Using unique village census data collected in 2003 and 2008 in Senegal, we assess the impact of a major World Bank-funded Community Driven Development (CDD) program on membership and assortative matching in community-based organizations (CBOs). We implement both standard discrete choice and dyadic regression techniques. We find that channeling development aid through CBOs makes these organizations more inclusive in the sense that a number of traditionbound assortative matching patterns are partly broken. Ceteris paribus, this leads to more heterogeneous CBOs. On the other hand, the likelihood of CBO membership is reduced in treated villages, with significant differences between men and women. Our results suggest that grassroots level development projects which target CBOs must be carefully designed and executed if they are not to result, paradoxically, in a greater degree of social exclusion, with differentiation by gender playing a crucial role.
Equity home bias is one of the most enduring puzzles in international finance. In this paper, I start out by documenting a novel stylized fact about home bias: countries with weaker domestic institutions hold fewer foreign assets. I then explore a macroeconomic mechanism by which the presence of agency problems in firms may explain this pattern. To do so, I develop a two-country dynamic stochastic general equilibrium model of international portfolio choice with corporate governance frictions and two distinct agents - outside investors (outsiders) and large controlling shareholders (insiders). Insiders can extract private benefits of control from a firm at a cost which is lower when institutions are weaker. I show that the interaction between the insider's private benefits and investment decisions leads asset and labor income for outsiders to be more negatively correlated in countries with weaker institutions. Thus, outsiders in these countries bias their portfolios more towards home assets to hedge their labor income risk. Calibrating the model to match existing estimates of private benefits of control, I am also able to replicate the cross-country dispersion in insider ownership and investment volatility seen in the data.
This paper estimates the causal impact of landmines on child health and household expenditures in Angola by exploiting geographical variations in landmine intensity. We generate exogenous variation in landmine intensity using the distance between communes and rebel headquarters. As predicted by our theoretical model of rebel mining, landmine intensity is found to be a decreasing function of the distance to a set of rebel headquarters. Instrumental variables estimates, based on two household surveys and the Landmines Impact Survey, indicate that landmines have large and negative effects on weight-for-age, height-for-age and household expenditures. We discuss our results with respect to the costs and benefits of landmine clearance.
This paper tests the generalized Trivers Willard hypothesis, which predicts that parents with heritable traits that increase the relative reproductive success of males compared to females will have relatively more males than females. As in Kanazawa (2005) we test if taller mothers have relatively more sons in a pooled sample of Demographic Health Surveys (DHS) from 46 developing countries. Despite using a rich dataset and an array of statistical models that address some of the concerns raised by Gelman (2007), we provide further evidence against the hypothesis.
There has been a long debate about whether speculators are stabilizing or not. We consider a model where speculators have a stabilizing role in normal times, but may also provoke large risk panics. The very feature that makes arbitrageurs liquidity providers in normal times, namely their tolerance of risk, enables a large increase in asset price risk during a financial panic. We show that a policy that discourages balance sheet risk reduces the magnitude of financial panics, as well as asset price risk in both normal and panic states.
The Recent crises have seen very large spikes in asset price risk without dramatic shifts in fundamentals. We propose an explanation for these risk panics based on self-fulfilling shifts in risk made possible by a negative link between the current asset price and risk about the future asset price. This link implies that risk about tomorrow’s asset price depends on uncertainty about risk tomorrow. This dynamic mapping of risk into itself gives rise to the possibility of multiple equilibria and self-fulfilling shifts in risk. We show that this can generate risk panics. The impact of the panic is larger when the shift from a low to a high risk equilibrium takes place in an environment of weak fundamentals. The sharp increase in risk leads to a large drop in the asset price, decreased leverage and reduced market liquidity. We show that the model can account well for the developments during the recent financial crisis.
