Ashok S. Rai

Is Grameen Lending Efficient? Repayment Incentives and Insurance in Village Economies

Many believe that a key innovation by the Grameen Bank is to encourage borrowers to help each other in hard times. To analyse this, we study a mechanism design problem where borrowers share information about each other, but their limited side contracting ability prevents them from writing complete insurance contracts. We derive a lending mechanism which efficiently induces mutual insurance. It is necessary for borrowers to submit reports about each other to achieve efficiency. Such cross-reporting increases the bargaining power of unsuccessful borrowers, and is robust to collusion against the bank. Copyright 2004, Wiley-Blackwell.

Sorting through affirmative action: Three field experiments in Colombia

The use of affirmative action policies to promote female employment remains debated. Do affirmative action policies attract female applicants, and does that come at the expense of deterring highly qualified male applicants? In three field experiments in Colombia, we compare job seekers who are informed of affirmative action selection criteria before they apply with those who are told after applying. We find that the gains in attracting female applicants far outweigh the losses in male applicants. Moreover, our results indicate that affirmative action does not decrease the quality of the top 15th percentile of the pool of applicants.

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.