natural resources curse or blessing are natural resources a curse or a blessing the empirical evidence suggests that either outcome is possible this paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources these include that a resource bonanza induces appreciation of the real exchange rate deindustrialization and bad growth prospects and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law corruption presidential democracies and underdeveloped financial systems another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad induces corruption especially in nondemocratic countries and keeps in place bad policies finally resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets the survey also offers some welfare based fiscal rules for harnessing resource windfalls in developed and developing economies

geopolitics and international organizations an empirical study on imf facilities there is growing awareness that the distribution of imf facilities may not be influenced only by the economic needs of borrowers this paper focuses on the fact that the imf may favour geopolitically important countries in the distribution of imf loans differentiating between concessional and non concessional facilities to carry out the empirical analysis we construct a new database that compiles a wide array of proxies for geopolitical importance for 107 imf countries over 1990 2003 focusing on emerging and developing economies we use a factor analysis to capture the common underlying characteristic of countries geopolitical importance as well as a potential analysis since we also want to account for the geographical situation of the loan recipients while controlling for economic and political determinants our results show that geopolitical factors influence notably lending decisions when loans are non concessional whereas results are less robust and in opposite direction for concessional loans this study provides empirical support to the view that geopolitical considerations are an important factor in shaping imf lending decisions potentially affecting the institution s effectiveness and credibility

what enables rapid economic progress what are the needed institutions abstract in recent years institutions have again become a central focus of economists and other scholars studying the processes of economic growth and the reasons why nations have differed so greatly in their achievements on this front however with few exceptions the exploration of the role of institutions has not been connected with a coherent analysis of the relationships between institutions and institutional change and technological advance this paper proposes a way of analyzing these relationships the concept of social technologies which support physical technologies plays a key role in the analysis

why do some oil producing countries succeed in democracy while others fail summary empirical studies examining the effect of oil on democracy have shown contradictory results this paper offers an explanation in measuring the number of years between the beginning of oil production and the attainment of political independence in oil producing countries we found that the greater the number of years the higher the level of democracy ceteris paribus the types of resources exploited in the colonial period were shown to have influenced institutions nature and the formation of elite which acts to prevent subsequent political reforms this pattern is mitigated in countries that started producing oil far away from their independence

auctions with variable supply uniform price versus discriminatory abstract we examine an auction in which the seller determines the supply after observing the bids we compare the uniform price and the discriminatory auction in a setting of supply uncertainty where uncertainty is caused by the interplay of two factors the seller s private information about marginal cost and the seller s incentive to sell the profit maximizing quantity given the received bids in every symmetric mixed strategy equilibrium bidders submit higher bids in the uniform price auction than in the discriminatory auction in the two bidder case this result extends to the set of rationalizable strategies as a consequence we find that the uniform price auction generates a higher expected revenue for the seller and a higher trade volume

the carbon curse are fuel rich countries doomed to high co2 intensities the carbon curse is a new theory related to but distinct from the resource curse it states that fossil fuel rich countries tend to follow more carbon intensive developmental pathways than if they were fossil fuel poor countries due to a hitherto unappreciated syndrome of causal mechanisms first fuel rich countries emit significant amounts of co2 in the extraction of fuel and through associated wasteful practices such as gas flaring second easy access to domestic fuel in such countries leads to crowding out effects for their energy mix and economic structure for example abundant oil may displace other fuels from the energy mix and lead to the dutch disease third fuel abundance weakens the economic incentive to invest in energy efficiency fourth governments in fuel rich countries are under considerable pressure to grant uneconomic fuel consumption subsidies which further augments the carbon intensity of their economic output due to the combined effect of these causal mechanisms it is genuinely difficult for fuel rich countries to evade carbon intensive developmental pathways and yet there are remarkable exceptions like norway such positive outliers indicate that the carbon curse is not destiny when appropriate policies are adopted

the dutch disease a disease after all many third world oil producers are encountering serious problems in building up a diversified export base while west european oil and gas producers netherlands united kingdom are suffering a decline in their traded goods manufacturing sector induced by real wage pressures it is becoming increasingly clear that high but temporary oil revenues may be somewhat ora mixed blessing the quip of the economist notwithstanding the mechanism behind this unbalance is clear enough part of the oil revenues is spent on non traded goods which leads to a real appreciation i e a rise in the relative price of non traded goods in terms of traded goods this in turn draws resources out of the non oil traded sector into the non traded goods producing sector corden and neary 1982 van wijnbergen 1980 one may say that this is an efficient response to the increase in income from oil production the united kingdom mexico egypt simply should move into oil derived industries and non traded goods and forget about their manufacturing sector until oil reserves are exhausted however many developing countries are hesitant to take this advice after all the post world war ii success stories in economic development involve without exception countries that promoted their traded goods sector aggressively moreover it is a well established stylised fact that technological progress is faster in the traded non sheltered sectors of an economy than in the non traded sector balassa 1964 is an early reference considering the hypothesis that technological progress rather than taking place exogenously with the passage of time is a function of accumulated experience the concern of countries like egypt mexico or indonesia is much easier to understand since solow 1957 and denison 1962 it is known that capital accumulation explain only a small part of economic growth if most of economic growth is caused by learning by doing induced technologica

endogenous growth asymmetric trade and resource dependence the aggregate income of oil exporting countries relative to that of oil poor countries has been remarkably constant in recent decades despite the existence of structural gaps in productivity growth rates this stylized fact is rationalized in an endogenous growth model of asymmetric trade where resource poor and resource rich economies display productivity differences but stable income shares due to terms of trade dynamics the model yields two testable predictions that deserve empirical scrutiny i the asymmetric impact between exporters and importers of national taxes on resource use on income shares and ii the inverse relation between terms of trade dynamics and total factor productivity growth

budget rules and resource booms and busts a dynamic stochastic general equilibrium analysis this paper develops a dynamic stochastic general equilibrium model to analyze and derive simple budget rules in the face of volatile public revenue from natural resources in a low income country like niger the simulation results suggest three policy lessons or rules of thumb when a resource price change is positive and temporary the best strategy is to save the revenue windfall in a sovereign fund and use the interest income from the fund to raise citizens consumptionover time this strategy is preferred to investing in public capital domestically even when private investment benefits from an enhanced public capital stock domestic investment raises the prices of domestic goods leaving less money for government to transfer to households public investment is not 100 percent effective in raising output in the presence of a negative temporary resource price change however the best strategy is to cut public investment this strategy dominates other methods such as trimming government transfers to households which reduces consumption directly or borrowing which incurs an interest premium as debt rises in the presence of persistent positive and negative shocks the best strategy is a mix of public investment and saving abroad in a balanced regime that provides a natural insurance against both types of price shocks the combination of interest income from the sovereign fund transfers tohouseholds and output growth brought about by public investment provides the best protective mechanism to smooth consumption over time in response to changing resource prices

economic freedom culture and growth how do economic freedom and culture impact economic growth this paper argues that culture as measured by the world values surveys and economic institutions associated with economic freedom are both independently important for economic prosperity but the strength of their impact can be better understood only when both are included in the growth regression our results indicate that economic freedom is more important than culture for growth outcomes suggesting substitutability between the two we posit that culture is important for growth when economic freedom is absent diminishing in significance once economic freedom is established

the narrow moving band the dutch disease and the competitive consequences of mrs thatcher notes on trade in the presence of dynamic scale economies abstract this paper presents a model of trade in which comparative advantage instead of being determined by underlying attributes of countries evolves over time through learning by doing in this model arbitrary patterns of specialization once established tend to become entrenched over time the model sheds light on three widely held views that do not make sense in more conventional models first is the view that temporary protection of selected sectors can permanently alter the pattern of comparative advantage in the protecting country s favor second is the view that seemingly favorable developments such as the discovery of exportable natural resources may lead to a permanent loss of other sectors and reduce welfare in the long run third is the possibility that a temporary overvaluation of a currency due to tight money can lead to a permanent loss of competitiveness in some sectors

auctions of divisible goods with endogenous supply abstract uniform price auctions are studied in which the seller may cancel part of the supply after observing the bids this feature eliminates many of the collusive seeming equilibria of the auction in equilibrium the seller always sells the full quantity

imf bailouts and moral hazard this paper empirically investigates the extent of investor moral hazard associated with imf bailouts by analyzing the responses of sovereign bond spreads to the changes in the perceived probability of imf bailouts of countries undergoing financial crisis we do not find strong evidence that the extent of investor moral hazard changed after the non bailout of russia in august 1998 that signaled a modification to imf intervention policy in contrast we find evidence that investor moral hazard is intensified for those countries that have stronger political connections to the imf and that are thereby more likely to be bailed out by the imf this pattern prevailed even after the russian crisis

the effects of a natural gas boom on employment and income in colorado texas and wyoming improvements in technology have made it profitable to tap unconventional gas reservoirs in relatively impermeable shale and sandstone deposits which are spread throughout the u s mostly in rural areas proponents of gas drilling point to the activity s local economic benefits yet no empirical studies have systematically documented the magnitude or distribution of economic gains i estimate these gains for counties in colorado texas and wyoming three states where natural gas production expanded substantially since the late 1990s i find that a large increase in the value of gas production caused modest increases in employment wage and salary income and median household income the results suggest that each million dollars in gas production created 2 35 jobs in the county of production which led to an annualized increase in employment that was 1 5 of the pre boom level for the average gas boom county comparisons show that ex ante estimates of the number of jobs created by developing the fayetteville and marcellus shale gas formations may have been too large

employment innovation and productivity evidence from italian microdata italian manufacturing firms have been losing ground with respect to many of their european competitors this paper presents some empirical evidence on the effects of innovation on employment growth and therefore on firms productivity with the goal of understanding the roots of such poor performance we use firm level data from the last three surveys on italian manufacturing firms conducted by mediocredito capitalia which cover the period 1995 2003 using a modified version of the model proposed by harrison jaumandreu mairesse and peters 2005 which separates employment growth rates into those associated with old and new products we provide robust evidence that there is no employment displacement effect stemming from process innovation the sources of employment growth during the period are split equally between the net contribution of product innovation and the net contribution from sales growth of old products however the contribution of product innovation is somewhat lower than that for the four comparison european countries considered by harrison et al

social divisions and institutions assessing institutional parameter variation this paper investigates the hypothesis that the association between property rights institutions and income is weaker in countries with high social divisions it argues that social divisions should have a negative effect on perceived institutional inclusiveness which in turn should depress institutional payoffs absent a property rights indicator that captures the perceived inclusiveness of institutions social divisions should then weaken the observed association between property rights institutions and income the empirical results support this hypothesis and highlight the importance of evaluating whether the institutions measure used captures the institutional framework applying to the population at large

the resource curse revisited a bayesian model averaging approach abstract the evidence for the effects of oil rents on growth is mixed a result which can be explained with model uncertainty we address the issue using bayesian model averaging techniques and an updated cross country data set for long term growth in the period 1970 2014 including 91 countries and 54 potential growth determinants we do not find empirical evidence for the existence of a natural resource curse in our sample on the contrary our results suggest a robust positive effect of oil rents on long term economic growth we then introduce interaction terms of oil rents with potential conditions under which oil dependency can lead to sub standard growth the results indicate that the positive effect of oil rents may be conditional on the quality of institutions we test the robustness of our results using a panel data set and find neither a curse nor a positive effect of oil rents on short to medium run growth

the dynamics of resource based economic development evidence from australia and norway australia and norway have achieved modern levels of development as resource based economies thus avoiding the so called resource curse their ability to achieve this rested heavily on repeated diversification into new resource products and industries these processes relied largely on innovation confirming the close ties that have existed between resource based industries and knowledge producing and disseminating sectors of society we develop a resource based diversification model that analyses the interaction between enabling sectors and resource industries and apply it to the historical experience of the two countries

funds from non renewable energy resources policy lessons from alaska and alberta abstract we document the use of energy natural resource funds in alaska and alberta and analyze theirs characteristics for further implementation in resource rich countries such funds allow dealing theoretically with intergenerational equity issues corruption and more general institutional problems the performance of both funds is very different depending on the management and composition choices but some policy lessons can be drawn from these two examples importantly the role of a public dividend policy is highlighted as a way to bypass corrupted institutions and to enhance quality of life for poorest people we also emphasize the need to deal with inflation to make the fund sustainable

the origins of american industrial success 1879 1940 the united states became the world s preeminent manufacturing nation at the turn of the twentieth century this study considers the bases for this success by examining the factor content of trade in manufactured goods surprisingly the most distinctive characteristic of u s manufacturing exports was intensity in nonreproducible natural resources furthermnore this relative intensity was increasing between 1880 and 1920 the study then asks whether resource abundance reflected geological endowment or greater exploitation of geological potential it was mainly the latter jel 042 recent thinking about american economic performance has been marked by alarm over the country s loss of its competitive edge most of this discussion is not rooted in an understanding of the historical origins of the economic leadership now thought to be in jeopardy modern economists tend to assume that the american advantage has been technological and

natural resources and the tradeoff between authoritarianism and development abstract why do african and middle eastern countries seem cursed by an abundance of natural resources yet usa australia and norway seem blessed a growing literature has argued that the benevolence or malignance of natural resources depends upon the quality of institutions this paper offers a new explanation based on associational freedom and its interaction with the political system the model predicts that natural resources have an adverse impact on economic performance and transition to democracy in authoritarian regimes but not in democracies it also predicts that repression of associational freedom will be increasing in natural resources in authoritarian regimes i test the model s predictions using fixed effects regressions on an international panel from 1975 to 2000 and find support

optimal dutch disease growth models of the dutch disease such as those of krugman 1987 matsuyama 1992 sachs and warner 1995 and gylfason et al 1999 explain why resource abundance may reduce growth however the literature also raises a new question if the use of resource wealth hurts productivity growth how should such wealth be optimally managed this question forms the topic of the present paper in which we extend the growth literature on the dutch disease from a positive to a normative setting we show that the assumptions in the previous literature imply that the optimal share of national wealth consumed in each period needs to be adjusted down however some dutch disease is always optimal thus lower growth in resource abundant countries may not be a problem in itself but may be part of an optimal growth path the optimal spending path of the resource wealth may be increasing or decreasing over time and we discuss why this is the case

age and great invention great achievements in knowledge are produced by older innovators today than they were a century ago using data on nobel prize winners and great inventors i find that the age at which noted innovations are produced has increased by approximately 6 years over the 20th century this trend is consistent with a shift in the life cycle productivity of great minds it is also consistent with an aging workforce the paper employs a semi parametric maximum likelihood model to 1 test between these competing explanations and 2 locate any specifi cs hifts in life cycle productivity the productivity explanation receives considerable support i find that innovators are much less productive at younger ages beginning to produce major ideas 8 years later at the end of the 20th century than they did at the beginning furthermore the later start to the career is not compensated for by increasing productivity beyond early middle age i show that these distinct shifts for knowledge based careers are consistent with a knowledgebased theory where the accumulation of knowledge across generations leads innovators to seek more education over time more generally the results show that individual innovators are productive over a narrowing span of their life cycle a trend that reduces other things equal the aggregate output of innovators this drop in productivity is particularly acute if innovators raw ability is greatest when young

rent seeking and resource booms abstract this paper develops a model of rent seeking in which the opportunity cost of rent seeking is foregone entrepreneurship it provides conditions under which resource booms tend to lead to an increase in rent seeking activity and those in which they induce entrepreneurship we identify an important difference between the two activities which leads resource booms to bias gains in favour of rent seeking over entrepreneurship but we also show that this bias depends on the nature of the initial equilibrium

do natural resource revenues hinder financial development the role of political institutions we hypothesize that natural resource revenues may deteriorate contract enforcement if political institutions are weak as poor contract enforcement leads to low financial development resource revenues may hinder financial development in countries with poor political institutions but not in countries with comparatively better political institutions we provide empirical support for this hypothesis based on within country variation in our sample covering the period 1970 2005 and 133 countries our results are robust to the use of additional control variables different samples and alternative measures of financial development and political institutions

resource intensity institutions and development summary we examine the relationship between resource abundance and several indicators of human welfare consistent with the existing literature on the relationship between resource abundance and economic growth we find that given an initial income level resource intensive countries tend to suffer lower levels of human development while we find only weak support for a direct link between resources and welfare there is an indirect link that operates through institutional quality there are also significant differences in the effects that resources have on different measures of institutional quality these results imply that the resource curse is a more encompassing phenomenon than previously considered and that key differences exist between the effects of different resource types on various aspects of governance and human welfare 2005 elsevier ltd all rights reserved

the quality of political institutions and the curse of natural resources we propose a theoretical model to explain empirical regularities related to the curse of natural resources which emphasises the behaviour and incentives of politicians we extend the standard voting model to give voters political control beyond the elections this gives rise to a new restriction that policies should not give rise to a revolution our model clarifies when resource discoveries might lead to revolutions namely in countries with weak institutions it also suggests that for bad political institutions human capital depends negatively on natural resources while for high institutional quality the dependence is reversed this finding is corroborated in cross section regressions

the voracity effect abstract we analyze an economy that lacks a strong legal political institutional infrastructure and is populated by multiple powerful groups powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock in equilibrium this leads to slow economic growth and a voracity effect by which a shock such as a terms of trade windfall perversely generates a more than proportionate increase in fiscal redistribution and reduces growth we also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks jel f43 o10 o23 o40

does foreign aid distort incentives and hurt growth theory and evidence from 75 aid recipient countries foreign aid transfers can distort individual incentives and hence hurt growth by encouraging rent seeking as opposed to productive activities we construct a model of a growing small open economy that distinguishes two effects from foreign transfers i a direct positive effect as higher transfers allow the financing of infrastructure ii an indirect negative effect as higher transfers induce rent seeking competition by self interested individuals in this framework the growth impact of aid is examined jointly with the determination of rent seeking behavior we test the main predictions of the model for a cross section of 75 aid recipient countries there is evidence that aid has a direct positive effect on growth which is however significantly mitigated by the adverse indirect effects of associated rent seeking activities this is especially the case in recipient countries with relatively large public sectors

adjustable supply in uniform price auctions non commitment as a strategic tool abstract in some uniform price auctions the auctioneer decides how much to sell after the bidding auctioneer expected profit and social welfare can each be strictly higher in all equilibria given such adjustable supply than in all equilibria given any fixed quantity and reserve price

history lessons institutions factor endowments and paths of development in the new world the explanations offered for the contrasting records of long run growth and development among the societies of north and south america most often focus on institutions the traditional explanations for the sources of these differences in institutions typically highlight the significance of national heritage or religion we in contrast argue that a hemispheric perspective across the wide range of colonies established in the new world by the europeans suggests that although there were many influences factor endowments or initial conditions had profound and enduring effects on the long run paths of institutional and economic development followed by the respective economies

natural resources rent seeking and welfare abstract a new and very simple mechanism to explain why natural resource abundance may lower income and welfare is developed in a model with rent seeking a greater amount of natural resources increases the number of entrepreneurs engaged in rent seeking and reduces the number of entrepreneurs running productive firms with a demand externality it is shown that the drop in income as a result of this is higher than the increase in income from the natural resource more natural resources thus lead to lower welfare

booming sector and de industrialisation in a small open economy this paper presents a theoretical analysis of the dutch disease the phenomenon whereby a boom in one traded goods sector squeezes porfitability in other traded goods sectors both by directly bi

corruption and reduced oil production an additional resource curse factor prominent contributions to the resource curse literature suggest weak governance and corruption are important factors behind the wide welfare variations observed among oil producing countries how weak governance and corruption influence revenue management and expenditure decisions as well as the possible welfare benefits derived from oil are broadly discussed how they impact upon volumes of oil produced has however attracted little attention this paper combines a review of the resource curse and oil production literatures with findings from qualitative interviews with oil sector experts to appreciate the feasibility of connections between corruption and oil production below its potential we make particular reference to environments where regulatory institutions or political accountability are weak and focus primarily on producer government and oil firm relations drawing on insights from geology political science and economics we suggest suboptimal production solutions can impact volumes of oil actually produced and create constraints on long term revenues for oil producing countries we argue greater disclosure of information on oil production efficiency on a field by field and country by country basis will assist further investigation of the relationships between corruption and volumes of oil produced

avoiding the resource curse indigenous communities and canada s oil sands summary concerns about a resource curse in canada have been raised in response to rapid growth in the petroleum sector in northern alberta in previous research there has been little consideration of how symptoms of the resource curse are experienced and managed at a regional scale and by indigenous communities an analysis of effects and responses is offered using a natural financial human and social capitals framework without consideration of how to manage the symptoms of the resource curse oil and gas activity is likely to further disadvantage indigenous populations already living on the margins of canadian society

insecure resources bilateral trade and endogenous predation a game theoretic analysis of conflict and trade this article analyzes how interstate conflict over resources affects the incentives to trade and how greater trade openness affects the endogenous decisions of arming by enemy countries we identify conditions under which there is trade between two adversary countries and show that each adversary s arming affects domestic welfare in three different ways the first is an export revenue effect which increases welfare because arming causes export revenue to go up i e there is an arming induced terms of trade improvement the second is a resource predation effect which increases welfare because arming increases the appropriation of a rival country s resource input to produce a consumption good the third is an output distortion effect which reduces welfare because arming lowers the domestic production of civilian goods based on these effects we show circumstances in which greater trade openness reduces the intensity of arming we also discuss the implications of resource security asymmetry for conflict and trade

cointegrating institutions the time series properties of country institutional measures abstracta country s political and economic institutions are critical for economic prosperity the literature abounds with institutional measures precisely because institutions are multidimensional we use panel unit root and cointegration tests to examine the time series properties of several institutional measures to answer two questions first do institutional changes tend to be permanent second which subsets of institutions tend to converge or move together these answers have important implications for whether permanent institutional reform is possible and whether reforms can be undertaken one institutional area at a time or instead must simultaneously encompass multiple institutional areas

minerals institutions openness and growth an empirical analysis competing explanations of the resource curse are tested using panel data the data support the existence of a mineral resource curse for developing countries with weak institutions consistent with the hypothesis that owners of mineral resources use weak institutions and openness to trade to stifle the development of human capital to the detriment of growth in other sectors of the economy manufacturing imports substitute for the development of domestic production so openness to trade correlates with lower growth in mineral dependent economies the dutch disease and debt overhang explanations of the resource curse are not supported

political foundations of the resource curse in this paper we argue that the political incentives that resource endowments generate are the key to understanding whether or not they are a curse we show 1 politicians tend to over extract natural resources relative to the efficient extraction path because they discount the future too much and 2 resource booms improve the efficiency of the extraction path however 3 resource booms by raising the value of being in power and by providing politicians with more resources which they can use to influence the outcome of elections increase resource misallocation in the rest of the economy 4 the overall impact of resource booms on the economy depends critically on institutions since these determine the extent to which political incentives map into policy outcomes countries with institutions that promote accountability and state competence will tend to benefit from resource booms since these institutions ameliorate the perverse political incentives that such booms create countries without such institutions however may suffer from a resource curse

trade matters in the fight against poverty narratives perceptions and lack of evidence in the case of fish trade in africa two opposing views exist in the literature on the potential role that international fish trade plays in economic development while some claim that fish trade has a pro poor effect others denounce the negative effect of fish export on local populations food security and doubt its contributions to the macro economy in this paper we explore this debate in sub saharan africa our analysis did not find any evidence of direct negative impact of fish trade on food security neither did it find evidence that international fish trade generates positive pro poor outcomes this paper discusses the possible reasons for this apparent lack of development impact and highlights the unsupported assumptions underlying the current discourse about international fish trade we suggest that given lack of evidence for the development benefits of fish trade between africa and developed countries fisheries policy could consider support for regional africa to africa trade that meets the growing african demand for lower value fish means of overcoming barriers to intra african trade in fish are discussed

the political economy of public income volatility with an application to the resource curse abstract in recent years many countries have witnessed a great deal of volatility in public budgets be it due to volatility in the access to foreign loans in greece or to unstable oil prices in venezuela we study the political consequences of such public income volatility as is standard in our model political incentives create inefficient policies to increase re election probabilities but we show that making public income uncertain creates specific new effects future volatility reduces the benefit of being in power making policy more efficient yet at the same time it also reduces the re election probability of an incumbent and since some of the policy inefficiencies are concentrated in the future this makes inefficient policy such as patronage public employment less costly our model highlights a new political economy connection between the volatility of the public budget and economic growth in the case where volatility comes from natural resource prices a characteristic of many developing countries we show that volatility in itself may be a source of inefficient resource extraction jointly interacting with increased patronage employment

reserve prices eliminate low revenue equilibria in uniform price auctions abstract uniform price auctions frequently admit equilibria which raise zero seller revenue we show that when demand is sufficiently strong when market supply is more than covered by any bidder s opponents the introduction of a reserve price improves revenue not only by directly increasing the market clearing price but also by eliminating low revenue equilibria in which the market clearing price is almost always equal to the reserve the condition on demand is sharp and when it is not satisfied there exist equilibria in which the market clearing price almost always equals the reserve our results therefore fully characterize the existence of low revenue equilibria in terms of bidder demand at a given reserve price this sharp characterization extends directly to the case of stochastic supply and low revenue equilibria also fail to exist when supply is stochastic and elastic

from curse to blessing institutional reform and resource booms in colombia abstract is it possible to reverse the resource curse through institutional reform evidence suggests that there is a negative relationship between abundance of natural resources and economic growth political stability democracy and peace however evidence illustrating how institutional reform can reverse this situation is scarce in this paper we exploit a component of an institutional reform that modified the allocation rule of oil royalties in colombia and evaluate a set of effects of this reform on the living standards of colombian households using international variations in the price of oil for identification we find that the reform had important effects on several household welfare indicators we find positive impacts on important dimensions such as reductions in multidimensional poverty and improvements on income employment housing conditions health and education among others results are mixed or null in other outcomes such as formality or employment in the service sector importantly we find no effects on monetary poverty but larger income effects for rich and urban households we test for the different channels boosting these effects and provide tentative evidence that supports the role of fiscal and administrative capacity mechanisms

effective foreign aid following civil war the nonstrategic desperation hypothesis when does aid foster development after civil war a testable model is needed to account for the uneven outcomes in postconflict development this article proposes and empirically tests the novel nonstrategic desperation hypothesis an explanation based on the varied incentives that fragile postconflict governments face when confronted with donor development goals paradoxically incentives to meet development goals only exist when donors have little strategic interest in the recipients and when recipients lack income from resource rents and are therefore desperate for income ten year data on infant mortality changes following civil wars ending 1970 96 and a variety of robustness checks support the hypothesis by focusing on how income sources constrain the choices of aid recipients and how these constraints can provide incentives to meet donor development goals the nonstrategic desperation hypothesis explains how the good use of aid can take place following civil war when institutions are weak

cursed by resources or institutions natural resource abundant countries constitute both growth losers and growth winners and the main difference between the success cases and the cases of failure lays in the quality of institutions with grabber friendly institutions more natural resources push aggregate income down while with producer friendly institutions more natural resources increase income such a theory finds strong support in data a key question we also discuss is if resources in addition alter the quality of institutions when that is the case countries with bad institutions suffer a double resource curse as the deterioration of institutions strenghtens the negative effect of more natural resources

gold exploitation and socioeconomic outcomes the case of burkina faso abstract in the early 2000s burkina faso launched several legal reforms aimed at increasing gold production this resulted in a gold mining boom making gold the main export product and the main source of economic growth of the country we hypothesize that gold extraction improved population living standards this paper investigates how the gold boom in burkina faso which began in 2007 has affected socioeconomic outcomes we use a simple theoretical model to motivate the testing of several hypotheses regarding these impacts employing a difference in differences strategy as well as panel data models we estimate the impacts using data from household surveys undertaken in 2003 and 2009 and administrative data consistent with our model the results suggest that areas hosting gold extraction have better average living standards in terms of headcount ratios poverty gaps and household expenditures than do areas without gold however the gold boom is also shown to have potentially increased local inequality and child labor in areas with these income gains these results demonstrate the importance of proactive government policy in mitigating negative welfare impacts

institutions and the resource curse countries rich in natural resources constitute both growth losers and growth winners we claim that the main reason for these diverging experiences is differences in the quality of institutions more natural resources push aggregate income down when institutions are grabber friendly while more resources raise income when institutions are producer friendly we test this theory building on sachs and warner s influential works on the resource curse our main hypothesis that institutions are decisive for the resource curse is confirmed our results contrast the claims of sachs and warner that institutions do not play a role

oil and regime type in latin america reversing the line of causality abstract in its first generation the literature on the resource curse typically posited that resource dependence shapes a country s economy and politics more recent work posits that the effects are mediated by institutions we take this newer approach further by arguing that economic and political institutions not just mediate but actually shape resource dependence our focus is on performance across national oil companies nocs in latin america we explain performance variation by invoking variations in regime and market features nocs that operate in contexts of greater independence from the executive branch stronger checks and balances within and outside the sector and greater market forces though not necessarily private actor dominance exhibit better performance institutions thus influence sector conditions rather than the other way around we advance this argument using original data from colombia and venezuela and supplementary data from mexico brazil and argentina our study focuses on the oil boom bust cycle of 2003 2016

the uniform price auction with endogenous supply abstract this paper shows that low price equilibria in the uniform price auction with endogenous supply do not exist if the seller employs the proportional rationing rule and is consistent when selecting among profit maximizing quantities in a consistent subgame perfect equilibrium the walrasian quantities are traded at the walrasian price

kleptocracy and divide and rule a model of personal rule many developing countries have suffered under the personal rule of kleptocrats who implement highly inefe cient economic policies expropriate the wealth of their citizens and use the proceeds for their own glorie cation or consumption we argue that the success of kleptocrats rests in part on their ability to use a divide and rule strategy made possible by the weakness of institutions in these societies members of society need to cooperate in order to depose a kleptocrat yet such cooperation may be defused by imposing punitive rates of taxation on any citizen who proposes such a move and redistributing the benee ts to those who need to agree to it thus the collective action problem can be intensie ed by threats which remain off the equilibrium path in equilibrium all are exploited and no one challenges the kleptocrat kleptocratic policies are more likely when foreign aid and rents from natural resources provide rulers with substantial resources to buy off opponents when opposition groups are shortsighted when the average productivity in the economy is low and when there is greater inequality between producer groups because more productive groups are more dife cult to buy off jel o12 h00

experience innovation and productivity empirical evidence from italy s slowdown the authors investigate whether the level of employee experience is good or bad for innovation and productivity using a sample of italian manufacturing firms during the early 2000s the authors find different results for managers versus workers experience the effect of managerial experience proxied by age on firm performance appears to depend on the type of firm in innovative firms having older managers and board members has a negative effect on innovation and productivity while in non innovative firms the costs and benefits of having older managers appear to cancel each other out for workers the effect of having a high share of inexperienced temporary workers is unambiguously associated with low innovation and low productivity these results also hold when endogenous regime switching is taken into consideration

economic backwardness in political perspective government policies and institutions shape economic incentives and via this channel have a first order impact on economic development why then do many societies adopt policies that discourage investment and maintain institutions that cause economic backwardness perhaps politically powerful groups elites are not in favor of economic growth but why it would appear that economic growth would provide more resources for these groups to take over or tax increasing their economic returns so why don t powerful groups always support economic development in this paper we develop a theory of inefficient government policies and institutions all else equal politically powerful groups would welcome superior institutions and technologies but in practice all else is not equal because superior institutions and technologies may reduce their political power and make it more likely that they will be replaced at the center of our theory is therefore the idea that changes in institutions or the introduction of new technologies often create turbulence eroding the political advantages and future economic rents of incumbent elites alternatively new technologies may enrich competing groups increasing their threat to incumbents these considerations make politically powerful groups fear losing power and oppose economic and political change even when such change will benefit society as a whole to understand the mechanism at work and its potential applications consider a concrete example industrialization in the nineteenth century bairoch 1982 estimates that between 1830 and 1913 world manufacturing output increased by a factor of 5 see table 1 panel a nevertheless this process was highly uneven across regions and countries bairoch also calculates that over the same period manufacturing output in developed countries europe and north america increasedbyafactorofover10 whereasitdeclinedinthe third world among developed countries there were

how do mineral states learn path dependence networks and policy change in the development of economic institutions summary based on case study methods i draw lessons from the political economy of macroeconomic management in chile and peru to explain how mineral states learn to think long term and eventually escape the resource curse i give an institutionalist account of the rise of countercyclical funds showing how the long term development of elite networks qualifies the contemporary making of curse escapes policy networks compose one central avenue of institutional development for both the reproduction of path dependence and the making of institutional change the exposition challenges political economy of development frameworks which over emphasize structural initial conditions and assume steady rent seeking behavior of state agents

permit market auctions with allowance reserves this article investigates pollution permit auctions that incorporate allowance reserves in these auctions the sale of a fixed quantity of permits is supplemented by an additional permit reserve this reserve automatically releases permits if a sufficiently high price is triggered the main justifications for implementing an allowance reserve are to reduce price volatility as well as assisting in cost containment we show paradoxically that incorporating an allowance reserve into a permit auction can decrease firms payoffs increase the clearing price and increase compliance costs this has implications for all major cap and trade markets including the us regional greenhouse gas initiative

mining away the preston curve summary i estimate the long term national health and education impacts of having a larger mining share in the economy by instrumenting the relative size of the mining sector with the natural geological variation in countries fossil fuel endowments i provide evidence suggestive of a causal relationship the findings suggest that countries with larger mining shares tend to have poorer health and education outcomes than countries with similar per capita incomes geographic characteristics and institutional quality doubling the mining share of an economy corresponds to on average the infant death rate being 20 higher life expectancy being 5 lower total years of education being 20 lower and 70 more people having no formal education divergences from the preston curve the concave relationship between cross country income and life expectancy that has long been of interest to economists demographers and epidemiologists are thus partly explained by the size of the mining sector within country evidence from indonesia paints a similar picture my results provide support for a growing body of evidence linking mining to poorer average living standards particularly vis a vis other types of income i also estimate the effects of national mining dependence on non mining income health and education investment and institutions

war and natural resource exploitation abstract we build a theoretical framework that allows for endogenous conflict behaviour i e fighting efforts and for endogenous natural resource exploitation i e speed ownership and investments while depletion is spread in a balanced hotelling fashion during peace the presence of conflict creates incentives for rapacious extraction as this lowers the stakes of future contest this voracious extraction depresses total oil revenue especially if world oil demand is relatively elastic and the government s weapon advantage is weak some of these political distortions can be overcome by bribing rebels or by government investment in weapons the shadow of conflict can also make less efficient nationalized oil extraction more attractive than private extraction as insecure property rights create a holdup problem for the private firm and lead to a lower license fee furthermore the government fights less intensely than the rebels under private exploitation which leads to more government turnover without credible commitment to future fighting efforts private oil depletion is only lucrative if the government s non oil office rents are large and weaponry powerful which guarantees the government a stronger grip on office and makes the holdup problem less severe

uniform vs discriminatory auctions with variable supply experimental evidence in the variable supply auction considered here the seller decides how many customers with unit demand to serve after observing their bids bidders are uncertain about the seller s cost we experimentally investigate whether a uniform or a discriminatory price auction is better for the seller in this setting exactly as predicted by theory it turns out that the uniform price auction produces substantially higher bids and consequently yields higher revenues and profits for the seller furthermore again as predicted by theory the uniform price auction yields a higher number of transactions which makes it also the more efficient auction format

oil volatility and sovereign risk of brics abstract we study the dependence between oil implied volatility shocks and brics sovereign risk from july 2009 to march 2017 first we examine spillovers in value at risk using multivariate regression quantiles and reveal that oil volatility represents a common risk for oil exporting and oil importing brics countries we also employ a quantile impulse response function and reveal the presence of an asymmetry in the mechanisms of shock transmissions between oil exporters russia and brazil and oil importers china and india the former are more sensitive to positive oil shocks whereas the latter are more sensitive to negative oil shocks second we measure the directional predictability in the quantiles using the bivariate cross quantilogram approach and show that in most cases a low high volatility of oil market predicts low high sovereign risk at various quantiles and lags policy implications are discussed

was latin america too rich to prosper structural and political obstacles to export led industrial growth this essay explores the divergence in economic policy and performance between east asia and latin america it offers a typology of explanations from the political economy literature evidence is presented for an explanation focused upon the relative size of the income sacrifice entailed in the competitive export of simple manufactures in the 1960s latin american countries would have faced massive politically unthinkable currency devaluations had they sought to compete with east asia thus latin american dependency in the post war period has been more complex than often supposed the essay ends with thoughts on export led industrialisation in indebted latin america

resource curse or not a question of appropriability this thesis presents three self contained essays focusing on empirical questions in growth and development economics each article addresses specific questions on why countries perform differently in particular i analyse the effect of democracy on economic development the relationship between natural resources and growth and the efficiency of foreign development assistance in the first essay democracy consolidation and growth i analyse the effect of democracy on economic growth in this context i argue that an important aspect to consider is how consolidated political systems are put simply i find that it is not only a question of how democratic countries are but also how long they have been democratic in other words economic performance tends to improve with the duration of uninterrupted democracy the performance of autocracies on the other hand tends to deteriorate over time however for newly established political systems there seems to be a cost of being democratic this implies that democracies only bear their fruit after some time the analysis has important policy implications to overcome initial straits international assistance focused on democratic consolidation may be important and a very good investment in fostering long run development the second essay resource curse or not a question of appropriability together with anne boschini and jesper roine is concerned with the relation between natural resources and economic development for most laymen as well as for most economists it would seem reasonable that countries richly endowed in natural resources also benefit from this wealth however a large literature has found a systematic negative effect of natural resource abundance on economic growth we suggest that this so called resource curse is not determined by resource endowments alone but rather by the interaction between the type of resources a country possesses and the quality of institutions in the country this combination of factors determines what we call the appropriability of a resource the concept of appropriability captures the likelihood of natural resources leading to rentseeking corruption or conflicts which in turn will harm economic development our results suggest that if institutions are good enough the curse may be turned into a blessing this may explain why some countries such as norway and botswana tend to benefit from their resources while others such as angola and sierra leone do not the third and final essay of this thesis foreign sectoral aid fungibility growth and poverty reduction is a contribution to the aid efficiency literature which is concerned with the question of whether aid helps or hinders economic development foreign development assistance is often targeted on specific public expenditure sectors if this aid is not used in the sector for which it was granted e g health education it is said to be fungible and donors may end up financing something completely different from what they intended e g military expenditures the major concern about sectoral fungibility is that the alternative use of aid may be less productive or less socially useful however measuring fungibility is not sufficient to determine whether foreign sectoral aid fungibility is actually harmful what is important is how the funds treated as fungible are used the essay starts by obtaining estimates of fungibility for 57 countries the results suggest that sectoral aid is indeed largely treated as fungible by recipient countries next to assess the economic and health effects of fungibility these estimates are incorporated into an empirical model of aid and growth as well as into a model of aid and infant mortality altogether i find no evidence of more fungible sectoral aid leading to worse performance

age seniority and labour costs lessons from the finnish it revolution the bad labour market performance of the workforce over 50 indicates that an aged workforce is often a burden for firms our paper seeks to investigate whether and why this is the case by providing evidence on the relation between age seniority and experience on the one hand and the main components of labour costs namely productivity and wages on the other for a sample of plants in three manufacturing industries forest industrial machinery and electronics in finland during the it revolution in the 1990s in average industries those not undergoing major technological shocks productivity and wages keep rising almost indefinitely with the accumulation of either seniority in the forest industry or experience in the industry producing industrial machinery in these industries the skill depreciation often associated with higher seniority beyond a certain threshold does not seemingly raise labour costs in electronics instead the seniority productivity profile shows a positive relation first and then becomes negative as one looks at plants with higher average seniority this body of evidence is consistent with the idea that fast technical change brings about accelerated skill depreciation of senior workers we cannot rule out however that our correlations are also simultaneously produced by worker movements across plants the seniority earnings profile in electronics is instead rather similar to that observed for the other industries a likely symptom of the prevailing finnish wage bargaining institutions which tend to make seniority one essential element of wage determination in the end seniority matters for labour costs not age as such but only in high tech industries not in the economy at large this is well tuned with previous research on gross flows of workers and jobs in the us and other oecd countries which unveiled the productivity driving role of resource reallocation or lack thereof between plants to improve the employability of the elderly at times of fast technical change public policy should thus divert resources away from preserving existing jobs and lend more attention to the retraining of old workers to ease their reallocation away from less productive plants or plants where they have become less productive into new jobs francesco daveri and mika maliranta

commodity prices and growth an empirical investigation whereas empirical evidence on the effect of higher commodity prices on the long run growth of commodity exporters is ambiguous time series analyses using vector autoregressive var models have found that commodity booms raise income in the short run in this paper we adopt panel error correction methodology to analyze global data for 1963 to 2008 to disentangle the short and long run effects of international commodity prices on output per capita our results show that commodity booms have unconditional positive short term effects on output but non agricultural booms in countries with poor governance have adverse long term effects which dominate the short run gains our findings have important implications for non agricultural commodity exporters with poor governance especially in light of the recent wave of resource discoveries in low income countries

a theory of entrepreneurship and institutional uncertainty abstract uncertainty and institutions are each vital concepts in entrepreneurship research however little work has been done to combine them into a consistent conceptual framework for analyzing the dynamic aspects of entrepreneurial action uncertainty and institutional change using insights from new institutional economics we develop a model that explains the institutional uncertainty resulting from conflicts between institutions on different levels of social activity we further explain how entrepreneurs can both cause and mitigate this uncertainty through market and institutional action finally we focus on a special case of institutional uncertainty regime uncertainty wherein entrepreneurs are left without reliable means to overcome uncertainty in political institutions

the local impact of mining on poverty and inequality evidence from the commodity boom in peru summary this paper studies the impact of mining activity on socioeconomic outcomes in local communities in peru in the 1990s and 2000s the value of peruvian mining exports grew by 15 times and since the early 2000s one half of fiscal revenues from mining have been devolved to local governments has this boom benefitted people in local communities using the district level poverty map of 2007 the latest available with accurate data on consumption poverty and inequality together with district level data on mining production and fiscal transfers to local governments we present some evidence to answer this question we find that mining districts have larger average consumption per capita and lower poverty rates than otherwise similar districts these positive impacts however decrease drastically with administrative and geographic distance from mining centers moreover consumption inequality within mining districts is higher than in comparable nonproducing districts this dual effect of mining is accounted for by first the better educated immigrants required and attracted by mining activity and second the jobs that some community natives obtain in industries and services related to mining the inequalizing impact of mining both across and within districts may help explain the social discontent with mining in peru despite its enormous revenues an area for future research highlighted in the paper regards the usefulness of fiscal transfers to local governments the mining canon a key component of the fiscal decentralization reform of 2002 we find neither a detrimental nor a beneficial effect from the mining canon in peru whether this is explained by our early measurement of results 5 years into the decentralization program or by the lack of implementation capacity of local governments remains to be answered

erratum to the uniform price auction with endogenous supply abstract this paper shows that low price equilibria in the uniform price auction with endogenous supply do not exist if the seller employs the proportional rationing rule and is consistent when selecting among profit maximizing quantities in a consistent subgame perfect equilibrium the walrasian quantities are traded at the walrasian price

natural resources education and economic development economic growth since 1965 has varied inversely with the share of natural capital in national wealth across countries four main channels of transmission from abundant natural resources to stunted economic development are discussed a the dutch disease b rent seeking c overconfidence and d neglect of education public expenditure on education relative to national income expected years of schooling for girls and gross secondary school enrolment are all shown to be inversely related to the share of natural capital in national wealth across countries natural capital appears to crowd out human capital thereby slowing down the pace of economic development

demographic transition in resource rich countries a blessing or a curse summary this study argues that resource wealth is a key factor for understanding income effects of demographic transition we develop a simple model highlighting how the income effect of increased labor supply may depend on resource rents and provide empirical evidence that support the theoretical predictions using panel data covering the period from 1982 to 2006 for more than 120 countries we find a negative interaction effect between resource wealth and demographic transition on national income moreover the negative interaction effect does not depend on institutional quality and is found also across different samples

increasing returns and the genesis of american resource abundance the usa became the world s leading mineral producing nation between 1870 and 1910 a development paralleled by the rising resource intensity of american manufacturing this paper challenges the premise that resource abundance simply reflected the country s geological endowment of mineral deposits instead in the century following 1850 the usa exploited its natural resource potentials to a far greater extent than other countries and did so across virtually the entire range of industrial minerals the paper argues that natural resource abundance was an endogenous socially constructed condition that was not geologically preordained it examines the complex legal institutional technological and organizational adaptations that shaped the us supply responses to the expanding domestic and international industrial demands for minerals and mineral products it suggests that strong positive feedbacks even in the exploitation of depletable resources were responsible for the explosive growth of the american minerals economy

learning by doing and the dutch disease this paper develops a model of learning by doing and the dutch disease that extends the earlier literature in two ways first it is assumed that both the traded and the non traded sector can contribute to learning second it is assumed that there are learning spillovers between the sectors it is shown that within such a model a foreign exchange gift results in a real exchange rate depreciation in the long run due to a shift in the steady state relative productivity between the traded and the non traded sector in contrast to standard models of the dutch disease production and productivity in both sectors may go up or down the conditions for the different cases are worked out

oil and women a re examination abstract in a seminal article ross 2008 reports a negative correlation between oil production and women s representation in the labour force and politics across countries this article re examines these relationships exploiting variations in oil endowments to address endogeneity concerns we confirm that oil production causes decline in women s representation additionally we show that consistent with dutch disease effects oil production decreases women s employment in the traded sector however it also leads to an increase in women s employment in the nontraded sector we explore some social consequences of oil production and show that it results in women marrying earlier and having more children

natural resources institutional quality and economic growth in china the resource curse has been mainly studied using cross country samples in this paper we analyze a cross province sample from one country china we focus on the interplay between resource abundance institutional quality and economic growth using two different measures of resource abundance a stock resource reserves and a flow resource revenues and employing various econometric approaches including varying coefficient models we find that resource abundance has a positive effect on economic growth at the provincial level in china between 1990 and 2008 an effect that depends nonlinearly on institutional quality 1995 confidence in courts the west china development drive policy initiated in 2000 caused substantial changes which we investigate through a comparative panel data analysis

studying the role of political competition in the evolution of government size over long horizons here we argue for the use of cointegration and error correction analysis to combine economic factors that are nonstationary with political factors that are stationary into an empirical model of the evolution of public policy over long periods the approach is applied to disentangle the contributions of economics and politics to the evolution of public expenditure by the government of canada over 130 years political competition emerges as the primary political factor affecting government size

revisiting the oil curse does ownership matter summary a large body of literature finds a negative relationship between oil abundance and economic growth the existing empirical evidence on the oil curse however does not account for variations in the ownership of oil this article investigates whether the effect of oil abundance on growth varies with ownership structures it also investigates whether pre existing institutional conditions influence the effect of oil abundance across different ownership structures using a novel database on ownership structures and employing a panel fixed effects estimation method it analyzes a sample of oil exporting developing countries during the period 1984 2005 the results show that the effect of oil abundance on growth varies with ownership structures and is also influenced by the quality of pre existing institutions under state ownership and control oil abundance reduces growth when the institutional quality is poor but increases growth when the institutional quality is good under private ownership on the other hand oil abundance increases growth when the institutional quality is poor but reduces growth when the institutional quality is good the results suggest that ownership matters and countries can avoid the oil curse by choosing an appropriate ownership structure given their pre existing institutional circumstances the policy advice in this article is adopt state ownership and control if the institutions are strong if the institutions are weak transfer ownership to foreign oil companies

corruption and the political economy of resource based development a comparison of asia and sub saharan africa we model how the supply and demand for bribes affects resource use by an economy and the reinvestment of resource rents in other assets this requires adjusting the world bank s measure adjusted net savings for any rent dissipation due to corruption the impacts of corruption on long run changes and periodic growth in the adjusted net savings rate are estimated across african and asian economies from 1970 to 2003 corruption rather than resource dependency per se affects negatively the ability of african countries to reinvest resource rents in the short term but for asian countries corruption is less important than point resources corruption influences long run growth in adjusted net savings rates in all countries and is also the pathway through which this growth is affected by patterns of resource use trade and abundance

firms age process innovation and productivity growth abstract this paper looks directly at the impact of firms age and process innovations on productivity growth a model that specifies productivity growth as an unknown function of these variables is devised and estimated using semiparametric methods results show that firms enter the market experiencing high productivity growth and that above average growth rates tend to last for many years but also that productivity growth of surviving firms converges process innovations at some point then lead to extra productivity growth which also tends to persist somewhat attenuated for a number of years

optimal dynamic tax evasion a portfolio approach abstract most tax evasion models are set in a timeless environment though this is not suitable for a study of revenues from financial activities where tax evasion occurs in a dynamic environment this study examines a representative agent aiming to maximize the expected utility from inter temporal consumption and could invest in both riskless and risky assets through tax evasion is possible only in the latter case the investor must pay a fine when his her evasion is detected with a given probability we show that i optimal consumption is higher with tax evasion ii optimal evasion is affected by neither the return nor the volatility of the risky asset iii evasion reduces investment in the risky asset and increases investment in the riskless asset iv evasion can be reduced more efficiently by increasing the fine rather than by increasing the frequency of controls v for a sufficiently high tax rate on the riskless asset the optimal evasion is zero and vi if the fine is proportional to the amount of taxes for only sufficiently low fines the yitzhaki 1974 paradox is confirmed

natural resources democracy and corruption we study how natural resources can feed corruption and how this effect depends on the quality of the democratic institutions our game theoretic model predicts that resource rents lead to an increase in corruption if the quality of the democratic institutions is relatively poor but not otherwise we use panel data covering the period 1980 to 2004 and 124 countries to test this theoretical prediction our estimates confirm that the relationship between resource rents and corruption depends on the quality of the democratic institutions our main results hold when we control for the effects of income time varying common shocks regional fixed effects and various additional covariates they are also robust across different samples and to the use of various alternative measures of natural resources democracy and corruption