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

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

applications barriers to entry and exclusive vertical contracts in platform markets i introduction exclusive contracts in vertical relationships feature prominently in antitrust cases in network industries at issue are contracts a firm with market power signs with its suppliers or buyers that may limit access to the market by its rivals we focus on the case in which the firm signs exclusive contracts with upstream suppliers for example in the 1980s developers of games for nintendo s video game console agreed not to provide any titles for other platforms atari v nintendo 1 in u s v microsoft the dominant software provider was charged with abusing its monopoly power in its contracts with internet content providers and independent software developers with the goal of excluding competitors to microsoft s internet explorer browser 2 exclusive contracts such as these are an example of vertical restraints an area in law and economics that has generated as much controversy as any we examine the impacts of exclusionary contracts between hardware manufacturers and software providers in the home video game market an important feature of the market for video game consoles is indirect network effects katz and shapiro 1985 whereby the consumer valuation of the primary product the console or platform increases with the number of complementary goods available gaming software if platform providers enjoy indirect network effects then each may want to prevent suppliers of its complementary good from also supplying competing platforms evans 2003 regibeau 2004 when a dominant platform provider and the producers of the complementary goods sign such exclusionary contracts they burden competing platforms and potential challengers with producing the complementary goods themselves or finding alternative suppliers which may raise rivals costs and can diminish competition brennan 2007 this is the applications barrier to entry at issue in the microsoft case foreclosure of competitors can result armstrong and wright 2007 whether survival of a single dominant platform is inefficient or to the detriment of consumers depends on the size of duplicated costs among platforms the heterogeneity of consumers preferences among platforms and among the complementary goods and other factors we focus on estimating determining the causes of and exploring the implications of indirect network effects for exclusively and nonexclusively provided games exclusive titles are those games that can only be played on one system because the console producer either created the game itself or negotiated an exclusive contract with a video game maker we examine the sixth generation videogame console market which comprises nintendo s gamecube sony s playstation2 and microsoft s xbox and uncover an interesting finding although we find strong indirect network effects and a large impact of exclusivity on rivals console demand when most games are nonexclusive the marginal exclusive game contributes virtually nothing to console demand exclusivity helps a firm establish market share at first but beyond a certain point additional locking up of software supply no longer hurts rivals consequently there is no ability to capture ever more console consumers through locking in an increasing supply of exclusive games such capture of the whole market is often assumed in discussion or derived in theoretical models of the video game industry in specific or platform markets in general by itself a finding that exclusivity does not affect console demand on the margin does not necessarily imply that there is no consumer harm for with heterogeneous game quality it may be that a console maker need only lock in the best games to harm the rivals ability to compete however our investigation suggests that exclusionary contracts did not hurt consumers because of two important features of the videogame market the bargaining power enjoyed by the best software providers coupled with the existence of blockbuster games that enable competitors to establish market share prevents the foreclosure of rivals through exclusive contracting suggested by some models armstrong and wright 2007

the long run determinants of inequality what can we learn from top income data this paper studies determinants of income inequality using a newly assembled panel of 16 countries over the entire twentieth century we focus on three groups of income earners the rich p99 100

china s uneven progress against poverty while the incidence of extreme poverty in china fell dramatically over 1980 2001 progress was uneven over time and across provinces rural areas accounted for the bulk of the gains to the poor though migration to urban areas helped the pattern of growth mattered rural economic growth was far more important to national poverty reduction than urban economic growth agriculture played a far more important role than the secondary or tertiary sources of gross domestic product gdp rising inequality within the rural sector greatly slowed poverty reduction provinces starting with relatively high inequality saw slower progress against poverty due both to lower growth and a lower growth elasticity of poverty reduction taxation of farmers and inflation hurt the poor external trade had little short term impact

new ways of looking at old issues inequality and growth abstract the paper uses new cross country data on income and asset land distribution to show that i there is a strong negative relationship between initial inequality in the asset distribution and long term growth ii inequality reduces income growth for the poor but not for the rich and iii available longitudinal data provide little support for the kuznets hypothesis policies that increase aggregate investment and facilitate acquisition of assets by the poor might thus be doubly beneficial for growth and poverty reduction

inequality in indonesia what can we learn from top incomes abstract using taxation and household survey data this paper estimates top income shares for indonesia during 1920 2004 our results suggest that top income shares grew during the 1920s and 1930s but fell in the post war era we observe a sharp rise in top income shares during the late 1990s coinciding with the 1997 98 economic crisis where comparable data are available top income shares in indonesia are generally higher than in other countries a finding that is at odds with the view that indonesia is a relatively egalitarian society this suggests that top income shares may provide a more complete picture of developing country inequality in comparative perspective

mining and poverty reduction transforming rhetoric into reality abstract this article critically evaluates the contribution that mining has made to poverty reduction and assesses the prospects for better performance in the future the article starts from the two assumptions that mineral resources are a potentially great source of wealth for poor countries and that the various ill effects associated with the resource curse are not inevitable it then directs its attention toward the world bank a leading advocate of mining led development and an institution with a core mandate to reduce poverty employing the world bank s own conceptualization of poverty as an analytical framework the article demonstrates that mining has a dismal empirical track record to date in poverty reduction while the theoretical reasons to believe that mining can contribute to poverty alleviation are perhaps sound the reality of mineral led development has not lived up to its rhetorical promise the article elucidates problems with existing approaches and evaluates the world bank s recently concluded extractive industries review as a dramatic new paradigm shift in thinking on mining and poverty reduction it concludes that mining can positively contribute toward poverty alleviation but only if a variety of demanding preconditions are met

top indian incomes 1922 2000 this article presents data on the evolution of top incomes and wages for 1922 2000 in india using individual tax return data the data show that the shares of the top 0 01 percent 0 1 percent and 1 percent in total income shrank substantially from the 1950s to the early to mid 1980s but then rose again so that today these shares are only slightly below what they were in the 1920s and 1930s this u shaped pattern is broadly consistent with the evolution of economic policy in india from the 1950s to the early to mid 1980s was a period of socialist policies in india whereas the subsequent period starting with the rise of rajiv gandhi saw a gradual shift toward more pro business policies although the initial share of the top income group was small the fact that the rich were getting richer had a nontrivial impact on the overall income distribution although the impact is not large enough to fully explain the gap observed during the 1990s between average consumption growths shown in national sample survey based data and the national accounts based data it is sufficiently large to explain a non negligible part of it

a new data set measuring income inequality this article presents a new data set on inequality in the distribution of income the authors explain the criteria they applied in selecting data on gini coefficients and on individual quintile groups income shares comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage although differences in the definition of the underlying data might still affect inter temporal and international comparability based on this new data set the authors do not find a systematic link between growth and changes in aggregate inequality they do find a strong positive relationship between growth and reduction of poverty

governance institutions resource rights regimes and the informal mining sector regulatory complexities in indonesia summary this study examines how shifting resource governance regimes affect labor inequities in the small scale mining sector in indonesia it focuses on the implications of governance decentralization processes and mining regulation reforms for indigenous and migrant populations who rely on informal unlicensed mining for income in central kalimantan while the findings illustrate the territorially uneven impacts of recent reforms they highlight how dominant paradigms that prioritize the enforcement of property rights schemes have contributed to problems of livelihood insecurity and poor environmental governance the article urges for more nuanced attention to contested articulations of power as well as local resource rights and institutional arrangements to assist rural communities in reversing marginalization

the effects of location and sectoral components of economic growth on poverty evidence from indonesia abstract in this paper we investigate the relationship between economic growth and poverty reduction by differentiating growth and poverty into their sectoral composition and urban rural location using data from indonesia we find that rural services growth reduces poverty in all sectors and locations however urban services growth has the largest effect on poverty in most sectors finally we also find that rural agriculture growth strongly reduces poverty in rural areas the largest contributor to poverty in indonesia this implies that while agriculture growth in rural areas still plays a major role in reducing poverty policies that enable strong growth in the services sector in both urban and rural areas would expedite poverty reduction

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

top incomes in the long run of history a recent literature has constructed top income shares time series over the long run for more than twenty countries using income tax statistics top incomes represent a small share of the population but a very significant share of total income and total taxes paid hence aggregate economic growth per capita and gini inequality indexes are sensitive to excluding or including top incomes we discuss the estimation methods and issues that arise when constructing top income share series including income definition and comparability over time and across countries tax avoidance and tax evasion we provide a summary of the key empirical findings most countries experience a dramatic drop in top income shares in the first part of the twentieth century in general due to shocks to top capital incomes during the wars and depression shocks top income shares do not recover in the immediate postwar decades however over the last thirty years top income shares have increased substantially in english speaking countries and in india and china but not in continental european countries or japan this increase is due in part to an unprecedented surge in top wage incomes as a result wage income comprises a larger fraction of top incomes than in the past finally we discuss the theoretical and empirical models that have been proposed to account for the facts and the main questions that remain open

inequality does cause underdevelopment insights from a new instrument consistent with the provocative hypothesis of engerman and sokoloff 1997 2000 this paper confirms with cross country data that agricultural endowments predict inequality and inequality predicts development the use of agricultural endowments specifically the abundance of land suitable for growing wheat relative to that suitable for growing sugarcane as an instrument for inequality is this paper s approach to problems of measurement and endogeneity of inequality the paper finds inequality also affects other development outcomes institutions and schooling which the literature has emphasized as mechanisms by which higher inequality lowers per capita income it tests the inequality hypothesis for development institutional quality and schooling against other recent hypotheses in the literature while finding some evidence consistent with other development fundamentals the paper finds high inequality to independently be a large and statistically significant barrier to prosperity good quality institutions and high schooling

the measurement and trend of housing inequality in the united states 1978 85 inequality in housing services for renters owners and all households in the united states is estimated for 1978 and 1985 hedonic techniques are applied to data from the american housing survey to derive values for housing services that include publicly provided as well as subsidized housing we find significant disparities in housing but substantially less inequality than in incomes in 1978 the top decile garnered 19 2 of housing services while the bottom decile received only 5 1 the trend however is towards greater equality in housing with large and statistically significant shifts across all deciles by 1985 the share of the top decile dropped to 16 3 a percentage decrease in share of 15 3 while that of the bottom decile rose to 5 7 a percentage increase of 11 4

why have some indian states done better than others at reducing rural poverty the unevenness of the rise in rural living standards in the various states of india since the 1950s allowed the authors to study the causes of poverty they modeled the evolution of average consumption and various poverty measures using pooled state level data for 1957 91 they found that poverty was reduced by higher agricultural yields above trend growth in nonfarm output and lower inflation rates but these factors only partly explain relative success and failure in reducing poverty initial conditions also mattered states that started the period with better infrastructure and human resources with more intense irrigation greater literacy and lower infant mortality rates had significantly greater long term rates of consumption growth and poverty reduction by and large the same variables that promoted growth in average consumption also helped reduce poverty the effects on poverty measures were partly redistributive in nature after controlling for inflation the authors found that some of the factors that helped reduce absolute poverty also improved distribution and none of the factors that reduced absolute poverty had adverse impacts on distribution in other words there was no sign of tradeoffs between growth and pro poor distribution

the composition of growth matters for poverty alleviation this paper contributes to explain the cross country heterogeneity of the poverty response to changes in economic growth it does so by focusing on the structure of output growth the paper presents a two sector theoretical model that clarifies the mechanism through which the sectoral composition of growth and associated labor intensity can affect workers wages and thus poverty alleviation then it presents cross country empirical evidence that analyzes first the differential poverty reducing impact of sectoral growth at various levels of disaggregation and the role of unskilled labor intensity in such differential impact the paper finds evidence that not only the size of economic growth but also its composition matters for poverty alleviation with the largest contributions from labor intensive sectors such as agriculture construction and manufacturing the results are robust to the influence of outliers alternative explanations and various poverty measures

evolution and human nature from an economic perspective on individual decision making human beings have three key characteristics preferences beliefs and rationality beliefs are the probabilities with which people think various outcomes will occur conditional on information that might be available preferences are the rankings over the set of gambles that are based on such beliefs over the outcomes rationality is the extent to which people succeed in choosing optimal actions in the light of their beliefs and preferences and the extent to which their beliefs are appropriately modified by their information economists typically impose only rather weak assumptions on preferences for example preferences are taken to be transitive and sometimes less explicitly exogenous and unchanging stronger assumptions are typically imposed on preferences in specific contexts however for example preferences over time might be represented by an additively separable function with constant rate of discount despite widespread recognition that this case is a special one further attitudes to risk are often represented by the expected utility theorem which rests on assumptions that are strong if also appealing the assumptions made on rationality in particular are usually very strong that is rationality in economic models usually entails the exact optimization of preferences and modification of beliefs in accordance with bayes theorem the economist s basic picture of preferences beliefs and rationality has been subject to challenges from a growing number of empirical anomalies the proposed explanations of these anomalies involve relaxing the assumptions that economists make on these preferences beliefs or rationality for example preferences

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

why don t we see poverty convergence average living standards are converging among developing countries and faster growing economies see more progress against poverty yet we do not find poverty convergence countries starting with higher poverty rates do not see higher proportionate rates of poverty reduction the paper tries to explain why analysis of a new dataset suggests that at given mean consumption high initial poverty has an adverse effect on consumption growth and also makes growth less poverty reducing thus for many poor countries the growth advantage of starting out with a low mean is lost due to a high incidence of poverty jel d63 i31 i32 o15

growth growth accelerations and the poor lessons from indonesia we study the impact of growth and growth accelerations on poverty and inequality in indonesia using a new panel dataset covering 26 provinces over the period 1977 132010 this dataset allows us to distinguish between mining and non mining in indonesia growth in non mining significantly reduces poverty and inequality in contrast overall growth and growth in mining appears to have no effect on the same growth acceleration in non mining reduces poverty and inequality whereas the same in mining increases poverty we expect that the degree of forward and backward linkages of mining and non mining sectors explains the asymmetric result