The paper analyses the effect of interest rate changes on education and child labor in an economy with a high-skilled sector, a low-skilled sector and fragmented credit markets. The high-skilled sector takes educated labor as input. The low-skilled sector takes unskilled labor, physical capital...

Credit constraints are central to development economics theory. However, there is scant direct evidence that supports the existence of such constraints. Traditional tests observe how consumption changes after an unexpected income shock. Such changes can also result from myopic behavior or...

Mehra and Prescott (1985) raised an issue that has still not yet been resolved in a satisfactory manner: the risk premium on US shares is (much) higher than could be explained by the neoclassic financial economics paradigm. Since then, this unresolved problem has become known as the Equity...

The paper analyses the effect of interest rate changes on education and child labor in an economy with a high-skilled sector, a low-skilled sector and fragmented credit markets. The high-skilled sector takes educated labor as input. The low-skilled sector takes unskilled labor, physical capital...

We show how to use panel data on household consumption to directly estimate households’ risk preferences. Specifically, we measure heterogeneity in risk aversion among households in Thai villages using a full risk-sharing model, which we then test allowing for this heterogeneity. There is...

What is the effect of the optimal information acquisition at date t+1 regarding the uncertainty at date t+2 on the saving behavior date t? This paper explores how agents choose the timing of uncertainty resolution and its effect on ex ante consumption-saving decisions. Under rational...

Collateral requirements play an important role in credit markets. This paper shows that the endowment effect—the phenomenon where owing a good increases one's valuation of it—inhibits demand for loans which use a borrower's existing assets as collateral. Using a field experiment in Kenya, we...

This paper studies the cyclical pattern of ex post markups in the banking system using balance-sheet data for a large set of countries. Markups are strongly countercyclical even after controlling for financial development, banking concentration, operational costs, inflation, and simultaneity or...

In an overlapping generations economy, lenders fund risky investment projects of firms by drawing up loan contracts in the presence of an informational asymmetry. An optimal contract entails the issue of only debt, only equity, or a mix of the two. The equilibrium choice of contract depends on...

To clarify the causal links between financial activity and economic growth, three theoretical models are analyzed and a structural equation path models is estimated. In the modeling part, poverty traps result from large fixed costs or high proportions of real investment to run a financial...