How enforcement institutions affect markets

In an experiment we study market outcomes under alternative incentive structures for third-party enforcers. Our transactions resemble an anonymous credit market where lenders can give loans and borrowers can repay them. When borrowers default, judges are free to enforce repayment but are themselves paid differently in each of three treatments. First, paying judges according to lenders votes maximizes surplus and the equality of earnings. In contrast, paying judges according to borrowers votes triggers insufficient enforcement, destroying the market and producing the lowest surplus and the most unequal distribution of earnings. Lastly, judges paid the average earnings of borrowers and lenders achieve results close to those based on lender voting. We employ a steps-of-reasoning argument to interpret the performances of different institutions. When voting and enforcement rights are allocated to different classes of actors, the difficulty of their task changes, and arguably as a consequence they focus on high or low surplus equilibria.

"As you receive with one hand, so should you give with the other": the mutual-help practices of Cape Verdeans on the Lisbon periphery”

Rural Cape Verdeans employ a number of mutual-help practices to mitigate the uncertainties surrounding activities fundamental to their subsistence. One of these practices is djunta mon (‘to work together’), a loosely planned, non-monetized system of allocating labor at peak intervals during the growing season. By means of djunta mon, neighbors or family members work in each other’s fields until the tasks of every landowning participant are complete. Alongside djunta mon in rural Cape Verde exist a number of other non-remunerated mutual-help practices, such as djuda mutua (‘mutual help’) and laja kaza (‘to add concrete to one’s house’). While less visible than djunta mon, they are nonetheless important in completing tasks essential to rural life in the islands. In this thesis, I will attempt to show how Cape Verdean immigrants in Lisbon have adapted the mutual-help practices of rural Cape Verde to a new, transnational context. The iterations of these practices in Lisbon differ from their rural counterparts in that they involve fewer people, occur on a year-round basis, and are concerned primarily with domestic work. They also help people find employment, access childcare, secure interest-free credit, and construct or repair houses. I will argue that extensive mutual-help ties ensure Cape Verdean migrants in Lisbon a sufficient pool of family and friends upon which they can rely for support and assistance. An additional element I will explore is the perception among Cape Verdean immigrants that these mutual-help practices seem to be occurring with less frequency. While this shift is in part due to the availability of other means of support, I will contend that the changing attitude of Cape Verdeans towards mutual help is also due to their encountering neoliberal notions of ‘self-accountability.’ Thus, Cape Verdeans perceive that their mutual-help practices are in decline, while simultaneously needing the material support that they provide.

Economic booms, trade deficits and economic policy

Many economic booms have been accompanied by realexchange rate appreciations, large trade defcits -whichhave sometimes persisted after the return to the initialexchange rate parity- and a deteriorating traded sector.Those circumstances have typically raised the questionof the de-sirability of some stabilization policy. We show that the dynamics induced by an expectedproductivity shock in an economy where the capital stockis non-mobile across sectors, match those circumstances.Furthermore, we obtain that credit market imperfectionstend to exacerbate trade deficits, and to cause aninefficient capacity reduction in the traded sector.Some stabilization policies are explored.

Systemic risk, interbank relations and liquidity provision by the Central Bank

We model systemic risk in an interbank market. Banks face liquidityneeds as consumers are uncertain about where they need to consume. Interbank credit lines allow to cope with these liquidity shocks while reducing the cost of maintaining reserves. However, the interbank market exposes the system to a coordination failure(gridlock equilibrium) even if all banks are solvent. When one bankis insolvent, the stability of the banking system is affected in various ways depending on the patterns of payments across locations. We investigate the ability of the banking industry to withstand the insolvency of one bank and whether the closure ofone bank generates a chain reaction on the rest of the system. Weanalyze the coordinating role of the Central Bank in preventing payments systemic repercussions and we examine the justification ofthe Too-big-to-fail-policy.

Las deducciones en el IRPF por gasto sanitario privado: situación actual y posibilidades de reforma

The paper provides information about the tax treatment given to personalhealth expenditures in the Personal Income Tax in Spain, and analyseswhat we know about it and how the tax credit or other forms ofpreferential tax treatment can contribute to the financement of privatehealth expenditures, of special relevance in view of the recent PersonalIncome Tax modification proposals . It also points out some of the mainredistributive results coming out from this type of public financement,differentiating between types of expenditures (mainly those on healthservices which are not provided by the public health system, from thosewhich are).

Interest rate restrictions in a natural experiment: loan allocation and the change in the usury laws in 1714

This article studies the effects of interest rate restrictions on loan allocation. The British governmenttightened the usury laws in 1714, reducing the maximum permissible interest rate from 6% to5%. A sample of individual loan transactions reveals that average loan size and minimum loan sizeincreased strongly, while access to credit worsened for those with little social capital. Collateralisedcredits, which had accounted for a declining share of total lending, returned to their former role ofprominence. Our results suggest that the usury laws distorted credit markets significantly; we findno evidence that they offered a form of Pareto-improving social insurance.

Ethics and creative accounting: Some empirical evidence on accounting for intangibles in Spain

Recent research shows that financial reports are losing relevance. Mainly thisis due to the growing strategic importance of intangible assets in theperformance of a company. A possible solution is to modify accounting standardsso that statements include more self-generated intangible assets, taking intoaccount with their inherent risk and difficulty of valuation. We surveyed loanofficers who were asked to assess the credit-worthiness of a hypotheticalcompany. The only information given was a simplified version of financialstatements. Half the group got statements where research and development costshad been capitalized. The other half got statements in which these costs hadbeen treated as an expense. The findings show that capitalization wassignificantly more likely to attract a positive response to a loan request. Thepaper raises the question of whether accounting for intangibles might providemanagers with one more creative accounting technique and, in consequence, itsethical implications.

Price regulation of plastic money: A critical assessment of Spanish rules

Recent decisions by the Spanish national competition authority (TDC) mandate paymentsystems to include only two costs when setting their domestic multilateral interchange fees(MIF): a fixed processing cost and a variable cost for the risk of fraud. This artificiallowering of MIFs will not lower consumer prices, because of uncompetitive retailing; but itwill however lead to higher cardholders fees and, likely, new prices for point of saleterminals, delaying the development of the immature Spanish card market. Also, to the extent that increased cardholders fees do not offset the fall in MIFs revenue, the task of issuing new cards will be underpaid relatively to the task of acquiring new merchants, causing an imbalance between the two sides of the networks. Moreover, the pricing scheme arising from the decisions will cause unbundling and underprovision of those services whose costs are excluded. Indeed, the payment guarantee and the free funding period will tend to be removed from the package of services currently provided, to be either provided by third parties, by issuers for a separate fee, or not provided at all, especially to smaller and medium-sized merchants. Transaction services will also suffer the consequences that the TDC precludes pricing them in variable terms.

Systemic crises and growth

In this paper, we document the fact that countries that have experienced occasional financial crises have on average grown faster than countries with stable financial conditions. We measure the incidence of crisis with the skewness of credit growth, and find that it has a robust negative effect on GDP growth. This link coexists with the negative link between variance and growth typically found in the literature. To explain the link between crises and growth we present a model where weak institutions lead to severe financial constraints and low growth. Financial liberalization policies that facilitaterisk-taking increase leverage and investment. This leads to higher growth, but also toa greater incidence of crises. Conditions are established under which the costs of crises are outweighed by the benefits of higher growth.

Cape Verde - Diagnostic Trade Inttegration study Update - 2013

This Report is an update of the Cape Verde Diagnostic Trade Integration Study, titled Cape Verde’s Insertion into the Global Economy, produced and validated by the Government of Cape Verde in December 2008. Like the previous 2008 study, this Cape Verde Diagnostic Trade Integration Study Update provides a critical examination of the major institutional and production constraints that hinder Cape Verde’s ability to capitalize fully on the growth and welfare gains from its integration into the world economy. As a policy report, this study offers a set of priority policies and measures that can be implemented by both the public and private sectors to mitigate and surmount these supply side and institutional constraints. These recommendations are summarized in an Action Matrix. The Report is fruit of the generous support of the multi-donor program the Enhanced Integrated Framework (EIF). In every crisis there is an opportunity. Four years after the validation of the country’s first Diagnostic Trade Integration Study in 2008, Cape Verde finds itself in a drastically altered external environment. Cape Verde faces a worsened external environment than four years ago, when it was also traversing years of crisis as global food and energy prices escalated. Just as the country was validating its first trade study in late 2008, and celebrating its graduation from the list of Least Developed Countries, the onset of the deepest global recession in recent memory triggered an even worse external situation as the country’s principal source of markets, investments, remittances and aid, the Eurozone, unraveled economically and politically. As the Eurozone crisis spread, it was Cape Verde’s misfortune that the crisis contaminated precisely its biggest Eurozone partners and donors, such as Portugal, Spain and Italy. For such a highly dependent and exposed economy like that of Cape Verde, the deteriorating external sector has had a substantial negative impact on its macroeconomic performance. At the time of the validation workshop and graduation in 2008, no one could have foreseen or predicted the severity of the global crisis that followed. Despite traversing these years of adversity and external shocks, and suffering palpable setbacks, Cape Verde’s economy had proven surprisingly resilient, especially its principal sector, tourism. To its great credit, the country’s economic fundamentals are solid, and have been carefully and prudently managed over the years. For this reason alone, the country has thus far weathered the global and Eurozone crisis. Yet the near and medium term future remains uncertain. The country’s margin for maneuver has narrowed, its options far more limited, and hard choices lie ahead. Thus, there is no better time than now to analyze Cape Verde’s position in the global economy, and to examine the many challenges and opportunities it faces. The first diagnostic trade study outlined an ambitious agenda and set of policy strategies to enhance Cape Verde’s participation in the global economy. Written prior to the global crisis, the study did not, and could not, anticipate the scope and depth of the subsequent global and Eurozone crises. A few short months before the validation of the first DTIS Cape Verde joined the World Trade Organization (WTO). It has spent these four years adjusting to this status and implementing its commitments. At the same time, the country seeks greater economic integration with the European Union. Since 2008 the government has been investing heavily in the country’s economic infrastructure, focusing especially on fostering transformation in key sectors like agriculture, fisheries, tourism and creative industries. For these and many other reasons, it is both timely and urgent to review the road traveled since 2008. It is an opportune moment to reassess the country’s options, to rethink strategies, and to chart a new way forward that it is practical, implementable, and that builds on the country’s competitive advantages and current successes.

Iowa Values Fund and Business Assistance Programs 2007 Annual Report, 2007

Following is the 2007 Annual Report of the Iowa Values Fund (IVF 2005) and Business Assistance Programs covering activity during Fiscal Year 2007 (FY ‘07) and cumulative for the first four years of the Iowa Values Fund Programs. The IVF (2005) is the primary funding source for a menu of financial assistance programs the Iowa Department of Economic Development (IDED) offers as incentives to Iowa companies to expand here, to recruit new companies into Iowa and assist new entrepreneurial ventures. In addition to IDED the law appropriates IVF (2005) funds for economic development activities to the Board of Regents, the Departments of Cultural Affairs and Natural Resources and to Community Colleges for certain workforce training programs. In addition to the IVF (2005), IDED allocates a portion of Community Development Block Grant and Federal Emergency Stimulus funds and several tax credit programs, all of which are included in this report.

Behavioral ecology of Heteragrion consors Hagen (Odonata, Megapodagrionidae): a shade-seek Atlantic forest damselfly

Behavioral ecology of Heteragrion consors Hagen (Odonata: Megapodagrionidae): a shade-seek Atlantic forest damselfly. The intensity of the inter and intra-sexual selection can affect male behavioral traits as territorial fidelity and aggressiveness allowing the existence of different strategies. However, its differential success could be affected by environmental - as the diel variation in temperature - and physiological constrains - as the variation in thermoregulatory abilities. In this context, we present a behavioral analysis of Heteragrion consors (Zygoptera, Megapodagrionidae) trying to characterize its mating system, diel activity pattern, temporal budget, territoriality and reproductive biology. These data were obtained based on field observations using the focal individual method and mark-recapture techniques in 120 m of a shaded Atlantic Forest stream in Brazil. The males of this species were territorial, varying in its local fidelity, while the females appear sporadically. Males were perched in the majority of the time, but were also observed in cleaning movements, longitudinal abdominal flexion, wing flexion and sperm transfer during perch. The males presented a perched thermoregulatory behavior related to an exothermic regulation. Foraging and agonistic interactions were rare, but dominate the other behavioral activities. Abdominal movements associated to long lasting copula pointed to the existence of sperm competition in this species. Males performed contact post-copulatory guarding of the females. These observations pointed to a non-resource mating system for this species.

Electronic Payments for Driver's Licensing Transactions,December 31, 2008

House File 2196 required the Department of Transportation (DOT) to study the acceptance of electronic payments at its customer service sites and sites operated by county treasurers. Specifically the legislation requires the following: “The department of transportation shall review the current methods the department employs for the collection of fees and other revenues at sites operated by county treasurers under chapter 321M and at customer service sites operated by the department. In conducting its review, the department, in cooperation with the treasurer of state, shall consider providing an electronic payment option for all of its customers. The department shall report its findings and recommendations by December 31, 2008, to the senate and house standing committees on transportation regarding the advantages and disadvantages of implementing one or more electronic payment systems.” This review focused on estimating the costs of providing an electronic payment option for customers of the DOT driver’s license stations and those of the 81 county treasurers. Customers at these sites engage in three primary financial transactions for which acceptance of electronic payments was studied: paying for a driver’s license (DL), paying for a non-operator identification card (ID), and paying certain civil penalties. Both consumer credit cards and PIN-based debit cards were reviewed as electronic payment options. It was assumed that most transactions would be made using a consumer credit card. Credit card companies charge a fee for each transaction for which they are used. The amount of these fees varies among credit card companies. The estimates for credit card fees used in this study were based on the State Treasurer of Iowa’s current credit card contract, which is due to expire in September 2009. Since credit card companies adjust their fees each year, estimates were based on the 2008 fee schedule. There is also a fee for the use of PIN-based debit cards. The estimates for PIN-based debit card transactions were based on information provided by Wells Fargo Merchant Services for current fees charged by debit card networks. Credit and debit card transactions would be processed through vendor-provided hardware and software. The costs would be determined through the competitive bidding process since several vendors provide this function; therefore, these costs are not reflected in this document.

Private borrowing during the financial revolution: Hoare’s Bank and its customers, 1702-1724

The financial revolution improved the British government s ability to borrow, andthus its ability to wage war. North andWeingast argued that it also permitted privateparties to borrow more cheaply and widely.We test these inferences with evidencefrom a London bank.We confirm that private bank credit was cheap in the earlyeighteenth century, but we argue that it was not available widely. Importantly, thegovernment reduced the usury rate in 1714, sharply reducing the circle of privateclients that could be served profitably.

Productivity growth and the exchange rate regime: The role of financial development

This paper offers empirical evidence that a country's choice of exchange rate regime can have a signifficant impact on its medium-term rate of productivity growth. Moreover, the impact depends critically on the country's level of financial development, its degree of market regulation, and its distance from the global technology frontier. We illustrate how each of these channels may operate in a simple stylized growth model in which real exchange rate uncertainty exacerbates the negative investment e¤ects of domestic credit market constraints. The empirical analysis is based on an 83 country data set spanning the years 1960-2000. Our approach delivers results that are in striking contrast to the vast existing empirical exchange rate literature, which largely finds the effects of exchange rate volatility on real activity to be relatively small and insignificant.