Outreach and performance of microfinance institutions: the importance of portfolio yield

In this paper, we examine the interaction between social outreach and financial return in microfinance. Running multivariate regression models and using 1,805 observations of microfinance institutions between 2004 and 2013, we find strong evidence suggesting that institutions with more social engagement – in terms of outreach to the poor – earn higher portfolio yields. We also find that measures of outreach are associated with increased operating expenses. As return figures are influenced by both costs and yield, and because both increase to a similar degree with the depth of outreach, these two effects lead to a zero sum result on return measures. This finding could explain why existing studies assessing the interaction between social outreach and different measures of financial performance in microfinance (such as return on assets/equity, operating expenses, operational self-sufficiency) have not produced consistent results.     

How does ownership influence business growth? A competitive dynamics perspective

Firms engage in competitive actions to gain market share and hence to grow their revenues. However, not all firms are equally able to use competitive actions to drive growth. We argue that the ability to translate competitive actions to revenue growth depends on the ownership of the firm. Drawing on principal-agent and principal-principal perspectives, we argue that: (1) private owners (both foreign and local) are better able to employ aggressive actions to grow their business than state owners; (2) firms with multiple owners (especially international joint ventures) are less able to implement actions that drive business growth than full ownership. We find support for these arguments in empirical tests on survey-based data of 106 firms in China. Results show that in an emerging market the principal-principal perspective can better explain governance and competition than the principal-agent perspective.     

Market power in distribution and pass‐through for consumers and producers

We examine the differential pass‐through of import prices into consumer and producer prices. We develop a framework with distribution costs and distribution market power. We then examine pass‐through from import prices to consumer and producer prices in the euro area using the U.S. import price as instrument. We find that pass‐through rates to producer prices are more sensitive to changes in distribution margins than pass‐through to consumer prices. Furthermore, only a portion of import price changes translate into domestic price changes limiting potential consumer benefits from tariff liberalization, with market power in distribution services being one important factor reducing pass‐through.     

Economic Retirement Age and Lifelong Learning: A Theoretical Model With Heterogeneous Labor,Biased Technical Change and International Sourcing

The employability of an aging population in a world of continuous and biased technical change is top of the political agenda. Due to endogenous human capital depreciation the effective retirement age is often below statutory retirement age resulting in permanent non‐employability of older workers. We analyze this phenomenon in a putty‐putty human capital vintage model and focus on education and the speed of human capital depreciation. Introducing a two‐stage education system with initial schooling and lifelong learning, not even lifelong learning turns out to be capable of aligning economic and statutory retirement. However, well‐designed education programs will keep more workers in highly productive activities at the end of their working life, and hence will substitute for simple social transfers, or for an early switch towards very low paid jobs.     

A Student Learning Inventory for Economics Based on the Students' Experience of Learning: A Preliminary Study

The authors present the initial development of a student learning inventory (SLI) that is specific to economics. This approach, which is based on the student experience of learning (SEL) literature, emphasizes aspects of prior knowledge in the learning history of entering first-year students. Preliminary insights from a first SLI suggest that on entry to university, students show considerable variation in their perceptions of what economics is and what economists do. From the SEL perspective, such variation affects student learning. It is argued that continued development of an economic-specific SLI may result in a better understanding of students' learning engagement with economics and ultimately assist instructors in better understanding student learning difficulties and increase student success in first-year economics.     

Bilateral Exchange Rates and Jobs

We study the labor market effects of realignment in fixed bilateral exchange rates, such as China's peg to the US dollar. We employ the open economy model by de Melo and Robinson to identify the core parameters of the real, trade side of the economy driving the unemployment effects of bilateral exchange rate realignment. A small open economy version of the model is explored analytically and a large multicountry version numerically. Analytics in the small open economy model show that unemployment effects of adjusting of a bilateral peg hinge on the fraction exported to and imported from the trading partner. A larger fraction exported to and a smaller fraction imported from the trading partner make it more likely that revaluation of a trading partner's currency has beneficial effects. Numerics in the large economy model show that Chinese revaluation can generate both positive and negative unemployment effects depending upon underlying parameter values. Adverse unemployment effects can go along with an improving trade balance.     

Pricing hybrid bundles by understanding the drivers of willingness to pay

Many companies are increasingly selling hybrid bundles, which comprise one or more goods and one or more services. Hybrid bundle pricing depends on understanding consumer willingness to pay (WTP) for the bundle, which rests on trade-offs among the benefits from four key drivers: service autonomy, complementarity, service quality variability, and overall bundle quality (basic vs. premium). The effects of these drivers and their interactions on the WTP of hybrid bundles are unknown. The authors develop hypotheses and test them rigorously using incentive-aligned choice-based conjoint and hierarchical Bayesian analysis. The results offer important guidelines for developing appropriate hybrid bundles. If a typical firm under budget constraint has to offer either of two hybrid bundles, one with high complementarity or one with service autonomy, the results suggest that it should offer the bundle with high complementarity. Furthermore, contrary to the conventional wisdom of minimizing service quality variability for premium quality bundles relative to basic quality bundles, the results recommend lowering service quality variability for basic quality bundles but maintaining it for premium bundles.     

TOTEX Malmquist index for CPI-X regulation: Does it correctly estimate the true frontier shift?

Journal of Regulatory Economics - The X in CPI-X regulation aims to adjust price or revenue allowances to changes in total factor productivity and input prices. If calculated correctly, both terms...