Interest Rates in Trade Credit Markets

All things equal, interest rates should increase with the borrower's risk. And yet, Klapper, Laeven, and Rajan (2012) cannot find such a positive relation in a broad sample of trade credit contracts. We shed some light on this puzzle by arguing that competition between informed and uninformed suppliers weakens the link between the trade credit cost and the borrower's creditworthiness. Our model implies that trade credit rates are more likely to increase with the borrower's risk if suppliers are less profitable, have high cost of funds, or sell inputs to firms plagued by moral hazard and financial distress.     

Agroecological Reconfiguration: Local Alternatives to Environmental Degradation in Mexico

Agroecological reconfiguration alternatives are programmes of action developed by local and regional organizations seeking to reverse environmental degradation produced by intensive industrialized farming. Growers who take part in them recognize their interdependence with the ecosystem and are aware of the need to act collectively in order to regain the productivity and competitiveness that have been lost through the degeneration of natural resources. The varied patterns of production developed by those promoting these alternatives are mixed, and have to demonstrate technical and economic viability; they must also justify themselves through commitment to a sustainable environmental and social development of the region. The diverse public and private actors involved share a sense that the ecosystem is a common heritage that must be safeguarded. Today, agroecological reconfiguration alternatives are the most effective initiatives for the environmental governance of agriculture in Mexico.     

The Informational Value of Incumbency

This paper exploits the informational value of incumbency: incumbency confers voters information about governing politicians not available from challengers. We propose a measure of incumbency advantage that improves the use of pure reelection success. We also study the relationship between incumbency advantage, ideological bias, and terms in office. Our argument emphasizes that incumbency affects candidates' chances of winning even if they had no opportunity to strategically utilize policies.     

Should Educational Policies Be Regressive?

In this paper, we study optimal educational policies when the ability to benefit from education is private information. We extend the framework of De Fraja (2002) in two directions. First, we replace his specification of the government’s budget constraint, which prevents the government to use tax revenues from an older generation to subsidize the education of a younger generation, by the usual one. We show that the optimal educational policies achieve the first best, are not regressive, and can be decentralized through Pigouvian taxes and credit provision. Second, we consider utility functions that are not quasi‐linear. In this case, we show that the first best can no longer be reached, education may not be monotonic in ability, and progressivities of education are locally welfare‐improving.     

LEARNING BY ASSOCIATION: MICRO CREDIT IN CHIAPAS, MEXICO

Micro credit programs provide institutional arrangements for low-income people to transit from nonmarket to market-oriented settings. This article develops a data set of payment records to determine micro credit participants' behavior on repayment performance. The findings shed new light strongly supporting micro credit as a feasible alternative to successfully provide financial resources to the poor, when controlling for asymmetric information. The empirical evidence indicates that learning by association through peer mentoring is a significant determinant in explaining high repayment rates, whereas peer monitoring is not. (JEL O1 , O17 , L31 , J15 )