Predictors of microcredit default in Indian self‐help groups

This exploratory study was conducted to examine the reasons behind credit defaults in Self‐help Group‐based microfinance programs in India. The study adopted the mixed‐method approach. Focus group discussions (FGDs) were conducted to collect information, and thematic analysis was followed to analyze data to identify the possible causes of loan defaults in self‐help groups (SHGs). Further, 120 defaulting and 120 performing SHGs were selected through stratified random sampling method. Finally, 960 respondents were randomly selected from 240 SHGs to collect information for quantitative inquiry. The ordinary least square (OLS) and probit models were engaged to process the data. This study identified three important attribution sets causing credit defaults, (i) bank‐related attributes, (ii) agency related attributes, and (iii) group dynamics. The probability of defaults in SHGs was predicted by the amount of loan disbursed by bank, agency's help in enterprise development, age of the microenterprise, microentrepreneurship of the SHG member, SHG visits to the bank, members dropped out from SHG, tenure of the president and secretary, and monthly membership saving in the SHG.     

FINANCE,DISTRIBUTION AND THE ECONOMIC OBJECTIVE OF FINANCIAL COOPERATIVE INSTITUTIONS

This paper proposes a model where the structure rather than the size of the financial sector explains its influence on income distribution. Because of information asymmetries, a financial sector dominated solely by profit‐maximizing financial intermediaries will increase income and wealth inequality as it gives preferential access to credit for high‐income agents, whereas a diversified inclusive financial sector with alternative models of finance, like cooperatives, will reduce the inequality gap. No full convergence in income distribution can be realized through finance only and there is still a need for redistribution policies. Accordingly, an objective function for cooperative financial institutions should define a desired pricing behaviour that can increase the income of members at a rate higher than the average growth rate of the economy.     

Foreign Capital in a Growth Model

Within the mechanism of endogenous growth, this paper empirically investigates the impact of financial capital on economic growth for a panel of 60 developing countries, through the channel of domestic capital formation. By estimating the model for different income groups, it is found that while private FDI flows exert beneficial complementarity effects on the domestic capital formation across all income‐group countries, the official financial flows contribute to increasing investment in the middle income economies, but not in the low income countries. The latter appears to demonstrate that the aid‐growth nexus is supported in the middle income countries, whereas the misallocation of official inflows is more likely to exist in the low income countries, suggesting that aid effectiveness remains conditional on the domestic policy environment.     

逆向第三财政与收入分配不公

第三财政指的是政府通过支配国有经济利润而形成的财力分配活动。近年来我国国有企业利润节节高升,甚至国际金融危机也不能放缓其步伐。本文构建了一个上游国有企业寡头垄断,下游私营企业完全竞争的市场模型,证明国有企业在很大程度上攫取了下游私营企业的创新红利,它们的高额利润来自于垄断地位。由于目前第三财政的收入几乎完全由体制内人群享有,故伴随而来的是体制内外人员收入差距的不断扩大,而工业化进程和足量农村劳动力供给带来的低工资,是我国劳动者报酬占GDP比重持续下降的重要原因。在当前体制下,不断膨胀的第三财政本身成为了恶化收入分配不公状况的一个原因,是一种逆向的财政机制,应该从支出入手进行调节。     

Skill Intensity in Foreign Trade and Economic Growth

This paper explores the link between trade structure, trade specialization and per capita income growth. It is argued that industrial upgrading in export specialization patterns has a positive long-run growth effect, while the effect of structural change in industrial import patterns is in principle ambiguous. A standard empirical growth model is augmented by various measures of structural change. The hypothesis that not trade per se matters, but that various types of trading activities impact differently on economic growth is tested on a sample of 45 countries (OECD members and selected Asian and Latin American countries) over the period 1981–1997. The data set comprises exports and imports for 35 manufacturing industries at the 3-digit level of the ISIC classification which are grouped according to skill intensity. The results of the dynamic panel estimation point towards a positive long-run growth effect arising from trade specialization in medium-high-skill-intensive industries. Further, important distinctions between the skill intensity of export and import patterns and their respective influence on economic development, as well as between the group of developing countries and OECD members are observed in this relationship.JEL classification: C23, F43, O19, O41, O57The author is grateful to Michael Landesmann and Robert Stehrer (wiiw), Neil Foster and Jesús Crespo Cuaresma (Department of Economics, University of Vienna), Michael Peneder (Austrian Institute of Economic Research) and two referees for valuable comments. This research is based on Jubiläumsfondsprojekt Nr. 8954, financial support by Oesterreichische Nationalbank is gratefully acknowledged.     

Does Regional Financial Development Matter for Growth? Evidence from Indian States

The paper investigates finance–growth relationship across 26 Indian states over the period 1981–2012 in a panel setting. We use four indicators of financial development: credit-GSDP ratio, deposit-GSDP ratio, credit-deposit ratio and branch density and apply panel generalized method of moments (GMM) techniques. We observe positive and significant effect of financial development on economic growth and our findings are robust across alternate indicators of financial development and model specifications. Our findings highlight pivotal role played by financial intermediaries in fostering savings mobilization and financing investment activities across states through channels of deposit mobilization, expansion of credit and greater branch expansion in unbanked locations and consequent reduction of transactions costs. These findings are consistent with observations that much of India’s superior growth performance is attributed to high level of domestic savings. The paper also takes care of issues of bias and precision of various GMM estimators arising out of small sample typically prevalent in empirical growth models like ours.     

INTERACTIONS BETWEEN FINANCIAL DEVELOPMENT AND TRADE OPENNESS

This paper empirically investigates the interaction between financial development and trade openness through simultaneous‐equation systems. The identification and estimation of the systems rely on the methodology of identification through heteroskedasticity proposed by Rigobon (2003). Using a panel consisting of 70 countries over the period 1960–2007, we find a two‐way causal relationship between financial development and trade openness. A better‐developed financial sector induces higher openness to trade, while higher openness in goods market stymies financial development. And such findings hold well for low‐income, high‐inflation, or low‐governance countries.     

Do Multinational Enterprises Contribute to Convergence or Divergence? A Disaggregated Analysis of US FDI*

It is widely held that foreign direct investment (FDI) has a positive effect on economic growth. To test this hypothesis, we perform convergence regressions derived from a theoretical model on the impact of FDI on endogenous technological change in small economies. The model includes FDI externalities that enhance growth, but also shows that FDI can crowd out host country income and reduce local innovation. The empirical analysis employs disaggregated US data for various FDI‐related activities—in addition to the conventionally used aggregate FDI stocks and flows. We estimate the net FDI impact on the convergence rate of per‐capita income to US levels, controlling for human development, financial development, and trade. We find that FDI accelerates convergence for high‐income countries only, otherwise slowing it down.     

Effects of financial liberalization on financial market development and economic performance of the SSA region: An empirical assessment

This study investigates the role of financial liberalization in promoting financial deepening and economic growth in Sub-Saharan African countries (SSA). We apply the more efficient system GMM estimator in dynamic panel data that combines first difference and original level specification to deal with the problems of weak instruments. Our dataset covers 21 countries in Sub-Saharan Africa over the period of 1981–2009.Additionally, the paper sought to examine both the direct and indirect impacts of financial liberalization policies on economic growth and financial deepening using a much more comprehensive and recent financial liberalization dataset. The econometric results suggest that, on average, financial liberalization is negatively associated with income growth in SSA region. Our findings provide support for the skeptical empirical view of financial liberalization in emerging markets, which show that liberalization, by itself, might be associated with lower economic growth through leading to destabilization, stimulating domestic capital flight and increasing the risk of financial fragility. However, the research finds that financial liberalization does indeed impact positively on financial deepening and resource mobilization in SSA region, after controlling for key macroeconomic factors such as institutional quality, fiscal imbalances and inflation. In fact the study reports a stronger reforms effect for countries that have stronger legal institutions, protection of property rights and higher human capital. Policy-wise, the study finds that institutional and human capital factors are important in explaining growth and financial development; therefore, it is necessary for SSA governments to promote a stronger and more transparent institutional development as we move forward.     

Getting help from abroad: The macroeconomics of foreign direct investment in infrastructure in low‐income countries

Infrastructure financing needs in most low‐income countries are substantial, but funding for such needs is only partly covered by national governments and aid donors. This paper introduces foreign direct investment (FDI) through public–private partnerships as a source of infrastructure financing in low‐income countries. A two‐sector open economy model is developed to assess the macroeconomic performance of FDI in infrastructure. With efficient foreign investment, an increase in revenue‐generating infrastructure investment boosts productivity and spurs private investment while stabilizing domestic prices. A direct comparison between infrastructure financed by domestic versus foreign investment shows that foreign investment creates higher output growth and welfare gains and is preferable to domestically sourced investment, irrespective of the underlying financing instrument the domestic economy is employing. FDI in non‐revenue‐generating infrastructure is also analyzed and discussed.     

Caste, Inequality, and Poverty in India

This paper analyses inequality and poverty in India within the context of caste‐based discrimination. It does so by decomposing the difference between (caste) Hindu and Scheduled Caste (SC) and Scheduled Tribe (ST) households in: their average household incomes; their probabilities of being in different income percentiles; their probabilities of being at different levels of poverty into: a “discrimination effect”, which stems from the fact that a household's income level, into which its (income‐generating) profile translates, depends on whether it is SC/ST; an “attributes (or residual) effect” which stems from the fact that there are systematic differences between SC/ST and Hindu households in their (income‐generating) profiles. The results, based on unit record data for 28,922 households, showed that at least one‐third of the average income/probability differences between Hindu and SC/ST households was due to the “unequal treatment” of the latter.     

ANALYSIS OF THE POSSIBILITIES FOR EXPANSION OF SERVICES IN TANZANIAN SAVINGS AND CREDITS CO‐OPERATIVE SOCIETIES: LEARNING FROM ECONOMIES OF SCALE

Savings and Credit Co‐operative Societies (SACCOS) increasingly recognized as the valuable tool for economic development in low‐income countries. However, recently researchers reported that one of their primary challenges to their expansion is the high level of inefficient. In this study, we analyzed the relationship between growth and efficiency of SACCOS using economies of scale concept. Then we address the role of management of the capital structure and allocation of resources in the expansion of SACCOS. The study used financial statement data from 60 SACCOS in Tanzania for the period of 2004–2011. The findings supports that most of SACCOS are small and cost inefficient because the industry is young, but, the efficiency increases as SACCOS expand. Second the allocation of resources in liquid, financial and non‐financial investment leads to no expansion in SACCOS. Thus, the growth of SACCOS via increasing loan to members, members’ savings, shares, and institutional capital should be encouraged as it increases the efficiency of SACCOS. Also, SACCOS should minimize the allocation of assets in other investments which are different from credit to members.     

Nonlinearity in the financial development–income inequality nexus

The majority of theoretical studies on the relationship between income inequality and financial development argue that financial deepening might be a feasible instrument for improving income distribution. This paper finds that the prediction crucially depends on the stages of financial development that the country is undergoing. The benefits of financial depth only occur if the country has reached a threshold level of financial development. Below this critical value, financial development counteracts income inequality. Our policy implication is that a minimum level of financial development is a necessary precondition for achieving reduction in income inequality through financial development.     

DOES THE EFFECTIVENESS OF BOARD OF DIRECTORS AFFECT FIRM PERFORMANCE OF CONSUMER CO‐OPERATIVES? THE CASE OF ICOOP KOREA

Consumer co‐operatives in Korea have been growing rapidly since they launched their own shops. If co‐operatives would be too much oriented to enlargement or economic growth, they might easily pay no attention to members’ participation which is one of the priorities in co‐operatives. It could lead to losing the value of co‐operatives. So it is important to adjust the balance between members’ participation and economic growth. This paper focuses on the role of board of directors in doing that. It aims to examine how effectiveness of the board influences members’ participation and the participation has effect on performance of co‐operatives in the case of iCOOP Korea. The variables such as communication with members and usage of management skills and knowledge are employed as measures of the effectiveness of the board in decision‐making process. The data are collected by survey the respondents of which are 222 directors of 30 primary co‐operatives. It is analyzed by Structural Equation Model. The findings of the research are as follows. Firstly, communication of the board with members increases the members’ democratic participation, and the increased participation contributes to improving the financial performance. Secondly, management skills and knowledge of the board does not have significant relations with the level of members’ participation, even though members’ economic participation has significantly positive relation with the financial performance. The findings imply that members’ voluntary participation will be increased when boards of co‐operatives try to reflect members’ needs in the decision making processes, and it can help the co‐operatives improve their financial performance. It suggests a clue for the trade‐off between the value of co‐operatives and growth of business which many co‐operatives are trying to resolve.     

Women self-help groups and intra-household decision-making in agriculture

This study examines the effect of women-centric agricultural self-help groups (SHGs) on intra-household decision-making in agriculture. Using data collected from an intra-household survey of 815 households, we analyze the effect of women's membership in different types of SHGs on 14 decisions related to farms and households. Specifically, we investigate the discord in decision-making, which is the difference in the perceived decision-making roles of spouses within a household. Our results show that women's participation in SHGs has increased their role in decision-making by 8–13%. However, the effects vary according to the type of intervention and the decision. We found fewer discords in intra-household decision-making in seed SHGs than in micro-finance SHGs. In conclusion, our study suggests that women's engagement in agriculture-based SHG interventions can encourage joint decision-making, but the magnitude of this effect depends on the type of SHG. Development agencies can use this information to design interventions targeted at empowering women through the improvement of the agricultural value chain.     

Child cash benefits and family expenditures: Evidence from the National Child Benefit

Income may improve child outcomes through two mechanisms: as a direct input into health and education, or indirectly, by reducing household financial stress. We exploit policy‐induced changes in refundable tax benefit income in Canada to study these two potential mechanisms. Our findings suggest that additional income may improve outcomes through both mechanisms: some benefit income is spent on direct education inputs, while some is spent on everyday items likely to improve the general conditions children face. Additionally, some families reduce spending on risky behaviour items. Spending responses to benefit generosity appear to vary by income and by child age.     

Drivers of the real effective exchange rates in high and upper‐middle income countries

This paper revisits the nexus between real effective exchange rate (REER) and total factor productivity (TFP) by controlling for trade openness, financial development and natural resources rents. We use a sample of 60 high‐income and upper‐middle income countries over the period 1995–2015 and employ the GMM estimation framework. Our results advance the empirical knowledge on the drivers of REER by providing robust evidence that the impact of TFP is not uniform across different country clusters. We find that in high‐income countries, increasing productivity causes the REER to depreciate hence becoming more trade competitive while the opposite is true for upper‐middle income countries. Furthermore, financial development and natural resources rents have no meaningful impact in the case of upper‐middle income countries but retain a significant effect in high‐income countries. Trade openness plays a key role in explaining the variation in REER in both country clusters.     

Is perceived financial inadequacy persistent?

In an attempt to understand the determinants of financial inadequacy, this paper employs the ability of households to make ends meet as a measure of their perceived financial inadequacy. Using household‐level data from the European Community Household Panel covering eight countries over the period from 1994 to 2001, this study applies a dynamic probit model that incorporates both state dependency and individual fixed effects. Exploiting a latterly enhanced bias‐corrected fixed‐effects probit model, I address the persistent nature of subjective financial inadequacy by directly estimating fixed effects while correcting for incidental parameters and avoiding the initial conditions problem of dynamic models. The results reveal that employing time‐invariant individual effects to model subjective monetary perception is essential. However, by controlling for household heterogeneity, income, indebtedness, and health status, I find that in addition to the major differences across European households, country‐specific factors can have adverse effects on the persistent nature of perceived financial inadequacy.     

WHAT MAKES INTERNATIONAL CAPITAL FLOWS PROMOTE ECONOMIC GROWTH? AN INTERNATIONAL CROSS‐COUNTRY ANALYSIS

This paper re‐examines the relationship between international capital flows and economic growth within the context of various ‘conditional factors’ that possibly have the potential to influence such relationships. It achieves this by employing panel data for 80 countries that cover 1976–2007. International capital inflow is broken down into foreign direct investments (FDI) and foreign portfolio investments (FPI). We find interesting evidence that only FDI has a positive effect on growth and that FPI has an unfavorable, if not negative, effect on growth. The conditional variables of banking liberalization, high‐income level, twin crises, lower corruption, and human capital mitigate the positive impacts of FDI on growth. In contrast, the middle‐income level and good shareholder protection have a positive effect. As concerns FPI, the level of financial liberalization, being in a Latin American region, the wealth of countries, and market governance all influence the way that FPI affects growth, whereas the conditional variables of twin crises and human capital do not influence the effect of FPI on economic growth.     

POLICY UNCERTAINTY,ELECTORAL SECURITIES,AND REDISTRIBUTION*

This article investigates how uncertainty about the adoption of a redistribution policy affects political support for redistribution when individuals can trade policy‐contingent securities in the stock market. In equilibrium the support for redistribution is smaller than where no “policy‐insurance market” is available. This implies that in economies with well‐developed financial markets redistribution decreases with the level of participation in these markets and with income inequality. Furthermore, the existence of a policy‐insurance market may lead to a less equal distribution of income than where no insurance is available even if a majority of individuals are redistributing resources through private transfers.