Is Group Lending A Good Enforcement Scheme for Achieving High Repayment Rates?: Evidence from Field Experiments in Vietnam

Microfinance institutions employ various kinds of incentive schemes but estimating the effect of each scheme is not easy due to endogeneity bias. We conducted field experiments in Vietnam to capture the role of joint liability, monitoring, cross-reporting, social sanctions, communication and group formation in borrowers’ repayment behavior. We find that joint liability contracts cause serious free-riding problems, inducing strategic default and lowering repayment rates. When group members observe each others’ investment returns, participants are more likely to choose strategic default. Even after introducing a cross-reporting system and/or penalties among borrowers, the default rates and the ratios of participants who chose strategic default under joint liability are still higher than those under individual lending. We also find that joint liability lending often failed to induce mutual insurance among borrowers. Those who had been helped or who had repaid a little in the previous round were more likely to default strategically and repay a little again in the current round and those who paid large amounts were always the same individuals.

Trade Credits under Imperfect Enforcement: A Theory with a Test on Chinese Experience

It is widely recognized that trade credit is an important financial mechanism, particularly in developing economies and transition economies where institutions are weak. This paper documents theoretical analysis and empirical accounts on what facilitates an effective supply of trade credit based on original surveys conducted in P.R. of China. Our theory predicts that trade volume and trade credit are increasing function of cash held by the buyer and enforcement technology of the seller. Furthermore, if the state sector’s enforcement technology is high, it has positive external effect to expand the volumes of trade credit and trades in the whole economy. From the data, we found that government made active commitment in enforcement of trade credit contract and the government owned firms are main supplier and receivers of trade credit, which suggest that enforcement by government and state sector were effective against presumptions in the previous literatures.

Smuggling and import duties in Myanmar

This paper examines the effects of import duties on smuggling in Myanmar. Following Fisman and Wei (2004), the reporting discrepancies between Myanmar’s imports records and corresponding exports recorded by trading partners are regarded as indicative of smuggling. The paper studies whether reporting discrepancies differ across trading partners as well as across time. Our main findings are first, that the hike in import duties in June 2004 helped to widen the reporting discrepancies, which suggests smuggling for tax evasion purposes and second, that reporting discrepancies differ considerably across trading partners: land borders appear to be particularly attractive venues for smugglers.

Tax differentials and inflow of foreign direct investments : evidence from foreign operations of U.S. multinational companies

This paper concerns the measurement of the impact of tax differentials across countries on inflow of Foreign Direct Investment (FDI) by using comprehensive data on the foreign operations of U.S. multinational corporations that has been collected by the Bureau of Economic Analysis (BEA), the U.S. Department of Commerce. In particular, this research focuses on examining: (1) how responsive FDI locations are to tax differentials across countries, (2) how different the tax effect on FDI inflow is between developed and developing countries, and (3) whether investment location decisions have become more or less sensitive to tax differences between countries over time ranging from the late 1990s to the early 2000s. Estimation results suggest that high rates of corporate income taxation are associated with reduced foreign assets of U.S. multinational firms in all industries by decreasing the return to foreign asset investment. Further, foreign assets of U.S. multinationals in all industries have become more responsive to non-income tax differentials across countries than to income tax differences from 1999 to 2004. Empirical estimates also indicate that foreign investment by American firms is associated with higher tax sensitivity more in developed countries than in those that are developing.

Ex ante bargaining and ex post enforcement in trade credit supply: theory and evidence from China

If payment of goods is easily default, economic transaction may deeply suffer from the risk. This risky environment formed a mechanism that governs how economic transaction is realized, subsequently how trade credit is given. This paper distinguished ex ante bargaining and ex post enforcement, then modeled that bargaining power reduces trade credit ex ante, and ex post enforcement power and cash in hand of buyer can enhances both trade amount and trade credit in a presence of default risk. We modeled this relationship in order to organize findings from previous literature and from our original micro data on detailed transaction in China to consistently understand the mechanism governing trade credit. Then empirically tested a structure from the theoretical prediction with data. Results show that ex post enforcement power of seller mainly determines size of trade credit and trade amount, cash in hand of buyer can substitute with enforcement power; Bargaining power of seller is exercised to reduces trade credit and trade amount for avoiding default risk, but it simultaneously improves enforcement power as well. We found that ex post enforcement power consists of (ex ante) bargaining power on between two parties and intervention from the third party. However, its magnitude is far smaller than the direct impact to reduce trade credit and trade amount.

Trade policies and trade mis-reporting in Myanmar

While the trade statistics of Myanmar show surpluses for 2007 through 2010, the corresponding statistics of trade partner countries indicate deficits. Such discrepancies in mirror trade statistics are analyzed in connection with the ‘export-first and import-second’ policy provisioning import permissions on permission applicants possessing a sufficient amount of the export-tax-deducted export earnings. Under this policy, the recorded imports and exports of the private sector have been maintaining equilibrium, whereas discrepancies in the mirror statistics have fluctuated. This suggests that traders adjusted mis-reporting in accordance with the supply and demand of the export earnings.

Features of IP rights enforcement in Korea and China

This report examines recent updates to the regulation and enforcement of intellectual property (IP) rights in Korea and China, in particular patent rights including invention, utility, and design rights. This paper also discusses some features and issues of the actual IP enforcement situation in those countries in comparison with Japan.

The emission reduction effect and economic impact of an energy tax vs. a carbon tax in China : a dynamic CGE model analysis

Chinese government commits to reach its peak carbon emissions before 2030, which requires China to implement new policies. Using a CGE model, this study conducts simulation studies on the functions of an energy tax and a carbon tax and analyzes their effects on macro-economic indices. The Chinese economy is affected at an acceptable level by the two taxes. GDP will lose less than 0.8% with a carbon tax of 100, 50, or 10 RMB/ton CO2 or 5% of the delivery price of an energy tax. Thus, the loss of real disposable personal income is smaller. Compared with implementing a single tax, a combined carbon and energy tax induces more emission reductions with relatively smaller economic costs. With these taxes, the domestic competitiveness of energy intensive industries is improved. Additionally, we found that the sooner such taxes are launched, the smaller the economic costs and the more significant the achieved emission reductions.