The paper uses micro-level data obtained from surveying informal and formal small textile producers in Bolivia to estimate the economic returns to social capital. Social capital is defined as being linked to other individuals. The paper studies forms of social links that vary with respect to...

This paper shows that donors that maximize relative aid impact spread their budgets across many recipient countries in a unique Nash equilibrium, explaining aid fragmentation. This equilibrium may be inefficient even without fixed costs, and the inefficiency increases in the equality of donors...

In this paper we quantify the impact of wealth transfers such as remittances and foreign aid using a DSGE-RBC model. We calibrate and simulate the model using data from 85 recipient countries. Within this framework we demonstrate: First, the income eect created from a permanent increase in...

In a setting with a low level of anonymous trust and without an effective shadow of courts, the possibility to return a low quality good can work as a simple mechanism to overcome moral hazard in buyer seller transactions. Informal firms – in contrast to formal ones – operate in the hidden...

The paper studies the role of social capital in the urban informal sector in Bolivia. It shows that a formal firm has about 6.4 times the sales of an informal firm with no social capital, but informal firms use their social capital to compensate for the lack of formal productivity benefits. By...

In many situations, irreconcilable disagreements between players lead to costly ownership disputes over assets-for example, in case of joint ownership. This article studies the role of such disputes in a situation where two players have to make a transaction-specific investment and when...

This article explores the role of social capital created by social network membership in the small-firm sector in developing countries. Some empirical studies find that social capital hampers economic performance by creating market segmentation and inducing rent-seeking activities. Other studies...