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

Author

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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.

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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    Citations

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    Cited by:

    1. Zawojska, Aldona & Siudek, Tomasz, 2005. "Do Cooperative Banks Really Serve Agricultural Sector in Poland?," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24479, European Association of Agricultural Economists.
    2. Simon Cornée, 2014. "Soft Information and Default Prediction in Cooperative and Social Banks," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 3(1), pages 89-103, June.
    3. Guinnane, Timothy W. & Martinez-Rodriguez, Susana, 2010. "Did the Cooperative Start Life as a Joint-Stock Company? Business Law and Cooperatives in Spain, 1869-1931," Center Discussion Papers 90880, Yale University, Economic Growth Center.
    4. Timothy W. Guinnane, 2001. "Delegated Monitors, Large and Small: The Development of Germany's Banking System, 1800-1914," Working Papers 835, Economic Growth Center, Yale University.
    5. 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.
    6. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
    7. Cull, Robert & Davis, Lance E. & Lamoreaux, Naomi R. & Rosenthal, Jean-Laurent, 2006. "Historical financing of small- and medium-size enterprises," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 3017-3042, November.
    8. Galassi, Francesco L., 2000. "Measuring Social Capital: Culture as an Explanation of Italy’s Economic Dualism," Economic Research Papers 269304, University of Warwick - Department of Economics.
    9. Anaïs A Périlleux, 2010. "Maturity Mismatch and Governance of Microfinance Cooperatives: Lessons from History," Working Papers CEB 10-005.RS, ULB -- Universite Libre de Bruxelles.
    10. Cusack, Thomas R. & Iversen, Torben & Soskice, David, 2007. "Economic interests and the origins of electoral systems," Discussion Papers, Research Unit: Institutions, States, Markets SP II 2007-07, WZB Berlin Social Science Center.
    11. Avner Greif, 2006. "History Lessons: The Birth of Impersonal Exchange: The Community Responsibility System and Impartial Justice," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 221-236, Spring.

    More about this item

    Keywords

    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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