03. Journals

2,963 items available

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http://hdl.handle.net/10986/2210

These are journal articles published in World Bank journals as well as externally by World Bank authors.

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Now showing 1 - 10 of 44

Borrower Leakage from Costly Screening: Evidence from SME Lending in Peru

(Elsevier, 2021-11) Arraiz, Irani ; Bruhn, Miriam ; Roth, Benjamin N. ; Ruiz-Ortega, Claudia ; Stucchi, Rodolfo

We provide evidence that commercial lenders in Peru suffer leakages in their loan approval process. Leveraging a discontinuity in the loan approval process of a large bank, we find that receiving a loan approval from the bank causes loan applicants to receive offers from other financial institutions as well. Competing lenders captured almost three quarters of the new loans to previously financially excluded borrowers. Importantly, many of these borrowers never took a loan from our partner bank, even after our partner bank approved them. Lenders may therefore underinvest in screening new borrowers and expanding financial inclusion, as their competitors reap some of the benefit. Our results highlight that information spillovers between lenders may operate outside of credit registries.
Informed Trading in Business Groups

(Published by Oxford University Press on behalf of the World Bank, 2020-06) Pedraza, Alvaro

Business groups, which are collections of legally independent companies with a significant amount of common ownership, dominate private sector activity in developing countries. This paper studies information flows within these groups by examining the trading performance of institutional investors in firms that belong to the same group. Using a novel dataset with complete transaction records in Colombia, this paper estimates the difference in returns between trades of asset managers in group-affiliated companies and trades of non-affiliated managers in the same stocks during the same period. The data show that affiliated managers display superior timing ability and that their trades outperform those of non-affiliated managers by 0.85 percent per month. The evidence suggests that institutional investors with group affiliation access information that is only available to members of the group. In order to limit the use of private information, financial authorities might need to expand their disclosure rules to monitor the trades of group-affiliated investors.
Land Values, Property Rights, and Home Ownership: Implications for Property Taxation in Peru

(Elsevier, 2017-12-30) Hawley, Zackary ; Miranda, Juan José ; Sawyer, W. Charles

This paper evaluates the effect of property rights on property values in Peru. Previous research on squatting has shed light on how the provision of formal land titles affects a number of socioeconomic outcomes and a subset of this research has provided estimates on how the provision of formal titles affects property values. However, the phenomenon of squatting encompasses a variety of informal property rights distinct from the possession of a legal title. Using an exceptionally rich household data set including geo-location at the community level we study the effects of both formal and informal property rights on property values. Having a title increases property values by almost 7 percent and squatting on the land by invasion reduces values by about 6 percent. Using these estimates, we determine the potential losses of property tax revenue and are able to study the issue of squatting in the context of public finance.
On the Effects of Enforcement on Illegal Markets: Evidence from a Quasi-Experiment in Colombia

(Published by Oxford University Press on behalf of the World Bank, 2017-06-01) Mejía, Daniel ; Restrepo, Pascual ; Rozo, Sandra V.

This paper studies the effects of enforcement on illegal behavior in the context of a large aerial spraying program designed to curb coca cultivation in Colombia. In 2006, the Colombian government pledged not to spray a 10 km band around the frontier with Ecuador due to diplomatic frictions arising from the possibly negative collateral effects of this policy on the Ecuadorian side of the border. We exploit this variation to estimate the effect of spraying on coca cultivation by regression discontinuity around the 10 km threshold and by conditional differences in differences. Our results suggest that spraying one additional hectare reduces coca cultivation by 0.022 to 0.03 hectares; these effects are too small to make aerial spraying a cost-effective policy for reducing cocaine production in Colombia.
Remittances and Vulnerability in Developing Countries

(Published by Oxford University Press on behalf of the World Bank, 2017-02) Bettin, Giulia ; Presbitero, Andrea F. ; Spatafora, Nikola L.

This paper examines how international remittances are affected by structural characteristics, macroeconomic conditions, and adverse shocks in recipient economies. We exploit a novel, rich panel data set, covering bilateral remittances from 103 Italian provinces to seventy-nine developing countries over the period 2005–2011. We find that remittances are negatively correlated with the business cycle in recipient countries and in particular increase in response to adverse exogenous shocks, such as large terms-of-trade declines. This effect is stronger where the migrant communities have a larger share of newly arrived migrants. Finally, we show that recipient-country financial development is negatively associated with remittances, suggesting that remittances help alleviate credit constraints.
Psychometrics as a Tool to Improve Credit Information

(Published by Oxford University Press on behalf of the World Bank, 2016-03-30) Arraiz, Irani ; Bruhn, Miriam ; Stucchi, Rodolfo

This paper studies the use of psychometric tests, designed by the Entrepreneurial Finance Lab (EFL), as a tool to screen out high credit risk and potentially increase access to credit for small business owners in Peru. We compare repayment behavior patterns across entrepreneurs who were offered a loan based on the traditional credit scoring method versus the EFL tool. We find that the psychometric test can lower the risk of the loan portfolio when used as a secondary screening mechanism for already banked entrepreneurs—that is, those with a credit history. The EFL tool can also allow lenders to offer credit to some unbanked entrepreneurs—that is, those without a credit history—who were rejected based on their traditional credit scores, without increasingthe risk of the portfolio.
Strategic Interactions and Portfolio Choice in Money Management: Theory and Evidence

(Wiley, 2015-12) Pedraza, Alvaro

I study portfolio choice of strategic fund managers in the presence of a peer-based underperformance penalty. While the penalty generates herding behavior, correlated trading among managers is exacerbated when a strategic setting is considered. The equilibrium portfolios are driven by the least restricted manager, who may vary according to the realization of returns. I compare model predictions to evidence from the Colombian pension fund management industry, where six asset managers are in charge of portfolio allocation for the mandatory contributions of the working population. These managers are subject to a peer-based underperformance penalty, which is known as the minimum return guarantee (MRG). I study trading behavior by managers before and after a change in the strictness of the MRG in June 2007. The evidence suggests that a tighter MRG results in more trading in the direction of peers, a behavior that is more pronounced for underperforming managers. I show that these findings are consistent with the qualitative and quantitative predictions of the theoretical model. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions. http://olabout.wiley.com/WileyCDA/Section/id-820227.html
Institutional Investors and Long-Term Investment: Evidence from Chile

(Published by Oxford University Press on behalf of the World Bank, 2015-09-29) Opazo, Luis ; Raddatz, Claudio ; Schmukler, Sergio L.

Developing countries are trying to develop long-term financial markets and institutional investors are expected to play a key role. This paper uses unique evidence on the universe of institutional investors from the leading case of Chile to study to what extent mutual funds, pension funds, and insurance companies hold and bid for long-term instruments and which factors affect their choices. Using monthly asset-level portfolios we show that, despite the expectations, mutual and pension funds invest mostly in short-term assets relative to insurance companies. The significant difference across maturity structures is not driven by the supply side of debt or tactical behavior. Instead, it seems to be explained by manager incentives (related to short-run monitoring and the liability structure) that, combined with risk factors, tilt portfolios toward short-term instruments, even when long-term investing has averaged higher returns. Thus, expanding large institutional investors does not necessarily imply more developed long-term markets.
The Challenges of Bankruptcy Reform

(Published by Oxford University Press on behalf of the World Bank, 2012-08) Cirmizi, Elena ; Klapper, Leora ; Uttamchandani, Mahesh

The 2008 financial crisis was followed by a global economic downturn, a credit crunch, and a reduction in cross-border lending, trade finance, and foreign direct investment, which adversely affected businesses around the world. The consequent increase in the number of firm insolvencies in the corporate sector highlights the need for commercial bankruptcy laws to liquidate efficiently unviable firms and reorganize viable ones, so as to maximize the total value of proceeds received by creditors, shareholders, employees, and other stakeholders. The authors summarize the theoretical and empirical literature on bankruptcy design, discuss the challenges of introducing and implementing bankruptcy reforms, and present examples of how policymakers are trying to take advantage of the current economic downturn as an opportunity to engage in meaningful reform of the bankruptcy process. They also review the main principles of efficient insolvency laws and bankruptcy procedures.
Demystifying Success : The New Structural Economics Approach

( 2011-04) Lin, Justin Yifu

It took a Scottish moral philosopher with no training in economics to set the course of modern economics and challenge researchers to answer what is arguably the most fundamental question in public policy, namely: what is the recipe for growth, job creation, and poverty reduction?