Using an original database of rating agencies, this paper gives empirical evidence on the impact of subsidy intensity on the efficiency of Microfinance Institutions (MFIs). We find that subsidies have had a positive impact on efficiency, in the sense that MFIs that received subsidies are more efficient than those that do not. However, we find also that subsidization beyond a certain threshold renders the marginal effect on efficiency negative. In our sample, 26% of MFIs receive levels of subsidization higher than that threshold, which implies that a marginal cut on subsidy intensity would increase their efficiency. JEL G30, G32, J23

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We analyze the impact of corruption on bilateral trade, highlighting its dual role in terms of extortion and evasion. Corruption taxes trade, when corrupt customs officials in the importing country extort bribes from exporters (extortion effect); however, with high tariffs, corruption may be trade enhancing when corrupt officials allow exporters to evade tariff barriers (evasion effect). We derive and estimate a corruption-augmented gravity model, where the effect of corruption on trade flows is ambiguous and contingent on tariffs. Empirically, corruption taxes trade in the majority of cases, but in high-tariff environments (covering 5% to 14% of the observations) their marginal effect is trade enhancing. (c) 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

This paper addresses the link between trade exposure and wage volatility. First, it shows, in a simple model, that trade exposure magnifies the impact of domestic productivity shocks on industry-specific labor demand, particularly for the less export-intensive industries, and that, if labor is not perfectly mobile, this implies a rise in wage volatility. Then, it tests these predictions, using industry data. The empirical results confirm that wage volatility increases with an industry's degree of openness, and that it declines with an increase in the industry's export intensity. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.