In many developing and transition countries, we observe rather high levels of corruption. This is surprising from a political economy perspective, as the majority of people in a corrupt country suffer from high corruption levels. Our model is based on the fact that corrupt officials have to pay...

In transition countries, the real impact of banking crises has so far been rather moderate. We study the effect of bank insolvency on corporate incentives in a model where incumbent banks possess an informational advantage. We find that bank insolvency reduces the incentive to restructure for...

Business groups in emerging markets perform better than unaffiliated firms. One explanation is that business groups substitute some functions of missing institutions, for example, enforcing contracts. We investigate this by setting up a model where firms within the business group are connected...

In many developing countries, we observe rather high levels of corruption. This is surprising from a political economy perspective, as the majority of people generally suffers from high corruption levels. We explain why citizens do not exert enough political pressure to reduce corruption if...

Should the European Union grant state aid through an institution like the European Investment bank? This paper evaluates the efficiency of different measures for granting state aid. We use a theoretical model with firms that differ in their creditworthiness and compare different types of...

Access to finance is a prerequisite for economic development. Existing studies measure access by the use of finance. We develop a direct measurement for access to finance from the Business Environment and Enterprise Performance Survey 2005 data. We determine whether a firm without a loan does...

Empirical evidence that migrants send home more remittances after disasters raises the question of whether remittances are used to self-insure, substituting for both formal and informal insurance. We investigate this question using a unique data set on the usage patterns of financial services by...

Empirical evidence that migrants send home more remittances after disasters raises the question of whether remittances can be used to self-insure, substituting for both formal and informal insurance. We investigate this question using a unique data set on the usage patterns of financial services...