Microfinance and gender empowerment

In this paper, we develop a theoretical model of household production, bargaining and credit to analyse how access to microcredit affects intra-household decision-making and welfare, and identify conditions under which female household members are most likely to benefit. We show that, consistent with ethnographic accounts of the impact of microcredit programmes on poor households, access to loans can lead to a variety of outcomes for intra-household decision-making and welfare depending on initial conditions and that, in some instances, women borrowers may experience a decline in welfare. We identify two instances in which a woman is most likely to benefit: when there is scope for investing the loan profitably in a joint activity, and when a large share of the household budget is devoted to household public goods.     

Do more open countries have a higher growth rate but more inequality?

While other researchers have examined the effect of outward orientation on economic growth, this paper examines the relationship between outward orientation and 21 measures of economic development using data from 88 developing countries. An attempt is made to answer the question: Does outward orientation result in positive economic growth at the expense of higher income inequality, a higher poverty rate, and other harmful effects on economic development measures? The results show that there is, in the net, a positive correlation between openness and measures of economic development. Second, while outward orientation affects economic growth positively and the higher economic growth in turn leads to a higher level of economic development, there is weak evidence that there are additional direct, negative effects of outward orientation on economic development measures.     

How did wars dampen trade in the MENA region?

The article investigates the impact of wars on trade in the Middle East and North African region. Using an augmented gravity model that controls for the endogeneity problem in our estimation, we introduce a war variable and distinguish between different types of conflicts. The results show that wars have a significantly negative impact on exports, imports and trade. Civil conflicts hinder exports, imports and trade significantly. The disaggregated version of the gravity model shows that non-state conflicts have a detrimental effect on bilateral trade flows in manufacturing, and that none of the conflicts do affect trade in services. We also find that, on average, a conflict is equivalent to a tariff of 5% of the value of trade.     

Risk-Sharing and Benefit Smoothing in A Hybrid Pension Plan

Abstract

A hybrid pension plan with an explicit formula for sharing risk between the plan sponsor and the members is proposed. The performance of this plan is analyzed using a modified version of the model used by Dufresne (1988). Formulas for the variance of the contribution income and benefit outgo are derived, assuming investment returns are independent and identically distributed. The performance of the hybrid plan is compared with a defined contribution (DC) plan providing the same expected retirement benefit. It is shown that the hybrid plan is more efficient in the control of investment risk, and that this gain in efficiency is greater when “lifestyle” investment strategies are adopted in the DC plan. Modifications to the proposed hybrid benefit structure that might be required for a real plan are suggested.     

On the determinants of trade in services: evidence from the MENA region

This article examines the determinants of aggregate flows of service trade in MENA countries using an adapted version of the gravity model and a panel data set covering the 2000 to 2009 period for 21 countries and 10 sectors. A new determinant of trade performance is introduced: the number of bound commitments undertaken by a sector in the WTO as well as the availability of those commitments by mode of supply. The results show that being a WTO member boosts trade in services. In addition, the number of bound commitments increases exports, imports and trade in services. This positive and significant effect remains robust even after controlling for several econometric issues, namely, the selection bias related to the WTO membership and the endogeneity of commitments.¹1. We are grateful to the editor Mark Taylor and two anonymous referees for providing valuable comments and suggestions. We would also like to thank the participants to the ERF 18th Annual Conference and to the 32nd Annual Meeting of the Middle East Economic Association (MEEA). This work benefited from the financial support of Economics Research Forum (ERF). It does not reflect the Forum’s opinion.     

Global Value Chains and Local Business Environments: Which Factors Really Matter in Developing Countries?

Review of Industrial Organization - This study assesses the effect of an economy’s business environment on the ability of firms to be part of a global value chain (GVC). With the use of a...     

Using the law to change the custom

The custom often acts as a powerful hindrance to equity-increasing changes. In this paper, we present a simple model of legal dualism in which a progressive legal reform can, under certain conditions, shift the conflicting custom in the direction intended by the legislator. Formal law then acts as an outside anchor that exerts a 'magnet effect’ on the custom. We also characterize the conditions under which a moderate reform performs better than a radical one in improving the welfare of the disadvantaged sections of the population. We illustrate our insights using examples on inheritance, marriage, and divorce in Sub-Saharan Africa and India.     

Deterministic Modeling of Defined-Contribution Pension Funds

Abstract

Formulas are derived to model the response of a money purchase, defined-contribution pension fund to the following types of investment shock: (1) an instantaneous fall in the value of the fund assets and (2) a permanent, uniform reduction in the rate of earned interest. An alternative defined-contribution fund, incorporating a variable defined-benefit scale, is then proposed, and its responses to the same investment shocks are compared with those of the money purchase fund. The comparison shows that the variable defined-benefit approach offers a useful alternative to the money purchase principle for defined-contribution pension funds.     

The Michigan Circuit Breaker and its Impact on the Incidence of the Property Tax

A bstract . In the absence of any program of property tax relief , the relationship between homestead property values and household incomes in Michigan introduces an inherent bias towards regressivity into the property tax. Analysis of a sample of 15,620 owner-occupied households showed a tax relief program, called the Michigan Circuit Breaker , and in particular the special relief afforded to taxpayers 65 and over ( senior citizens ), to be highly effective in reducing this inherent regressivity in the tax. As a result of the circuit breaker, this tendency towards regressivity in the property tax is effectively offset to the extent of producing near proportionality in the incidence of the tax as applied to owner-occupied housing.