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


  • Timothy W. Guinnane

    (Yale University)


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.

Suggested Citation

  • Timothy W. Guinnane, 1997. "Cooperatives as Information Machines: German Rural Credit Cooperatives, 1883-1914," Discussion Papers 97-20, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:9720

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    rural development; credit cooperatives;

    JEL classification:

    • N3 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy


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