Financial Fragmentation and Insider Arbitrage

If there were no impediments to the flow of capital across space, then the returns to capital should be equalized. We provide evidence to the contrary. There are large differences in the return to comparable investments across different towns in the state of Tamil Nadu in South India. We explore why these differences are not arbitraged away - and suggest that if an insider has monopoly power in arbitraging across towns then it is in his profit-maximizing interest to reduce but not eliminate the di¤erences in returns to capital.credit constraints;limits to arbitrage

Financial Fragmentation despite Arbitrage

If there were no impediments to the flow of capital across space, then interest rates would equalized. We provide evidence to the contrary. We find significant differences in interest rates across the South Indian state of Tamil Nadu, i.e. evidence that financial markets are fragmented. We also find evidence of limited arbitrage across financial markets. --credit constraints,informal finance

Cosigners Help

We investigate how well social collateral does as an alternative to traditional physical collateral. We do so by studying cosigned loans - a borrower´s loan is backed by the personal guarantee of a cosigner. We use a regression discontinuity approach with data from South Indian bidding Roscas. Our main finding is that cosigners do indeed provide social collateral: doubling the number of cosigners halves the probability of arrears for high risk borrowers. We then distinguish between different theories of social collateral. Cosigners may be e¤ective as a monitoring device (a borrower would pay to rid herself of the nuisance of a cosigner) or as an insurance device (a borrower would pay for the benefit of a cosigner). We show that these two interpretations of cosigning have different empirical predictions in the context of a bidding Roscas. We find support for the insurance role of cosigners. --credit,default,cosigner,rosca

Climate change will increase naturalization risk from garden plants in Europe

Aim: Plant invasions often follow initial introduction with a considerable delay. The current non-native flora of a region may hence contain species that are not yet naturalized but may become so in the future, especially if climate change lifts limitations on species spread. In Europe, non-native garden plants represent a huge pool of potential future invaders. Here, we evaluate the naturalization risk from this species pool and how it may change under a warmer climate. Location Europe. Methods: We selected all species naturalized anywhere in the world but not yet in Europe from the set of non-native European garden plants. For this subset of 783 species, we used species distribution models to assess their potential European ranges under different scenarios of climate change. Moreover, we defined geographical hotspots of naturalization risk from those species by combining projections of climatic suitability with maps of the area available for ornamental plant cultivation. Results: Under current climate, 165 species would already find suitable conditions in > 5% of Europe. Although climate change substantially increases the potential range of many species, there are also some that are predicted to lose climatically suitable area under a changing climate, particularly species native to boreal and Mediterranean biomes. Overall, hotspots of naturalization risk defined by climatic suitability alone, or by a combination of climatic suitability and appropriate land cover, are projected to increase by up to 102% or 64%, respectively. Main conclusions: Our results suggest that the risk of naturalization of European garden plants will increase with warming climate, and thus it is very likely that the risk of negative impacts from invasion by these plants will also grow. It is therefore crucial to increase awareness of the possibility of biological invasions among horticulturalists, particularly in the face of a warming climate

Financial Fragmentation and Insider Arbitrage

If there were no impediments to the flow of capital across space, then the returns to capital should be equalized. We provide evidence to the contrary. There are large differences in the return to comparable investments across different towns in the state of Tamil Nadu in South India. We explore why these differences are not arbitraged away - and suggest that if an insider has monopoly power in arbitraging across towns then it is in his profit-maximizing interest to reduce but not eliminate the di¤erences in returns to capital

Cell Phones and Rural Labor Markets: Evidence from South Africa

We study the labor market effects of the roll-out of mobile phone coverage in rural South Africa. We address identification issues which arise from the fact that network roll-out cannot be viewed as an exogenous process to local economic development. We combine spatially coded data from South Africa's leading network provider with annual labor force surveys. We use terrain properties to construct an instrumental variable that allows us to identify the causal effect of network coverage on economic outcomes under plausible assumptions. We find substantial effects of network roll-out on labor market outcomes with remarkable gender-specific differences. Employment increases by 15 percentage points when a locality receives network coverage. A gender- differentiated analysis shows that most of this effect is due to increased employment by women, in particular those who are not burdened with large child care responsibilities at their homes. All of the employment gains accrue in wage employed occupations. Agricultural employment decreases substantially, especially among males.

There

Abstract: There is long-standing theoretical debate on the role of collateral in …nancial markets. There is no satisfactory evidence of the causal relationship (if any) between the amount of collateral required and the subsequent probability of overdues. We analyze an exogenous change in the number of cosigners required as collateral on small loans in South India. Our regression discontinuity approach reveals that increasing the number of cosigners reduces overdues –the e¤ect is large and signi…cant. Our results support the idea that collateral provides borrowers with incentives to repay but contradicts models in which collateral (1) is purely a hedge against default risk (2) sorts between high and low risk borrowers and (3) makes lenders lazy in their screening e¤orts