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Cooperatives as Information Machines: German Rural Credit Cooperatives, 1883-1914

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  • Timothy W. Guinnane

    (Yale University)

Abstract

Credit cooperatives are common institutions today and were numerous in several European countries during the nineteenth century. Credit cooperatives were especially successful in Germany, which is surprising given Germany's highly developed banking system. Why was there any room for another financial institution? One explanation offered by modern economists for the success of credit cooperatives emphasizes two features of cooperatives: they can capitalize on superior information about borrowers and they can impose inexpensive but effective sanctions on defaulting borrowers. These features permit cooperatives to lend to individuals that banks would not want as customers and to tailor loan terms more closely to borrower's needs. German cooperators made similar arguments about the efficiency advantages of cooperatives in the nineteenth century. This paper uses the historical business records of several German credit cooperatives to test this. The results show that a real efficiency advantage was at least part of the explanation for the cooperatives' success.

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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 97-20.

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Length: 35 pages
Date of creation: Dec 1997
Date of revision:
Publication status: Published in: Journal of Economic History 61(2) 2001, 366-389
Handle: RePEc:kud:kuiedp:9720

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Keywords: rural development; credit cooperatives;

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Cited by:
  1. Ángel Pascual Martínez Soto & Susana Martínez Rodríguez, . "The difficult and tortuous path of agricultural cooperative networks in Spain, 1890-1935," UHE Working papers 2006_12, Universitat Autònoma de Barcelona, Departament d'Economia i Història Econòmica, Unitat d'Història Econòmica.
  2. Susana Martínez Rodríguez & Ángel Pascual Martínez Soto, 2008. "El Raiffesianismo español: cooperativismo agrícola confesional de crédito en España 1890-1934," UHE Working papers 2008_01, Universitat Autònoma de Barcelona, Departament d'Economia i Història Econòmica, Unitat d'Història Econòmica.
  3. Timothy W. Guinnane & Jochen Streb, 2009. "Moral hazard in a mutual health-insurance system: German Knappschaften, 1867-1914," Working Papers, Economic Growth Center, Yale University 978, Economic Growth Center, Yale University.
  4. Ingrid Groessl & Rolf von Luede & Jan Fleck, 2013. "Genesis and Persistence of Trust in Banks," Macroeconomics and Finance Series, Hamburg University, Department Wirtschaft und Politik 201307, Hamburg University, Department Wirtschaft und Politik.
  5. Timothy Guinnane & Susana Martinez-Rodriguez, 2010. "Did the Cooperative Start Life as a Joint-Stock Company? Business Law and Cooperatives in Spain, 1869-1931," Working Papers, Economic Growth Center, Yale University 987, Economic Growth Center, Yale University.
  6. Cull, Robert & Xu, Lixin Colin & Yang, Xi & Zhou, Li-An & Zhu, Tian, 2013. "Market facilitation by local government and firm efficiency : evidence from China," Policy Research Working Paper Series 6688, The World Bank.
  7. Simon Cornée, 2014. "Soft Information and Default Prediction in Cooperative and Social Banks," Economics Working Paper Archive (University of Rennes 1 & University of Caen), Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS 201402, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  8. Avner Greif, 2006. "History Lessons: The Birth of Impersonal Exchange: The Community Responsibility System and Impartial Justice," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 20(2), pages 221-236, Spring.
  9. Cusack, Thomas R. & Iversen, Torben & Soskice, David, 2007. "Economic interests and the origins of electoral systems," Discussion Papers, Research Unit: Institutions, States, Markets, Social Science Research Center Berlin (WZB) SP II 2007-07, Social Science Research Center Berlin (WZB).
  10. Ran Abramitzky, 2011. "Lessons from the Kibbutz on the Equality-Incentives Trade-Off," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 25(1), pages 185-208, Winter.
  11. Zawojska, Aldona & Siudek, Tomasz, 2005. "Do Cooperative Banks Really Serve Agricultural Sector in Poland?," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark, European Association of Agricultural Economists 24479, European Association of Agricultural Economists.
  12. Anaïs A Périlleux, 2010. "Maturity Mismatch and Governance of Microfinance Cooperatives: Lessons from History," Working Papers CEB, ULB -- Universite Libre de Bruxelles 10-005.RS, ULB -- Universite Libre de Bruxelles.
  13. Robert Cull & Lance E. Davis & Naomi R. Lamoreaux & Jean-Laurent Rosenthal, 2005. "Historical Financing of Small- and Medium-Sized Enterprises," NBER Working Papers 11695, National Bureau of Economic Research, Inc.
  14. Timothy Guinnane, 2001. "Delegated Monitors, Large and Small: The Development of Germany’s Banking System, 1800-1914," CESifo Working Paper Series 565, CESifo Group Munich.
  15. Timothy W. Guinnane, 2001. "Delegated Monitors, Large and Small: The Development of Germany's Banking System, 1800-1914," Working Papers, Economic Growth Center, Yale University 835, Economic Growth Center, Yale University.
  16. Derek C. Jones & Panu Kalmi, 2012. "Economies of Scale Versus Participation: a Co-operative Dilemma?," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, European Research Institute on Cooperative and Social Enterprises, vol. 1(1), pages 37-64, December.

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