World Bank lending and financial sector development

Using a new database of World Bank loans to support financial sector development, the authors investigate whether countries that received such loans experienced more rapid growth on standard indicators of financial development than countries that did not. They account for self-selection with treatment effects regressions, and also use propensity score matching techniques. The authors'results indicate that borrowing countries had significantly more rapid growth in M2/GDP than non-borrowers, and swifter reductions in interest rate spreads and cash holdings (as a share of M2). Borrowers also had higher private credit growth rates than non-borrowers in treatment effects regressions, but not in standard panel regressions with fixed country effects. On the whole, however, the results indicate significant advantages for borrowers over non-borrowers in terms of financial development.

Other People’s Money: Money’s Perceived Purchasing Power Is Smaller for Others Than for the Self

Nine studies find that people believe their money has greater purchasing power than the same quantity of others’ money. Using a variety of products from socks to clocks to chocolates, we found that participants thought the same amount of money could buy more when it belonged to themselves versus others – a pattern that extended to undesirable products. Participants also believed their money – in the form of donations, taxes, fines, and fees – would help charities/governments more than others’ money. We tested six mechanisms based on psychological distance, the endowment effect, wishful thinking, better-than-average biases, pain-of-payment, and beliefs about product preferences. Only a psychological distance mechanism received support. Specifically, we found that the perceived purchasing power of other people’s money decreased logarithmically as others’ psychological distance from the self increased, consistent with psychological distance’s subadditive property. Further supporting a psychological distance mechanism, we found that framing one’s own money as distant (vs. near) reduced the self-other difference in perceived purchasing power. Our results suggest that beliefs about the value of money depend on who owns it, and we discuss implications for marketing, management, psychology, and economics

A step too far? Leader racism inhibits transgression credit

Prior research established that when in-group leaders commit serious transgressions, such as breaking enforceable rules or engaging in bribery, people treat them leniently compared with similarly transgressive regular group members or out-group leaders (‘transgression credit’). The present studies test a boundary condition of this phenomenon, specifically the hypothesis that transgression credit will be lost if a leader's action implies racist motivation. In study 1, in a corporate scenario, a transgressive in-group leader did or did not express racism. In study 2, in a sports scenario, an in-group or out-group leader or member transgressed rules with or without a racist connotation. Both studies showed that in-group transgressive leaders lost their transgression credit if their transgression included a racial connotation. Wider implications for constraining leaders' transgressions are discussed