why are informal loans still a big deal evidence from north east thailand abstractthis article examines the use and benefit of informal loans for different income groups of rural households in north east thailand using a difference in differences estimation approach which is later complemented by propensity score matching the article shows that different household groups profit from informal loans in different ways poor households increase their asset endowment and in particular farming assets whereas rich households food consumption rises especially if households borrow due to a shock by showing that informal loans serve different households for different purposes this article provides an explanation why they still play an important role

does microcredit increase household welfare in the absence of microinsurance summary this study answers the question does a combination of microcredit and microinsurance improve the wellbeing of low income households we examine this challenge through heckman sample selection instrumental variable and treatment effect models the findings indicate that households using microcredit in combination with microinsurance derive significant gains in terms of welfare improvement microcredit may be good but its benefit to the poor is enhanced and sustained if the poverty trapping risks are covered with microinsurance to this extent combining microcredit with microinsurance will empower the poor to make a sustainable exit from poverty

micro data heterogeneity and the evaluation of public policy nobel lecture this paper summarizes the contributions of microeconometrics to economic knowledge four main themes are developed 1 microeconometricians developed new tools to respond to econometric problems raised by the analysis of the new sources of micro data produced after the second world war 2 microeconometrics improved on aggregate time series methods by building models that linked economic models for individuals to data on individual behavior 3 an important empirical regularity detected by the field is the diversity and heterogeneity of behavior this heterogeneity has profound consequences for economic theory and for econometric practice 4 microeconometrics has contributed substantially to the scientific evaluation of public policy

does microfinance reduce poverty in bangladesh new evidence from household panel data abstract the study examines whether loans from microfinance institutions mfi reduce poverty in bangladesh drawing upon the nationally representative household panel with four rounds from 1997 to 2004 the effects of general microfinance loans and loans for productive purposes on income food consumption and women s body mass index are estimated overall effects of mfi loans on income and food consumption were positive and the purpose of the loan is important in predicting which household welfare indicator is improved alternative estimation methods confirm a positive impact of mfi loans on food consumption growth which supports the poverty reducing effects of microfinance in bangladesh

the impact of group lending in northeast thailand abstract much of the literature on group lending focuses on its high repayment rates rather than its goal of promoting borrower welfare most studies that attempt to measure the impact of group lending neglect the issues of self selection and endogenous program placement thus leading to biased estimates of impact one reason for this neglect is the lack of data that would allow for identification of impact this paper surmounts these problems by using data from a quasi experiment conducted in northeast thailand in 1995 1996 program participants were identified in six control villages 1 year prior to receiving loans surveys were then conducted of these control members treatment members in eight older program villages and nonmembers in both types of village this survey design allows for straightforward estimation of impact the results indicate that program loans are having little impact although naive estimates of impact that fail to account for self selection and endogenous program placement significantly overestimate impact

impact of off farm labor supply on food expenditures of the farm household abstract farm households diversify their income sources by working off the farm this is a risk management strategy that is used by farm households in both developed and developing countries income diversification via off farm work is associated with higher incomes and food consumption however little is known about the association between off farm work and farm household food expenditures in an effort to bridge this gap this study attempts to assess the impact of off farm work decisions by the operator and or the spouse on the food expenditures of the farm household using a nationwide farm household survey in the united states and new econometric method we find that the decisions of the operator and or the spouse to work off the farm are significantly interrelated 29 however these two decisions affect food expenditures in different ways the operator s off farm work decision is positively related to food expenditures while the spouse s decision is negatively associated with expenditures on food by the farm household

microfinance and poverty a macro perspective we test the hypothesis that microfinance reduces poverty at the macro level using cross country and panel data which are constructed by the microfinance information exchange data on microfinance institutions mfis and the world bank data taking account of the endogeneity associated with mfis loans we show that a country with higher mfis gross loan portfolio per capita tends to have lower levels of poverty indices contrary to recent micro evidence our results suggest that microfinance significantly reduces poverty at macro level and thus reinforce the case for channeling funds from development finance institutions and governments of developing countries into mfis

the sacrifices of micro borrowers in ghana a customer protection perspective on measuring over indebtedness this article measures the over indebtedness of micro borrowers it defines over indebtedness from a customer protection perspective based on the borrowers sacrifices we analyse the sacrifices borrowers experience and find that 30 per cent of borrowers are over indebted we then test risk management indicators of debt problems as predictors of over indebtedness over indebtedness is strongly related to delinquency and the debt to income ratio but not to debt amounts or to multiple borrowing although our model correctly predicts 72 6 per cent of cases even the best indicators identify only a few over indebted borrowers risk management is not enough to protect customers against over indebtedness but the industry needs to measure customer experiences directly

territorial restrictions in franchise contracts i introduction efficient contracts establish the incentives for contractual parties through the assignment of rights or authority over decisions as well as shares of profit this insight has been widely used to explain the nature of the firm 1 the role of rights assignment in explaining specific business contracts however is relatively unexplored here we analyze contractual rights within franchise systems focusing on the right to add new franchisees to an existing franchise area the choice in a franchise contract is simple either grant the franchisor the right to add new franchisees in the future or allow existing franchisees the right to block the addition of new outlets the literature on vertical restraints assumes that the restraints specified in contracts are enforced and never renegotiated with respect to territorial exclusivity in particular the literature mainly takes two perspectives territorial protection either prevents franchisor hold up behavior the appropriation of franchisee returns from the investment in establishing the local market or it corrects distortions arising from competition among franchisees 2 our model extends the hold up story by recognizing the dynamic nature of contractual relations between parties contracts are always open for renegotiation and the initial contracts are designed with this in mind the key effect in assigning the right to add additional franchisees is on the status quo point in bargaining subsequent to the initial contract the central point is simple the party with the authority to add franchisees can extract a larger portion of the wealth created by investment in the system incentives depend on the appropriated portion of the return to investment therefore the optimal contract assigns the right to the party whose input is more valuable to the system 3 the next section offers a simple model that develops this theme in a subsequent section we examine some facts about franchise systems in place and illustrate alternative assignments of authority ii the model we consider the simplest franchise contract a franchisor f offers to a franchisee g a contract giving the right to collect profits from the use of the franchisor s brand name in a retail territory we assume that the level of economic profits cannot be verified by a third party such as a court this rules out explicit sharing rules for profits between the two parties 4 these profits depend upon the efforts of both the franchisor and franchisee in developing the market the efforts are undertaken immediately after the contract is signed the franchisee s input represents for example local advertising selling effort or quality and the franchisor s input represents for example national advertising or the maintenance of the brand name the profits from the venture are uncertain and depend on the realization of a draw should the system prove sufficiently successful it may be profitable to add another retail outlet the evolution of contracts will respond to any opportunity for profit enhancement and any restrictions in the initial contract preventing this realization will be open for renegotiation the role for territorial constraints in particular may be illustrated within a simple formal model the effort levels of the franchisor and franchisee are denoted by e sub f and e sub g and are measured in dollars the profits earned from the brand name depend upon a stochastic variable e g demand uncertainty denoted by theta which is realized after the efforts are undertaken after the realization of theta there is an opportunity for the franchisor to sell a position in the territory to a second franchisee a product idea that enjoys success warrants an expanded retail network as the market is mature at this point no further investment is required the key element of the contract for our interest is the allocation of authority over the admission of additional retailers to the territory in question does the contract guarantee to the original franchisee exclusive authority to the use of the brand name in the territory

agency theory and franchising some empirical results this article provides an empirical assessment of various agency theoretic explanations for franchising including risk sharing one sided moral hazard and two sided moral hazard the empirical models use proxies for factors such as risk moral hazard and franchisors need for capital to explain both franchisors decisions about the terms of their contracts royalty rates and up front franchise fees and the extent to which they use franchising in this article i exploit several new sources of data on franchising to construct a cross section of 548 franchisors involved in various business activities in the united states in 1986 the data are most consistent with a model based on two sided moral hazard the empirical models are also more successful at explaining the extent to which franchisors choose to franchise stores than at explaining the terms of franchise contracts finally contrary to the predictions of several theoretical models i find that royalty rates and franchise fees are not negatively related

can commercially oriented microfinance help meet the millennium development goals evidence from pakistan summary the current emphasis in the microfinance industry is a shift from donor funded to commercially sustainable operations this article evaluates the impact of access to microloans from the khushhali bank pakistan s first and largest microfinance bank which operates on commercial principles using primary data from a detailed household survey of nearly 3 000 borrower and non borrower households a difference in difference approach is used to test for the impact of access to loans once the results are disaggregated between rural and urban areas there is a positive impact in rural areas on food expenditure and on some social indicators such as the health of children and female empowerment these impacts are observed even in very poor households these findings suggest that commercially oriented microfinance and the millennium development goals are not incompatible given a supportive environment

impact of microfinance on schooling evidence from poor rural households in bolivia summary channels for the influence of microfinance programs on a rural household s demand for schooling are identified income growth risk management child labor demand gender empowerment and parent information within a random utility framework a model of household consumption investment in education and borrowing suggests determinants at the individual household and regional levels of the probability of schooling gaps using data from two surveys of households of clients of microfinance organizations in bolivia regression models examine determinants of schooling gaps inferences about otherwise positive microfinance impacts identify potential negative effects of increased child labor demand which challenge usual assumptions and pose dilemmas for policymakers

microenterprise credit programs deja vu abstract microenterprises in low income countries are the target of an increasing number of credit programs these efforts resemble earlier problematic attempts to assist operators of small farms with credit similarities discussed include target group definition assumptions policies and project justifications authors go on to list a dozen lessons from the experience with small farmer credit that might apply to microenterprise credit efforts authors then conclude that debt is not an effective tool for helping most poor people to enchance their economic conditions be they operators of small farms or microenterprises

microfinance and household poverty reduction new evidence from india the objective of the present study is to examine whether household access to microfinance reduces poverty using national household data from india treatment effects model is employed to estimate the poverty reducing effects of micro finance institutions mfis loans for productive purposes such as investment in agriculture or non farm businesses on household poverty levels these models take into account the endogenous binary treatment effects and sample selection bias associated with access to mfis despite some limitations such as those arising from potential unobservable important determinants of access to mfis significant positive effect of mfi productive loans on multidimensional welfare indicator has been confirmed the significance of treatment effects coefficients has been verified by both tobit and propensity score matching psm models in addition we found that loans for productive purposes were more important for poverty reduction in rural than in urban areas however in urban areas simple access to mfis has larger average poverty reducing effects than the access to loans from mfis for productive purposes this leads to exploring service delivery opportunities that provide an additional avenue to monitor the usage of loans to enhance the outreach

incentive conflicts and contractual restraints evidence from franchising abstract this study uses agency theory to develop testable implications about three provisions commonly observed in franchise contracts 1 restrictions on passive ownership 2 area development plans and 3 mandatory advertising expenditures the primary hypothesis is that these provisions are most likely when there are significant externalities among the units within the franchise system the evidence based on a large sample of franchise contracts is generally consistent with this hypothesis the evidence also suggests that these incentive instruments are complements in contrast to the theory most of the results do not support the hypothesis that the percentage of company owned units is related to externalities within the system franchisee risk aversion and or wealth constraints appear more important while the study focuses on franchising the results provide insights into related provisions in other contracts

consumer myopia standardization and aftermarket monopolization abstract in this paper i show that the standard bertrand competition argument does not apply when firms compete for myopic consumers who optimize period by period i develop the model in the context of aftermarket with overlapping generations of consumers simultaneous product offerings in the primary market and aftermarket establishes a price floor for the primary good this constraint prevents aftermarket rents from being dissipated by the primary market competition duopoly firms earn positive profits despite price competition with undifferentiated products nonetheless government interventions to reinforce aftermarket competition such as a standardization requirement may lead to the partial collapse of the primary market

vertical restraints and the law evidence from automobile franchising abstract after a 2002 european commission regulation prohibited the use of dealer exclusive territories automobile franchise contracts in italy introduced price ceilings and standards on verifiable marketing and service inputs such as advertising and salespeople the contracts also imposed quantity floors a practice already in use before the regulatory change the introduction of standards suggests that consistent with a view of vertical restraints as coordination mechanisms manufacturers used exclusive territories to induce desired dealer services and once the use of exclusive territories was prohibited they switched to alternative contractual devices to achieve this goal the introduction of price ceilings despite free intrabrand competition also suggests that car manufacturers tried to prevent some dealers from gaming the quantity floors by selling to other dealers customers while charging monopolistic prices at their own locations

an economic theory of vertical restraints vertical restraints imposed by manufacturers on the prices locations and sales of retail firms represent a puzzling departure from the simple price mediated exchange of conventional markets in this article we analyze the theoretical basis for these restraints in a setting where retailers inform consumers and are imperfectly competitive and where a manufacturer has some monopoly power we identify three potential externalities affecting retailers decisions these externalities lead to the failure of simple uniform price contracts to coordinate the incentives of retailers with the objective of maximizing combined manufacturer and retailer profits we identify the packages of vertical restraints that are minimally sufficient under various conditions to neutralize the externalities and to achieve the joint profit maximum

empowering women with micro finance evidence from bangladesh abstract this article examines the effects of men s and women s participation in micro credit programs on various indicators of women s empowerment using data from a special survey carried out in rural bangladesh these credit programs are well suited to studying how gender specific resources alter intrahousehold allocations because they induce differential participation by gender through the requirement that only one adult member per household can participate in any micro credit program empowerment is formalized as an unobserved latent variable reflecting common components of qualitative responses to a large set of questions pertaining to women s autonomy and decision making power the empirical methods are attentive to various sources of endogeneity and the results are consistent with the view that women s participation in micro credit programs helps to increase women s empowerment the effects of male credit on women s empowerment were generally negative

repayment performance in group based credit programs in bangladesh an empirical analysis abstract this paper analyzes the repayment rates of 128 credit groups belonging to three group based credit programs in bangladesh the association for social advancement asa the bangladesh rural advancement committee brac and the rangpur dinajpur rural service rdrs using tobit analysis specific tests are performed on the following hypothesized determinants group size size of loans degree of loan rationing enterprise mix within groups demographic characteristics social ties and status and occurrence of idiosyncratic shocks the paper concludes that if basic principles of prudential banking are adhered to repayment rates can be good even in poor and remote communities the important thing for financial institutions is to tailor services such that it becomes worthwhile for the poor to establish a profitable long term association in addition more freedom to members in the process of group formation is recommended

the economic effects of franchise termination laws we would like to thank blake rhodes and pam schommer for excellent research assistance participants in workshops at arizona state university university of california berkeley the university of chicago dartmouth college iowa state university the justice department the university of rochester and the university of utah as well as jeff coles arnold cowan jim dana franklin m fisher stuart gilson ben hermalin cliff holderness gregg jarrell alan krueger wayne mikkelson walter oi jim poterba ajai singh cliff smith kathy spier david weisbach jamie zender jerry zimmerman and especially kevin j murphy and an anonymous referee for comments on an earlier draft brickley and weisbach thank the managerial economics research center of the university of rochester and the john m olin foundation and dark thanks the college of business at iowa state university for financial support brickley also thanks the garn institute of finance at the university of utah for financial assistance 1 see mark robichaut franchise rules are back off drawing board wall st j july 6 1990 at bl note that in this article we focus on laws that apply to business format franchises for an analysis of state laws in automobile franchising see richard l smith ii franchise regulation an economic analysis of state restrictions on automobile distribution 25 j law econ 125 1982 richard a epstein unconscionability a critical appraisal 18 j law econ 293 314 15 1975 and paul h rubin the theory of the firm and the structure of the franchise contract 21 j law econ 223 1978 other work on the economics of franchising includes james a brickley frederick h dark the choice of organizational form the case of franchising 18 j fin econ 401 1987 james a brickley frederick h dark michael s weisbach an agency perspective on franchising 20 fin mgmt 1991 in

markets state franchise laws dealer terminations and the auto crisis abstract in fall 2008 general motors and chrysler were both on the brink of bankruptcy and ford was not far behind as the government stepped in and restructuring began gm and chrysler announced their plan to terminate about 2 200 dealerships in this paper we first provide an overview of franchising in car distribution how it came about and the legal framework within which it functions states earn about 20 percent of all state sales taxes from auto dealers as a result new car dealerships and especially local or state car dealership associations have been able to exert influence over local legislatures this has led to a set of state laws that almost guarantee dealership profitability and survival albeit at the expense of manufacturer profits available evidence and theory suggests that as a result of these laws distribution costs and retail prices are higher than they otherwise would be and this is particularly true for detroit s big three car manufacturers which is likely a factor contribut

resale price maintenance an economic assessment of the federal trade commission s case against the corning glass works this article examines the economic explanations for the use of resale price maintenance rpm by the corning glass works using empirical evidence developed from the federal trade commission s case challenging the practice three classes of rpm theories are tested the supplier and dealer anticompetitive theories and the class of principle agent theories the article uses both ex ante and ex post tests to distinguish the theories including tests based on structural evidence as well as data on sales advertising and stock market reactions for the company and its competitors around critical events in the case the evidence most convincingly rejects the anticompetitive theories and points toward a principle agent explanation in which rpm helped increase sales of corning s products the case is of interest in part because the simple products at issue in the case are not the types of products most often associated with potential efficiency explanations for rpm

rethinking the effects of microcredit on household welfare in cambodia abstractthis article analyses the effects of microcredit on household welfare in terms of household expenditure per capita in cambodia with data from the cambodia socio economic survey carried out in 2014 the analysis describes the effects via formal and informal lending sectors accounting for endogenous selection bias arising from unobserved factors and for structural differences between borrowers and non borrowers in terms of expenditure functions the findings suggest that microcredit in both sectors reduces household expenditure

supermarkets farm household income and poverty insights from kenya summary the expansion of supermarkets in developing countries may have important implications for poverty and rural development while previous studies have compared farm profits between participants and non participants in supermarket channels wider income effects have hardly been analyzed moreover most existing studies do not account for structural differences between the two groups we address these issues by using endogenous switching regression and building on a survey of vegetable farmers in kenya participation in supermarket channels is associated with a 48 gain in average household income which also contributes to poverty reduction to realize these benefits on a larger scale will require institutional support

the impact of microfinance in sub saharan africa a systematic review of the evidence microfinance is seen as a key development tool and despite the current deepening crisis within the industry it continues to grow in sub saharan africa we systematically reviewed the evidence of the impacts of micro credit and micro savings on poor people in sub saharan africa we considered impacts on income savings expenditure and the accumulation of assets as well as non financial outcomes including health nutrition food security education child labor women s empowerment housing job creation and social cohesion the available evidence shows that microfinance does harm as well as good to the livelihoods of the poor

does adaptation to climate change provide food security a micro perspective from ethiopia we examine the driving forces behind farmers decisions to adapt to climate change and the impact of adaptation on farmers food production we investigate whether there are differences in the food production functions of farm households that adapted and those that did not adapt we estimate a simultaneous equations model with endogenous switching to account for the heterogeneity in the decision to adapt or not and for unobservable characteristics of farmers and their farm we compare the expected food production under the actual and counterfactual cases that the farm household adapted or not to climate change we find that the group of farm households that adapted has systematically different characteristics than the group of farm households that did not adapt the relationship between production and average temperature is inverted u shaped for farm households that adapted while it is u shaped for farm households that did not adapt and vice versa in the case of precipitation we find that adaptation increases food production however the impact of adaptation on food production is smaller for the farm households that actually did adapt than for the farm households that did not adapt in the counterfactual case that they adapted

formal and informal rural credit in four provinces of vietnam abstract this paper uses a survey of 932 rural households to uncover how the rural credit market operates in vietnam households obtain credit through formal and informal lenders formal loans are almost entirely for production and asset accumulation while informal loans are used for consumption smoothening the determinants of formal and informal credit demand are distinct while credit rationing depends on education and credit history in particular regional differences in the demand for credit are striking a one size fits all approach to credit policy in vietnam would be inappropriate