a subsector approach to small enterprise promotion and research abstract this paper introduces a diagnostic research methodology designed to help target small enterprise development efforts in less developed countries it argues that research should focus on commodity specific subsectors which include the competing channels and supporting input and output linkages of small firms using this approach analysts can improve their understanding of small enterprise dynamics interventions that may promote them at low cost and policies that constrain small firm growth

development of financial markets and the size distribution of manufacturing establishments international comparisons abstract institutional determinants have largely been neglected in explaining international differences in the size distribution of manufacturing establishments this paper draws on recent developments in institutional analysis to derive certain hypotheses concerning the way in which the size distribution within manufacturing is affected by the degree of development of the markets for debt and equity these hypotheses are tested on the basis of an international cross section of 54 countries the results are generally supportive of the hypotheses especially in the case of developing countries

unions w ages and employment evidence from finland reduced form wage and employment equations derived from a bargaining model are estimated using the two step method proposed by engle and granger 1987 econometrica 55 251 276 wages and employment arinfluenced by varriables which determine profits on the one hand and the utility of the union on the other hand in addition bargaining power appears to matter union strength was discovered to have a positive effect on both wages and employment in the manufacturing industry the a positive effect on both wages and employment in the manufacturing industry the two step method made it possible to evaluate both the long run elasticities and shortrun adjustment step response functions indicate that adjustment is not particularly slow in general this papers to be true for wages but especially for employment hence if the actual real wage employment combination is considered inappropriate it is not primarily due to too slow adjustment rather it implies that the equilibrium is inappropriate

small manufacturing enterprises in developing countries emphasis is often placed on the promotion of small enterprises in developing countries particularly as a means of improving the lot of unskilled workers this focus raises questions about the relationship between establishment size and the pattern and efficiency of factor use and about the nature and effects of price differentials in factor markets this article goes some way toward answering these questions with data from surveys of small manufacturing enterprises in india and colombia sponsored by the world bank and relevant material from other countries the article also examines india s long standing policy unusual among developing countries of providing special support and protection for small enterprises analyses based on disaggregated data found that small firms are not reliably more labor intensive than their larger counterparts nor are they consistently more technically efficient in their use of resources in light of these findings and an analysis of factor markets this article discusses the general implications of the research results for industrial policy in developing countries

a test of the insider outsider hypothesis in union preferences in this paper a model of wage and employment determination in a unionized industry is developed and estimated the model incorporates rules governing union membership so that an insider outsider model can be estimated this approach allows the trade off the union makes between wages and employment to vary depending on whether membership is growing or contracting the model is estimated using data on the international woodworkers of america and the wood products industry in british columbia canada the insider outsider model is consistently rejected in favor of models in which some positive weight is placed on all levels of employment the results do suggest however that the weight the union places on employment decreases with the level of employment copyright 1995 by the london school of economics and political science

the role of collateral in credit markets with imperfect information abstract the paper analyzes the structure of credit market equilibrium under imperfect information collateralization and credit rationing are compared as alternative means to cope with problems of adverse selection and moral hazard it is shown that lenders may use collateral as a self selection and incentive mechanism rationing occurs only if the borrowers collaterizable wealth is too small to allow perfect sorting or to create sufficiently strong incentives whenever there is rationing in an equilibrium some borrowers are charged the maximum amount of collateral

credit rationing in small scale enterprises special microenterprise programmes in ecuador small scale enterprises receive several forms of aid but many are denied access to formal loans a demand and supply model is estimated to analyse the factors lenders use to ration credit in special microenterprise programmes the results reveal that suppliers do not discriminate against less profitable enterprises and entrepreneurs who have not completed their high school education however these entrepreneurs have a smaller demand for external finance from the microenterprise programmes than more profitable enterprises and entrepreneurs who have graduated from high school

agricultural household models extensions applications and policy this book presents the basic model of an agricultural household that underlies most of the case studies undertaken so far the model assumes that households are price takers and is therefore recursive the decisions modeled include those affecting production and the demand for inputs and those affecting consumption and the supply of labor comparative results on selected elasticities are presented for a number of economies the empirical significance of the approach is demonstrated in a comparison of models that treat production and consumption decisions separately and those in which the decisionmaking process is recursive the book summarizes the implications of agricultural pricing policy for the welfare of farm households marketed surplus the demand for nonagricultural goods and services the rural labor market budget revenues and foreign exchange earnings in addition it is shown that the basic model can be extended in order to explore the effects of government policy on crop composition nutritional status health saving and investment and to provide a more comprehensive analysis of the effects on budget revenues and foreign exchange earnings methodological topics primarily the data requirements of the basic model and its extensions along with aggregation market interaction uncertainty and market imperfections are discussed the most important methodological issues the question of the recursive property of these models is also discussed

the impact of credit on peasant productivity and differentiation in nicaragua abstract an endogenous switching regressions framework is used to structure and identify the impact of credit on small farm food production in nicaragua the results which emerge weakly support the hypothesis that credit had a positive impact on production and could be expected to reduce the pattern of structurally unbalanced growth in nicaraguan agriculture however the estimated impact is of a form which implies a process of differentiation and unequal growth in the peasant sector in the wake of the new opportunities afforded by credit

the subcontracting behavior of single vs multiplant enterprises in us manufacturing implications for economic development abstract in this paper we explore the factors shaping the production subcontracting make buy decisions of managers in the plants of both small and large firms in 21 industries that constitute the us metalworking and machinery manufacturing sector descriptive and multivariate statistical analyses of original survey data collected in 1986 1987 lead us to infer that a regional economic development strategy that promotes those manufacturing firms with a single relatively large plant making a diverse range of products and having close ties to customers but limited internal machining capacity has the greatest potential for generating local backward linkages in this respect we find empirical if nuanced support for certain normative aspects of the industrial district or networking approach to economic development policy

housing price land supply and revenue from land sales in a recent study peng and wheaton empirically examine the effect of restrictive land supply on hong kong house prices however we argue that the impact of the supply of new land by the hong kong government is not as important as they maintain in accounting for the volatile house prices in hong kong we show that there is no causal relationship between land supply and housing prices our estimations based on the annual data of hong kong s public land sales find that the government acts to maximise land revenue maximisation of revenue from land sales is however consistent with the efficient allocation of resources we also show that the amount of land sales by the government and land in developers land banks tend to decrease when market interest rates increase land banking behaviour is governed by economic conditions long term land holding costs should cover interest costs

access to capital and its impact on agrarian structure and productivity in kenya access to capital and its distribution across agents can profoundly shape the structure and performance of an agrarian market economy it is conceptually useful to distinguish between ex ante and ex post capital access ex ante capital access denotes the ability of agents to finance production costs e g labor and purchased inputs costs which must be paid ex ante that is prior to the actual realization of production ex post capital access that is access to capital after the realization of the production process is of particular importance as an insurance substitute in low income agrarian economies where contingency markets are imperfect buoyant ex post capital access would permit an individual to stabilize consumption year to year even as production fluctuates annually a number of theoretical models have ex

how small enterprises in ghana have responded to adjustment ghana is often cited as an african country that has undertaken major macroeconomic reforms with generally positive results for economic growth within ghana s industrial sector the effects of structural adjustment policies have differed among subsectors and firms little is known however about the impact of adjustment on smaller firms a survey of small scale enterprises sses was carried out in november 1989 to learn more about the impact of the adjustment program on their operations to evaluate their potential contribution to dynamic industrial recovery and to identify appropriate measures that would accelerate the growth of sses in numbers size and productivity specific objectives of the survey were to 1 learn more about the characteristics of small firms and their owners 2 analyze how policy changes have affected small firms highlighting entrepreneurs strategies for adapting to their new environments and 3 identify constraints to the future growth of small firms results show that adjustment policies have forced the sses to become more competitive to survive and that significant structural changes are taking place across subsectors and within firms the overall business environment has generally improved during the adjustment program although shortcomings remain uncertainty about political and economic stability and lack of finance appear to be the most immediate restraints on investment

an integration of trade union models in a sequential bargaining framework this paper aims to embed two popular models of trade union behavior the monopoly model and the efficient bargaining model in a more general framework it does this by analyzing sequential bargaining models where wages are determined before employment and the power of the union in the two stages of the bargain differs as well as finding that the monopoly and efficient bargain models are special cases of this model a new class of models is also discovered this framework is used to analyze the relationship between union pow er and efficiency the empirical analysis of trade unions and the effects of trade union legislation copyright 1987 by royal economic society

decentralized industrialization and rural development evidence from taiwan after 3 decades of growth widespread poverty persists in underdeveloped countries one of the major characteristics of the poor is that a disproportionate number of them are located in rural areas since a large number of the rural poor have limited or no access to productive agricultural land raising agricultural productivity alone may be insufficient to reduce rural poverty consequently attention has now turned to rural nonfarm activities as a possible source of rural employment and income this paper uses evidence from taiwan to show that the level of rural nonfarm ac

does lack of access to formal credit constrain agricultural production evidence from the land tenancy market in rural india while it is commonly believed that lack of access to government subsidized formal credit underlies observed differences in farm productivity in rural india there is little empirical evidence on this issue in this paper i address this issue by examining whether households use the farm land rental market to equilibrate their access to formal credit as they are known to do in the case of other imperfectly marketable inputs this research reveals however that the advantage formal borrowers enjoy in the tenancy market does not reflect their access to formal credit per se but their greater ownership of inputs such as irrigated land

credit constraints credit unions and small scale producers in guatemala abstract efficient and equitable development outcomes may depend in part on whether formal financial institutions leave low wealth producers tightly constrained in their access to credit if so can cooperative institutions efficiently relax these constraints these issues are explored using survey data gathered from 950 small scale producer households in areas of guatemala with market oriented credit unions that mobilize savings and make unsubsidized loans nonprice rationing by banks is found to be common among lower wealth households while credit unions relax credit constraints for a significant portion of those rationed by banks but not the poorest of the study households

barriers to the growth of informal sector firms a case study between 1960 and 1974 in the punjab pakistan many artisan units entered the production of small capacity tubewells however having reached a certain stage even the largest and the most enterprising of these firms were unable to expand any further this study seeks to identify the factors that prevented their further growth the article directs attention to the inability of the informal enterprise to adopt techniques that are essential for growth beyond a certain stage the main source of this weakness lies in the fact that many of the skills associated with the use of these techniques are necessarily acquired through formal educational and training channels the inability to expand beyond a certain stage is therefore identified with the inability to cross over into the modern sector the barrier lies in the social and economic background of the informal firm s owner manager which limits his capacity to absorb and attract through the market skills and resources needed to adopt the necessary techni

investment and economic growth abstract the paper revisits the old question how much does investment contribute to economic growth building on recent work of maurice scott it suggests that the analysis of growth in developing as in the industrial countries would benefit from a capital accumulation approach in the following analysis economic growth is related to three variables all greatly influenced by the quality of economic policies the rate of investment the social rate of return to investment and the investment induced returns to labor

the flip side of fashion used clothing exports to the third world since the early 1970s western countries have increasingly recycled their second hand clothes by exporting to the third world in response some ldc governments have banned used clothing imports to protect their domestic textile industries this article after reviewing the structure and evolution of world used clothing trade examines the consequences for africa s largest importer rwanda in this low income country with its small domestic textile industry displacement is minimal and imported used clothing offers a modest but rare policy lever for directly increasing national income as well as incomes of the rural poor

unemployment in britain male unemployment in britain has risen from around 2 per cent in the 1950s to around 17 per cent in 1985 see figure 1 the figures are for male unemployment because there is no consistent series for women 1 even more remarkably unemployment has fallen in only three years out of the last twenty 1973 1978 and 1979 to account for this we need a model that explains both changes in the natural or non accelerating inflation rate of unemployment nairu and deviations from it we use a three equation supply side model centred on the labour market this has two main features the first concerns the determination of employment in the short run the labour demand function that we use cuts through the fruitless debate now raging especially in europe as to whether current unemployment is classical or keynesian according to the classical view employment is too high because real wages are too high according to the keynesian view real wages are not binding and unemployment is high because the product market does not clear with prices too high relative to nominal demand the whole debate is set in the framework of perfect competition yet in perfect competition prices are set by impersonal forces and it is not clear what could possibly stop prices clearing the market it is much more reasonable to think of prices as being set by imperfectly competitive firms existing prices being the best they can think of given the demand they face in this context firms demand for labour will depend on both the real product wage and the level of real aggregate demand this is the demand function we estimate and it conforms both to common sense and to the data however this does not imply that employment can be made to grow without limit by pumping up real demand for in the medium term when price surprises are eliminated our model determines three variables employment real wages and real demand on the basis of three equations an employment equation a price equation and a wage equation thus in the medium term there is a natural level of employment and corresponding to this a natural level of real aggregate demand the second key feature of our model concerns the medium term determination of unemployment in the medium term the planned mark up of wages over prices in wage settlements must be consistent with the mark up of prices over wage costs in employers pricing behaviour for if wage setters try to set real product wages higher than is consistent with employers pricing behaviour this generates ever increasing inflation thus the key to understanding unemployment in the medium term is the behaviour of wage setters if events occur that push them towards too high real wages then unemployment has to rise to offset these influences we shall call these influences wage pressure variables or push factors and they are clearly crucial in understanding unemployment the variables here include the social security system employment protection

the rural non farm economy prospects for growth and poverty reduction summary policy makers have high expectations for the rural non farm economy rnfe given high income shares growing employment and frequently low capital requirements they see the rnfe as a potential pathway out of poverty for their rural poor yet available evidence suggests that pro poor rural non farm growth does not occur automatically for the poor to benefit from rural non farm growth policy makers must stimulate buoyant rural economies with robust non farm income growth not simply low productivity employment moreover the poor must gain access to growing market niches fluid labor markets provide one important bridge linking the rural poor to growing non farm opportunities

who is credit constrained in the u s economy an important assumption of the life cycle model of consumption is the postulate of perfect capital markets this hypothesis has recently been challenged by substantial empirical evidence hall and mishkin 1982 using the panel study of income dynamics estimate that 20 percent of united states families are liquidity constrained mariger 1986 derives a life cycle model with endogenous liquidity constraints and using a cross section estimates this fraction to be 19 4 percent hubbard and judd 1986 simulate a model with a constraint on net worth which shows that with reasonable assumptions about preferences 19 0 percent of united states consumers are liquidity constrained the emerging consensus points therefore to a fraction of approximately 20 percent of the population behaving in a manner that is inconsistent with the pure life cycle model in addition hayashi 1985 and zeldes 1989 investigate the correlation among consumption wealth and income for various population groups and infer that liquidity constraints are more important for younger families with low levels of wealth and saving the main limitation of these studies is that in their data sets constrained consumers are not observable and have to be identified via indirect evidence thus there is as yet little firm evidence about the characteristics of the consumers who are likely to be credit constrained this paper adopts an approach that differs from previous tests for liquidity constraints because it makes use of data where constrained consumers are observable and explicitly links their existence to credit market imperfections and personal characteristics the data drawn from the 1983 survey of consumer finances scf and described in section ii provide information on individuals whose request for credit has been rejected by financial intermediaries in section iii a model is developed in which consumers and lenders behavior jointly determines the probability that a consumer is rationed in the credit market this probability is then

empirical measurement of credit rationing in agriculture a methodological survey empirical analysis of rural credit market failure has been of key scientific and political interest in recent years the aim of this article is to give an overview of the various methods for measuring credit rationing that are employed in the literature furthermore the methods are subjected to a comparative evaluation of their specific strengths or shortcomings six approaches are distinguished measurement of loan transaction costs analysis of qualitative information collected in interviews analysis of quantitative information collected in interviews using the credit limit concept analysis of spill over effects with regard to secondary credit sources econometric household modeling and the econometric analysis of dynamic investment decisions an explicit comparison with a first best solution is impossible in the first three approaches since they essentially rely on a subjective assessment of borrowers access to credit based on qualitative or quantitative indicators the fifth and sixth approaches allow a rigorous interpretation in the framework of neoclassical equilibrium theory the fourth approach takes an intermediate position since spill over on segmented loan markets reveals a willingness to pay with regard to the supposedly less expensive but rationed primary source the approaches are fairly data demanding in general usually requiring specific data on loan transactions even so most approaches are applicable to cross sectional household data with the exception of the first all methods surveyed might plausibly be used to empirically detect credit rationing

growth of small size enterprises in india its nature and content abstract the paper highlights the nature of growth of small size enterprises in india and discusses how far the growth is accompanied by the fulfillment of objectives such as poverty eradication and the removal of regional imbalances without hampering the long term growth prospects of the economy to facilitate the discussion village cottage and handcrafts enterprises of the small scale sector are separated from its modern component the available evidence as is based on a number of studies in this area suggests that the somewhat unusual and high growth of the small scale sector is not accompanied by efficiency innovativeness and social justice policy bias against largeness seems to explain the growth whereas an elaborate system of subsidies and incentives has had only a marginal role

comparative analysis of investment models for new york dairy farms traditional and dynamic investment models were estimated using farm level dairy data the traditional model predicted more variability in desired capital and less variability in the adjustment rate than did the dynamic model overall the traditional model performed better both models suggest a significant delay between changes in the determinants of desired capital stock and the actual investment expenditure new york dairy farmers may be making more extensive use of existing capital before making additional expenditures another explanation may be our use of farm level data where investment is periodic and discrete most other studies have used aggregate data

employment in the british coal industry a test of the labour demand model the authors test the conventional model of labor demand against the alternative that bargaining takes place over both wages and employme nt for a time series cross section data set covering the british coal industry they note the difficulty of identifying the contract curve under the alternative hypothesis and suggest the use of variables affecting the union and management status quo points as instruments for the endogenous wage they find that outside variables such as benefits and manufacturing wages are important in determining the level of employment thus rejecting the labor demand model copyright 1988 by royal economic society

relating external support business growth creating strategies for survival a comparative case study analyses of small manufacturing firms smfs and entrepreneurs using a comparative case study approach this paper presents three of thirty two findings on small plastic manufacturing firms spmfs and entrepreneurs in nigeria the selected firms represent performance differences between firms that have received external support and those that did not due to lack of support some entrepreneurs had to independently sustain themselves through their creativeabilities findings from the study revealed that small plastic manufacturing entrepreneurs in nigeria are constrained by certain external and internal factors ironically these constraints seem to have challenged some entrepreneurs to invent original strategies on their own to cope survive and to remain in business lack of financial capital especially foreign exchange needed to import vital operating inputs from abroad has been the most serious constraint other serious external constraints identified are inadequate infrastructure facilities competition from large firms unfavorable government policies dearth of machines and spare parts and paucity of raw materials internal obstacles like incompetent planning poor organizational skills and limited knowledge among others were common obstacles faced by the entrepreneurs in addition another discovery is that funding assistance to entrepreneurs by relevant institutions concerned is not free from bias on the basis of favoritism it is therefore recommended that funding institutions should give due consideration and encouragement to promising talents two have especially been identified from the study as typical examples of potential avant garde entrepreneurs and such should not be neglected or wasted guidance for further progress through training is another helpful approach to take and give succor to such admirable talents entrepreneurs who qualify for grants from institutions should completely be decided on compliance to standard selection procedures rules and evidence of superior entrepreneurial qualities in addition those who qualify for support should be determined only after feasible business plans have been presented

contractual union firm agreements and the theory of the firm under uncertainty abstract this article analyzes the consequence of introducing union firm contractual agreements in the theory of the firm under uncertainty generalizing the works on the labor managed firm it is shown that the risk averse firm produces more than the risk neutral firm or the firm operating under certainty as long as equilibrium employment is negatively related to union wages that is when union power over wages is higher than that over employment

mighty oaks from little acorns can microenterprise serve as the seedbed of industrialization abstract how can microenterprises foster the development of an industrial sector featuring a dynamic medium or large enterprise sector we propose two possible mechanisms graduation of microenterprises and savings by microentrepreneurs we examine the barriers to both mechanisms and reexamine policies designed to aid the sector projects aimed at the enterprise level are not likely to remove barriers to firms graduating or saving changes in macro policy may have a positive effect reforms of the legal and regulatory environment may be very important and should be rethought with the mechanisms of the seedbed role specifically in mind

tests of alternative wage employment bargaining models with an application to the uk aggregate labour market abstract in this paper we propose a test that discriminates among alternative models of bargaining for wages and employment the test rests on a theoretical framework which encompasses both the labour demand and the efficient bargain models of wage and employment determination it is based on testing the cross equation restrictions implied for the coefficients of union power variables in reduced form wage and employment equations the test is illustrated for the layard and nickell model of the aggregate uk labour market for which it is found that one can reject both the labour demand model and the hypothesis that wage employment bargains are efficient in favour of a generalised model of inefficient bargaining for wages and employment

fundamental q cash flow and investment evidence from farm panel data this study used a 1976 1992 panel data set to test whether farm machinery investors face finance constraints tests were based on fundamental q investment equations in which cash flow was added as an additional explanatory variable results indicated that 1 credit constraints were generally not a problem during the 1970s boom 2 credit constraints became a problem during the 1980s and early 1990s because of tighter credit and or more conservative financial managerial styles 3 the investment cash flow relationships of low debt and older operator farms were not significantly affected by farm business cycles and 4 the investment cash flow relationships of high debt and young operator farms were affected strongly by business cycles debt level was the strongest determinant of credit constraints asset size and operator age were less important

union firm bargaining and the influence of product market power and production technology on systematic risk the relationship between the capm firm beta and the firm s microeconomic decisions is studied by a model under uncertainty which combines the feature of an ex ante inputs substituable production technology and the existence of a union which bargains over various economic dimensions of the firm it is shown that the earlier findings of a relationship between the firm beta the firm product market power and the labor capital ratio may be reinforced through the indirect channel of labor market bargaining but the relationship becomes more complex and heavily depends on the scope of the union firm bargaining process this yields the empirical prediction confirmed for a panel of belgian firms that any proper estimation of the determinants of firm beta must control for firms in the sample being unionized

contestable markets an uprising in the theory of industry structure presents a transcript of the presidential address delivered at the 94th meeting of the american economic association on december 29 1981 discussion of developments in the theory of industry structure welfare attributes of contestable markets behavior characteristics of oligopoly equilibrium intertemporal vulnerability to inefficient entry ebsco

bayesian learning in an infant industry model abstract most analyses of the infant industry argument assume that production early on benefits subsequent production in deterministic fashion this paper presents an alternative framework for evaluating the infant industry argument that focuses on imperfect information as a barrier to entry initial entrants provide information of social value by reducing uncertainty for potential followers about the suitability of local conditions in contrast to earlier work i show that factors that increase the informational barrier to entry may lower the optimal subsidy to the infant industry and that the standard test of the success of infant industry policy is not always valid 1997 elsevier science b v

costly monitoring loan contracts and equilibrium credit rationing this paper develops a model with asymmetrically informed agents and costly monitoring of loan contracts where an equilibrium can exhibit credit rationing borrowers are identical ex ante but some receive loans and others do not in contrast to existing credit rationing theories rationing does not occur here due to inflexible prices adverse selection or moral hazard optimizing behaviour produces a standard debt contract in equilibrium the aggregate quantity of loans and equilibrium interest rates respond differently depending on whether there is rationing in equilibrium

employment adjustment in uk manufacturing this analysis differs from previous studies of labor demand in its explicit inclusion of the costs to the firm of adju sting its workforce these costs include institutional factors such a s employment protection legislation and unions and market factors su ch as the degree of slack in the labor market two questions are addr essed what is the quantitative impact of these forces and does their inclusion improve the fit of a labor demand function the results sh owed these factors to have a strong influence on the rate of hiring f iring and to improve significantly on conventional labor demand funct ions copyright 1988 by royal economic society

access to credit plot size and cost inefficiency among smallholder tobacco cultivators in malawi abstract using data from the malawi financial markets and household food security survey this paper examines the effect of access to credit from formal sources and tobacco plot size on cost inefficiency among malawian smallholder tobacco cultivators farm specific cost inefficiency is estimated within the framework of stochastic frontier analysis access to credit is measured as the sum of household members self reported credit limits at credit organisations arguably a truer measure of an exogenous credit constraint than credit program participation or actual loan uptake it is found that tobacco cultivation is significantly less cost inefficient per acre on larger plots while access to credit by itself has no statistically discernible effect on cost inefficiency it reduces the gain in cost efficiency from a larger plot size

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

transaction costs of credit to the small scale sector in the philippines discussions on the cost of credit in less developed countries seldom include the transaction costs of lending these costs consists of the cost of administering credit and the cost of risk of default this study attempts to present estimates of these transaction costs of lending to the small scale sector by different financial institutions in the philippines recipients of the loans are subdivided by size and activity the problem of extending credit to the small scale sector is that the real cost of lending to small farmers is three times and to small scale industry is twice that of lending to large scale industry therefore lending to the smalll scale sector is feasible only under one or a combination of the following financial arrangements high interest rates cheaper funds from the central bank or cross subsidization the philippine experience shows that certain specialized lending institutions are an appropriate vehicle for extending credit to the small scale sector rural banks are a particularly good example since administrative costs are low and price or allocative efficiency is sufficiently higher than that of private development banks

a dynamic contracting model for wages and employment in three european economies we present a structural dynamic non linear model for an efficient contracting between a firm facing adjustment costs on labour and a union having preferences which are subject to habit formation the model s first order necessary conditions are estimated for the french the dutch and the belgian labour market the estimation results turned out to be remarkably similar for the three countries two alternative hypotheses are also investigated i a myopic behaviour of the union and ii a competitive labour market the performance of the efficient contract model with a forward looking union is found to be superior to that of the neo classical model in explaining the dynamics of employment and wages in the three countries

contestable markets and the theory of industry structure a review article contestable markets and the theory of industry structure is a comprehensive integration expansion and application of the ideas of william j baumol elizabeth e bailey john c panzar robert d willig edward zajac and their associates on contestability theory in 16 chapters baumol panzar and willig 1982a try to make precise especially in a multiproduct context ideas related to the chicago school approach to industrial organization to argue forcefully that potential entry disciplines monopoly and at the same time to offer a product more directly useful to the policymaker than the more abstract mathematical writings on increasing returns there are at least five basic ideas presented here first under certain structural conditions on technology and certain technical requirements on demands frictionless entry and exit together with equal access to technology lead to a type of competitive equilibrium with desirable welfare consequences even though there may be only one active firm in equilibrium a market with the foregoing characteristics of frictionless reversible entry and equal access to technology is called a perfectly contestable market by baumol et al 1982a the market for air travel between two cities serves as a canonical example such a market may support only one airline but the active airline must price at cost to prevent a price cutting rival airline from flying in and skimming off customers the authors conclude that the presence of such shadow entrants will force competition like behavior by the incumbent even though the market may be a natural monopoly second baumol et al 1982a define natural monopoly as a situation where the technology is characterized by a subadditive cost function that is to say c l7 yt l c y for any collection of output

contestability vs competition analyzes the ultra free entry as normative contribution to industrial organization ultra free entry in context of the evolving field of industrial organization assessment of the conceptual validity of william baumol elizabeth bailey john panzar and robert willig s analysis in representing the nature of competition empirical issues in measuring and testing ultra free entry ebsco

deagrarianization and rural employment in sub saharan africa a sectoral perspective abstract sub saharan africa is steadily becoming less rural in character for decades development thinking has prescribed industrialization as the virtuous path leading away from economic dependence on agriculture but africa s industrial record has been plagued with underperformance an alternative perspective centered on the process of deagrarianization and attendant rural employment generation may offer more explanatory power and policy direction this paper outlines key theoretical components and practical concerns of a deagrarianization approach the nature and incidence of deagrarianization in sub saharan africa is contrasted with that experienced in developed industrial countries conceptual approaches dealing with rural non agricultural employment are identified within different social science disciplines through a thematic review of the literature the conclusion highlights the need for more focused study of the deagrarianization process and rural service sector development

market imperfections and output loss in the presence of expenditure constraint a generalized shadow price approach in view of widespread capital market imperfections and farmers budget constraints in developing countries an indirect production function ipf is used for a study of 289 indian paddy growers the analysis generalizes the ipf to accommodate the numerous kinds of market imperfections and policy induced distortions that pervade less developed countries agriculture the presence of these distortions in an expenditure constrained situation results in a loss of output defined as the difference between maximal potential output and actual output for the sample of farmers average output loss is found to be in the range of 12

a dynamic model of union power wages and employment the traditional approach to modelling the effects of trade union power on wages and employment has paid very little attention to how the form of union power affects the outcome in this paper wage and employment determination is considered in a dynamic model where some workers e g non union members continue to work in the event of a dispute to see whether this practice can be justified the predictions of the model are very different from the standard one for example both wages and employment may be a nonmonotonic function of union density the model can also explain situations in which unions are sustainable in the long run

implicit contracts a survey 7mplicit contracts resolve the distribution of uncertainty and utilization of specific human capital between risk averse workers and less risk averse firms incomplete contracts are required to yield involuntary layoffs in contract markets otherwise contracts are efficient and pareto optimal by construction there is a close relation between contract theory and neoclassical labor market theory contracts smooth consumption but increase the volatility of labor supply and labor utilization to demand disturbances because contractural insurance eliminates the income effects of socially diversifiable risks this result is similar to the intertemporal substitution hypothesis however the price mechanism in a contract is substantially different contracts embody a nonlinear two part pricing scheme the lump sum part allocates the income consumption consequences of risks and the marginal pricing part allocates production and labor utilization this implicit pricing mechanism is in all respects flexible though the observed average hourly wage combines both parts and may give the outward appearanceof rigidity furthermore the observed average wage rate in a contract does not reflect marginal conditions necessary for structural econometric estimation indivisibilities appear necessary to account for the split between work sharing and layoffs contracts with private information are also considered in the nonlinear pricing context this abstract was borrowed from another version of this item

contestable markets an uprising in the theory of industry structure comment a situation traditionally identified as conducive to imperfect competition is when average costs decline and the cheapest scale of production is large relative to the size of the market however some of the more recent literature on industrial organization has emphasized a supposed distinction between fixed costs of production and sunk costs of production a point frequently made is that while the possibility of sunk costs can create genuine barriers to entry pure fixed costs per se do not inhibit competitive market performance this approach finds its logical extreme in the norm or abstraction of perfect contestability perfect contestability is essentially a theory of the polar case of frictionless entry and exit as william baumol stated a contestable market is one into which entry is absolutely free and exit is absolutely costless p 3 certainly this is the most reasonable interpretation of a situation where potential entrants feel free to disregard an incumbent s price response suppose every potential and actual producer has access to the same technology in a perfectly contestable market there are no set up or shut down losses the main result is that even with declining average costs of production the incumbent firm does not dare to post a price higher than average cost price above cost invites being undercut by a hit and run shadow entrant capable of producing at the same flow rate and at identical unit cost during just the briefest instant of time i argue that this line of reasoning is misleading perfect contestability gets around the problem of increasing returns only by in effect assuming it away a hit and run technology makes the firm behave as if it is competitive in a market precisely because the convexity preconditions for competition are de facto being met in that market this comment shows that strictly speaking there is no such thing as a pure fixed cost unless there are sunk costs located somewhere in the relevant production technology all costs are variable as a matter of formal theory you cannot have a range of decreasing average cost without sunk costs presumably there is also an approximation theorem which states that when sunk costs are close to being negligible then average production costs are practically nondecreasing perfect contestability holds approximately in a market only to the extent that production costs for the market are approximately nondecreasing my discussion will be restricted to the familiar case of a single well defined homogeneous fully divisible commodity while more general approaches are possible for the sake of simplicity the following definition is used the average cost function a c y t describes say the minimum cost per unit of output produced at a uniform flow rate y throughout the time interval 0 t especially in applications to industrial organization theory it is essential to remember that cost functions are not generally timeless and that writing ac as a function of y alone can be dangerously vague behind the free entry and exit of a hitand run technology in a perfectly contestable market is the abstraction of no sunk costs investments are fully reversible because nothing is lost in setting up or shutting down production

contestability vs competition once more baumol willig and other advocates of contestability theory continue to urge the idea not only for its insights but also as a clear basis for many antitrust and regulatory decisions yet the limits of the theory remain the three key assumptions are extremely strict and two of them are in mutual conflict the theory is not robust to imperfections in order to displace effective competition with contestability baumol must adopt a sequence of implausible propositions which unfortunately have little analytical or empirical basis

behavioural and material determinants of production relations in agriculture in this essay we develop a framework for analysing the major institutions governing the production and exchange of output and the primary factors of production in rural areas the analysis incorporates general considerations of risk and information constraints jointly with the principal material attributes of agriculture and of agricultural production factors the framework is used to analyse barriers to the existence of the major intertemporal and factor markets it is applied specifically to land scarce environments for which it provides an internally consistent explanation for many of the well documented institutional features of such settings in addition the analysis provides new implications for among other phenomena the inter relationships among ownership holdings operational scale family size and factor productivity for the scarcity of animal rental markets and use of animals as collateral for the renting out of land by small landowners and for the existence of plantations for certain crops

wage bargaining and monopsony this paper identifies three possible outcomes of higher relative firm bargaining power in a unionized firm facing an upward sloping labor supply curve the conventional regime with reduced wage and higher employment corresponds to firm bargaining power below a certain critical value a supply constrained regime where increased firm bargaining power reduces both wages and employment occurs when the bargaining power is above another critical level a novel result is that we identify a third regime with firm bargaining power between these critical levels where changes in relative bargaining power does not affect wages and employment

productive decentralization or indigenous growth small manufacturing enterprises and regional development in central portugal lewis j r and williams a m 1987 productive decentralization or indigenous growth small manufacturing enterprises and regional development in central portugal reg studies 21 343 361 small firms are crucial to the portuguese economy and have been important in the recent expansion of industrial activity away from core regions a survey of the formation and development of manufacturing enterprises in four contrasting rural locations within the central region tested the relevance of explanations based on north italian evidence of productive decentralization and spatial spread however analysis of employment characteristics inter firm linkages and conditions of firm formation reveals the dominance of independent and indigenous growth in the present wave of industrialization variations in firm characteristics between industrial sectors and economic environments indicate the need for more effective promotion policies not least to contain intra regional inequalities lewis j r et williams a m 1

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

determinants of credit rationing a study of informal lenders and formal credit groups in madagascar abstract previous research on the determinants of credit rationing focused exclusively on the behavior of formal lenders who contract directly with an individual borrower based on survey data from madagascar this paper presents an analysis of credit rationing by informal lenders and by members of community based groups that allocate formal group loans among themselves the results show that group members are able to obtain and to use locally available information about the applicant s creditworthiness in much the same way as informal lenders do both types of lenders use the applicant s debt servicing obligations and income as the main criteria for credit rationing this paper therefore empirically confirms theoretical arguments that community based groups have an information advantage over distant formal bank agents

small industry in developing countries a discussion of issues abstract this paper first examines the changing size distribution of industry in developing countries by region and over time and by reference to firm level surveys it discusses the underlying causes the importance of markets generated by the growth of agriculture and rural incomes for the regional development of industry both small and large scale is noted second it discusses the entrepreneurship issue arguing that while small and largefirms alike are highly responsive to the growth of markets the measured entrepreneurial response is neither as full nor as efficient as is desirable the third and last part discusses small industry programmes and their relation to development policy financing and extension programmes are considered in detail and there is a discussion of the risks involved some parallels with agricultural credit are discussed in particular the default problem and the problems associated with concessionary finance it is also argued that small industries and by implication the programmes intended to support them would stand to benefit from more efficient and also more labour demanding policies towards agriculture and industry

financial market efficiency in an agrarian economy microeconometric analysis of the pakistani punjab the shadow price of capital in production is a useful indicator of the efficacy of the rural financial system using data on participants and non participants in a small farm credit programme from the pakistani punjab this article estimates the shadow price of capital endogenous switching regressions techniques are employed to control for the likely heterogeneity of borrowers versus non borrowers results indicate that an individual selected at random from the population of small farmers would experience a 200 per cent rate of return on the first rupee borrowed from the small farm credit programme indicating a high shadow price of capital and a prima facie case for small farm credit programmes