does opening a stock exchange increase economic growth we examine the connection between the creation of stock exchanges and economic growth with a new set of data on economic growth that spans a longer time period than generally available we find that economic growth increases relative to the rest of the world after a stock exchange opens our evidence indicates that increased growth of productivity is the primary way that a stock exchange increases the growth rate of output rather than an increase in the growth rate of physical capital we also find that financial deepening is rapid before the creation of a stock exchange and slower subsequently

absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth abstract this study examines the effects of foreign direct investment fdi and equity foreign portfolio investment efpi on economic growth using data on 80 countries from 1979 through 1998 the results largely suggest that lagged fdi and efpi do not have direct unmitigated positive effects on growth but some data are consistent with the view that the effects of fdi and efpi are contingent on the absorptive capacity of host countries with particular respect to financial or institutional development moreover extreme bound analysis eba of significant results indicates that the estimates are robust compared to other empirical studies on growth

environmental policy and international trade when governments and producers act strategically some environmentalists express concern that trade liberalization may damage the environment by giving governments incentives to relax environmental policies to give domestic producers a competitive advantage support for such concern may be given by models of imperfectly competitive trade where there may be rent shifting incentives for governments to relax environmental policies but there are also incentives for producers to act strategically e g through their investment in rd ii allowing governments to act strategically increases the incentive for producers to act strategically iii welfare is lower when both parties act strategically and iv strategic behavior by producers and governments is greater when governments use emission taxes than when they use emission standards

investor protection and equity markets we present a simple model of an entrepreneur going public in an environment with poor legal protection of outside shareholders the model incorporates elements of becker s j political econ 106 1968 172 crime and punishment framework into a corporate finance environment of jensen and meckling j financial econ 3 1976 305 we examine the entrepreneur s decision and the market equilibrium the model is consistent with a number of empirical regularities concerning the relation between investor protection and corporate finance it also sheds light on the patterns of capital flows between rich and poor countries and on the politics of reform of investor protection r 2002 elsevier science b v all rights reserved

capital flows and gdp in emerging economies and the role of global spillovers abstract this paper provides a global analysis of capital flow impacts on gdp for selected emerging economies as additional control variables we also include currency reserves and effective exchange rates in our analysis we distinguish between gross and net capital flows and also assess the impact of both fdi and portfolio flows accounting for the fact that common factors have been the main drivers of capital flows while country specific determinants pull factors drive the response to such shocks we analyze shocks to country groups but consider country specific responses based on a bayesian time varying panel var framework in the spirit of canova and ciccarelli 2009 based on a sample of 24 economies our results show a robust positive effect of capital flows on gdp except for korea both gross and net capital flows display a positive impact for around two quarters the impact of effective exchange rates on gdp hardly offers an explanation for a possible transmission of capital flow effects with effective depreciations both positively and negatively linked to gdp we also find that the effect of net portfolio flows is even more positive compared to net fdi flows for emerging economies finally we provide evidence that the importance of global factors increases in times of crises

equilibrium pollution taxes in open economies with imperfect competition abstract this paper argues that imperfect competition in global markets creates a strategic interaction between governments that can lead to the inefficient distortion of pollution taxes this distortion can be decomposed into a rent capture effect and a pollution shifting effect the rent capture effect lowers equilibrium taxes as each country attempts to gain a competitive advantage over its trading partner and thereby capture foreign rent through net exports the pollution shifting effect raises equilibrium taxes as each country attempts to transfer production and its associated pollution to the other country this effect vanishes if pollution is perfectly transboundary because shifted pollution causes as much damage to the domestic environment as does domestic pollution the net effect on symmetric equilibrium taxes is negative except in the special case of perfect competition with no transboundary pollution in this case the two effects are mutually offsetting and the nash equilibrium is efficient when pollution is at least partially transboundary there also arises the usual transboundary externality and this reinforces the negative net strategic effect giving rise to equilibrium taxes that are lower than what is globally efficient

environmental policy with endogenous plant locations in a game between the governments of two countries each chooses its own environmental policy the nash equilibria of the game are generally not pareto optimal on the one hand each country may want to attract industry giving it an incentive to choose low environmental taxes or standards on the other hand if disutility from pollution is sufficiently high each country might prefer that a firm locates only in other countries this effect tends to make the environmental policy under non cooperation stricter than it would be with cooperation

endogenous timing in duopoly games stackelberg or cournot equilibria abstract simultaneous versus sequential play is studied in an extended game in a preplay stage players decide whether to select actions in the basic game at the first opportunity or to wait until observing their rivals first period actions in one extended game players first decide when to select actions without committing to actions in the basic game the equilibrium has a simultaneous play subgame unless payoffs in a sequential play subgame pareto dominate those payoffs in another extended game deciding to select at the first turn requires committing to an action both sequential play outcomes are the equilibria only in undominated strategies

does environmental dumping lead to delocation environmental dumping is often viewed as an instrument used by some countries in the attempt to attract foreign investments stated otherwise the delocation of firms would be a major outcome of a stiff environmental policy in this paper we study the impact of a strict anti pollution policy pursued by a government on domestic firms locational decisions and determine the main variables that interact with such a policy some preliminary welfare implications are also provided

capital account liberalization what do cross country studies tell us capital account liberalization it is fair to say remains one of the most controversial and least understood policies of our day one reason is that different theoretical perspectives have very different implications for the desirability of liberalizing capital flows another is that empirical analysis has failed to yield conclusive results the answer another influential strand of thought contends is that this efficient markets paradigm is fundamentally misleading when applied to capital flows limits on capital movements are a distortion it is an implication of the theory of the second best that removing one distortion need not be welfare enhancing when other distortions are present

von stackelberg and cournot duopoly choosing roles under what circumstances will firms agree on the choice of roles of leader and follower in the von stackelberg duopoly model a key determinant is the slope of the firms reaction function in either price or quantity space the duopolists will disagree over the choice of roles if they have downward sloping reaction functions each will prefer to be the leader they will also disagree if they have upward sloping reaction functions and similar profit functions each will prefer that the other be the leader preferences between von stackelberg and cournot outcomes are also considered

the legal environment banks and long run economic growth this paper examines the relationship between the legal system and banlding development and traces this connection through to long run rates of per capita gdp growth capital stock growth and productivity growth the data indicate that countries where the legal system 1 emphasizes creditor rights and 2 rigorously enforces contracts have better developed banks than countries where laws do not give a high priority to creditors and where enforcement is lax furtherrnore the exogenous component of banking development the component defined by the legal environment is positively and robustly associated with per capita growth physical capital accumulation and productivity growth this paper addresses two questions first do crosscountry differences in the legal rights of creditors the efficiency of contract enforcement and the origin of the legal system explain cross country differences in the level of banking development second do better developed banks cause faster economic development that is is the component of banking development defined by the legal environment positively associated with long run rates of economic growth capital accumulation and productivity growth examining the relationship between the legal system and banking development is valuable irrespective of issues associated with long run growth first banks may influence the level of income per capita and the magnitude of cyclical fluctuations bernanke and gertler 1989 1990 second many economists stress that understanding the evolution of legal and financial systems is essential for understanding economic development north 1981 engerman and sokoloff 1996 consequently quantitative information on the relationship between the legal environment and banks will improve our understanding of business cycles and the process of economic development furthermore examining the causal links between banks and economic growth has both conceptual and policy implications on the conceptual front a long literature debates the importance of banks in economic development starting as early as bagehot 1873 economists have argued that better banks banks that are better at identifying creditworthy firms mobilizing savings pooling risks and facilitating transactions

a new database on the structure and development of the financial sector this article introduces a new database of indicators of financial structure and financial development across countries and over time the database is unique in that it combines a wide variety of indicators that measure the size activity and efficiency of financial intermediaries and markets it improves on previous efforts by presenting data on the public share of commercial banks introducing indicators of the size and activity of nonbank financial institutions and constructing measures of the size of bond and primary equity markets this article introduces a new database the first to provide comprehensive measures of the development structure and performance of the financial sector this database is the first to define and construct indicators of the size and activity of nonbank financial intermediaries such as insurance companies pension funds and non deposit money banks it is also the first to include indicators of the size of primary equity markets and primary and secondary bond markets in constructing the database authors carefully deflate measures and match stock and flow variables

environmental taxes and first mover advantages this paper studies whether governments prefer to be leaders or followers in environmental policies to analyze this question i assume transboundary pollution and two countries that have to decide whether to set environmental taxes sequentially or simultaneously when taxes are set sequentially an effect denoted as the sequential setting effect arises that raises the equilibrium taxes i show that whether governments prefer to be leaders or followers in taxes depends on the degree to which environmental pollution spills over to trading partners when this overspill is low enough taxes are strategic complements and both the leader and the follower obtain greater welfare than under a simultaneous tax setting however the leader country obtains greater welfare than the follower in this case governments set taxes sequentially when the degree to which environmental pollution spills over to trading partners is high enough taxes are strategic substitutes and governments set taxes simultaneously in this case each government wants to avoid becoming the follower in taxes

self selection and the earnings of immigrants comment in a recent article in this review borias 1987 george borjas uses a standard model of self selection to demonstrate that immigrants in the united states may not necessarily be positively selected as is commonly assumed borjas empirical results based on u s census micro data merged with country of origin characteristics for 41 sending countries however do not provide clear or consistent results with respect to the immigration selection issue although they do confirm earlier findings that the characteristics of the countries of origin of u s immigrants explain a substantial proportion of the differences in their economic status jasso and rosenzweig 1986b the purpose of this note is to show that borjas results are themselves subject to biases due to additional processes of self selection in particular his inconclusive findings with respect to immigration selectivity arise from the use of a choice based sample enlargement of his highly selective sample of countries based on the number of foreign born in the united states yields results that appear to conform much more closely and consistently to conventional wisdom namely that the united states appears to attract those persons with above average skills we also provide evidence that changes in the earnings of aggregate immigrant entry cohorts used by borjas to measure the assimilation of immigrants reflect another evidently important selection process namely selective emigration the effects of country characteristics on the wages of the foreign born at entry immigration selectivity are thus not comparable to the effects of such variables on the changes in the characteristics of an immigrant cohort over time emigration selectivity the effects via immigration self selection of country of origin characteristics on the quality q of immigrants who migrate to a destination country is neatly summarized by borjas in his equation 12 with unobservables determining earnings normally distributed the expected quality of immigrants in the united states is given by

are small stock markets different abstract recent literature has established a positive correlation between financial development and economic growth while papers such as bencivenga et al j econom theory 67 1995 53 identify potential nonlinearities in this relationship empirical research to date has allowed for only linear relationships this paper uses regression tree techniques to investigate whether the partial correlation between growth and financial development differs based on countries levels of financial and economic development as in previous studies growth and financial development are positively correlated in countries with high levels of market capitalization however this relationship does not appear to hold for countries with low levels of market capitalization

international financial integration and economic growth abstract this paper uses new data and new econometric techniques to investigate the impact of international financial integration on economic growth and also to assess whether this relationship depends on the level of economic development financial development legal system development government corruption and macroeconomic policies using a wide array of measures of international financial integration for 57 countries and an assortment of statistical methodologies we are unable to reject the null hypothesis that international financial integration does not accelerate economic growth even when controlling for particular economic financial institutional and policy characteristics

cross country evidence on determinants of fiscal policy effectiveness the role of trade and capital flows this article studies the determinants of size differentials between fiscal multipliers in countries around the world both advanced and developing economies we introduce variables not considered b

environmental policy when market structure and plant locations are endogenous abstract a two region two firm model is developed in which firms choose the number and the regional locations of their plants both firms pollute and market structure is endogenous to environmental policy there are increasing returns at the plant level imperfect competition between the home and the foreign firm and transport costs between the two markets at critical levels of environmental policy variables small policy changes cause large discrete jumps in a region s pollution and welfare as a firm closes or opens a plant or shifts production to from a foreign branch plant the implications for optimal environmental policy differ significantly from those suggested by traditional pigouvian marginal analysis

portfolio flows volatility and growth abstract we study the realized openness to portfolio flows of economically more developed and less developed countries as it affects future gdp growth outflows of a country s funds into u s securities are predictive of gdp growth suggesting that the benefits of openness outweigh local capital flight both inflows and outflows of funds via local equity securities are predictive of growth which is the evidence of the benefits of openness for less developed countries the effect of inflows is especially strong country specific volatility in flows does not detract from growth and volatility in world wide flows precedes growth overall the evidence is consistent with strong benefits of realized financial integration where the availability of u s markets for local portfolio investment along with equity investment from the outside enhances economic growth

capital account liberalization financial depth and economic growth abstract we show a statistically significant and economically relevant effect of open capital accounts on financial depth and economic growth in a cross section of countries over the periods 1986 1995 and 1976 1995 countries having open capital accounts had a significantly greater increase in financial depth and over the 20 year period greater economic growth these results however are largely driven by the developed countries included in the sample the observed failure of capital account liberalization to promote financial deepening among developing countries suggests potentially important policy implications concerning the desirability of opening up the capital account

international aspects of pollution control pollution is a by product of production is only gradually dissolved by the environment and crosses national borders the market outcome ignores the adverse effects of pollution and thus yields higher levels of output and pollution than would prevail under a supranational social planner which does care about pollution in practice governments often do not cooperate and this leads to outcomes of pollution and production in between the market outcomes and the outcomes under supra national social planning absence of precommitment leads to lower emission charges less cleaning up activities and more pollution appropriate levels of emission charges under the various outcomes are a result of this analysis attention is also paid to investment in clean technology the debate between optimists who believe that higher production is compatible with sound environmental policy and pessimists can be analysed in this way