tax havens and disclosure aggregation multinational firms have been accused by politicians regulators and citizen groups of shifting profits to low tax geographic areas we present evidence that multinational firms with tax haven operations tend to aggregate their geographic disclosures to a greater extent the results are consistent with managers attempting to avoid criticism by reducing the transparency of their tax avoidance activities we find these results to be stronger for larger firms with higher political costs and for firms in natural resources industries in retail industries or with low competition the evidence is relevant to policymakers and others interested in multinational firms financial reporting and tax activities

best policy response to environmental shocks applying a stochastic framework abstract the paper develops a general framework for the analysis of environmental shocks in growing economies endogenous capital investments allow identifying the dual role of capital as a buffer against shocks and a source of pollution we study the effects of recurring natural disasters on optimal growth and efficient environmental policies emissions may cause continuous fluctuations entail discrete and recurring jumps or trigger so called tipping points with large costs to the economy closed form solutions are provided for all the model variants we discuss possible applications in environmental economics and identify current research gaps

the household response to persistent natural disasters evidence from bangladesh we examine the short run economic impacts of recurrent flooding on bangladeshi households surveyed in 2000 2005 and 2010 in 2010 household income and expenditure survey hies households answered a set of questions on whether they were affected by flood and its likely impacts we identify two treatment affected groups by using the self reported data and historical rainfall data based flood risk index we estimate a difference indifference did model to quantify the impacts on income expenditure asset and labour market outcomes and further extend our analysis to different income and expenditure brackets overall we find robust evidence of negative impacts on agricultural income and expenditure intriguingly the extreme poor i e the bottom 15th quintile experience significant positive impacts on agricultural income in the self reported treatment case

the economics of small business finance the roles of private equity and debt markets in the financial growth cycle abstract this article examines the economics of financing small business in private equity and debt markets firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle we show the sources of small business finance and how capital structure varies with firm size and age the interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment we also analyze a number of research and policy issues review the literature and suggest topics for future research

rain and the democratic window of opportunity according to the economic approach to political transitions negative transitory economic shocks can give rise to a window of opportunity for democratic change we examine this hypothesis using yearly rainfall variation over the 1980 2004 period in 41 sub saharan african countries we find that a 25 drop in rainfall increases the probability of a transition to democracy during the following two years by around 3 percentage points a 5 fall in income due to low rainfall raises the probability of democratization by around 7 percentage points we also find that rainfall does not affect transitions from democracy to autocracy

the impact of climate change on incomes and convergence in africa abstract climate change is projected to detrimentally affect african countries economic development while income inequalities across economies is among the highest on the planet however it is projected that income levels would converge on the continent hitherto there is limited evidence on how climate change could affect projected income convergence accelerating slowing down or even reversing this process here we analyze convergence considering climate change damages by employing an economic model embedding the three dimensions of risks at the country level exposure vulnerability and hazards the results show 1 with historical mean climate induced losses between 10 and 15 percent of gdp per capita growth the majority of african economies are poorly adapted to their current climatic conditions 2 western and eastern african countries are projected to be the most affected countries on the continent and 3 as a consequence of these heightened impacts on a number of countries inequalities between countries are projected to widen in the high warming scenario compared to inequalities in the low and without warming scenarios to mitigate the impacts of economic development and inequalities across countries we stress 1 the importance of mitigation ambition and africa s leadership in keeping global mean temperature increase below 1 5 c 2 the need to address the current adaptation deficit as soon as possible 3 the necessity to integrate quantitatively climate risks in economic and development planning and finally 4 we advocate for the generalization of a special treatment for the most vulnerable countries to access climate related finance the analysis raises issues on the ability of african countries to reach their sdgs targets and the potential increasing risk of instability migration across african countries of decreased trade and economic cooperation opportunities as a consequence of climate change exacerbating its negative consequences

declining nutrient intake in a growing china does household heterogeneity matter summary this paper uses chinese household data for 1989 2009 to explain why mean nutrient intake has declined despite economic growth we focus on household heterogeneity in nutrient intake response to increases in household income allowing for its endogeneity a quantile instrumental variable fixed effects panel estimation shows that rising income tends to reduce inequality in macronutrient intake in both urban and rural areas in 2004 09 this is driven by increases in nutrient intake for the urban nutrient poor and falls in nutrient intake for the rural nutrient non poor on the other hand fluctuations in prices of meat eggs and oil increase nutrition poverty

natural disasters and human capital accumulation the empirical literature on the relationship between natural disaster risk and investment in education is inconclusive model averaging methods in a framework of cross country and panel regressions show an extremely robust negative partial correlation between secondary school enrollment and natural disaster risk this result is driven exclusively by geologic disasters exposure to natural disaster risk is a robust determinant of differences in secondary school enrollment between countries but not necessarily within countries natural disasters human capital education school enrollment bayesian model averaging

flooded with debt this study explores if natural disasters are able to trigger a sovereign debt default natural disasters make the debt of a country less sustainable as they worsen the public finances of a country the main findings from our empirical analysis clearly indicate that large scale natural disasters increase significantly the onset probability of a sovereign debt default by about three percentage points it turns out that particularly major earthquakes and storms raise the likelihood of a default as they create the most widespread damage reported worldwide this will limit the debt servicing opportunities of a country in the future

internal equity financing and the performance of multinational subsidiaries in emerging economies we examine the internal equity financing of the multinational subsidiary which retains and reinvests its own earnings internal equity financing is a type of firm specific advantage fsa along with other traditional fsas in innovation research and development brands and management skills it also reflects subsidiary level financial management decision making here we test the contributions of internal equity financing and subsidiary level financial management decision making to subsidiary performance using original survey data from british multinational subsidiaries in six emerging countries in the south east asia region our first finding is that internal equity financing acts as an fsa to improve subsidiary performance our second finding is that over 90 of financing sources including capital investment by the parent firms in the british subsidiaries come from internal funding our third finding is that subsidiary level financial management decision making has a statistically significant positive impact on subsidiary performance our findings advance the theoretical empirical and managerial analysis of subsidiary performance in emerging economies

catastrophic natural disasters and economic growth this paper examines the short and long run average causal impact of catastrophic natural disasters on economic growth by combining information from comparative case studies the counterfactual of the cases studied is assessed by constructing synthetic control groups taking advantage of the fact that the timing of large sudden natural disasters is an exogenous event it is found that only extremely large disasters have a negative effect on output both in the short and long run however this result appears in two events where radical political revolutions followed the natural disasters once these political changes are controlled for even extremely large disasters do not display any significant effect on economic growth it is also found that smaller but still very large natural disasters have no discernible effect on output

valuation of environmental goods a shadow value perspective abstract this paper proposes a shadow value based methodology for the economic valuation of environmental goods the proposed method derives from a cost of production perspective this type of approach represents advantages with respect to usual methods linked with demand perspective when the interests of future generations is under consideration the computational procedure is simple and the required information easy to obtain we explain how the methodology works with the help of a forestry example

uniqueness and indeterminacy on the dynamics of endogenous growth abstract in this paper we study the dynamics of endogenous growth both in the model of lucas and in a generalization that incorporates a labor leisure choice we characterize the regions of the parameter space that give rise to unique equilibria as well as the regions that yield a continuum of equilibria with positive growth rates we find that such multiple equilibria exist for empirically very plausible parameters in particular when the lucas model is modified to incorporate endogenous labor journal of economic literature numbers e00 e3 o40

the globe debate back to relevance this is a critical summary review of the debate about the global leadership and organizational behavior effectiveness globe study in jibs and other journals between november 2006 and the present issue several contributors did not realize that globe used three essential constructs taken from my publications in a sense entirely different from mine values practices and organizational culture not recognizing the ensuing confusion they had no answer for the question in my 2006 review what did globe really measure if you do not know what you are talking about you can continue arguing for ever beyond the fuzziness of what is measured the debate leaves us with an even more fundamental question what is the use of the globe dimensions

inflation targeting as a shock absorber abstract we study the characteristics of inflation targeting as a shock absorber using quarterly data for a large panel of countries to overcome an endogeneity problem between monetary regimes and the likelihood of crises we propose to study large natural disasters we find that inflation targeting improves macroeconomic performance following such exogenous shocks it lowers inflation raises output growth and reduces inflation variability compared to alternative monetary regimes this performance is mostly due to a different response of monetary policy and fiscal policy under inflation targeting finally we show that only hard but not soft targeting reaps the rewards deeds not words matter for successful monetary stabilization

deep impact geo simulations as a policy toolkit for natural disasters adverse post natural disaster outcomes in low income regions like elevated internal migration levels and low consumption levels are the result of market failures poor mechanisms for stabilizing income and missing insurance markets which force the affected population to respond and adapt to the shock they face in a spatial environment with multiple locations with independent but inter connected markets these transitions quickly become complex and highly non linear due to the feedback loops between the micro individual level decisions and the meso location wise market decisions to capture these continuously evolving micro meso interactions this paper presents a spatially explicit bottom up agent based model to analyze natural disaster like shocks to low income regions the aim of the model is to temporally and spatially track how population distributions income and consumption levels evolve in order to identify low income workers that are food insecure the model is applied to the 2005 earthquake in northern pakistan which faced catastrophic losses and high levels of displacement in a short time span and with market disruptions resulted in high levels of food insecurity the model is calibrated to pre crisis trends and shocked using distance based output and labor loss functions to replicate the earthquake impact model results show how various factors like existing income and saving levels distance from the fault line and connectivity to other locations can give insights into the spatial and temporal emergence of vulnerabilities the simulation framework presented here leaps beyond existing modeling efforts which usually deals with macro long term loss estimates and allows policy makers to come up with informed short term policies in an environment where data is non existent policy response is time dependent and resources are limited

sudden stops and the mexican wave currency crises capital flow reversals and output loss in emerging markets sudden stops are the simultaneous occurrence of a currency balance of payments crisis with a reversal in capital flows we investigate whether sudden stop crises are a unique phenomenon and whether they entail an especially large and abrupt pattern of output collapse a bmexican waveq using a panel data set over 1975 1997 and covering 24 emerging market economies we distinguish between the output effects of currency crises capital inflow reversals and sudden stop crises sudden stop crises have a large negative but short lived impact on output growth over and above that found with currency crises a currency crisis typically reduces output by about 2 3 while a sudden stop reduces output by an additional 6 8 in the year of the crisis the cumulative output loss of a sudden stop is even larger around 13 15 over a 3 year period our model estimates correspond closely to the output dynamics of the dmexican wavet such as seen in mexico in 1995 turkey in 1994 and elsewhere and out of sample predictions of the model explain well the sudden and seemingly unexpected collapse in output associated with the 1997 1998 asian crisis d 2005 elsevier b v all rights reserved

the shocking origins of political transitions evidence from earthquakes do earthquakes trigger political transitions using a rich panel dataset of 160 countries observed over 1950 2007 we find that earthquake shocks measured in terms of the effect of ground motion amplitude on death toll have two contradicting effects on political change on the one hand earthquakes drive transitions into democracy due to an affective shock which we interpret to be the reaction of citizens by which they hold the incumbent government responsible for earthquake damages on the other hand earthquakes indirectly hasten transitions into a less democratic regime because they increase the income level contemporaneously possibly due to short term emergency response and recovery expenditures and thus raising the opportunity cost of contesting the incumbent government overall we show that while not leading to a full fledged regime transition earthquake shocks open a new democratic window of opportunity but this window is narrowed by improved economic conditions

efficient dynamic pollution taxation in an uncertain environment this paper analyzes efficient pollution taxation within a stochastic model of endogenous growth pollution is a by product of production and causes disutility furthermore the productivity which results from environmental quality is uncertain this reflects e g uncertain capital depreciation induced by natural disasters like hurricanes or floods this uncertainty is shown to raise an ambiguous impact on the optimal pollution level as well as on optimal environmental taxation market equilibrium turns out to be suboptimal since the households mis perceive their individual impact on pollution conditions for welfare maximizing pollution taxation are stated and it is shown that a direct pollution tax is not appropriate to yield pareto optimal growth instead a linear capital income tax together with a linear abatement subsidy build an efficient tax scheme if secondarily the governmental budget is balanced moreover an increase in the riskiness of environmental productivity may even lead to an increase in the optimal pollution level and to a decrease in optimal environmental taxation depending predominantly on the preference parameters

effective climate policies in a dynamic north south model abstract the paper develops a two region endogenous growth model with climate change affecting the countries capital stocks negatively we compare two different policies aimed at supporting less developed countries climate mitigation by developed countries which moderates the increase in stock pollution and hence capital depreciation and income transfers in the tradition of development aid under a mild set of assumptions we find that active climate policies are more efficient for developed economies and also remarkably better for developing countries than additional development aid the main reason is the difference between the two policies with respect to their effects on economic growth the results are robust with respect to possible model extensions

are external shocks responsible for the instability of output in low income countries external shocks such as commodity price fluctuations natural disasters and the role of the international economy are often blamed for the poor economic performance of low income countries the author quantifies the impact of these different external shocks using a panel vector autoregression var approach and compares their relative contributions to output volatility in low income countries vis a vis internal factors he finds that external shocks can only explain a small fraction of the output variance of a typical low income country internal factors are the main source of fluctuations from a quantitative perspective the output effect of external shocks is typically small in absolute terms but significant relative to the historic performance of these countries

sudden stops banking crises and investment collapses in emerging markets abstract we evaluate whether financial openness leaves emerging market economies vulnerable to the adverse effects of capital reversals sudden stops on domestic investment we investigate this claim in a broad sample of emerging markets during the period 1976 2002 if the banking sector does not experience a systemic crisis sudden stop events fail to have a significant impact on investment bank crises on the other hand have a significant negative effect on investment even in the absence of a contemporaneous sudden stop crisis we also find that openness to capital flows worsens the adverse impact of banking crises on investment our results provide statistical support for the policy view that a strong banking sector which can withstand the negative fallout of capital flight is essential for countries that open their economies to international financial flows

anonymous shell companies a global audit study and field experiment in 176 countries to test whether firms behave consistently with international law prohibiting anonymous incorporation we conducted a global audit study and field experiment using data from 1639 incorporation firms in 176 countries we requested anonymous incorporation and randomly assigned references to international law threat of penalties norms of appropriate behavior or a placebo we find a substantial number of firms willing to flout international standards and show that those in oecd countries proved significantly less compliant with rules than in developing countries or tax havens firms in tax havens displayed significantly greater compliance and were sensitive to experimental interventions invoking international law

climate change green growth and aid allocation to poor countries with serious impacts of climate change looming in a few decades but current poverty still high in the developing world we ask how to spend development aid earmarked for the poor poverty reduction tends to be strongly linked to economic growth but growth impacts the environment and increases co2 emissions so can greener growth that is more climate resilient and less environmentally damaging deliver large scale poverty reduction can aid be used for effective poverty reduction now without affecting carbon emissions substantially we argue that there are bound to be trade offs between emissions reductions and a greener growth on the one hand and growth that is most effective in poverty reduction we argue that development aid earmarked for the poorest countries should only selectively pay attention to climate change and remain focused on fighting current poverty reduction including via economic growth not least as future resilience of these countries and their population will depend on their ability to create wealth and build up human capital now the only use for development aid within the poorest countries for explicit climate related investment ought to be when the investments also contribute to poverty reduction now including for increasing resilience to current impacts of environmental shocks or when the investments done now have serious intertemporal lock in problems so that they have implications also for when climate change bites by 2050 in our conclusions we offer a series of concrete principles to judge development spending

the price impact of extreme weather in developing countries we examine the impact of extreme weather on consumer prices in developing countries by constructing a monthly data set of potential hurricane and flood destruction indices and linking these with consumer price data for 15 caribbean islands our econometric model shows that the price impact of extreme weather events can be large to illustrate potential welfare losses due to these price effects we combine our estimates with price elasticities obtained from a demand system and with event probabilities for jamaica our results show that while expected monthly losses are small rare events can cause large falls in monthly welfare due to price increases

natural disasters in a two sector model of endogenous growth using an endogenous growth model with physical and human capital accumulation this paper considers the sustainability of economic growth when the use of a polluting input e g fossil fuels intensifies the risk of capital destruction through natural disasters we find that growth is sustainable only if the tax rate on the polluting input increases over time the long term rate of economic growth follows an inverted v shaped curve relative to the growth rate of the environmental tax and it is maximized by the least aggressive tax policy of those that asymptotically eliminate the use of polluting inputs unavailability of insurance can accelerate or decelerate the growth maximizing speed of the tax increase depending on the relative significance of the risk premium and precautionary savings effects welfare is maximized under a milder environmental tax policy especially when the pollutants accumulate gradually

banks as secret keepers banks are optimally opaque institutions they produce debt for use as a transaction medium bank money which requires that information about the backing assets loans not be revealed so that bank money does not fluctuate in value reducing the efficiency of trade this need for opacity conflicts with the production of information about investment projects needed for allocative efficiency intermediaries exist to hide such information so banks select portfolios of information insensitive assets for the economy as a whole firms endogenously separate into bank finance and capital market stock market finance depending on the cost of producing information about their projects

how bad are twins output costs of currency and banking crises we investigate the output effects of banking and currency crises in emerging markets focusing on whether twin crises entail especially large losses recent literature emphasizes the costs of financial crises and suggests that twin crises are particularly damaging to the real economy using a panel data set for 1975 97 we find that currency banking crises are very costly reducing output by about 5 8 8 10 over a 2 4 year period the cumulative loss of both types of crises is therefore very large we do not find however additional feedbacks or interactive effects associated with twin crises further damaging the economy

scarcity growth and r d abstract the limits to economic growth due to resource scarcity can be alleviated only by the development of backstop substitutes this paper combines resource based economic growth with r d to reduce the cost of backstop technologies characterizing the entire dynamics of optimal growth and r d processes we find that an economy s growth prospects depend on its type as determined by its production technology and learning ability and by its knowledge capital endowment a wide variety of growth patterns emerges ranging from cases in which an economy that without r d eventually stagnates converges to a steady state is diverted by r d onto a path of sustained growth to cases in which r d is not warranted resource scarcity is shown to encourage r d due to the increased reliance on the backstop technology

the dynamics of foreign direct investments in land and pollution accumulation following the recent increase of foreign direct investments in land this paper studies their possible effects on the development of a local economy to this aim we use a two sector model external and local with heterogeneous agents external investors and local land owners we assume that both sectors are negatively affected by pollution but only the external sector is polluting the local government can tax the external sector s production activities to finance environmental defensive expenditures we first examine the equilibria that emerge in the model from the dynamics of pollution and physical capital and then investigate the conditions for the coexistence of the two sectors and the impact of the external sector on the revenues of the local population using numerical simulations we show that a revenue increasing path may occur only if the pollution tax is high enough and the impact of the external sector on pollution is low enough otherwise foreign direct investments may end up impoverishing the local population

fiscal responses after catastrophes and the enabling role of financial development natural disasters may constitute a major shock to public finances and debt sustainability because of their impact on output and the need for government response with reconstruction and relief expenses the question arises of whether governments can use financial development policy as the means to mitigate or insure against this negative fiscal impact this paper uses a panel vector autoregressive model estimated on annual data for high and middle income countries over 1975 2008 to study the role of debt market development and insurance penetration in enabling fiscal response after catastrophes the authors find that countries with higher debt market development suffer smaller real consequences from disasters but that their deficits expand further followingthe mitigating fiscal response disasters in countries with high insurance penetration also experience smaller real consequences of disasters but without the need for further deficit expansions from an ex post perspective the availability of insurance could offer the best mitigation approach against the real and fiscal consequences of disasters

does the exchange rate regime matter for real shocks evidence from windstorms and earthquakes abstract does the choice of exchange rate regime affect an economy s adjustment to real shocks exploiting the unpredictability and economic exogeniety of windstorms hurricanes and typhoons and earthquakes this paper assesses the often contrasting answers found in the theoretical literature there is robust evidence that exchange rate flexibility helps an economy better adjust to real shocks and consistent with the channels emphasized in the classic literature on exchange rates and shocks differences in the behavior of the export sector help explain the different reactions between the two regimes

measuring efficiency by a single price system we propose a multi criteria model to measure the relative levels of efficiency for a set of alternatives measurement is achieved by a single price system this involves a marked difference between data envelopment analysis dea and the model herein neither the assumptions of the proposed model nor its mathematical solution are related to dea in contrast to dea the model allows for selecting a single efficiency optimum

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

why economic dynamics matter in assessing climate change damages illustration on extreme events extreme events are one of the main channels through which climate and socioeconomic systems interact and it is likely that climate change will modify the probability distribution of the losses they generate the long term growth models used in climate change assessments however cannot capture the eects of such shortterm shocks to investigate this issue a non equilibrium dynamic model nedym is used to assess the macroeconomic consequences of extreme events this exercise allowed us to dene the economic amplic ation ratio as the ratio of the overall production loss due to an event to its direct costs this ratio could be used to improve the cost benet analysis of prevention measures we found also that unlike a solow like model nedym exhibits a bifurcation in gdp losses for each value of the capacity to fund reconstruction gdp losses remain moderate if the intensity and frequency of extremes remain under a threshold value beyond which gdp losses increase sharply this bifurcation may partly explain why some poor countries that experience repeated natural disasters cannot develop applied to the specic issue of climate change this model suggests that changes in the distribution of extremes may entail signican t gdp losses in absence of specic adaptation it suggests therefore that to avoid inaccurately low assessments of damages researchers must take into account the distribution of extremes instead of their average cost and make explicit assumptions on the organization of future economies

are there limits to growth a simple theoretical model of pollution is developed that generates an inverted u shape relationship between per capita income and environmental quality this model is then used to study long run growth the same inverted u shape is shown to appear in time series and the prospects for sustained growth are shown to hinge on whether increasingly strict environmental regulation is compatible with a constant rate of return on capital implementation is also studied tax and voucher schemes are shown to have an advantage over direct regulation because they provide the correct incentives for capital accumulation copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the enso effect and asymmetries in wheat price dynamics summary climate has historically played a critical role in the development of nations primarily due to its intrinsic linkage with agricultural production and prices this study examines one such relationship between the better known and most talked about climate anomaly el nino southern oscillation enso and the international prices of wheat one of the most produced and consumed grain cereals in the world the enso price relationship moreover is assumed to be characterized by nonlinear dynamics because of the known asymmetric nature of enso cycles as well as that of wheat prices this study applies a vector smooth transition autoregressive vstar modeling framework to monthly spot prices of wheat from the united states the european union australia canada and argentina as well as the sea surface temperature anomalies from the nino3 4 region which serves as a proxy for the enso variable results show that overall wheat prices tend to increase after la nina events and decrease after el nino events the regime dependent dynamics are apparent with more amplified price responses after la nina shocks and with more persistent price responses during the la nina conditions this is consistent with the economics of storage wherein shocks related to expected supply and demand are known to have a more pronounced effect in a low inventory regime findings of this study have strong implications for development economics as they point to an additional channel of adversity due to the enso related climate shocks moreover the enso induced price fluctuations are likely to affect the dynamics of international food and cash programs during extreme episodes of this climate anomaly

sustainable growth and the environmental kuznets curve abstract this paper develops an endogenous growth model with pollution and both human and physical capital human capital is produced cleanly and physical capital can be used for pollution control economic growth is sustainable in the long run it is optimal for human capital to grow more rapidly than physical capital output and consumption while pollution declines for realistic parameter values our results differ sharply from stokey s result for an ak technology that sustained economic growth is not optimal the model can generate an environmental kuznets curve a pollution tax or a voucher system can implement the pareto efficiency solution

multicriteria decision analysis and environmental economics an approximation abstract a multicriteria approach to address basic problems in environmental economics is proposed in this paper the methodology is underpinned by the wellknown multicriteria method called compromise programming together with some recent results relating the compromise sets with the traditional optimisation of the utility functions to illustrate the proposed methodology the following two cases are suggested 1 the reconciliation between economic environmental as well as recreational objectives inherent to the management of an environmental asset such as forestry system and 2 its application to the appraisal of environmental improvements or damages when nonmonetary objectives are involved

natural disaster situations and growth a macroeconomic model for sudden disaster impacts the aim of this paper is to examine the relation between a natural disaster situation and its potential effects on the growth rate of output by means of a simple macroeconomic model which is later applied as a demonstration to a sample of countries affected by major natural disasters in the last two decades this quantitative application appears to support the model the main conclusions are that capital loss is unlikely to have an important effect on growth and that a very moderate response expenditure may be sufficient to prevent the growth rate of output from falling a general derived conclusion is that foreign and public disaster response may be better used to help actual victims and affected activities directly than to proceed on the rather unsound prima facie belief that the economy will be heavily affected by the disaster

a theory of disasters and long run growth abstract this paper develops a unified framework in which various types of catastrophic shocks can be simultaneously considered within a standard model of economic growth we first establish the basic existence and equivalence results we then apply the framework to an endogenous growth model to consider the influence of disasters on the long term equilibrium and the transition phase the result shows that while experiencing disasters may lower the average growth rate of the affected countries there exist various channels through which the risk of disasters and long term economic performance are positively correlated this finding reconciles the apparently contradictory evidence in recent empirical studies

adaptation for mitigation this paper develops a two region north and south dynamic model in which regional stocks of effective labor are negatively influenced by the global stock of pollution by characterizing the equilibrium strategy of each region we show that the regions best responses can be strategic complements through a dynamic complementarity effect the model is then used to analyze the impact of adaptation assistance from north to south it is shown that north s unilateral assistance to south thus enhancing south s adaptation capacity can facilitate pollution mitigation in both regions especially when the assistance is targeted at labor protection pollution might increase in the short run but in the long run the level of pollution will decline the adaptation assistance we propose is incentive compatible and pareto improving

migration risk and liquidity constraints in el salvador abstract this article utilizes panel data from el salvador to investigate the use of transnational migration as an ex post risk management strategy i show that adverse agricultural conditions in el salvador increase both migration to the united states and remittances sent back to el salvador i show that in the absence of any agricultural shocks the probability that a household sent members to the united states would have decreased on average by 24 26 i also show that the 2001 earthquakes reduced net migration to the united states a one standard deviation increase in earthquake damage reduced the average probability of northward migration by 37 11 the evidence suggests that the effects of the earthquakes had more to do with households retaining labor at home to cope with the effects of the disaster than with the earthquakes disrupting migration financing

the macroeconomic consequences of disasters abstract natural disasters have a statistically observable adverse impact on the macro economy in the short run and costlier events lead to more pronounced slowdowns in production yet interestingly developing countries and smaller economies face much larger output declines following a disaster of similar relative magnitude than do developed countries or bigger economies a close study of the determinants of these adverse macroeconomic output costs reveals several interesting patterns countries with a higher literacy rate better institutions higher per capita income higher degree of openness to trade and higher levels of government spending are better able to withstand the initial disaster shock and prevent further spillovers into the macro economy these all suggest an increased ability to mobilize resources for reconstruction financial conditions also seem to be of importance countries with more foreign exchange reserves and higher levels of domestic credit but with less open capital accounts appear more robust and better able to endure natural disasters with less adverse spillover into domestic production

natural disasters and countries exports new insights from a new and an old database this paper is the first to uncover in details the impact of different families of disasters on exports from 1979 to 2000 storms floods earthquakes and changes in temperatures besides our paper is the first to compare in a quasi systematic way the results across the two data sets at hand the standard em dat data and geomet data a newly available data set based on geophysical and meteorological data european economic review 2013 58 18 journal of development economics 2014 111 92 we run series of regressions while accounting progressively for the characteristics of products all traded goods v s agriculture ones the characteristics of the country size level of development and the intensity of the catastrophes when pooling all countries and all types of disasters we do not find any statistical impact on exports but when focusing on each of them separately and on agricultural goods the occurrence of an earthquake appears to reduce exports of about 3 regardless of its location a windstorm shock even when it happens to be very severe has hardly any impact a flood on its side is estimated to reduce export flows of a small country by nearly 3 the effect of changes in temperatures is ambiguous all in all except for temperature related disasters the results are consistent across both data sets em dat and geomet although they appear to be slightly more in line with our expectations in the case of geomet

the transaction costs theory of joint ventures an empirical study of japanese subsidiaries in the united states this paper offers the first large sample empirical study of the factors which influence the choice of japanese firms between full or partial ownership of their u s manufacturing subsidiaries it studies for the first time the ownership policies of investors of a single home country in a single host country thus keeping variations within home and host countries constant one methodological improvement over previous studies is the use as independent variables of the relevant characteristics of the investing firms these had been proxied in previous studies by data on u s industries entered the results suggest that the degree of ownership taken by japanese manufacturing investors in their american subsidiaries is driven by the same general transaction costs variables that determine the choices made by their u s counterparts japanese parents joint venture when they need to combine with other firms intermediate inputs which are subject to high market transaction costs an intriguing result however is the lack of significance of two variables which in the u s case strongly push towards full control of foreign subsidiaries in this study neither the japanese parent s r d nor its advertising intensities had any significant impact on their ownership policies

natural disasters and macroeconomic performance recent empirical research has shown that output and gdp per capita in the aftermath of natural disasters are not necessarily lower than before the event in many cases both are not significantly affected and surprisingly sometimes they are found to respond positively to natural disasters here we propose a novel economic theory that explains these observations specifically we show that gdp is driven above its pre shock level when natural disasters destroy predominantly durable consumption goods cars furniture etc disasters destroying mainly productive capital in contrast are predicted to reduce gdp insignificant responses of gdp can be expected when disasters destroy both durable goods and productive capital we extend the model by a residential housing sector and show that disasters may also have an insignificant impact on gdp when they destroy residential houses and durable goods we show that disasters irrespective of whether their impact on gdp is positive negative or insignificant entail considerable losses of aggregate welfare

natural disasters growth and institutions a tale of two earthquakes abstract we examine the impact of natural disasters on gdp per capita by applying the synthetic control approach and using a within country perspective our analysis encompasses two large scale earthquakes that occurred in two different italian regions in 1976 and 1980 we show that the short term effects are negligible in both regions though they become negative if we simulate the gdp that would have been observed in absence of financial aid in the long term our findings indicate a positive effect in one case and a negative effect in the other largely reflecting divergent patterns of the tfp consistent with these findings we offer further evidence suggesting that a quake and related financial aid might either increase technical efficiency via a disruptive creation mechanism or reduce it by stimulating corruption distorting the markets and deteriorating social capital finally we show that the bad outcome is more likely to occur in regions with lower pre quake institutional quality as a result our evidence suggests that unanticipated local shocks are likely to change long run growth rates exacerbating territorial disparities

renewable resources in an endogenously growing economy balanced growth and transitional dynamics abstract we introduce a renewable resource sector into an endogenous growth model of a small economy deriving the transitional dynamic equilibrium the model generates a long run equilibrium in which a resource sector of limited size can coexist with constant ongoing growth elsewhere the key feature of the model is the allocation of labor between harvesting the resource and its use in the final output sector this naturally generates the empirically observed negative relationship between resource abundance and growth we examine both the dynamic and long run responses of the economy to various shocks pertaining to technological production conditions and resource sector parameters

post disaster aid and development of the manufacturing sector lessons from a natural experiment in china abstract we adopt a disaggregate approach to study the link between aid and dutch disease dynamics using a natural experiment in china specifically we examine whether post disaster aid provided to a subsample of chinese counties devastated by an earthquake in 2008 affects the sectoral composition of local economies using different methods we consistently find that counties receiving more aid even nearby counties not directly damaged by the earthquake tend to suffer from a contraction of the manufacturing sector innovative features of the paper include its regional perspective its identification strategy resting on a special provision in chinese policy pairwise aid and its focus on dutch disease effects in the context of post disaster aid

using weather variability to estimate the response of savings to transitory income in thailand this paper measures the extent to which farmers are able to use savings and dissavings to smooth consumption in response to unexpected shocks to income time series information on regional rainfall is used to construct estimates of transitory income due to rainfall shocks the relationship between these measures of transitory income and savings indicates that farm households save a significantly higher fraction of transitory income than nontransitory income jel d91 016 the incomes of farm households in developing countries are notorious for being both low and uncertain policies that increase the incomes of farmers may well be different

optimum growth and carbon policies with lags in the climate system we study the optimal carbon tax in an economy in which climate change stemming from polluting non renewable resource affects the economy s growth potential our main contribution is to introduce and explore the natural time lag of the climate system between emissions and damages to capital accumulation in an endogenous growth setting this allows us to investigate how optimal climate policy and its interplay with climate dynamics affect long run growth and the transition of the economy towards it without pollution decay a higher speed of emissions diffusion steepens the growth profile of the economy with pollution decay this leads to lower short run but higher long run economic growth during transition poor understanding of the emissions diffusion process leads to suboptimal carbon taxes resource extraction and growth

building resilience to natural disasters an application to small developing states abstract we present a dynamic small open economy model to explore the macroeconomic impact of a major natural disaster in addition to permanent damages to public and private capital the disaster causes temporary losses of productivity inefficiencies during the reconstruction process and damages to the sovereign s creditworthiness we use the model to study the debt sustainability concerns that arise from the need to fully rebuild public infrastructure over the medium term and analyze the feasibility of ex ante policies such as building adaptation infrastructure and fiscal buffers and contrast these policies with the post disaster support provided by donors investing in resilient infrastructure may prove useful in particular if it is viewed as complementary to standard infrastructure because it raises the marginal product of private capital crowding in private investment while helping withstand the impact of the natural disaster in an application to vanuatu we find that donors should provide an additional 50 of pre cyclone gdp in grants to be spent over the following 15 years to ensure public debt remains sustainable following cyclone pam helping the government build resilience on the other hand reduces the risk of debt distress and at lower cost for donors

economic development and losses due to natural disasters the role of hazard exposure abstract our contribution is to show that the relationship between wealth and disasters is mainly formed by the exposure to disaster hazard we first build a simple analytical model that demonstrates how countries that face a low hazard of disasters are likely to see first increasing losses and then decreasing ones with increasing economic development at the same time countries that face a high hazard of disasters are likely to experience first decreasing losses and then increasing ones with increasing economic development we then use a cross country panel dataset in conjunction with a hazard exposure index to investigate whether the data is consistent with the predictions from the model in line with our model we find that the relationship of losses with wealth crucially depends on the level of hazard of natural disasters faced by countries

can natural disasters have positive consequences investigating the role of embodied technical change it has been suggested that disasters might have positive economic consequences through the accelerated replacement of capital this possibility is referred to as the productivity effect this effect is investigated using a model with embodied technical change in this framework disasters can influence the production level but cannot influence the growth rate in the same way than the saving ratio in a solow like model depending on reconstruction quality indeed accounting for embodied technical change can either decrease or increase disaster costs but is never able to turn disasters into positive events moreover a better but slower reconstruction amplifies the short term consequences of disasters but pays off over the long term regardless the productivity effect cannot prevent the existence of a bifurcation when disaster damages exceed the reconstruction capacity potentially leading to poverty traps c 2008 elsevier b v all rights reserved

bank dependence in emerging countries cross border information percolation in mutual fund equity investing in contrast to the literature involving u s bank domestic lending we find that mutual funds affiliated with lending banks reduce their equity investment and turnover in the non u s listed stock of their non u s borrowers compared to non lending banks or unaffiliated mutual funds reduced equity holdings increase loan spreads preserving the lending bank s cross border information monopoly equity market holdings and turnover are reduced when banks lend to firms in emerging nations and when the geographic distance between the lender and the mutual fund manager is greatest thereby long range information percolation may benefit global institutions at the expense of individual subsidiaries

economic development and the impacts of natural disasters abstract we use disaster impact data over time to examine the degree to which the human and economic losses from natural disasters are reduced as economies develop we find that countries with higher income higher educational attainment greater openness more complete financial systems and smaller government experience fewer losses

the growth aftermath of natural disasters this paper provides a description of the macroeconomic aftermath of natural disasters it traces the yearly response of gross domestic product growth both aggregated and disaggregated into its agricultural and non agricultural components to four types of natural disasters droughts floods earthquakes and storms the paper uses a methodological approach based on pooling the experiences of various countries over time it consists of vector auto regressions in the presence of endogenous variables and exogenous shocks varx applied to a panel of cross country and time series data the analysis finds heterogeneous effects on a variety of dimensions first the effects of natural disasters are stronger for better or worse on developing than on rich countries second while the impact of some natural disasters can be beneficial when they are of moderate intensity severe disasters never have positive effects third not all natural disasters are alike in terms of the growth response they induce and perhaps surprisingly some can entail benefits regarding economic growth thus droughts have a negative effect on both agricultural and non agricultural growth in contrast floods tend to have a positive effect on economic growth in both major sectors earthquakes have a negative effect on agricultural growth but a positive one on non agricultural growth storms tend to have a negative effect on gross domestic product growth but the effect is short lived and small future research should concentrate on exploring the mechanisms behind these heterogeneous impacts

natural disasters and the effect of trade on income a new panel iv approach natural disasters affect bilateral trade we use this fact to generalize the instrumental variables strategy of frankel and romer 1999 to a panel setup this allows revisiting an old question does openness cause per capita gdp we work with a modified gravity framework in which we interact foreign natural disasters with geography predicting the exogenous component of bilateral trade flows and aggregating over trade partners we obtain a time varying instrument for multilateral openness of a country controlling for constant determinants of income history geography by means of fixed effects we find a robust positive effect of trade on income averaging 0 74 the estimated elasticity is substantially smaller than the one obtained in the cross section poor or non oecd countries feature a larger elasticity

exchange market mayhem the antecedents and aftermath of speculative attacks exchange market mayhem the antecedents and aftermath of speculative attacks this paper evaluates the causes and consequences of episodes of turbulence in foreign exchange markets using data from 1959 through 1993 for twenty oecd countries we consider the antecedents and aftermath of devaluations and revaluations flotations fixings and speculative attacks which may not be successful we find that realignments of fixed exchange rates are alike devaluations are preceded by political instability budget and current account deficits and fast growth of money and prices revaluations are mirror images of devaluations speculative attacks resemble devaluations but money growth and inflation are more endemic and there is no last minute attempt to tighten monetary policy in contrast few consistent correlations link regime transitions like flotations or fixings to macroeconomic or political variables transitions between exchange rate regimes are largely idiosyncratic and are neither consistently provoked ex ante by systematic imbalances nor typically justified ex post by subsequent changes in policy we conclude that there are no clear early warning signals of many speculative attacks and no easy solutions for policy makers barry eichengreen andrew k rose and charles wyplosz

natural disasters and labor markets abstract while it is clear that natural disasters have serious welfare consequences for affected populations less is known about how local labor markets in low income countries adjust to such large shocks combining data from the indonesia family life survey the desinventar database the u s geological survey and district level employment indicators this paper explores how a large earthquake in indonesia affected labor market outcomes in particular the evolution of wages across sectors i find that the earthquake had a positive effect on wage growth for workers who were employed in the agricultural sector at baseline i propose two mechanisms for this result a higher growth rate of the price of rice and a downward shift in the supply of workers in the agricultural sector i show that evidence mainly supports the latter labor shifted out of the agricultural sector into the construction sector raising the marginal product of labor in agriculture

energy transition under irreversibility a two sector approach in this paper we analyze the optimal energy transition of a two sector economy energy and final goods with exhaustible oil reserves a renewable source of energy and a pollution threat the latter corresponds to a pollution threshold above which a part of the capital is lost following flooding for instance we show that the optimal energy transition path may correspond to a corner regime in which the economy starts using both resources then crosses the pollution threshold and therefore loses a part of its capital at the end the sole adoption of the renewable energy is optimal only in the long run this result is in line with the asymptotic energy transition arguments stating that the transition to clean energy may happen only in the long run we also show that economy reduces the use of energy resource as long as the productivity of capital and energy services is high therefore public policies should promote investments in energy innovation that targets productive sector home appliances and buildings and helps to save both money and energy we extend the present model to allow for additional investment in energy saving technologies our main results show that this additional investment favours the energy transition in the sense that it increases the time within which the economy may experience the catastrophe and the welfare of the society for policy implications economic instruments such as taxes on dirty energy subsidies on clean energy or incentives for energy saving technologies need to be implemented in order to promote the energy transition this is particularly important for developing countries that mostly rely on polluting energy resources and are the most vulnerable to climate change but those economic instruments should be carefully designed in line with the asymptotic energy transition result

an overlapping generations model of growth and the environment this article analyzes the potential conflict between economic growth and the maintenance of environmental quality in an overlapping generations model short lived individuals make decisions which have long lasting effects on both factor productivity and the environment the model provides a theoretical explanation of observed correlations between environmental quality and income whereby economic growth is associated first with declines then improvements in environmental quality it suggests circumstances in which multiple pareto ranked steady state equilibria may arise and in which sustained growth of both capital and environmental quality may occur overmaintenance of the environment analogous to dynamically inefficient overaccumulation of capital may emerge copyright 1994 by royal economic society

on the existence of balanced growth equilibrium the authors characterize the class of dynamic models that allow for the most commonly used types of sustained economic growth balanced and asymptotically balanced they show that under a constant returns to scale technology asymptotically constant discount rate and asymptotically constant elasticity of marginal felicity are not only necessary but also sufficient conditions for the existence of a n asymptotically balanced growth equilibrium path the authors provide examples of recursive utility models that accept a n asymptotically balanced growth equilibrium and discuss their implications on cross country differences in growth rates as well as on savings behavior and wealth distribution copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

naturally negative the growth effects of natural disasters abstract growth theory predicts that natural disasters should on impact lower gdp per capita however the empirical literature does not offer conclusive evidence most existing studies use disaster data drawn from damage records of insurance companies we argue that this may lead to estimation bias as damage data and the selection into the database may correlate with gdp we build a comprehensive database of disaster events and their intensities from primary geophysical and meteorological information in contrast to insurance data our geomet data reveal a substantial negative and robust average impact effect of disasters on growth the worst 5 disaster years come with a growth damage of at least 0 46 percentage points that average effect is driven mainly by very large earthquakes and some meteorological disasters poor countries are more strongly affected by geophysical disasters rich more by meteorological events international openness and democratic institutions reduce the adverse effect of disasters

the cleansing effect of recessions the authors investigate industry response to cyclical variations in demand production units that embody the newest process and product innovations are continuously being created and outdated units are being destroyed although outdated units are the most likely to turn unprofitable and be scrapped in a recession they can be insulated from the fall in demand by a reduction in creation the structure of adjustment costs plays a determinant role in the responsiveness of those two margins the calibrated model matches the relative volatilities of the observed manufacturing job creation and destruction series and their asymmetries over the cycle copyright 1994 by american economic association

from the editors endogeneity in international business research this essay builds on the exposition by thomas et al and focuses on analyzing cause and effect in international business research we attempt to explain how endogeneity problems occur and why they are so prevalent in international business research in a non technical fashion we then discuss the importance of explicitly identifying how the chosen research design best approximates a randomized controlled experiment finally we provide some guidelines on achieving this goal and emphasize the practices that seem most relevant to jibs reviewers in evaluating high quality international business research