are determined in an optimal way as well as to situations where many of the terms are specified institutionally section i examines interlinked credit and tenancy contracts section ii examines interlinked marketing and tenancy contracts section iii points out the possible interlinking between labor contracts and consumption goods markets and section iv presents the different equilibrium frameworks discussed in the paper such as monopoly monopsony competition and equilibria with surplus labor

u s equity and commodity futures markets hedging or financialization abstract in this paper we investigate the hedging versus the financialization nature of commodity futures vis a vis the equity market using a arma filter based correlation approach our results suggest that while gold futures are typically seen as a hedge against unfavorable fluctuations in the stock market the majority of commodity futures appears to be treated as a separate asset class in line with their increasing financialization our results are robust to the presence of inflation highlight the hedging role played by fuel energy commodity futures in the nineties and reveal that the commodity financialization boosted since the 2000s we also show that gold futures are partially a safe haven for equity investments in the short term but not in the mid term finally we uncover some hedging financialization of crude oil futures associated to global demand oil supply shocks

from earnings inequality to consumption inequality this paper studies the paths from inequality in earnings to inequality in household consumption we show that careful study of the evolution of the variances and covariances of earnings and consumption within cohorts across time can identify permanent and transitory shocks we present an application to the evolution of inequality in the united kingdom we extend previous results to recognise separate earnings of partners in couples

default insurance and debt over the life cycle abstract the widespread use of debt and default suggests that unsecured credit markets play an important role in consumption smoothing in this paper i address two previously unanswered questions first how does policy towards debt default affect the evolution of consumption and net worth over the life cycle second how does debt default policy interact with social insurance over the life cycle the findings are as follows first us default policy appears lax in the sense that it creates severe credit constraints especially for the young second eliminating default will lower consumption inequality among the young but will increase it among the old third social insurance alters default risk and in turn loan pricing and therefore matters for purely intertemporal smoothing

switching costs and adverse selection in the market for credit cards new evidence abstract to explain persistence of credit card interest rates at relatively high levels calem and mester aer 1995 argued that informational barriers create switching costs for high balance customers as evidence using data from the 1989 survey of consumer finances they showed that these households were more likely to be rejected when applying for new credit in this paper we revisit the question using the 1998 and 2001 scf further we use new information on card interest rates to test for pricing effects consistent with information based switching costs we find that informational barriers to competition persist although their role may have declined

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

the mexican food system sam sowing subsidies reaping apathy abstract the author examines the case put forward in the preceding article by dr meissner for considering sam as a constructive policy for alleviating mexico s food and nutrition problems although sympathetic to the goals of sam the author is apprehensive about the programme s foundation in this article he questions dr meissner s interpretation of mexico s recent agrarian development distinguishes between the analysis provided in the sam documents and the policy measures to which they give rise and points to serious problems of implementation