"Market failures are at the heart of why poor countries cannot get rich, and why poor people in wealthy countries do not become richer. The most crucial sort of market failures are those that plague credit and financial markets. Credit Markets for the Poor provides a rich introduction and overview of both the theory and evidence behind failing credit markets. It shows why credit markets may fail, why they actually do so, how this influences economic outcomes and people's life chances, and what can be done about it. The book will be indispensable reading for economists trying to understand the incidence and persistence of poverty within and between nations."
-JAMES A. ROBINSON, Harvard University

Access to credit is an important means of providing people with the opportunity to make a better life for themselves. Loans are essential for most people who want to purchase a home, start a business, pay for college, or weather a spell of unemployment. Yet many people in poor and minority communities—regardless of their creditworthiness—find credit hard to come by, making the climb out of poverty extremely difficult. How dire are the lending markets in these communities and what can be done to improve access to credit for disadvantaged groups? In Credit Markets for the Poor, editors Patrick Bolton and Howard Rosenthal and an expert team of economists, political scientists, and legal and business scholars tackle these questions with shrewd analysis and a wealth of empirical data.

Credit Markets for the Poor opens by examining what credit options are available to poor households. Economist John Caskey profiles how weak credit options force many working families into a disastrous cycle of short-term, high interest loans in order to sustain themselves between paychecks. Löic Sadoulet explores the reasons that community lending organizations, which have been so successful in developing countries, have failed in more advanced economies. He argues the obstacles that have inhibited community lending groups in industrialized countries—such as a lack of institutional credibility and the high cost of establishing lending networks—can be overcome if banks facilitate the community lending process and establish a system of repayment insurance. Credit Markets for the Poor also examines how legal institutions affect the ability of the poor to borrow. Daniela Fabbri and Mario Padula argue that well-meaning provisions making it more difficult for lenders to collect on defaulted loans are actually doing a disservice to the poor in credit markets. They find that in areas with lax legal enforcement of debt agreements, credit markets for the poor are underdeveloped because lenders are unwilling to take risks on issuing credit or will do so only at exorbitant interest rates. Timothy Bates looks at programs that facilitate small-business development and finds that they have done little to reduce poverty. He argues that subsidized business creation programs may lure inexperienced households into entrepreneurship in areas where little profitable investment is possible, hence setting them up for failure.

With clarity and insightful analysis, Credit Markets for the Poor demonstrates how weak credit markets are impeding the social and economic mobility of the needy. By detailing the many disadvantages that impoverished people face when seeking to borrow, this important new volume highlights a significant national problem and offers solutions for the future.

PATRICK BOLTON is John H. Scully ’66 Professor of Finance and professor of economics in the Bendheim Center for Finance at Princeton University.

HOWARD ROSENTHAL is Roger Williams Straus Professor of Social Sciences and professor of politics at Princeton University and visiting professor in the Department of Economics at Brown University.

CONTRIBUTORS: Raisa Bahchieva, Timothy Bates, Patrick Bolton, John P. Caskey, Daniela Fabbri, Robert Kaestner, Malgosia Madajewicz, Mario Padula, Howard Rosenthal, Loic Sadoulet, Lisa J. Servon, Robert M. Townsend, Susan M. Wachter, Antwuan Wallace, and Elizabeth Warren.

"Insufficient Funds is a comprehensive presentation of what is known about the asset holdings and use of financial services by low-income U.S. households, the factors that might influence their choices in this arena, and the potential for private- and public-sector initiatives to help the poor build wealth and obtain better financial services. All of the authors are top experts in their fields and the volume is well-written, balanced, and cohesive. Insufficient Funds is undoubtedly the best single source for readers seeking a well-informed, thoughtful treatment of the issues."
-JOHN P. CASKEY, Swarthmore College

"This thorough volume from leading scholars provides a textured portrait of the relationships low-income households maintain with formal and informal financial services. Ranging from the latest theory to comparative data analysis to policy innovation, Insufficient Funds is a must read for any scholar, student, or policymaker interested in credit, savings, or asset accumulation in their role as barriers to escaping poverty."
-DALTON CONLEY, New York University

One in four American adults doesn’t have a bank account. Low-income families lack access to many of the basic financial services middle-class families take for granted and are particularly susceptible to financial emergencies, unemployment, loss of a home, and uninsured medical problems. Insufficient Funds explores how institutional constraints and individual decisions combine to produce this striking disparity and recommends policies to help alleviate the problem.

Mainstream financial services are both less available and more expensive for low-income households. High fees, minimum-balance policies, and the relative scarcity of banks in poor neighborhoods are key factors. Michael Barr reports the results of an in-depth study of financial behavior in 1,000 low- and moderate-income families in metropolitan Detroit. He finds that most poor households have bank accounts, but combine use of mainstream services with alternative options such as money orders, pawnshops, and payday lenders. Barr suggests that a tax credit for banks serving primarily disadvantaged customers could facilitate greater equality in the private financial sector.

Drawing on evidence from behavioral economics, Sendhil Mullainathan and Eldar Shafir show that low-income individuals exhibit many of the same patterns and weaknesses in financial decision making as middle-class individuals and could benefit from many of the same financial aids. They argue that savings programs that automatically enroll participants and require them to actively opt out in order to leave the program could drastically increase savings ability. Ronald Mann demonstrates that significant changes in the credit market over the past fifteen years have allowed companies to expand credit to a larger share of low-income families. Mann calls for regulations on credit card companies that would require greater disclosure of actual interest rates and fees. Raphael Bostic and Kwan Lee find that while home ownership has risen dramatically over the past twenty years, elevated risks for low-income families—such as foreclosure—may well outweigh the benefits of owning a home.

The authors ultimately argue that if we want to demand financial responsibility from low-income households, we have an obligation to assure that these families have access to the banking, credit, and savings institutions that are readily available to higher-income families. Insufficient Funds highlights where and how access is blocked and shows how government policy and individual decisions could combine to eliminate many of these barriers in the future.

REBECCA M. BLANK is the Robert S. Kerr Senior Fellow at the Brookings Institution.

MICHAEL S. BARR is professor of law at the University of Michigan Law School.

CONTRIBUTORS: Raphael W. Bostic, Daryl Collins, Kwan Ok Lee, Ronald J. Mann, Jonathan Morduch, Sendhil Mullainathan, Una Okonkwo Osili, Anna L. Paulson, Daniel Schneider, John Karl Scholz, Ananth Seshadri, Eldar Shafir, Michael Sherraden, Peter Tufano.

A Volume in the National Poverty Center Series on Poverty and Public Policy

As social action programs in health, education, and welfare have expanded, interest has grown in evaluating their implementation and effectiveness. Policymakers and social planners--at all levels of government and in the private sector--are currently confronted with the problem of evaluating the large number of human service programs that compete for available resources.

Academic and Entrepreneurial Research presents a systematic study of the expenditure of federal funds for evaluation research. It reviews federally-supported evaluations of programs, including evaluations of social change experiments and research-demonstration programs funded by the various executive departments of the federal government. Evaluation studies of these large-scale programs vary in scope, quality, and potential utility. Bernstein and Freeman examine all projects initiated during fiscal year 1970 in order to understand better the methods employed, the types of persons engaged in such research, and expectations regarding the utilization of findings.

The book provides data about "high" and "low" quality evaluation research and contains recommendations for restructuring the entire evaluation research enterprise in light of the findings.

ILENE NAGEL BERNSTEIN is assistant professor of sociology at Indiana University.

HOWARD E. FREEMAN is director of the Institute for Social Science Research and professor of sociology at the University of California, Los Angeles.

During the 1970s, a nationwide school finance reform movement—fueled by litigation challenging the constitutionality of state education funding laws—brought significant changes to the way many states finance their public elementary and secondary school systems. School finance reform poses difficult philosophical questions: what is the meaning of equality in educational opportunity and of equity in the distribution of tax burdens? But it also involves enormous financial complexity (for example, dividing resources among competing special programs) and political risk (such as balancing local control with the need for statewide parity).

For those states (like New York) that were slow to make changes a new decade has brought new constraints and complications. Sluggish economic growth, taxpayer revolts, reductions in federal aid, all affect education revenues. And the current concern with educational excellence may obscure the needs of the poor and educationally disadvantaged.

This book will provide New York’s policy makers and other concerned specialists with a better understanding of the political, economic, and equity issues underlying the school finance reform debate. It details existing inequities, evaluates current financing formulas, and presents options for change. Most important, for all those concerned with education and public policy in New York and elsewhere, it offers a masterful assessment of the trade-offs involved in developing reform programs that balance the conflicting demands of resource equalization, political feasibility, and fiscal responsibility.

"Synthesizes the political and fiscal research [on school finance reform] and applies it to the New York Context....A blueprint for how to redesign state school finance....A fine book." —Public Administration Review

"This is a book that lucidly discusses the issues in school finance and provides valuable reference material." —American Political Science Review

The late JOEL S. BERKE was director of the Education Policy Research Institute of Educational Testing
Service.

MARGARET E. GOERTZ is policy research scientist at Educational Testing Service.

RICHARD COLEY is research associate at Educational Testing Service.

"The Silicon Valley is seen as the exemplar of the new economy and Milwaukee represents the old. Yet are these labor markets truly different and if so in what ways? Staircases or Treadmills? takes on the challenge of answering this question and does so with a focus on those outside the relatively small elite who have prospered in the past decades. The original fieldwork and survey research reported in this important book adds to our knowledge of the role of institutions and personal networks in shaping outcomes. This is empirical research at its best."
-PAUL OSTERMAN, MIT Sloan School

"Staircases or Treadmills? is a carefully-researched, well-argued, important book. As more and more people turn to a variety of private and public organizations to help them find new or better jobs, the authors' deep understanding of intermediary types, market niches, and outcomes is a significant contribution. Some findings are surprising; all will be useful to researchers, activists, and policymakers concerned about how best to help low-income workers advance."
-RICHARD KAZIS, Jobs for the Future

"Staircases or Treadmills? presents a rich and detailed portrait of the workforce-intermediary landscape in two specific regional labor markets. It offers a useful framework for analyzing the services of workforce intermediaries that covers a wide range of organizational types. The book illuminates the growing influence of a range of organizations that play a role in mediating the hiring process in these two labor markets, and how these organizations have in turn influenced the labor-market prospects and outcomes of low- wage workers. This picture of the tremendous fragmentation, variability of service provision, and uneven quality among workforce-intermediary service providers illustrates the challenge that workers and employers face. Staircases or Treadmills? is essential reading for anyone interested in improving labor-market functioning and facilitating improved outcomes for low-income workers."
-MAUREEN CONWAY, The Aspen Institute

Globalization, technological change, and deregulation have made the American marketplace increasingly competitive in recent decades, but for many workers this “new economy” has entailed heightened job insecurity, lower wages, and scarcer benefits. As the job market has grown more volatile, a variety of labor market intermediaries—organizations that help job seekers find employment—have sprung up, from private temporary agencies to government “One-Stop Career Centers.” In Staircases or Treadmills? Chris Benner, Laura Leete, and Manuel Pastor investigate what approaches are most effective in helping workers to secure jobs with decent wages and benefits, and they provide specific policy recommendations for how job-matching organizations can better serve disadvantaged workers.

Staircases or Treadmills? is the first comprehensive study documenting the prevalence of all types of labor market intermediaries and investigating how these intermediaries affect workers’ employment opportunities. Benner, Leete, and Pastor draw on years of research in two distinct regional labor markets—“old economy” Milwaukee and “new economy” Silicon Valley—including a first-of-its-kind random survey of the prevalence and impacts of intermediaries, and a wide range of interviews with intermediary agencies’ staff and clients. One of the main obstacles that disadvantaged workers face is that social networks of families and friends are less effective in connecting job-seekers to stable, quality employment. Intermediaries often serve as a substitute method for finding a job.  Which substitute is chosen, however, matters: The authors find that the most effective organizations—including many unions, community colleges, and local non-profits—actively foster contacts between workers and employers, tend to make long-term investments in training for career development, and seek to transform as well as satisfy market demands. But without effective social networks to help workers locate the best intermediaries, most rely on private temporary agencies and other organizations that offer fewer services and, statistical analysis shows, often channel their participants into jobs with low wages and few benefits. Staircases or Treadmills? suggests that, to become more effective, intermediary organizations of all types need to focus more on training workers, teaching networking skills, and fostering contact between workers and employers in the same industries.

A generation ago, rising living standards were broadly distributed and coupled with relatively secure employment. Today, many Americans fear that heightened job insecurity is overshadowing the benefits of dynamic economic growth. Staircases or Treadmills? is a stimulating guide to how private and public job-matching institutions can empower disadvantaged workers to share in economic progress.

CHRIS BENNER is assistant professor of urban and economic geography at Pennsylvania State University.

LAURA LEETE is the Fred H. Paulus Director of Public Policy Research and associate professor of economics and public policy at Willamette University.

MANUEL PASTOR is a professor of geography and American Studies and ethnicity at the University of Southern California.

Over the past eight years, a marked shift in the national political mood has substantially reduced the federal government's involvement in ameliorating urban problems and enhanced the prominence of state and local governments in the domestic policy arena. Many states and big cities have been forced to reassess their traditionally vexed relationships.

Nowhere has this drama been played out more stormily than in New York. In The Two New Yorks, experts from government, the academy, and the non-profit sector examine aspects of an interaction that has a major impact on the performance of state and city institutions. The analyses presented here explore current state-city strategies for handling such troubling policy areas as education, health care, and housing. Attention is also given to important contextual factors such as economic and demographic trends, and to structural features such as the political framework, relationships with the national government, and the system of public finance.

Despite its uniquely large scope, the drama of the new New Yorks parallels or presages issues faced by virtually all large cities and their states. This unprecedented study makes a vital contribution in an era of declining federal aid and pressing urban need.

GERALD BENJAMIN is at SUNY New Paltz.

CHARLES BRECHER is at New York University.

CONTRIBUTORS: Richard D. Alba, Mary Jo Bane, Gerald Benjamin, Robert Berne, Susan Blamk, Barbara B. Blum, Matthew Drennan, Barbara Gordon Espejo, Ester Fuchs, Cynthia B. Green, James M. Hartman, Raymond D. Horton, Sarah F. Liebschutz, David Lewin, Irene Lurie, Paul D. Moore, James C. Musselwhite Jr., Martin Shefter, Kenneth E. Thorpe, Emanuel Tobier, Katherine Trent, 

Concerns itself with the future of sociology, and of all social science. The thirteen authors—among them Wendell Bell, Kai T. Erikson, Scott Greer, Robert Boguslaw, James Mau, and Ivar Oxaal—are oriented toward a redefinition of the role of the social scientist as advisor to policymakers and administrators in all major areas of social concern, for the purpose of studying and shaping the future. This book contains research strategies for such "futurologistic" study, theories on its merits and dangers, as well as an annotated bibliography of social science studies of the future.

WENDELL BELL is professor of sociology at Yale University.

JAMES A. MAU is associate professor of sociology and associate dean of the Graduate School at Yale University.

CONTRIBUTORS: J. Victor Baldridge, Pauline B. Bart, Robert Boguslaw, Menno Boldt, William R. Burch Jr., Kai T. Erikson, Scorr Greer, Paul Hollander, Bettina J. Huber, Ivar Oxall, Henry Winthrop.

Does social science influence social policy? This is a topic of perennial concern among students of politics, the economy, and other social institutions. In Effective Social Science, eight prominent social researchers offer first-hand descriptions of the impact of their work on government and corporate policy.

In their own words, these noted political scientists, economists, and sociologists—among them such influential scholars as James Coleman, Joseph Pechman, and Eliz Ginzberg—tell us what it was like to become involved in the making of social policy. These rich personal narratives, derived from detailed interviews conducted by Bernard Barber (himself a veteran of the biomedical poliy arena), illuminate the role of social science in diverse areas, including school desegregation, comprehensive income taxation, military manpower utilization, transportation deregulation, and the protection of privacy.

The patterns traced in this volume indicate that social science can influence policy, but only as part of a pluralistic, political process; effective social research requires advocacy as well as a conducive social and idealogical climate. For anyone curious about the relationship between social knowledge and social action, this book provides striking illustration and fruitful analysis.

BERNARD BARBER is professor at Barnard College and the Graduate faculties at Columbia University.

A recent Supreme Court decision confirmed the churches' right to tax exemption for religious property. In this highly relevant book, Alfred Balk places this question in social perspective and demonstrates how tax exemption and immunity affect the fiscal load of local communities and the well-being of our whole society. Among the "free list" or tax-free properties which the author examines are churches, hospitals, schools, and government buildings. Seven specific proposals for reform are set forth.

ALFRED BALK is visiting editor of the Columbia Journalism Review and an Editor-at-Large of Saturday Review. He has written more than a hundred articles for national magazines, including Harper’s, Saturday Review, Saturday Evening Post, New York Times Magazine, Reader’s Digest, This Week, The Nation, McCall’s, and The Reporter. He also is the author of The Religion Business (John Knox, 1968), and a contributor to a number of anthologies.

Over the last forty years, rising national income has helped reduce poverty rates, but this has been accompanied by an increase in economic inequality. While these trends are largely attributed to technological change and demographic shifts, such as changing birth rates, labor force patterns, and immigration, public policies have also exerted a profound affect on the welfare of Americans. In Public Policy and the Income Distribution, editors Alan Auerbach, David Card, and John Quigley assemble a distinguished roster of policy analysts to confront the key questions about the role of government policy in altering the level and distribution of economic well being.

Public Policy and the Income Distribution tackles many of the most difficult and intriguing questions about how government intervention—or lack thereof—has affected the incomes of everyday Americans. Rebecca Blank analyzes welfare reform, and presents systematic research on income, poverty rates, and welfare and labor force participation of single mothers. She finds that single mothers worked more and were less dependent on public assistance following welfare reform, and that low-skilled single mothers had no greater difficulty finding work than others. Timothy Smeeding compares poverty reduction programs in the United States with policies in other developed countries. Poverty and inequality are higher in the United States than in other advanced economies, but Smeeding argues that this is largely a result of policy choices. Poverty rates based on market incomes alone are actually lower in the United States than elsewhere, but government interventions in the United States were less than half as effective at reducing poverty as were programs in the other countries. The most dramatic poverty reduction story of twentieth century America was seen among the elderly, who went from being the age group most likely to live in poverty in the 1960s to the group least likely to be poor at the end of the century. Gary Englehardt and Jonathan Gruber examine the role of policy in alleviating old-age poverty by estimating the impact of Social Security benefits on the income of the elderly poor. They find that the growth in Social Security almost completely explains the large decline in elderly poverty in the United States.

The twentieth century was remarkable in the extent to which advances in public policy helped improve the economic well being of Americans. Synthesizing existing knowledge on the effectiveness of public policy and contributing valuable new research,Public Policy and the Income Distribution examines public policy's successes, and points out the areas in which progress remains to be made.

ALAN J. AUERBACH is Robert D. Burch Professor of Economics and Law at the University of California, Berkeley.

DAVID CARD is Class of 1950 Professor of Economics at the University of California, Berkeley.

JOHN M. QUIGLEY is I. Donald Terner Distinguished Professor and professor of economics at the University of California, Berkeley.

CONTRIBUTORS: Rebecca M. Blank,  Dora L. Costa,  Janet Currie,  Gary V. Engelhardt,  Jonathan Gruber,  Matthew E. Kahn, Steven Raphael,  Emmanuel Saez,  Jonathan Skinner,  Timothy M. Smeeding,  Weiping Zhou.