estimating the effect of hierarchies on information use theory suggests that greater hierarchical distance between a subordinate and his boss makes it more di cult to share abstract and subjective information in decision making a novel data set put together from credit dossiers of large corporate loan applicants enables us to observe the information collected by loan o cers and also how it is used by the ultimate loan approving o cer we flnd that greater hierarchical geographical distance between the information collecting agent and the loan approving o cer leads to less reliance on subjective information and more on objective information by exploiting non linearities in the assignment rules that determine an applicant s hierarchical distance and using information collecting agent flxed efiects we show that our result cannot be driven by endogenous assignment of applicants we also flnd that higher frequency of interactions between the information collecting agent and loan approving o cer both over time and through geographical proximity helps mitigate the efiects of hierarchical distance on information use our results show that hierarchical distance in uences information use and highlights the importance of human touch in communication

does deposit insurance retard the development of non bank financial markets whether and how the introduction of deposit insurance affects non bank financial market development depends on whether banks and non bank financial markets are substitutes or complements and theory has conflicting views using data on 134 countries over a 28 year period and several identification strategies we find that the introduction of deposit insurance retards the equity market the non bank depositaries sector and the banking sector when law and order is weak while strong law and order mitigates this effect it does not lead to a positive outcome for all markets for non bank financial markets the effect is greater in the long run so that while deposit insurance increases banking sector development in the long run it retards non bank financial markets regardless of the level of law and order finally several design features exacerbate the negative outcomes our results have important policy implications for implementing or altering deposit insurance schemes

boston versus deferred acceptance in an interim setting an experimental investigation abstract while much of the school choice literature advocates strategyproofness recent research has aimed to improve efficiency using mechanisms that rely on non truthtelling equilibria we address two issues that arise from this approach we first show that even in simple environments with ample feedback and repetition agents fail to reach non truthtelling equilibria we offer another way forward implementing truth telling as an ordinal bayes nash equilibrium rather than as a dominant strategy equilibrium we show that this weaker solution concept can allow for more efficient mechanisms in theory and provide experimental evidence that this is also the case in practice in fact truth telling rates are basically the same whether truthtelling is implemented as an ordinal bayes nash equilibrium or a dominant strategy equilibrium this provides a proof of concept that ordinal bayes nash design might provide a middle path achieving efficiency gains over strategy proof mechanisms without relying on real life agents playing a non truth telling equilibrium

bank ownership and performance does politics matter this paper uses a new dataset to reassess the relationship between bank ownership and bank performance providing separate estimations for developing and industrial countries it finds that state owned banks located in developing countries tend to have lower profitability and higher costs than their private counterparts and that the opposite is true for foreign owned banks the paper finds no strong correlation between ownership and performance for banks located in industrial countries next in order to test whether the differential in performance between public and private banks is driven by political considerations the paper checks whether this differential widens during election years it finds strong support for this hypothesis

bundling as an optimal selling mechanism for a multiple good monopolist abstract multiple objects may be sold by posting a schedule consisting of one price for each possible bundle and permitting the buyer to select the price bundle pair of his choice we identify conditions that must be satisfied by any price schedule that maximizes revenue within the class of all such schedules we then provide conditions under which a price schedule maximizes expected revenue within the class of all incentive compatible and individually rational mechanisms in the n object case we use these results to characterize environments mainly distributions of valuations where bundling is the optimal mechanism in the two and three good cases

efficient resource allocation under multi unit demand abstract we study resource allocation with multi unit demand such as the allocation of courses to students in contrast to the case of single unit demand no stable mechanism not even the student proposing deferred acceptance algorithm achieves desirable properties it is not strategy proof and the resulting allocation is not even weakly efficient under submitted preferences we characterize the priority structure of courses over students under which stability is consistent with strategy proofness or efficiency we show that stability is compatible with strategy proofness or efficiency if and only if the priority structure is essentially homogeneous this result suggests that efficient allocation under multi unit demand is difficult and that the use of stable mechanisms may not deliver desirable outcomes

distance constraints the limits of foreign lending in poor economies how far does mobility of multinational banks solve problems of financial development using a panel of 80 000 loans over 7 years i show that greater cultural and geographical distance between a foreign bank s headquarters and local branches leads it to further avoid lending to informationally difficult yet fundamentally sound firms requiring relational contracting greater distance also makes them less likely to bilaterally renegotiate and less successful at recovering defaults differences in bank size legal institutions risk preferences or unobserved borrower heterogeneity cannot explain these results these distance constraints can be large enough to permanently exclude certain sectors of the economy from financing by foreign banks

corporate governance and efficiency in banking evidence from emerging economies abstractthis article investigates the impact of corporate governance on bank efficiency across a sample of 139 commercial banks from 17 countries of central and eastern europe during the period 200

broadening the market design approach to school choice school choice refers to policies that allow parents preferences to be an input to the decision of which school a student will attend a rich body of research has developed over the past 10 15 years to study mechanisms that implement school choice this literature has mostly taken the inputs of school choice preferences priorities and capacities as exogenous more recently researchers have sought to embed the school choice problem into its wider context thereby broadening the scope of market design questions and enriching the analysis this article discusses current school choice policy issues in light of this recent literature and outlines remaining open questions

the role of finance in environmental innovation diffusion an evolutionary modeling approach abstract the implementation of climate adaptation and mitigation policies depend on the development of green technologies whose diffusion is constrained by a number of barriers which prevent them to spread broadly and at a fast pace by means of an agent based computational model the paper investigates the macro and micro economic dynamics considering the role of a traditional commercial bank and a state investment bank that explicitly supports green investments simulation results emphasize that green finance matter and that the market diffusion of environmental innovation is more pronounced when the presence of the public investment bank is combined with strong consumers preferences oriented towards environmental quality the relevance of the paper is twofold besides contributing to the literature on the finance innovation nexus by considering the role of climate finance within a complex systems framework it provides a model that can be used as a tool to explore policies to foster environmental innovation diffusion

financial development bank ownership and growth or does quantity imply quality abstract in 1980 india nationalized its large private banks this induced different bank ownership patterns across different towns allowing credible identification of the effects of bank ownership on financial development lending rates and the quality of intermediation as well as employment and investment credit markets with nationalized banks experienced faster credit growth during a period of financial repression nationalization led to lower interest rates and lower quality intermediation and may have slowed employment gains in trade and services development lending goals were met but these had no impact on the real economy

information or regulation what drives the international activities of commercial banks information costs and regulatory barriers distinguish international financial markets from national ones using panel data on bilateral assets and liabilities of commercial banks i empirically determine the impact of information costs and regulations and i isolate intra eu financial linkages i confirm that information costs and regulations are important factors influencing international asset choices of banks but their relative importance differs among countries

the drivers of foreign bank lending in central and eastern europe the roles of parent subsidiary and host market traits we analyze the relative roles of subsidiary and parent banking group traits in driving foreign banks lending patterns in the central and eastern european cee region before and during the crisis we use a bank level dataset on western european banking groups and their cee subsidiaries over the 2002 2013 period we find that lower capital to asset ratios and higher non performing loans npl ratios at either the subsidiary or the parent bank level significantly lowered subsidiary lending growth before and during the crisis the onset of the crisis not only lowered subsidiary lending growth in the cee countries but also has altered the relationship between balance sheet conditions and lending growth however we also find strong evidence that this crisis effect is significantly less pronounced for subsidiaries participating in the vienna initiative our results policy implications include purging banks of npls enhanced regulatory coordination and the inclusion of parent bank traits in countercyclical capital buffer calculations

foreign banks and credit stability in central and eastern europe a panel data analysis abstract we examine whether foreign and domestic banks in central and eastern europe react differently to business cycles and banking crises our panel dataset comprises data of more than 250 banks for the period 1993 2000 with information on bank ownership and mode of entry during crisis periods domestic banks contracted their credit base whereas greenfield foreign banks did not also home country conditions matter for foreign bank growth as there is a significant negative relationship between home country economic growth and host country credit by greenfields finally greenfield foreign banks credit growth is influenced by the health of the parent bank

the objective function of government controlled banks in a financial crisis abstract we present evidence that government controlled banks gcbs significantly increased their lending to small and medium sized enterprises smes whose main bank was a large bank in the 2008 09 financial crisis further analyses show that the weak relationship between large banks and smes is a major cause for this phenomenon the mixed cournot oligopoly model with relationship banking where profit maximizing private banks and a welfare maximizing gcb coexist shows that this finding is consistent with the welfare maximization by a gcb rather than its own profit maximization

a theoretical model of bank lending does ownership matter in times of crisis abstract the present study investigates theoretically the lending responses of government owned and private banks in the event of unexpected financial shocks our model predicts that public banks provide more loans to the real sector during times of crisis compared to private banks which cut down on lending and increase liquidity holdings we put forth three reasons for this heterogeneous behavior first the objective of public banks in contrast to their private peers is not only to maximize profits given risks but also to stabilize and promote the recovery of the economy second public banks may suffer less deposit withdrawals or avoid a bank run in a severe crisis because the state has better access to additional funds making a recapitalization more likely and finally public banks may suffer less deposit withdrawals due to their higher credibility in promising a future recapitalization in the case of a severe crisis

do lenders favor politically connected firms rent provision in an emerging financial market corruption by the politically connected is often blamed for economic ills particularly in less developed economies using a loan level data set of more than 90 000 rms that represents the universe of corporate lending in pakistan between 1996 and 2002 we investigate rents to politically connected rms in banking classifying a rm as political if its director participates in an election we examine the extent nature and economic costs of political rent provision we nd that political rms borrow 45 percent more and have 50 percent higher default rates such preferential treatment occurs exclusively in government banks private banks provide no

determinants of bank cost efficiency in transition economies evidence for latin america central and eastern europe and south east asia in this study we adopt wang s 2002 heteroscedastic stochastic frontier model which allows us to investigate bank cost efficiency and to measure the marginal effects of some variables on both the level and the variability of inefficiency in recent years the financial crisis has significantly affected the banking systems of the transition countries hence the efficiency is of major importance for the stability of the banks regarding the determinants of efficiency we find evidence that banks that follow a more cautious strategy characterized by lower risk appetite and average expectations on profitability have higher cost efficiency we also find that traditional deposit taking and loan making still remain the most efficient activity of the banks additionally the results showed that a higher gross domestic product growth rate implies an increase in the inefficiency level indicating an unsustainable bank management behaviour which in periods of economic growth adopts policies that can generate

leveling the playing field sincere and sophisticated players in the boston mechanism empirical and experimental evidence suggests different levels of sophistication among families in the boston public school student assignment plan we analyze the preference revelation game induced by the boston mechanism with sincere players who report their true preferences and sophisticated players who play a best response we characterize the set of nash equilibrium outcomes as the set of stable matchings of a modified economy where sincere students lose priority to sophisticated students any sophisticated student weakly prefers her assignment under the pareto dominant nash equilibrium of the boston mechanism to her assignment under the recently adopted student optimal stable mechanism jel d82 i21

foreign banks trends and impact over the past two decades foreign banks have become much more important in domestic financial intermediation heightening the need to understand their behavior we introduce a new comprehensive database made publicly available on bank ownership including the home country of foreign banks for 5 324 banks in 137 countries over the period 1995 2009 we document large increases in foreign bank presence in many countries but with substantial heterogeneity in terms of host and banks home countries bilateral investment patterns and bank characteristics in terms of impact we document that the relation between private credit and foreign bank presence importantly depends on host country and banks characteristics specifically foreign banks only seem to have a negative impact on credit in low income countries in countries where they have a limited market share where enforcing contracts is costly and where credit information is limited available and when they come from distant home countries this shows that accounting for heterogeneity including bilateral ownership is crucial to better understand the implications of foreign bank ownership

comparing school choice mechanisms by interim and ex ante welfare recent work has highlighted welfare gains from the use of the boston mechanism over deferred acceptance da in school choice problems in particular finding that when cardinal utility is taken into account boston interim pareto dominates da in certain incomplete information environments with no school priorities we show that these previous interim results are not robust to the introduction of weak priorities however we partially restore the earlier results by showing that from an ex ante utility perspective the boston mechanism pareto dominates any strategyproof mechanism including da even allowing for arbitrary priority structures thus we suggest ex ante pareto dominance as a relevant criterion by which to compare school choice mechanisms this criterion may be of particular interest to school districts as they can be thought of as social planners whose goal is to maximize the overall ex ante welfare of the students

government financial institutions and capital allocation efficiency in japan abstract this paper uses the industry level panel data from 1975 2005 and estimates wurgler s the elasticity of industry investment to value added for each of japan s 47 prefectures we find that wurgler s varies considerably across prefectures even though there is no regulatory restriction on inter regional flow of financial capital moreover exploiting cross prefecture variation in wurgler s we show that the share of government loans is strongly and negatively correlated with the quality of capital allocation we also find that this negative correlation is robust to controlling for local economic and financial development and more pronounced in declining industries than growing industries moreover the share of government loans is positively correlated with investment to output ratio but negatively correlated with total factor productivity growth taken as a whole the results are broadly consistent with the view that japan s government financial institutions stimulate investment in declining industries while distorting capital allocation and reducing overall productivity growth

the real effects of government owned banks evidence from an emerging market using plant level data for brazilian manufacturing firms this paper provides evidence that government control over banks leads to significant political influence over the real decisions of firms i find that firms eligible for government bank lending expand employment in politically attractive regions near elections these expansions are associated with additional favorable borrowing from government banks further these persistent expansions take place just before competitive elections and are associated with lower future employment growth by firms in other regions the analysis suggests that politicians in brazil use bank lending to shift employment towards politically attractive regions and away from unattractive regions

banking services for everyone barriers to bank access and use around the world using information from 193 banks in 58 countries the authors develop and analyze indicators of physical access affordability and eligibility barriers to deposit loan and payment services they find substantial cross country variation in barriers to banking and show that in many countries these barriers can potentially exclude a significant share of the population from using banking services correlations with bank and country level variables show that bank size and the availability of physical infrastructure are the most robust predictors of barriers further the authors find evidence that in more competitive open and transparent economies and in countries with better contractual and informational frameworks banks impose lower barriers finally though foreign banks seem to charge higher fees than other banks in foreign dominated banking systems fees are lower and it is easier to open bank accounts and to apply for loans on the other hand in systems that are predominantly government owned customers pay lower fees but also face greater restrictions in terms of where to apply for loans and how long it takes to have applications processed these findings have important implications for policy reforms to broaden access

bank ownership and lending patterns during the 2008 2009 financial crisis evidence from latin america and eastern europe this paper examines the impact of bank ownership on credit growth in developing countries before and during the 2008 2009 crisis using bank level data for countries in eastern europe and latin america it analyzes the growth of banks total gross loans as well as the growth of corporate consumer and residential mortgage loans although domestic private banks in eastern europe and latin america contracted their loan growth rates during the crisis there are differences in foreign and government owned bank credit growth across regions in eastern europe foreign bank total lending fell by more than domestic private bank credit these results are primarily driven by reductions in corporate loans furthermore government owned banks in eastern europe did not act counter cyclically the opposite was true in latin america where the growth of government owned banks corporate and consumer loans during the crisis exceeded that of domestic and foreign banks contrary to the case of foreign banks in eastern europe those in latin america did not fuel loan growth prior to the crisis and did not contract lending at a faster pace than domestic banks during the crisis

the great retrenchment international capital flows during the global financial crisis the current crisis saw an unprecedented collapse in international capital flows after years of rising financial globalization we identify the stylized facts and main drivers of this development the retrenchment in international capital flows is a highly heterogeneous phenomenon first across time being especially dramatic in the wake of the lehman brothers failure secondly across types of flows with banking flows being the hardest hit due to their sensitivity of risk perception and thirdly across regions with emerging economies experiencing a shorter lived retrenchment than developed economies our econometric analysis shows that the magnitude of the retrenchment in capital flows across countries is linked to the extent of international financial integration its specific nature with countries relying on bank flows being the hardest hit as well as domestic macroeconomic conditions and their connection to world trade flows gian maria milesi ferretti and cedric tille

cardinal bayesian allocation mechanisms without transfers abstract in allocating goods with no use of monetary transfers random allocation mechanisms can be designed in order to elicit information on preference intensities i study the nontransfer allocation of two ex ante identical objects under bayesian incentive compatibility with symmetric agents and independent private valuations i find the ex ante utilitarian optimal mechanism in which the probability of receiving a specified object is used as numeraire to purchase probability units of the other object i characterize this mechanism as an appropriate combination of lotteries auctions and insurance the latter element ensures that efficient auctions are feasible if the problem is constrained to guarantee exactly one object per agent then the optimal mechanism uses no information other than the agents ordinal preferences

multinational banks and the global financial crisis weathering the perfect storm we use data on the 48 largest multinational banking groups to compare the lending of their 199 foreign subsidiaries during the great recession with lending by a benchmark group of 202 domestic banks contrary to earlier more contained crises parent banks were not a significant source of strength to their subsidiaries during the 2008 09 crisis as a result multinational bank subsidiaries had to slow down credit growth about twice as fast as domestic banks this was particularly the case for subsidiaries of banking groups that relied more on wholesale market funding domestic banks were better equipped to continue lending because of their greater use of deposits a relatively stable funding source during the crisis we conclude that while multinational banks may contribute to financial stability during local bouts of financial turmoil they also increase the risk of importing instability from abroad

foreign bank behavior during financial crises one of the persistent policy problems faced by governments contemplating financial liberalizations is the question of whether to allow foreign banks entry into the domestic economy this question has become ever more urgent in recent times due to rapid financial globalization coupled with the credit contractions experienced as a result of the 2007 08 financial crisis this paper examines the question of whether opening the financial sector to foreign participation is a good idea for developing countries using a unique bank level database of foreign ownership in particular the authors examine whether the credit supply of majority foreign owned financial institutions differ systematically conditional on a crisis event in their home economies they show that foreign banks that were exposed to crises in their home countries exhibit changes in lending patterns that are lower by between 13 and 42 percent than their non crisis counterparts

priorities in school choice the case of the boston mechanism in barcelona abstract the boston mechanism is a school allocation procedure that is widely used around the world and has been criticized for its incentive problems in order to resolve overdemands for a given school most often priority is given to families living in the neighborhood of the school using a very rich data set on school applications for the case of the boston mechanism in barcelona we exploit an unexpected change in the definition of neighborhood this change allows us to identify that a large fraction of families systematically ranks first high priority schools neighborhood schools in this case additional data on school enrollment decisions and census data shows that some seemingly unsophisticated parents are high income families that can rank hard to get schools because they can afford the outside option of a private school in case they do not get in this sheds light on important inequalities beyond parents lack of sophistication found in the literature

structural estimation of a model of school choices the boston mechanism vs its alternatives we model household choice of schools under the boston mechanism bm and develop a new method applicable to a broad class of mechanisms to fully solve the choice problem even if it is infeasible

resolving conflicting preferences in school choice the boston mechanism reconsidered the boston mechanism is among the most popular school choice pro cedures in use yet the mechanism has been criticized for its poor incentive and welfare performances which led the boston public schools to recently replace it with gale and shapley s deferred acceptance algorithm henceforth da the da elicits truthful revelation of ordinal preferences whereas the boston mechanism does not but the latter induces participants to reveal their cardinal preferences i e their relative preference intensities whereas the former does not we show that cardinal preferences matter more when families have similar ordinal preferences and schools have coarse priorities two common features of many school choice environ ments speci cally when students have the same ordinal preferences and schools have no priorities the boston mechanism pareto dominates the da in ex ante wel fare the boston mechanism may not harm but rather bene t participants who may not strategize well in the presence of school priorities the boston mechanism also tends to facilitate a greater access than the da to good schools by those lack ing priorities at those schools these results contrast with the standard view and cautions against a hasty rejection of the boston mechanism in favor of mechanisms such as the da

politicians and banks political influences on government owned banks in emerging markets abstract government ownership of banks is very common in countries other than the united states this paper provides cross country bank level empirical evidence about political influences on these banks it shows that government owned banks increase their lending in election years relative to private banks this effect is robust to controlling for country specific macroeconomic and institutional factors as well as bank specific factors the increase in lending is about 11 of a government owned bank s total loan portfolio or about 0 5 of the median country s gdp per election per government owned bank