The Economic Impact of Social Ties: Evidence from German Reunification

We use the fall of the Berlin Wall in 1989 to show that personal relationships which individuals maintain for non-economic reasons can be an important determinant of regional economic growth. We show that West German households who have social ties to East Germany in 1989 experience a persistent rise in their personal incomes after the fall of the Berlin Wall. Moreover, the presence of these households significantly affects economic performance at the regional level: it increases the returns to entrepreneurial activity, the share of households who become entrepreneurs, and the likelihood that firms based within a given West German region invest in East Germany. As a result, West German regions which (for idiosyncratic reasons) have a high concentration of households with social ties to the East exhibit substantially higher growth in income per capita in the early 1990s. A one standard deviation rise in the share of households with social ties to East Germany in 1989 is associated with a 4.6 percentage point rise in income per capita over six years. We interpret our findings as evidence of a causal link between social ties and regional economic development.economic development, German reuni cation, networks, social ties

The Economic Impact of Social Ties: Evidence from German Reunification

We use the fall of the Berlin Wall in 1989 to show that personal relationships which individuals maintain for non-economic reasons can be an important determinant of regional economic growth. We show that West German households who have social ties to East Germany in 1989 experience a persistent rise in their personal incomes after the fall of the Berlin Wall. Moreover, the presence of these households significantly affects economic performance at the regional level: it increases the returns to entrepreneurial activity, the share of households who become entrepreneurs, and the likelihood that firms based within a given West German region invest in East Germany. As a result, West German regions which (for idiosyncratic reasons) have a high concentration of households with social ties to the East exhibit substantially higher growth in income per capita in the early 1990s. A one standard deviation rise in the share of households with social ties to East Germany in 1989 is associated with a 4.6 percentage point rise in income per capita over six years. We interpret our findings as evidence of a causal link between social ties and regional economic development.

Moral Hazard: Experimental Evidence from Tenancy Contracts

We report results from a field experiment designed to estimate the effects of tenancy contracts on agricultural input choices, risk-taking, and output. The experiment induced variation in the terms of sharecropping contracts: some tenants paid 50% of output in compensation for land usage; others paid 25%; again others paid 50% of output and received cash, either fixed or stochastic. We find that tenants with higher output share utilized more inputs, cultivated riskier crops, and generated 60% more output relative to control. Cash transfers did not effect farm output. We interpret the increase in output as the incentive effect of sharecropping

Naming and shaming: the impacts of different regimes on hospital waiting times in England and Wales

Improving accountability in public services has been a central objective of many public sector reforms in recent years. Chief among these have been efforts to generate observable performance measures as a basis for monitoring performance. This paper examines a natural experiment in regimes applied to waiting list targets for hospital admissions in England and Wales. Prior to 2001, each country had similar policies, organisational structures for hospital care, and levels of resources. After 2001, the principal difference between the countries were the consequences for hospitals that failed to meet targets for waiting times: in England, failure resulted in sanctions in a process of `naming and shaming', but in Wales, failure was perceived to result in extra resources. We use hospitals in Wales as a 'control group', to examine the effect of `naming and shaming' in England. We found that this policy did indeed reduce waiting times in England as compared with Wales. However, there is some evidence there was in England, initially, some shuffling of prospective patients to meet specific targets which increased mean waiting times

The Economic Impact of Social Ties: Evidence from German Reunification

We use the fall of the Berlin Wall in 1989 to identify a causal effect of social ties on regional economic growth. We show that households who have social ties to East Germany in 1989 experience a persistent rise in their personal incomes after the fall of the Berlin Wall. Moreover, the presence of these households significantly affects economic performance at the regional level: it increases the returns to entrepreneurial activity, the share of households who become entrepreneurs, and the likelihood that firms based within a given West German region invest in East Germany. As a result, West German regions which (for idiosyncratic reasons) have a high concentration of households with social ties to the East exhibit substantially higher growth in income per capita in the early 1990s. A one standard deviation rise in the share of households with social ties to East Germany in 1989 is associated with a 4.6 percentage point rise in income per capita over six years. We interpret our findings as evidence that social ties between individuals can indeed facilitate economic growth.economic development; German Reunification; migration; networks; social ties

Incentives and the De Soto Effect

This paper explores the consequences of improving property rights to facilitate the use of fixed assets as collateral, popularly attributed to the influential policy advocate Hernando de Soto. We use an equilibrium model of a credit market with moral hazard to characterize the theoretical effects and also develop a quantitative analysis using data from Sri Lanka. We show that the effects are likely to be nonlinear and heterogeneous by wealth group. They also depend on the extent of competition between lenders. There can be significant increases in profits and reductions in interest rates when credit markets are competitive. However, since these are due to reductions in moral hazard, that is, increased effort, the welfare gains tend to be modest when cost of effort is taken into account. Allowing for an extensive margin where borrowers gain access to the credit market can make these effects larger depending on the underlying wealth distribution

Naming & Shaming: The impacts of different regimes on hospital waiting times in England and Wales

Improving accountability in public services has been a central objective of many public sector reforms in recent years. Chief among these have been efforts to generate observable performance measures as a basis for monitoring performance. This paper examines a natural experiment in regimes applied to waiting list targets for hospital admissions in England and Wales. Prior to 2001, each country had similar policies, organisational structures for hospital care, and levels of resources. After 2001, the principal difference between the countries were the consequences for hospitals that failed to meet targets for waiting times: in England, failure resulted in sanctions in a process of `naming and shaming', but in Wales, failure was perceived to result in extra resources. We use hospitals in Wales as a 'control group', to examine the effect of `naming and shaming' in England. We found that this policy did indeed reduce waiting times in England as compared with Wales. However, there is some evidence there was in England, initially, some shuffling of prospective patients to meet specific targets which increased mean waiting times.hospital waiting times; targets