Post-reform Years Research Articles

Giving Credit Where Credit is Due? The Community Reinvestment Act and Mortgage Lending in Lower-Income Neighborhoods

I identify and quantify the mortgage supply effect of the Community Reinvestment Act (CRA), a law mandating that banks help provide credit in lower-income neighborhoods, by exploiting a discontinuity in the selection rule determining which census tracts CRA targets. Using a comprehensive source of micro data on MSA mortgage applications, I find that CRA affects bank lending primarily in large MSA's, where banks are most scrutinized. The analysis indicates that CRA's effect on bank originations was about 4% between 1994 and 1996, and expanded to 8% in 1997-2002, consistent with the timing of a reform strengthening CRA. I provide some evidence that marginal loans go to atypical, potentially higher-risk borrowers. The results also indicate net "crowd-in": lending to targeted tracts by unregulated institutions rises in post-reform years, in particular to those areas that have had relatively low home purchase volume in the recent past, consistent with a model of information externalities in credit markets. Finally, using changes in tract eligibility status following the release of Census 2000 data as an additional source of variation, I find that CRA increased bank lending to newly targeted tracts in large MSA's by 4-5% in 2004 and 2005.

Can Audit Reforms Affect the Information Role of Audits? Evidence from the German Market

We investigate whether audit reforms affect the information role of audits in a country where the audit traditionally serves a statutory reporting function. Specifically, we investigate the audit market effects of audit reforms mandated by the German government in the Act on Control and Transparency of Enterprises. We test for differences in the types of audit reports issued, the information content of first time going-concern audit opinions, and the demand for dominant audit suppliers pre and post the implementation of the Act to draw inferences on whether the audit reforms enhanced the information role of German audits. We find an increase in the frequency of modified audit opinions after the audit objective changed from verifying assets in place to identifying and reporting concern uncertainties and non-compliant financial reporting practices. We also find an increase in the information content of first time going-concern audit reports issued after the audit reforms are implemented. In addition, the results also indicate an increase in the demand for dominant audit suppliers in the post-reform years. Moreover, we document a significant increase in the number of auditor lawsuits after the audit reforms went into effect. Collectively, our results suggest that the audit reforms improved the information role of German audits and that German firms responded to the improvement in audit reporting by increasing their demand for dominant audit suppliers.

A Decomposition of Total Productivity Growth: A Regional Analysis of Indian Industrial Manufacturing Growth

Total factor productivity (TFP) growth in industrial manufacturing is measured for 15 major Indian states for the period 1982-83 to 2000-01 using non-parametric linear programming methods. TFP growth is decomposed into efficiency and technological changes and also measure for the bias in technical change. The resulting information is used to examine whether the post-reform period shows any improvement in productivity and efficiency in comparison to the pre-reform one. Findings of the present exercise indicate the improvement in TFP. The recent change in TFP is governed by the technical progress in contrast to similar gain caused by the improvement in technical efficiency in the pre-reform regime. The technological progress in state manufacturing exhibited a capital using bias during the study period. Regional differences in TFP persist, although the magnitude of variation has declined in the post-reform period. Moreover, it is also found that there is a tendency of convergence in terms of TFP growth rate among Indian states during the post-reform years and only the states that were technically efficient at the beginning of the reform remain innovative.

Threshold Effects of Dismissal Protection Legislation in Germany

In this paper we use a reform in the applicability of the Protection Against Dismissal Act or Kundigungsschutzgesetz in Germany to identify employment effects of the legislation for small establishments. Using a panel of establishments for the period 1997-2001, we find some evidence that a tightening of the threshold resulted in a higher probability of persistence and a lower probability of growth for the units in the treatment group during the post-reform years. When using the establishment size as according to the legislation, the effects were the strongest for establishments which were further away from the threshold. This result could reflect the presence of other institutional barriers or adjustment costs than those imposed by the Act. Alternatively, small establishments are unlikely to have perfect information regarding the applicability of the legislation. This is somewhat supported by the results when taking all employees as the measure for the establishment size. However, there is also some evidence that these results are being driven by other factors than the reform of the legislation.

Reapportionment and Redistribution: Consequences of Electoral Reform in Japan

Does reapportionment in a legislature affect policy outcomes? We examine this question from a comparative perspective by focusing on reapportionment associated with the electoral reform in Japan. First, we show that the reform of 1994 resulted in an unprecedented degree of equalization in legislative representation. Second, using municipal-level data, we present evidence that municipalities in overrepresented districts received significantly more subsidies per capita, as compared to those in underrepresented districts, in both prereform and postreform years. Third, by examining the relationship between the change in the number of seats per capita and the change in the amount of subsidies per capita at the municipal level, we show that the equalization in voting strength resulted in an equalization of total transfers per person.

Reapportionment and Redistribution: Consequences of Electoral Reform in Japan

Does reapportionment in a legislature affect policy outcomes? We examine this question from a comparative perspective by focusing on reapportionment associated with the electoral reform in Japan. First, we show that the reform of 1994 resulted in an unprecedented degree of equalization in legislative representation. Second, using municipal‐level data, we present evidence that municipalities in overrepresented districts received significantly more subsidies per capita, as compared to those in underrepresented districts, in both prereform and postreform years. Third, by examining the relationship between the change in the number of seats per capita and the change in the amount of subsidies per capita at the municipal level, we show that the equalization in voting strength resulted in an equalization of total transfers per person.

Long-Run Money Demand and Inflation in China

This article reports on the stability of the long-run money demand functions for three definitions of money in China. Using annual data from 1951–1991, I have found that the long-run money demand functions using M0 and M2 exist and are stable throughout the sample period, which includes pre- and post-reform years. Further, it is found that the income elasticities of the real money demands for M0 and M2 are around 1.4–1.5 and 1.8–1.9. The results indicate that to control inflation under 10% in China, the targeted M2 growth rate should not exceed 28–29%.

The New Economic Policy and Permanent Migration in Zhejiang Province, China

"This article examines the impact of economic reforms on the volume and characteristics of permanent migration in Zhejiang Province, China. The data suggest that the new economic policy induced a surge in permanent migration during the post-reform years. Such positive impact of the reform on permanent migration has started to fade away in 1985, as government relaxed its control over residence. Moreover, market mechanisms started playing a more important role in employment, exchange, and consumption. The data also suggest that the new economic policy has particularly favored the better educated, and thereby increased educational differentials between permanent migrants and nonmigrants. For all other characteristics examined, the results show consistently that post-reform migrants are less differentiated from nonmigrants than their pre-reform counterparts." An earlier version of this paper was presented at the 1994 Annual Meeting of the Population Association of America.

Legislators, leaders, and lawmaking: the U.S. House of Representatives in the postreform era

Although Congress has never been popular, it has in recent years been the subject of particularly relentless and bitter criticism: gridlock is the central problem plaguing American government, say many, and Congress is to blame. According to Barbara Sinclair, the contemporary political environment has made legislating extraordinarily difficult. Huge deficits and, until 1993, deep policy differences between the president and congressional majorities have complicated already difficult choices. In this context, Sinclair asks, how has House not only performed its legislative functions but also managed to enhance its role in the American political system? In Legislators, Leaders, and Lawmaking Sinclair traces the emergence during the 1980s House majority party leadership that is highly active and deeply involved in multiple aspects of legislative process, but one that leads by means of a participatory and inclusive style. Drawing on extensive interviews with House members, staffs, and informed observers, she describes the changing role of the leadership from the prereform period, through the immediate post reform years, to the present. The reforms of the 1970s, Sinclair argues, combined with the constraints of the 1980s political environment to give effective leadership an importance in the legislative process unprecedented in the modem era. As a result, the book's focus on party leadership provides a vantage point for understanding the legislative process in the House and the major changes that process has undergone in the last several decades.

Sources of income inequality in post-reform China

The paper contains estimates of the distribution of household income and the sources of income inequality for rural and urban China and for China as a whole from data generated by a 1988 survey of 10,258 rural and 9,009 urban households. A comparison with estimates available for previous years shows that inequality in the distribution of rural income, after an initial improvement in the immediate post-reform years, has been increasing since 1983. By 1988 the distribution of income in rural China was about as unequal as that in rural India. Urban inequality, though far less than in any contemporary developing economy, has also increased since the beginning of reforms. From an analysis of the sources of income inequality the paper outlines some major policy reforms that would combine an improvement in the distribution of income with greater economic efficiency.

The microallocative impact of the Hungarian economic reform of 1968: Some evidence from the export sector

We have investigated the allocative efficiency of the Hungarian export sector in both pre-reform and post-reform years. The results indicate that, although misallocation due to bilateral currency constraints was reduced by the reform, the overall efficiency of the export sector declined significantly. While the failure of the reform in a single, although from the Hungarian viewpoint, critical sector of the economy is not direct evidence of the failure of the entire reform, it does indicate that successful reforms may be more difficult to achieve than either western or socialist economists have anticipated.