Associations versus registration as alternative strategies of small firms

Small firms, especially those in developing countries, face several serious problems: (1) costs of regulation, including corruption, (2) contract enforcement, and (3) idiosyncratic risks that leave their owners with high costs of finance. To deal with these problems, it is recognized that firms exercise choice over their degree of formality. Little attention, however, has been given to the alternative strategies that firms may choose in gaining formality and dealing with these problems. This article examines the choice between two different strategies: (1) registering with official entities, and (2) participating in private associations. We develop hypotheses concerning factors that would favor one such choice over the other and then test these hypotheses with data taken from a large sample survey of Mexican microenterprises. The results provide support, in some cases strong support, for most of the hypotheses.

Child Labor and Multinational Conduct: A Comparison of International Business andStakeholder Codes

Increasing attention to the issue of child labor has been reflected in codes of conduct that emerged in the past decade in particular. This paper examines the way in which multinationals, business associations, governmental and non-governmental organizations deal with child labor in their codes. With a standardized framework, it analyzes 55 codes drawn up by these different actors to influence firms external, societal behavior. The exploratory study helps to identify the main issues related to child labor and the use of voluntary instruments such as codes of conduct. Apart from a specific indication of the topics covered by the code, especially minimum-age requirements, this also includes monitoring systems and monitoring parties. Most important to company codes are the sanctions imposed on business partners in case of non-compliance. Severe measures may be counterproductive as they do not change the underlying causes of child labor and can worsen the situation of the child workers by driving them to more hazardous work in the informal sector. This underlines the importance of a broad rather than a restrictive approach to child labor in codes of conduct. The paper discusses the implications of this study, offering suggestions for future research.     

The U.S. Postal Savings System and the collapse of building and loan associations during the Great Depression

Building and loan associations (B&Ls) financed over half of new houses constructed in the United States during the 1920s but they lost their predominance within the following decades as they were pushed to convert into Savings and Loans (S&Ls). This study examines whether the U.S. government-insured Postal Savings System attracted funds away from B&Ls precisely when they needed them the most in the Great Depression. Annual town- and county-level data from 1920 through 1935 for three states show that the sudden rise in local postal savings was associated with local downturns in B&Ls. Using a panel vector autoregression, we find that postal savings significantly reduced the amount of money in B&Ls, yet B&Ls had no significant effect on postal savings banks. Alternatively, postal savings had no significant effect on commercial banks. The results suggest that this competitive dynamic prevented B&Ls from rebounding in the mid-1930s and helped contributed to Great Depression's local real estate lending decline.