Download or read book Essays in Development Economics microform Evaluating Solutions to Asymmetric Information in Credit Markets written by Eric Benjamin Santor and published by National Library of Canada = Bibliothèque nationale du Canada. This book was released on 2002 with total page 414 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Credit Markets and Development Economics written by Anil Kumar Jain and published by . This book was released on 2014 with total page 140 pages. Available in PDF, EPUB and Kindle. Book excerpt: Chapter 1 (co-authored with Ali Choudhary) exploits exogenous variation in the amount of public information available to banks about a firm to empirically evaluate the importance of adverse selection in the credit market. A 2006 reform introduced by the State Bank of Pakistan (SBP) reduced the amount of public information available to Pakistani banks about a firm's creditworthiness. Prior to 2006, the SBP published credit information not only about the firm in question but also (aggregate) credit information about the firm's group (where the group was defined as the set of all firms that shared one or more director with the firm in question). After the reform, the SBP stopped providing the aggregate group-level information. We propose a model with differentially informed banks and adverse selection, which generates predictions on how this reform is expected to affect a bank's willingness to lend. The model predicts that adverse selection leads less informed banks to reduce lending compared to more informed banks. We construct a measure for the amount of information each lender has about a firm's group using the set of firm-bank lending pairs prior to the reform. We empirically show those banks with private information about a firm lent relatively more to that firm than other, less-informed banks following the reform. Remarkably, this reduction in lending by less informed banks is true even for banks that had a pre-existing relationship with the firm, suggesting that the strength of prior relationships does not eliminate the problem of imperfect information. Chapter 2 examines the provision of public goods in developing countries is a central challenge. This paper studies a model where each agent's effort provides heterogeneous benefits to the others, inducing a network of opportunities for favor-trading. We focus on a classical efficient benchmark - the Lindahl solution - that can be derived from a bargaining game. Does the optimistic assumption that agents use an efficient mechanism (rather than succumbing to the tragedy of the commons) imply incentives for efficient investment in the technology that is used to produce the public goods? To show that the answer is no in general, we give comparative statics of the Lindahl solution which have natural network interpretations. We then suggest some welfare-improving interventions. In chapter 3 (co-authored with Robert Townsend) we present a tractable model of platform competition in a Walrasian equilibrium. Rochet and Tirole (2003) sparked a decade of extensive study on two-sided markets. However, the analysis of two-sided markets with multiple platforms has been largely ignored. We endogenize the size of each platform for different utility functions, different types of agents, and different levels of capital. Contrary to the prior literature, our economy is efficient - platforms internalize the network effects of adding more users by offering bundles which state both the number of users and the price to join the platform. Further, we show that the first and second welfare theorems are still able to be applied. Our model suggests how the equilibrium characterization of two-sided markets changes when we alter the cost structure or wealth of agents and subsequently we analyse the welfare implications of various placebo interventions.

Download or read book Essays on Credit Markets in the Developing and Developed Worlds written by Pedro Barreira A. de Aratanha and published by . This book was released on 2014 with total page 124 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation describes the functioning of credit markets in both developed and developing nations, and provides empirical evidence on the relevance of such markets to the real economy. In Chapter 1, I empirically analyze the unintended effects of microlending on children's test scores and time allocation. By making credit available to poor entrepreneurs, microlending has the potential to increase the borrower's opportunity cost of participating in other activities, including household activities and parental involvement. To identify the causal effects, I explore the variation in the expansion of the largest microlending program in Brazil, that occurs over the years and across municipalities. More specifically, I rely on a unique feature that arbitrarily prevented the program from operating beyond certain boundaries within that country. I find that children in different grades are affected differently. Fifth graders underperform in standardized math exams and are less likely to work hard in their homework assignments. Their parents are also less likely to attend parent-teacher meetings at school. Ninth graders spend more time in household chores on a typical school day, but that does not necessarily translate into worse test scores. But otherwise, I do not find any impact on dropout rates in these grades. In Chapter 2, I explore rainfall fluctuations in Brazil to measure the long-term effects of early life conditions on entrepreneurial productivity. I focus on the performance of low-income entrepreneurs, who are also borrowers from the largest microlender in that country. I match newly collected individual-level administrative data from the microlending institution to their clients' year, month, and municipality of birth data on rainfall. Thus, through the date and place of birth, I am able to link the prevailing weather conditions, specifically water scarcity, during the entrepreneur's in utero and early life, to the performance of his business during adulthood. I find that being exposed to a drought is associated with about 2 percent lower revenue. Chapter 3 describes the role of credit markets predicting recessions in the United States. Key financial variables, such as the prices of financial instruments, are commonly associated with expectations of future economic events. During periods of credit market turmoil, financial asset prices are especially informative of linkages between the real and financial sides of the economy: Movements in asset prices can provide early warning signals for such economic downturns. In this chapter, I analyze the predictive content of real stock returns, term spreads and credit spreads. Using dynamic probit models to forecast the real economy fluctuations, I show that credit spreads are an important predictors of future recessions, in particular, of the sharp decline in 2008. I also confirm that term spreads are the primary predictive variables.

Download or read book Essays on Incomplete Credit Markets in the Developing Countries written by Eric Ulysses Van Tassel and published by . This book was released on 1998 with total page 274 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Asymmetric Information and Imperfect Credit Markets written by Basab Dasgupta and published by . This book was released on 2005 with total page 282 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Financial Development and Economic Growth written by Byungyoon Lee and published by . This book was released on 2000 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Development Economics written by Diego Vera Cossio and published by . This book was released on 2018 with total page 233 pages. Available in PDF, EPUB and Kindle. Book excerpt: A fundamental concern in development economics is the presence of institutional and labor market failures that interact with frictions in financial markets, which may prevent economic growth. This dissertation studies the importance of these interactions in a series of three papers. Chapter 1 studies the extent to which by allowing grassroots organizations--as opposed to banks--to allocate publicly-funded credit, it is possible to overcome existing financial frictions and deliver resources the community members who need it the most: poor, high-productivity households. Using a long panel dataset I find evidence of misallocation: credit was provided to households with poor credit history, which were richer and less productive than non-borrowers. Instead, resources were delivered to households with connections to local political leaders. The results highlight the limitation of community-based approaches to allocating public resources in developing countries. Chapter 2 shows that a cash-transfer program targeted to children in Bolivian public schools boosted employment among mothers of beneficiary children by providing extra-liquidity in a context of fixed costs to work. Chapter 3 exploits rich data from Thailand to show that estimates of total factor productivity can be used to predict business success in the aftermath of credit-expansion programs.

Download or read book Essays on Credit Markets in Developing Countries written by Margaret Madajewicz and published by . This book was released on 1998 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Development Economics written by Qian Li and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation explores various topics in development economics. Chapter 1, "Information Sharing in Trade Credit Markets: Evidence from Kenyan Retail Shops, " is a study of the impact of introducing credit bureau service to the trade credit market between small retail shops and their suppliers in Kenya. In developing countries financial frictions hinder firm growth. Credit constraints result from poor contract enforcement and asymmetric information in the credit market. One solution is to provide infrastructure for lenders to share information on borrowers' credit history, which can mitigate adverse selection and improve repayment incentives, reduce resource misallocation and accelerate firm growth. Information flow facilitates informal enforcement which may be particularly important in an environment where formal (legal) enforcement is weak. I investigate the barriers to and impact of introducing an information sharing service for small and medium enterprises (SMEs) and their trade credit providers (suppliers) in the retail sector in Kenya, by means of randomized information intervention and subsidy of take-up. I focus on borrowers and lenders' decisions to adopt and share information, as well as the impact of the service in reducing information asymmetry, increasing borrowers' repayment incentives, buyer-supplier relationships and spillover among retail shops. I find that offering free credit reports to retail shops increases credit report ownership and knowledge, as well as shops' likelihood of applying for supplier credit, but not access to supplier credit. Lack of response from the supplier side seems driven by their unwillingness to rely on information in the credit reports as well as some suppliers' lack of ability to provide credit. Chapter 2, "Democracy, Devolution, and Local Spending: Evidence from Kenya's Constituency Development Fund, " examines the efficiency of allocation of Kenya's Constituency Development Fund. Kenya's Constituency Development Fund (CDF), introduced in 2003, was designed to better address local needs through locally-driven selection and implementation of development projects, with greater budget allocation to poorer areas. However, until 2013, Members of Parliament (MPs) of each constituency could appoint members of the local CDF committee, de facto controlling the CDF budget. As MPs have incentive to select projects in a way that maximizes reelection gains, this may compromise efficiency of project allocation. We present evidence on project allocation, including targeting to local needs and timing with elections, as well as project performance, to support the theory that MPs indeed allocated projects for reelection gains at the expense of efficiency. Chapter 3, "Farmer Credit and Firm Profits: Experimental Evidence from a Monopsony Buyer in Mozambique, " studies the impact of providing cash credit and additional extension services on small holder farmers' cotton output in Mozambique. Low usage of productive inputs leads to lower levels of smallholder farmer production, which can also affect the profitability of purchasers and processors of agricultural goods. But whether firms have incentive to directly intervene in farmer investments depends on its impact on production. We conduct an experiment with a large cotton company that has monopsony purchasing power in Mozambique. Among relatively productive farmers in the region, the firm randomly allocated farmers additional extension services, or additional extension services combined with drastically increased access to credit. We find that providing additional extension services increases the number of farmers who cultivate cotton, resulting in increased cotton purchases by the firm. However, the increases are modest and not profitable for the firm. Providing farmers credit has much stronger effects. Farmers offered credit plus extension are 67.7 percentage points more likely to grow cotton and increase cotton yields by 39.1 percent, resulting in drastically increased cotton production. However, overall repayment rate on cash credit is low (80.5 %), and the intervention may not be profitable for the firm. Assuming similar impact on cotton growing and loan repayment rates, a hypothetical intervention with the same amount of cash credit and no additional extension service would be more profitable.

Download or read book Essays on Credit Markets in Developing Economies written by Margaret Madajawicz and published by . This book was released on 1998 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Incentive Problems in International Credit Markets written by Aquiles Antonio Almansi and published by . This book was released on 1986 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Development Economics and Political Economy written by Lorenzo Casaburi and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a model of interlinked transactions that highlights the substitutability of price and credit pass-through across markets, and verify its predictions empirically. Calibration suggests that to ignore margins of pass-through other than price has substantial implications for welfare analysis.

Download or read book Essays in Macro and Development Economics written by Siyuan Ernest Liu and published by . This book was released on 2017 with total page 246 pages. Available in PDF, EPUB and Kindle. Book excerpt: The essays in this thesis study the implications of weak financial institutions for economic growth, allocation of resources, and economic development. Methodologically, the essays draw on a broad range of theoretical and empirical tools from both macro and microeconomics. Many currently and previously developing countries have adopted industrial policies that push resources towards certain "strategic" sectors, and the economic reasoning behind such polices is not well understood. In Chapter 1, I construct a model of a production network where firms purchase intermediate goods from each other in the presence of credit constraints. These credit constraints distort input choices, thereby reducing equilibrium demand for upstream goods and creating a wedge between the potential sales ("influence") and actual sales by upstream sectors. I analyze policy interventions and show that, under weak functional form restrictions, the ratio between a sector's influence and sales is a sufficient statistic that guides the choice of production and credit subsidies. Using firm-level production data from China, I estimate my sufficient statistic for each sector and show that it correlates with proxy measures of government interventions into the sector. Using a panel of cross-country input-output tables and sectoral production tax rates, I show that the tax rates for developing countries in Asia also correlate with the model-implied intervention measure. In joint work with Benjamin Roth, Chapter 2 offers a new explanation for why microcredit and other forms of informal finance have so far failed to catalyze business growth among small scale entrepreneurs in the developing world, despite their high return to capital. We present a theory of informal lending that highlights two features of informal credit markets that cause them to operate inefficiently. First, borrowers and lenders bargain not only over division of surplus but also over contractual flexibility (the ease with which the borrower can invest to grow her business). Second, when the borrower's business becomes sufficiently large she exits the informal lending relationship and enters the formal sector-an undesirable event for her informal lender. We show that in Stationary Markov Perfect Equilibrium these two features lead to a poverty trap and study its properties. The theory facilitates reinterpretation of a number of empirical facts about microcredit: business growth resulting from microfinance is low on average but high for businesses that are already relatively large, and microlenders have experienced low demand for credit. The theory features nuanced comparative statics which provide a testable prediction and for which we establish novel empirical support. Using the Townsend Thai data and plausibly exogenous variation to the level of competition Thai money lenders face, we show that as predicted by our theory, money lenders in high competition environments impose fewer contractual restrictions on their borrowers. We discuss robustness and policy implications. Motivated by the explosive growth of microfinance in India and the eventual collapse of the industry following the default crisis in 2010, my joint work with Daniel Green in Chapter 3 provides a theory that explains how institutional weakness in credit markets can fail to stimulate development even when there is ample credit supply. We show that when borrowers lack credible mechanisms to commit not to borrow further from other lenders in the future, not only does the increasing availability of lenders raise the interest rate on loans and reduce the amount of funds that entrepreneurs can borrow, but perversely it is those entrepreneurs with more profitable investment opportunities that will end up raising fewer investments precisely because they have stronger desires to seek out additional lenders in the future. This effect further discourages entrepreneurs from initiating the most efficient and productive endeavors, generating persistent underdevelopment.

Download or read book Market Institutions Governance and Development written by Dilip Mookherjee and published by . This book was released on 2008-06-15 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This collection of essays exemplifies the recent trend in micro-development economics, where the source of underdevelopment problems is related to deficiencies in underlying institutions and distribution of assets: market failures, contract enforcement mechanisms, information systems, inequality of land and education, and problems in governance and limited accountability.

Download or read book Essays in Macroeconomics Economic Development and Growth written by Lin Shao and published by . This book was released on 2016 with total page 189 pages. Available in PDF, EPUB and Kindle. Book excerpt: Chapter 1: Trade credit in production chains In an economy where production takes place in multiple stages and is subject to financial frictions, how firms finance intermediate inputs matters for aggregate outcomes. This paper focuses on trade credit -- the lending and borrowing of input goods between firms in a production chain -- and quantifies its aggregate impact. Motivated by empirical evidence, our model shows how trade credit alleviates financial frictions through a process of credit redistribution and creation, thus leading to a higher output level in the steady state. However, the flow of trade credit is prone to disruptions when financial crises hit the economy. The decline in economic activities following crises is in turn amplified by disruptions in trade credit. The model simulation suggests that the drop in trade credit during the Great Recession can account for almost one-fourth of the observed decline in output. Chapter 2: Financial development beyond the formal financial market This paper argues that to understand the quantitative importance of finance in economic development, it is important to look beyond the formal financial market. We document that informal financing is more accessible in countries with a highly developed formal financial market. The volume of informal financing, as well as the substitutability of informal financing for formal financing, are both positively correlated with the development of the formal financial market. We build a quantitative model in which a fundamental contract enforcement problem delivers the documented empirical patterns. The model is then disciplined to match aggregate and distributional moments of bank credit and trade credit -- an important informal financial institution -- of the U.S. and Chinese manufacturing firms, respectively. Our quantitative analysis suggests that by focusing on bank credit only, we understate the importance of finance in explaining the income differences between these two countries. Chapter 3: Economic reforms and industrial policy in a panel of Chinese cities We study the effect of place-based industrial policy on economic development, focusing on the establishment of Special Economic Zones (SEZ) in China. We use data from a panel of Chinese (prefecture-level) cities from 1988 to 2010. Our difference-in-difference estimation exploits the variation in the establishment of SEZ across time and space. We find that the establishment of a state-level SEZ is associated with an increase in the level of GDP of about 20%. This finding is confirmed with alternative specifications and in a sub-sample of inland provinces, where the selection of cities to host the zones was based on administrative criteria. The main channel is a positive effect on physical capital accumulation, although SEZ also have a positive effect on total factor productivity and human capital investments. We also investigate whether there are spillover effects of SEZ on neighboring regions or cities further away. We find positive and often significant spillover effects.

Download or read book Essays on the Community Reinvestment Act Information Externalities and Credit Rationing written by AKM Rezaul Hossain and published by . This book was released on 2004 with total page 482 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Development Economics written by Anthony Bruno Keats and published by . This book was released on 2012 with total page 167 pages. Available in PDF, EPUB and Kindle. Book excerpt: I study three separate questions in this dissertation. In Chapter 1, I investigate the extent to which credit and insurance market constraints affect occupational choice in rural Kenya. Using data I collected on individuals' subjective beliefs about the returns, costs, and risks associated with the occupations they typically choose from, I find that insurance market constraints prevent people from entering into high-profit but also high-risk occupations. In contrast, I do not find any evidence that credit market failures affect this choice. In Chapter 2, we conduct a randomized experiment to provide improved access to formal financial services in Western Kenya. We find low take-up and use of savings accounts and loans even after we waived account opening fees, provided information about loans, and lowered eligibility requirements to get credit. Survey evidence suggests people remain unbanked mainly due to the poor quality of banking services offered in the area (high fees, lack of trust, and unreliable service). In Chapter 3, I examine the effect of women's education on fertility and child health outcomes in Uganda. Women who get additional schooling reduce their preferences for family size: they delay the onset of fertility and reduce the total number of children they have overall. At the same time, mothers with more education invest more in their children's health and their children are better nourished. I find evidence that this child quantity-quality trade-off is driven by educated women's improved employment opportunities. In addition, schooling helps women exert more control over their reproductive lives. However, I find no evidence that more educated women increase bargaining power over other household decisions.