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.
