The differentiation between convergence and conditional convergence is extremely useful for understanding the economic progress of immigrants. As in the cross-country studies in the economic growth literature, the raw data reveal a positive correlation between the log entry wage of immigrants and the subsequent rate of wage growth. Furthermore, the same source country characteristics that lead to high entry wages tend to lead to faster wage growth. This positive correlation between entry wages and wage growth, however, turns negative when one compares immigrant groups who start out with similar human capital endowments. The empirical evidence, therefore, indicates that even though immigrant groups with the same level of human capital will have similar earnings over the long haul, the sizable wage differentials observed among the various immigrant groups at the time of entry may well diverge over time.
It turns out that there are also sizable differences in the rate of wage growth experienced by the different national origin groups in the United States (Boijas, 1995; Duleep and Regets, 1997a, 1997b; Schoeni, McCarthy, and Vemez, 1996; and Yuengert, 1994). Therefore, it is important to determine if the rate of wage convergence exhibits cohort effects: do the most recent immigrant cohorts experience either faster or slower wage growth than earlier cohorts? The existing evidence however, does not settle this issue conclusively. Duleep and Regets (1997b) argue that more recent waves, who have lower entry wages, will experience faster wage growth in the future, while Boijas (1995) and Schoeni, McCarthy, and Vemez (1996) do not find any evidence of cohort effects in the rate of wage growth.
This paper presents a theoretical and empirical study of the rate of economic progress experienced by immigrants. The study uses a human capital framework to motivate and guide the analysis. There seems to be some confusion about whether human capital theory implies wage convergence among the various immigrant groups, in the sense that immigrants who have high wages at the time of entry should experience slower subsequent wage growth. I show that a reasonable set of assumptions can easily generate investment behavior in the immigrant population that leads to wage divergence among groups, with the most skilled groups earning more at the time of entry and experiencing faster wage growth.
The economic impact of immigration depends both on how immigrants perform in the United States when they first enter the country, as well as on their long-run economic prospects. Beginning with Chiswick’s (1978) pioneering work, this dual concern has guided much of the empirical research in the economics of immigration. The literature has typically found that immigrants earn less than natives at the time of entry (with the entry wage disadvantage being larger for more recent cohorts), and that the wage gap between immigrants and natives narrows over time as immigrants “assimilate” in the United States. Many studies conclude that the rate of wage convergence between immigrants and natives is not very large, so that the most recent immigrant waves will probably suffer from a substantial wage disadvantage for much of their working lives.
The paper examines some of instances that make MFIs generate ‘bad money’ and the rationale behind using ‘good money’ to chase ‘bad money’. Data for the study is obtained by interviewing CEOs and credit officers of selected MFIs. An examination of MFIs loan books is done to confirm information provided by the interviewees. The paper concludes that the use of ‘good money’ for chasing ‘bad money’ is unprofitable and contaminates the entire portfolio of MFIs. Again, improper screening of loan applications also contributes to loan default. It is also concluded that management and board involvement in loan disbursement has serious negative implications for loan repayment and recovery. This can contribute to high level of non-performing loans (NPLs) on the balance sheet of MFIs.
Even though loan officers are supposed to be independent, are they allowed to be seen so? They might be independent in theory but not in practice. In almost all the MFIs there is board involvement in loan processes apart from the usual board meetings to discuss the approval or otherwise of certain loan thresholds. Two institutions believe that there is somehow board involvement. In the same way, four institutions indicate that management influence is common in loan processes where in some cases there is some level of partial involvement (somehow) by management personnel. In almost all the institutions loan officers seem to be independent but their independence is undermined by board and management involvement.
In almost all the MFIs interviewed, there is no code of ethics for directors and managers with regards to loans. We are not sure if such a document exists elsewhere but ideally there should be such a document to guide the board and management on loans. This probably has given chance to some board members and CEOs to do what they are not supposed to do creating serious conflict of interest.