public trust the law and financial investment abstract how does trust evolve in markets what is the optimal level of regulation and how does this affect trust formation and economic growth in a theoretical model we analyze these questions given the value of social capital and the potential for growth in the market when social capital is valuable regulation and trustfulness are substitutes in this case regulation may cause lower aggregate investment and decreased economic growth when the social capital is less valuable regulation and trustfulness may be complements in the paper we analyze the optimal level of regulation and highlight the novel predictions of the model

a spatial model of international conflict 1 he model presented here assumes that nations initiate conflict to change the international status quo across one or more issues to an outcome they prefer their preferences for different issue outcomes are represented by a classical spatial utility function international coalitions are formed both to enhance the chance of a successful challenge and to counter existing challenges disputes are modeled as periods of competition between two coalitions through the recruitment of additional members erosion of support for the opposing coalition and escalation of the crisis the two nation model is analyzed in detail and the existence of the core for the resulting game is proved the two main conclusions of the two nation model are that nations have a general incentive to exaggerate their issue positions in disputes and that the possibility of issue trades enhances the likelihood of compromise because scientific understanding arises from theories the explication of theories is essential for the development of scientific understanding to understand international conflictthat is the resolution of disputes between nations by coercion or the threat of coercion a theory that can explain such conflict is needed this paper will present a model drawn from rational choice theory specifically game theory that explains national actions in conflicts as strategic choices made in order to gain preferred resolutions of the international issues in dispute compared to existing game theory models of international conflict the model presented here provides an explicit description of how each nation s evaluation of the issues in dispute affects its desire to pursue compromise or conflict a more detailed sequence of escalation allowing for the detailed study of escalation strategies and a framework that can explain the timing and extent of third party interventions into ongoing crises

are there civic returns to education abstract the hypothesized effects of educational attainment on adult civic engagement and attitudes provide some of the most important justifications for government intervention in the market for education in this study i present evidence on whether these externalities exist i assess and implement two strategies for identifying the effects of educational attainment one is based on the availability of junior and community colleges the other on changes in teen exposure to child labor laws the results suggest that educational attainment has large and statistically significant effects on subsequent voter participation and support for free speech i also find that additional schooling appears to increase the quality of civic knowledge as measured by the frequency of newspaper readership

good bye lenin or not the effect of communism on people s preferences preferences for redistribution as well as the generosities of welfare states differ significantly across countries in this paper we test whether there exists a feedback process of the economic regime on individual preferences we exploit the experiment of german separation and reunification to establish exogeneity of the economic system from 1945 to 1990 east germans lived under a communist regime with heavy state intervention and extensive redistribution we find that after german reunification east germans are more in favor of redistribution and state intervention than west germans even after controlling for economic incentives this effect is especially strong for older cohorts who lived under communism for a longer time period we further find that east germans preferences converge towards those of west germans we calculate that it will take one to two generations for preferences to converge completely

people s opium religion and economic attitudes since max weber there has been an active debate on the impact of religion on people s economic attitudes much of the existing evidence however is based on cross country studies in which this impact is confounded by differences in other institutional factors we use the worldvalues surveys to id entify the relationship between intensity of religious beliefs and economic attitudes controlling for country fixed effects we study several economic attitudes towardcooperation the government working women legal rules thriftiness andthe market economy we also distinguish across religious denominations differentiating on whether a religion is dominant in a country we find that on average religious beliefs are associated with good economic attitudes where good is defined as conducive to higher per capita income andgrowth yet religious people tendto be more racist andless favorable with respect to working women these effects differ across religious denominations overall we find that christian religions are more positively associatedwith attitudes conducive to economic growth r 2003 elsevier science b v all rights reserved jel classification a1 e0 n4 z1

social mobility and redistributive politics just like economists voters have conflicting views about redistributive taxation because they estimate its incentive costs differently we model rational agents as trying to learn from their dynastic income mobility experience the relative importance of effort and predetermined factors in the generation of income inequality and therefore the magnitude of these incentive costs in the long run left wing dynasties believing less in individual effort and voting for more redistribution coexist with right wing dynasties this allows us to explain why individual mobility experience and not only current income matters for political attiitudes and how persistent differences in perceptions about social mobility can generate persistent differences in redistribution across countries

corruption inequality and fairness bigger governments raise the possibilities for corruption more corruption may in turn raise the support for redistributive policies that intend to correct the inequality and injustice generated by corruption we formalize these insights in a simple dynamic model a positive feedback from past to current levels of taxation and corruption arises either when wealth originating in corruption and rent seeking is considered unfair or when the ability to engage in corruption is unevenly distributed in the population this feedback introduces persistence in the size of the government and the levels of corruption and inequality multiple steady states exist in some cases

the extent of the market and the supply of regulation we present a model in which setting up and running a regulatory institution takes a fixed cost as a consequence the supply of regulation is limited by the extent of the market we test three implications of this model first jurisdictions with larger populations affected by a given regulation are more likely to have it second jurisdictions with lower incremental fixed costs of introducing and administering new regulations should regulate more this implies that regulation spreads from higher to lower population jurisdictions and that jurisdictions that build up transferable regulatory capabilities should regulate more intensely consistent with the model we find that higher population u s states have more pages of legislation and adopt particular laws earlier in their history than do smaller states we also find that the regulation of entry the regulation of labor and the military draft are more extensive in countries with larger populations as well as in civil law countries where we argue that the incremental fixed costs are lower

the role of social capital in financial development to identify the effect of social capital on financial development we exploit social capital differences within italy in high social capital areas households are more likely to use checks invest less in cash and more in stock have higher access to institutional credit and make less use of informal credit the effect of social capital is stronger where legal enforcement is weaker and among less educated people these results are not driven by omitted environmental variables since we show that the behavior of movers is still affected by the level of social capital of the province where they were born

regulation and distrust in a cross section of countries government regulation is strongly negatively correlated with social capital we document this correlation and present a model explaining it in the model distrust creates public demand for regulation while regulation in turn discourages social capital accumulation leading to multiple equilibria a key implication of the model is that individuals in low trust countries want more government intervention even though the government is corrupt we test this and other implications of the model using country and individual level data on social capital and beliefs about government s role as well as on changes in beliefs and in trust during the transition from socialism

trust in large organizations several authors suggest that trust is an important determinant of cooperation between strangers in a society and therefore of performance of social institutions we argue that trust should be particularly important for the performance of large organizations in a cross section of countries evidence on government performance participation in civic and professional societies importance of large firms and the performance of social institutions more generally supports this hypothesis moreover trust is lower in countries with dominant hierarchical religions which may have deterred networks of cooperation trust hold up remarkably well on a cross section of countries this abstract was borrowed from another version of this item

a theory of misgovernance this paper tries to explain why government bureaucracies are often associated with red tape corruption and lack of incentives the paper identifies two specific ingredients that together can provide an explanation the fact that governments often act precisely in situations where markets fail and the presence of agency problems within the government we show that these problems are exacerbated at low levels of development and in bureaucracies dealing with poor people we also argue that we need to posit the existence of a welfare oriented constituency within the government in order to explain red tape and corruption

the regulation of labor author s botero juan djankov simeon la porta rafael lopez de silanes florencio shleifer andrei abstract we investigate the regulation of labor markets through employment collective relations and social security laws in 85 countries we find that the political power of the left is associated with more stringent labor regulations and more generous social security systems and that socialist french and scandinavian legal origin countries have sharply higher levels of labor regulation than do common law countries however the effects of legal origins are larger and explain more of the variation in regulations than those of politics heavier regulation of labor is associated with lower labor force participation and higher unemployment especially of the young these results are most naturally consistent with legal theories according to which countries have pervasive regulaory styles inherited from the transplantation of legal systems

family values and the regulation of labor flexible labor markets requires geographically mobile workers to be e cient otherwise rms can take advantage of the immobility of workers and extract monopsony rents in cultures with strong family ties moving away from home is costly thus individuals with strong family ties rationally choose regulated labor markets to avoid moving and limiting the monopsony power of rms even though regulation generates lower employment and income empirically we do nd that individuals who inherit stronger family ties are less mobile have lower wages are less often employed and support more stringent labor market regulations there are also positive cross country correlations between the strength of family ties and labor market rigidities finally we nd positive correlations between labor market rigidities at the beginning of the twenty rst century and family values prevailing before world war ii which suggests that labor market regulations have deep cultural roots

the dark side of sunshine regulatory oversight and status quo bias abstract as the mortgage foreclosure crisis accelerated in the u s in the late 2000s state level policymakers implemented measures designed to protect consumers and stem the tide of foreclosures one form of policy was simply to require lenders to report on foreclosure prevention activities such policies represented a shift from the status quo for mortgage loan servicing firms operating under incomplete information doing nothing with non paying loans while waiting for more information to be revealed to either foreclosing on the borrower or offering the borrower a modification of loan terms using a difference in difference in differences empirical strategy we exploit one policy implemented in maryland for a subset of mortgage servicers and find evidence that firms perform more loan modifications as well as file more foreclosures increasing foreclosure filings was contrary to the intent of the policy suggesting that policymakers should be aware of how firms exhibit systematic biases much like individuals

investigating capitalism aversion capitalism aversion there are two non mutually exclusive theories of individual variations in pro capitalism opinions the first theory views pro capitalism opinions as self serving individuals are opposed to market forces when they threaten their economic rents the second theory views differences in such opinions as reflecting genuine disagreement on the efficiency of various economic systems using individual data we investigate the validity of both theories focusing on attitudes toward private ownership private profit and competition we find evidence that the first theory explains some of the variations in attitudes however consistent with the second theory we also find evidence of individual learning about the comparative virtues of economic systems the learning is slow home biased and path dependent long run cultural and historical determinants of pro market attitudes such as religion and legal origins explain more than 40 of the cross country variations in capitalism aversion last we provide tentative evidence that at the country level pro market opinions affect the nature of economic institutions our results suggest that the feasibility of economic reform does not depend solely on its impact on the distribution of rents ideological a prioris are likely to be important as well

trust regulation and market failures abstract government regulation of firms is associated with more negative externalities and unofficial activity across countries i argue that this correlation mainly reflects causality going from concerns about market failures to demand for government intervention using trust in others as a proxy for such concerns i show that differences in trust explain a great deal of variation in entry regulations then controlling for trust in the regression of market failures on regulation the latter is no longer associated with worse economic outcomes the same result is confirmed when i exploit country population as an alternative source of variation in regulation

culture openness and finance abstract differences in culture proxied by differences in religion and language cannot be ignored when examining why investor protection differs across countries we show that a country s principal religion predicts the cross sectional variation in creditor rights better than a country s natural openness to international trade its language its income per capita or the origin of its legal system catholic countries protect the rights of creditors less well than protestant countries a country s natural openness to international trade mitigates the influence of religion on creditor rights culture proxies are also helpful in understanding how investor rights are enforced across countries

economic evaluation of miscanthus production a review this paper reviews the peer reviewed literature dealing with the economics of miscanthus cultivation to identify factors influencing the adoption of miscanthus and to reveal shortcomings in research in total 51 studies have been identified for this review the majority of these publications are recent i e the majority is published after 2009 and concern case studies in europe particularly the uk and ireland and north america this review reveals that the economic viability of miscanthus depends on largely uncertain assumptions especially concerning yields 10 48 t dry matter per ha and prices 48 134 t dry matter but also concerning the lifespan 10 20 years and different cost items a lack of established markets high establishment costs and uncertainties arising to a large extent from the long term commitment are identified as major barriers to miscanthus adoption in addition the level of support for miscanthus production e g via subsidies is identified as crucial for miscanthus profitability but is found to be highly heterogeneous across countries next to diversity in agronomic and economic assumptions also the assessment criteria and research techniques used to investigate the profitability of miscanthus differ widely while the net present value criterion was most frequently used we identify a lack of approaches that account for risks and uncertainties which seem to potentially play a critical role in the uptake of miscanthus by farmers

government in transition abstract the speed of economic reforms is not the only important determinant of the success of the transition to a market economy the transition of government from a communist state to an institution supporting a market economy is as critical survey evidence shows that russia lags significantly behind poland in the transition of its government which may account for its inferior economic performance despite adopting similar economic reforms i argue that the lack of turnover of old communist politicians and the creation of inappropriate electoral and fiscal incentives for these politicians may account for the poor performance of the russian government and suggest some strategies for improving the situation