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

Guinnane, Timothy

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

No 97-20, Discussion Papers from University of Copenhagen. Department of Economics

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.

Keywords: rural development; credit cooperatives (search for similar items in EconPapers)
JEL-codes: N3 (search for similar items in EconPapers)
Pages: 35 pages
Date: 1997-12
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Published in: Journal of Economic History 61(2) 2001, 366-389

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Journal Article: COOPERATIVES AS INFORMATION MACHINES: GERMAN RURAL CREDIT COOPERATIVES, 1883–1914 (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:9720

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