Publications

A Structural Evaluation of a Large-Scale Quasi-Experimental Microfinance Initiative

rtownsend — Wed, 01 Jun 2011 05:00:00 GMT

Kaboski and Townsend use a structural model to understand, predict, and evaluate the impact of an exogenous microcredit intervention program, the Thai Million Baht Village Fund. They model household decisions in the face of borrowing constraints, income uncertainty, and high-yield indivisible investment opportunities. After estimating parameters, the authors evaluate the model's ability to predict and interpret the impact of village fund intervention.

Wealth Accumulation and Factors Accounting for Success

rtownsend — Tue, 01 Mar 2011 06:00:00 GMT

Townsend and Pawasutipaisit use detailed income, balance sheet, and cash flow statements constructed for households in a long monthly panel in an emerging market economy, as well as contributions in economic theory, to document and better understand the factors underlying success in achieving upward mobility in the distribution of net worth.

Financial Structure and Economic Welfare: Applied General Equilibrium Development Economics

rtownsend — Thu, 01 Apr 2010 05:00:00 GMT

This review provides a common framework for researchers thinking about the next generation of micro-founded macro models of growth, inequality, and financial deepening, as well as direction for policy makers targeting microfinance programs to alleviate poverty. Townsend covers topics such as the treatment of financial structure general equilibrium models, designing surveys to capture measures of income, investment/savings, and flow of funds, and aggregating individuals and households to the level of network, village, or national economy.

Welfare Gains from Financial Liberalization

rtownsend — Thu, 01 Apr 2010 05:00:00 GMT

In this paper, Townsend and Ueda address the controversial issue of financial liberalization. Using data from Thailand from 1976 to 1996, the authors find sizable welfare gains from liberalization, though the gain in economic growth is ambiguous. They take the view that financial liberalization is a government policy that alters the path of financial deepening, while financial deepening is endogenously chosen by agents given a policy and occurs in transition towards a distant steady state.

Financial Systems in Developing Economies: Growth, Inequality and Policy Evaluation in Thailand

rtownsend — Thu, 01 Apr 2010 05:00:00 GMT

Unique in its approach and in the variety of methods and data employed, this book is the first of its kind to provide an in-depth evaluation of the financial system of Thailand, a proto-typical Asian developing economy. Using a wealth of primary source qualitative and quantitative data, including survey data collected by Townsend, it evaluates the impact of specific financial institutions, markets for credit and insurance, and government policies on growth, inequality, and poverty at the macro, regional, and village level in Thailand. This work is useful not only as a guide to the Thai economy but more importantly as a means of assessing the impact that financial institutions and policy variation can have at the macro- and micro-level, including the distribution of gains and losses.

For more information on this publication, please visit http://ukcatalogue.oup.com/product/9780199533237.do.

Robustness, Estimation and Detection

lhansen — Tue, 01 Dec 2009 06:00:00 GMT

In this working paper, Hansen and Sargent address issues of decision-making under uncertainty. Uncertainty is particularly pervasive in decision-making by entrepreneurs, investors, and policy makers, yet it can be difficult to build probability models that fully reflect all aspects of the uncertainty. The authors here use two-continuous time recursive specifications of robust control problems with some unknown parameters or states. Upon analysis, Hansen and Sargent find that when faced with uncertainty, individuals form subjective beliefs about the future in order to determine the best course of action.

Households as Corporate Firms

rtownsend — Sun, 01 Nov 2009 05:00:00 GMT

This investigation proposes a conceptual framework for measurement necessary for an analysis of household finance and economic development. Samphantharak and Townsend build on and, where appropriate, modify corporate financial accounts to create balance sheets, income statements, and statements of cash flows for households in developing countries, using an integrated household survey. The authors also illustrate how to apply the accounts to an analysis of household finance that includes productivity of household enterprises, capital structure, liquidity, financing, and portfolio management. The conceptualization of this analysis has important implications for measurement, questionnaire design, the modeling of household decisions, and the analysis of panel data.

For more information, please visit http://www.cambridgeuniversitypress.com/us/catalogue/catalogue.asp?isbn=0521195829.

Measuring the Impact of Financial Intermediation: Linking Contract Theory to Econometric Policy Evaluation

rtownsend — Tue, 01 Sep 2009 05:00:00 GMT

Townsend and Urzua study the impact that financial intermediation can have on productivity through the alleviation of credit constraints in occupation choice and/or an improved allocation of risk. They bring together both static and dynamic structural models, as well as reduced form OLS and IV regressions.

Formulating, Identifying, and Estimating the Technology of Cognitive and Noncognitive Skill Formation

jheckman — Mon, 01 Dec 2008 06:00:00 GMT

Cunha and Heckman formulate and estimate models of the evolution of cognitive and non-cognitive skills over the lifecycle and explore the role that family plays in shaping the development of these skills. The authors place special emphasis on skill formation.

Returns to Capital in Microenterprises: Evidence from a Field Experiment

admin — Sat, 01 Nov 2008 05:00:00 GMT

Small and informal firms account for a large share of employment in developing countries. The rapid expansion of microfinance services is based on the belief that these firms have productive investment opportunities and can enjoy high returns to capital if given the opportunity. However, measuring the return to capital is complicated by unobserved factors such as entrepreneurial ability and demand shocks, which are likely to be correlated with capital stock. This paper uses a randomized experiment to overcome this problem, and to measure the return to capital for the average microenterprise in our sample, regardless of whether or not they apply for credit. The authors accomplish this by providing cash and equipment grants to small firms in Sri Lanka, and measuring the increase in profits arising from this exogenous shock to capital stock. After controlling for possible spillover effects, they find the average real return to capital to be substantially higher than the market interest rate. They then examine the heterogeneity of treatment effects to explore whether missing credit markets or missing insurance markets are the most likely cause of the high returns. Returns are found to vary with entrepreneurial ability and with measures of other sources of cash within the household, but not to vary with risk aversion or uncertainty.

Who are the Microenterprise Owners? Evidence from Sri Lanka on Tokman v. de Soto

admin — Sat, 01 Nov 2008 05:00:00 GMT

Is the vast army of the self-employed in low income countries a source of employment generation? This paper uses data from surveys in Sri Lanka to compare the characteristics of own account workers (non-employers) with wage workers and with owners of larger firms. The authors use a rich set of measures of background, ability, and attitudes, including lottery experiments measuring risk attitudes. Consistent with the International Labor Organization's views of the self employed (represented by Tokman), the analysis finds that two-thirds to three-quarters of the own account workers have characteristics which are more like wage workers than larger firm owners. This suggests the majority of the own account workers are unlikely to become employers. Using a two and a half year panel of enterprises, the authors show that the minority of own account workers who are more like larger firm owners are more likely to expand by adding paid employees. The results suggest that finance is not the sole constraint to growth of microenterprises, and provides an explanation for the low rates of growth of enterprises supported by microlending.

What is Middle Class about the Middle Classes around the World?

abanerjee — Sun, 01 Jun 2008 05:00:00 GMT

This paper examines the three distinct arguments about the special economic role of the middle class that are traditionally made. In one, new entrepreneurs armed with a capacity and a tolerance for delayed gratification emerge from the middle class and create employment and productivity growth for the rest of society. In a second, perhaps more conventional view, the middle class is primarily a source of vital inputs for the entrepreneurial class: it is their "middle class values" -- their emphasis on the accumulation of human capital and savings -- that makes them central to the process of capitalist accumulation. The third view, a staple of the business press, emphasizes the middle class consumer, whose demand for quality consumer goods feeds investment in production and marketing, which in turn raises income levels for everyone. This paper asks what should be made of these arguments in the context of today's developing countries. Banerjee and Duflo focus on two groups of middle class households: those whose daily per capita expenditures are between $2 and $4, and those with expenditures between $6 and $10. Starting from survey data on patterns of consumption and investment by the middle class in thirteen developing countries, the authors look for what is distinct about the global middle class, especially when compared to the global poor (defined as those whose per capita daily consumption is below $2 a day). In particular, is there anything special about the way middle class people per spend their money, earn their incomes, or bring up their children?

How High are Rates of Return to Fertilizer? Evidence from Field Experiments in Kenya

eduflo — Thu, 01 May 2008 05:00:00 GMT

In this paper, Duflo, Kremer and Robinson examine returns from fertilizer in Kenya. Agricultural economists have stressed the importance of fertilizer, yet the increases in productivity have not been measured. The authors conduct a series of demonstration plot experiments in which treatment and control plots are randomly allocated among farmers. They find fertilizer to be highly profitable in most cases, though in some it is not profitable. The authors investigate two reasons for low uptake of fertilizer: lack of information and savings difficulties.

Sources of TFP Growth – Occupational Choice and Financial Deepening

rtownsend — Sat, 01 Sep 2007 05:00:00 GMT

In this in-depth look at theories of wealth creation, the authors develop a method of growth accounting based on the integrated use of transitional growth models and micro data to explain the sources of total factor productivity (TFP) growth. TFP growth is measured as a residual, so the authors seek to identify the underlying sources of this residual growth by decomposing growth into four components: occupational shifts, financial deepening, capital heterogeneity and sectoral Solow residuals. When the growth accounting method is utilized in Thailand, a country that experienced rapid growth and great structural changes between 1976 and 1996, it is found that the majority of TFP growth can be explained by occupational shifts and financial deepening. Additionally, expansion of credit is found to be a major part.

The Economic Lives of the Poor

abanerjee — Mon, 01 Jan 2007 06:00:00 GMT

Banerjee and Duflo examine the factors that distinguish individuals who have had some success at wealth creation (the middle class) from those who have not (the lower class). The authors find many similarities between the middle class and the poor. They find, for example, that businesses run by middle class families do not look substantially different than those run by poor families. But, more favorable employment arrangements allow middle class families to accumulate wealth and, in turn, invest it into human capital through healthcare and education.