I study the coexistence of formal and informal finance in underdeveloped credit markets. While weak institutions constrain formal banks, shallow pockets hamper informal lenders. In such economies, informal finance has two effects. By increasing the investment return it decreases borrowers’...

Recent research has emphasized the influence of colonization on the institutional development and economic performance in former European colonies. Where European colonizers settled, they replicated the investment-conducive institutions found at home. It has been argued that a harsh disease...

Citizens are willing to abandon their short-term financial interest in free-riding considerably, if governments act in their interest, if procedures of the public decisions-making process are felt to be fair and if other fellow-citizens have to contribute also an adequate share to the community....

We explore theoretically and empirically whether social interaction, including local and global interaction, influences the incidence of corruption. We first present an interaction-based model on corruption that predicts that the level of corruption is positively associated with social...

Using data on the 20 Italian regions for the period 1970-1995, I examine whether the presence of social capital, as reflected in a number of different measures collected by Putnam (1993), affects economic productivity. I find three types of effects. First, social capital, when treated as an...

This research examines the economic origins of Islam and uncovers two empirical regularities. First, Muslim countries, virtual countries and ethnic groups, exhibit highly unequal regional agricultural endowments. Second, Muslim adherence is systematically larger along the pre-Islamic trade...

The topic of corruption has recently attracted a great deal of attention, yet there is still a lack of micro level empirical evidence regarding the determinants of corruption. Furthermore, the present literature has not investigated the effects of political interest on corruption despite the...

We build a simple model of legal dualism in which a pro-poor legal reform, under certain conditions, causes the conflicting custom to go some way toward producing the change intended by the legislator. It then acts as an "outside anchor" that exerts a "magnet effect" on the custom. We illustrate...

This paper uses a dynamic CGE model to assess the intertemporal and spatial dimension of technology spillovers embodied in international trade within a climate and trade policy framework. Three are the main contributions of the study. First, to include endogenous factor-biased technical change...

The industrial organization of developing countries is characterized by the pervasive use of subcontracting arrangements among small, financially constrained firms. This paper asks whether vertical integration relaxes those financial constraints. It shows that vertical integration trades off the...