the impact of government size on economic growth a threshold analysis we examine the nature of the relationship between government size and economic growth and identify the optimal level of government size using a large dataset through a novel and very general non linear panel generalized method of moments approach we show that this relationship is statistically significant above and below the optimal level even after splitting our sample to developed and developing countries finally we find an asymmetric impact of government size on economic growth in both developed and developing countries around the estimated threshold

the digital divide the role of political institutions in technology diffusion what factors have promoted and retarded the spread of the internet globally the internet is one example of the diffusion of technology much as other technologies the internet has diffused unevenly across countries raising concerns over a digital divide my main proposition is that its spread has been driven by neither technological nor economic factors alone rather political factors exert a powerful influence groups that believe they will lose from the internet use political institutions to enact policies that block the spread of the internet some political institutions make this easier than others data from roughly 190 countries from 1991 to 2001 showthat a country s regime type matters greatly even when controlling for other economic technological political and sociological factors democratic governments facilitate the spread of the internet relative to autocratic ones thus the spread of democracy may help reduce the digital divide

institutions factor prices and taxation virtues of strong states many of the most pernicious economic institutions and policies create entry barriers or manipulate factor prices to transfer resources from entrepreneurs and workers to groups that hold political power these inefficiencies partly result from the fact that direct and efficient fiscal instruments that can be used for taxation and redistribution of resources are absent one might then conclude that increasing state capacity and expanding the set of available fiscal instruments should improve the allocation of resources by preventing the use of these inefficient indirect methods of redistribution this reasoning ignores the effect of greater state capacity and the change in the set of available fiscal instruments on the political equilibrium however because the availability of more efficient means of taxation increases the potential benefits of controlling state power it also intensifies costly political conflict aimed at capturing the control of the state this indirect effect counteracts the benefits from more efficient taxation and may dominate the direct benefits the paper establishes the possibility that the allocation of resources may deteriorate substantially in response to an autonomous increase in state capacity and the set of fiscal instruments it also argues that in the british case which is a key historical example that points to the central role of increased state capacity in economic development this change was not autonomous instead it was an equilibrium response to changes in political institutions that placed better checks on the exercise of power by the executive this reasoning suggests that the study of the effect of fiscal capacity and the evaluation of policies aimed at increasing state capacity in less developed economies should be done in the context of dynamic models of political economy in which fiscal capacity and political constraints are jointly determined this abstract was borrowed from another version of this item

distributional coalitions the industrial revolution and the origins of economic growth in britain from the late 1600s to the mid 1800s britain was able to transform from a divided kingdom with a fragmented often stagnant economy into a powerful and stable state that simultaneously saw an expansion in the power wealth and stability of the central government while encouraging an economic transformation that gradually allowed both industrial technology and liberal commerce to flourish and break out of its mercantilist straitjacket we explain how rent seeking elites who might normally have opposed such sweeping transformations promoted institutional changes that in the long run expanded the economy and encouraged innovation even at the expense of class interests in the short run this meant that rent seeking in the 18th century was not so much reduced as redirected from local monopolies to state authorities and parliament but in the longer run the process of professionalization made possible greater liberalism in general even at the expense of general rent seeking itself the position of parliament as a meta institution for reforming and weakening rent creating restrictions as needed was pivotal to this process ideological changes particularly the scottish enlighten ment transformed the terms of the debate but could only be operationalized once interests were aligned so that gainers from industrialization could compensate or overcome traditional interests

business ethics in china first i briefly review the emergence and development of business ethics following three stages 1978 1984 1984 1994 1994 to the present and driven by four factors the inheritance of chinese traditional ethics the influence of marxist philosophy and ethics the reflections on the economic reform and the influence of business ethics from abroad then from a practical and a theoretical perspective i discuss the main challenges for business ethics in china issues of the economic system of corporate ethics and of management after commenting on the role of business ethics for the social development in china i offer some reflections about what china can contribute to and learn from other peoples

gift giving guanxi and illicit payments in buyer supplier relations in china analysing the experience of uk companies this paper explores the relationship between gift giving guanxi and corruption through a study of the relationships between uk manufacturing companies in china and their local component suppliers the analysis is based on interviews in the china based operations of 49 uk companies interviews were carried out both with senior often expatriate staff and with local line managers who were responsible for everyday purchasing decisions and for managing relationships with suppliers the results suggest that gift giving is perceived to be a significant problem in uk owned companies in china however the relationship between these payments and established understanding of gift giving within guanxi networks appears to be weak gift giving appears to be associated with illicit payments corruption and the pursuit of self interest firms seek to reduce the incidence of illicit transactions by changing staff roles instituting joint responsibilities which include the separation of different aspects of sourcing purchasing ineasing the involvement of senior staff in the process and through the education of employee and suppliers

a study of the attitudes towards unethical selling amongst chinese salespeople the latter part of the twentieth century saw the chinese economy moving towards a socialist market economy rather than a planned system despite growing interest in chinese business ethics little work has examined ethical issues concerning the chinese sales force this study draws from existing work on chinese and western business and sales ethics to develop hypotheses regarding the perceptions of unethical selling behaviour of modern chinese salespeople a survey of chinese sales executives is conducted and statistically analysed results are compared with those reported in previous us based research with regard to differences in perceptions of unethical selling behaviour the results indicate that contemporary chinese salespeople were more favourably disposed than expected towards unethical selling behaviour and also more favourably disposed than previously studied us salespeople younger chinese salespeople evaluated unethical behaviours more favourably than older ones the results are discussed along with implications for theory practice and future work

optimal taxation economic growth and income inequality that there is a trade off between equityand efficiency economic growth is wellknown two models have been developed thatlink government spending and taxation toeconomic growth this paper uses thesemodels to provide estimates of thegrowth maximizing tax rate then a twoequation structural model is developed andestimated that is used to find thetrade off rate between economic growth andincome inequality and the growth maximizinglevel of income inequality for the unitedstates over the period 1960 1990

foreign actors and intellectual property protection regulations in developing countries international agreements and institutions affect innovation in developing countries we analyze the impact of advanced country multinational enterprises amnes and supranational organizations on the regulatory adoption of global intellectual property protection standards in particular we investigate 60 developing countries that signed the trade relate aspects of intellectual property rights trips agreement of the world trade organization in 1994 our empirical findings show that a greater involvement of amnes in the domestic innovation systems of developing countries results in more stringent trips adoption and convergence to advanced country ip protection standards this relationship is positively moderated by country dependency on supranational organizations such as the international monetary fund this analysis contributes to the literature on institutional change and institutional voids it provides insights into the influence of external actors on the underlying change processes

does confucianism reduce minority shareholder expropriation evidence from china using a sample of 12 061 firm year observations from the chinese stock market for the period of 2001 2011 and geographic proximity based confucianism variables this study provides strong evidence that confucianism is significantly negatively associated with minority shareholder expropriation implying that confucianism does mitigate agency conflicts between the controlling shareholder and minority shareholders this finding suggests that confucianism has important influence on business ethics and thus can serve as an important ethical philosophy or social norm to mitigate the controlling shareholder s unethical expropriation behavior moreover my findings reveal that the nature of the ultimate owner attenuates the negative association between confucianism and minority shareholder expropriation suggesting that confucianism s negative impact on minority shareholder expropriation is less pronounced for state owned enterprises than for non state owned enterprises the above results are robust to a variety of sensitivity tests and my findings are valid after controlling for the potential endogeneity between confucianism and minority shareholder expropriation

does centralization increase the size of government abstract are fiscal programs larger or smaller if they are run centrally rather than locally in a prospective federation we abstract completely from well understood economic issues and focus instead on the political effects of centralization for fiscal programs with benefits broadly spread in the population such as redistributive transfer schemes social insurance and general government consumption centralization changes the coalition of voters who favor a large program in a direction that depends on the nature of the redistributive instrument for fiscal programs with localized benefits such as provision of local public goods centralization creates opportunities for rent seeking which increases the size of government

political losers as a barrier to economic development per capita income in many sub saharan african countries such as chad and niger is less than 1 30th of that of the united states most economists and social scientists suspect that this is in part due to institutional failures that stop these societies from adopting the best technologies a particularly interesting historical example comes from the diffusion of railways in the 19th century while railways are regarded as a key technology driving the industrial revolution there were large lags in their diffusion for example in 1850 the united states had 14 518 km of track britain 9 797 km and germany 5 856 km in the russian and hapsburg empires there were just 501 km and 1 357 kim respectively all data from brian r mitchell 1993 why do societies as in this example fail to adopt the best available technologies one answer is that existing powerful interest groups block the introduction of new technologies in order to protect their economic rents and societies are able to make technological advances only if they can defeat such groups economic monopolies may be one example a monopolist might wish to block the introduction of a new technology by a rival that will capture the market this idea which we call the economic losers hypothesis was discussed by simon kuznets 1968 developed at length by joel mokyr 1990 in the context of technology adoption and formalized by per krusell and jose victor rios rull 1996 and stephen l parente and edward c prescott 1997 related ideas are widely discussed in the literature on international trade policy with many formal models e g gene m grossman and elhanan helpman 1994 there are problems with this story however first despite the intuitive appeal of the idea there are relatively few instances where major economic change was blocked by economic losers mokyr 1990 emphasizes the attempts of many skilled artisans to block the introduction of new machines the most famous example is the luddites skilled weavers who were thrown out of work by mechanization interestingly however many of these groups including the luddites were ultimately unable to block economic progress equally important the economic losers hypothesis relies on the presumption that certain groups have the political power to block innovation but if so why not use this power to simply tax the gains generated by the introduction of the new technology this might be because there are limits on the nature of fiscal instruments though it seems plausible that groups with sufficient political power to block innovation would be able subsequently to lobby effectively for redistribution a more important reason however may be that the introduction of new technology and economic change more generally may simultaneously affect the distribution of political power we argue that the effect of economic change on political power is a key factor in determining whether technological advances and beneficial economic changes will be blocked in other words we propose a political loser hypothesis we argue that it is groups whose political power not economic rents is eroded who will block technological advances if agents are economic losers but have no political power they cannot impede technological progress if they have and maintain political power i e are not political losers then they have no incentive to block progress it is therefore agents who have t discussant gene grossman princeton university

the rise of europe atlantic trade institutional change and economic growth the rise of western europe after 1500 is due largely to growth in countries with access to the atlantic ocean and with substantial trade with the new world africa and asia via the atlantic this trade and the associatedcolonialism affected europe not only directly but also indirectly by inducing institutional change where initial political institutions those established before 1500 placed significant checks on the monarchy the growth of atlantic trade strengthened merchant groups by constraining the power of the monarchy and helped merchants obtain changes in institutions to protect property rights these changes were central to subsequent economic growth

insecure property and technological backwardness we consider the incentive to adopt superior technologies when private property is insecure the welfare costs of insecure property can be substantially greater than those commonly associated with diversion and with the disincentive effect induced by imperfect appropriation of returns when private property is sufficiently insecure anticipation of conflict over economic distribution gives rise to technological backwardness even though 1 superior technologies are readily available at zero cost and 2 the ex post diversion of resources might be small

fiscal decentralization and government size numerous studies have attempted to model the possible factors contributing to universal growth in public sectors this paper analyzes one device that appears capable of controlling some of that growth fiscal decentralization the results reported here also support the use of monopoly government assumptions in models of public policy

does confucianism reduce board gender diversity firm level evidence from china this study extends previous literature on the association between confucianism and corporate decisions by examining confucianism s influence on board gender diversity using a sample of chinese listed firms during the period of 2001 2011 and geographic proximity based confucianism variables i provide strong and consistent evidence to show that confucianism is significantly negatively associated with board gender diversity suggesting that the proportion of women directors in the boardroom is significantly lower for firms surrounded by strong confucianism atmosphere than for firms located in regions with weak confucianism atmosphere this finding also implies that confucian philosophical system has important impacts on business ethics and women s status in corporate governance moreover gdp per capita the proxy for economic development level in a province in which a firm is located attenuates the negative association between confucianism and board gender diversity above results are robust to different measures of confucianism and board gender diversity and are still valid after controlling for the potential endogeneity between confucianism and board gender diversity

gender and say a model of household behaviour with endogenously determined balance of power the evidence that the same total income can lead a household to choose different consumption vectors depending on who brings in how much of the income has led to an effort to replace the standard unitary model of the household with the collective model which recognizes that the husband and the wife may have different preferences and depending on the balance of power between them the household may choose differently one weakness of this new literature is that it fails to recognize that the household s choice could in turn influence the balance of power once this two way relation between choice and power is recognized we are forced to confront some new questions concerning how to model the household this paper tries to answer these by defining a household equilibrium examining its game theoretic properties and drawing out its testable implications it is shown for instance that once we allow for dynamic interaction a household can exhibit inefficient behavior and that for a certain class of parameters children will be less likely to work in a household where power is evenly balanced than one in which all power is concentrated in the hands of either the father or the mother the paper also draws out the implications for female labor supply

deregulation despite transitional gains the brewers guild of cologne 1461 acemoglu and robinson in the american economic review 90 2 126 130 2000 argue that historically economic rents have been less of a barrier to regulatory reform and innovation than political rents contrary to this conclusion i argue that the important margin of distinction for factors preventing deregulation is not whether rents are economic or political but rather what alternative profit opportunities are available and how innovation has changed the entrepreneurial opportunity set using the example of medieval cologne i show that the transitional gains trap framework as developed by tullock in the bell journal of economics 6 2 671 678 1975 applies in a static environment and can successfully prevent reform over long periods of time but that neither political nor economic entrepreneurs will ignore an opportunity for increased profitability in the long run in addition the organization of the political unit to which the regulation applies can determine the persistence of said regulation

interjurisdictional capital mobility fiscal externality and a corrective subsidy abstract recent studies emphasize that local property taxation may result in inefficiently small amounts of local public spending this paper shows that the inefficiency can be traced to a fiscal externality when one jurisdiction increases its taxes it causes a flow of capital to other jurisdictions that increases their tax revenues the inefficiency can be corrected with a subsidy that internalizes the externality key empirical parameters determining the magnitude of the externality are identified illustrative calculations indicate that subsidy rates on the order of 40 might be required to achieve efficiency

the growth tax in the united states by providing public goods including law and order national defense and income redistribution that expands the gains from exchange the scope and membership of the constitutional agreement government expenditures act as a positive externality on the growth rate beyond that level taxes act as a negative externality in this paper a simple model is formulated and the optimal growth maximizing tax rate found empirical estimation finds it to be in the range of 21 5 22 9 percent the effect of taxation beyond this level is a cumulative loss of about 30 trillion 1972 dollars in gnp over the period 1949 89

macroeconomic adjustment under regime change from social contract to arab spring abstract against the backdrop of the arab spring protests we examine macroeconomic stabilization under regime shift we model this as a dynamic interaction between a government and a profit maximizing firm the former imposes the state of technology some value of rent extraction labor market rigidities and time preference the firm conditional on these factors and the optimally determined inflation rate sets labor demand given its extractive nature there is a continuous probability of a political regime shift characterized by a hazard function we compare state and non state contingent forms the model is able to rationalize the early growth and developmental gains of many arab economies and their subsequent reversal as well as the later stalling of economic reforms the model provides a novel analysis of the evolution of the arab economies the shifting time preferences of policy makers and their interaction with economic reforms

telecommunications reform internet use and mobile phone adoption in the developing world summary how do telecommunications policies influence technology adoption has regulatory reform helped mitigate or exacerbate the digital divide we examine the effects of four policy reform strategies on a country s share of internet bandwidth internet hosts internet users personal computers and mobile phones we argue that the best policy environment for the telecommunications sector is one maintained by an independent regulator that is not above representing the public interest or entering into public private partnerships to develop national information infrastructure holding other factors constant privatizing the national telecommunications operator only has a few demonstrable effects and the effects are mixed liberalizing the market for consumer communications services and separating the telecommunications regulator from direct control by the executive branch of government are for the most part constructive policies for encouraging technology adoption yet over time too little public policy oversight usually has a negative impact on technology adoption regulatory independence mitigates against the digital divide but regulatory withdrawal exacerbates it our findings offer greater coverage than prior research and emerge from a time series cross sectional study of multiple technology indicators in 154 countries during the period 1990 2007

allocation under dictatorship research in stalin s archives we survey recent research on the soviet economy in the state party and military archives of the stalin era the archives have provided rich new evidence on the economic arrangements of a command system under a powerful dictator including stalin s role in the making of the economic system and economic policy stalin s accumulation objectives and the constraints that limited his power to achieve them the limits to administrative allocation the information flows and incentives that governed the behavior of economic managers the scope and significance of corruption and market oriented behavior and the prospects for economic reform

protection of property rights and growth as political equilibria abstract this paper presents a survey of the literature on property rights and economic growth different theoretical mechanisms that relate property rights to economic development are discussed lack of protection of property rights can result in slow economic growth through different channels expropriation of private wealth corruption of civil servants excessive taxation and barriers to adoption of new technologies the origins of property rights are also considered different theories are illustrated but more attention is paid to the social conflict view and its success and limitations the second part of the paper illustrates relevant empirical works on property rights and growth

local decentralization and local economic growth a cross sectional examination of us metropolitan areas this paper builds on the growing empirical literature that explores the relationship between government structure and economic growth it uses a new data set of 314 us metropolitan areas to examine the relationship between local decentralization and local economic growth the results indicate a negative relationship between the central city share of metro area population and economic growth and a positive relationship between both the number of municipalities per 100 000 residents and the number of counties per 100 000 residents and economic growth those findings provide support for the hypothesis that decentralization enhances economic growth

does legislative turnover adversely affect state expenditure policy evidence from indian state elections the effect of legislative turnover on the size and composition of government expenditures in indian states over the 1980 2000 period is examined the paper finds that excessive turnover in indian state elections results in inefficient government expenditure policy first the higher the turnover the larger the government size second excessive turnover affects the allocative efficiency of government expenditures by skewing the composition of government spending toward pure consumption and away from more productive investment expenditures third the effect of turnover on fiscal policy is not linear public consumption expenditure is convex in turnover while public investment expenditure is concave in turnover

exiting a lawless state an earlier paper showed that an economy could be trapped in an equilibrium state in which the absence of the rule of law led to asset stripping and the prevalence of asset stripping led to the absence of a demand for the rule of law highlighting a coordination failure this paper looks more carefully at the dynamics of transition from a non rule of law state the paper identifies a commitment problem as the critical feature inhibiting the transition the inability under a rule of law to forgive theft this can lead to the perpetuation of the non rule of law state even when it might seem that the alternative is pareto improving

federalism and the growth of government revisited recent research in public economics has been testing for a relationship in federal states between the decentralization of governments and the total and individual size of government shares in gnp according to one view economic theory offers no unambiguous empirical predictions provided there is a competitive political environment at each government level the rivalry between political parties will result in an outcome that conforms approximately to the preferences of the citizens as interpreted in the conventional median voter model under this scenario it is not certain what differences might be caused by more decentralization oates 1985 to determine any difference we would have to possess considerable knowledge about the distribution of tastes and the location of the populace it has been hypothesized nevertheless that increased decentralization could result in a higher level of government expenditure quoting the economic historian john wallis oates 1985 749 suggests that since individuals have more control over public decisions at the local than at the state or national level they will wish to empower the public sector with a wider range of functions and responsibility where these activities are carried out at more localizedlevels of government

how does fiscal decentralization affect aggregate national and subnational government size abstract beyond conducting the usual regression analysis of the relationship between fiscal decentralization and aggregate government size national and subnational combined this paper makes the first attempt to examine how different fiscal decentralization measures affect the sizes of national and subnational state and local combined governments an econometric analysis using panel data from 32 industrial and developing countries 1980 1994 finds that 1 expenditure decentralization leads to smaller national governments larger subnational governments and larger aggregate governments 2 revenue decentralization increases subnational governments by less than it reduces national governments hence leads to smaller aggregate governments and 3 vertical imbalance tends to increase the sizes of subnational national and aggregate governments

fiscal decentralization and the size of government a european country empirical analysis this article is an original contribution to the understanding of the relationship between fiscal decentralization and government size using a panel data set of the eu 15 countries we analyse the effect of decentralization on aggregate national and subnational government sizes by separating the long run effects of decentralization from its short run dynamics in the long run tax autonomy reduces central expenditure but increases and to a greater extent subnational public expenditure leading to higher aggregate public expenditure we find also that vertical imbalances tend to increase the sizes of subnational national and aggregate governments

fiscal decentralization and economic growth reconsidered recent studies examining the relation between fiscal decentralization and economic growth have failed to take account of the extent of the independent taxing powers available to sub national governments and thus have substantially overstated the degree of effective decentralization results from a cross section study of 19 oecd member countries suggest that when the measure of fiscal decentralization is limited to the revenues over which sub national governments have full autonomy its impact on economic growth is not statistically significant

persistence of power elites and institutions we construct a model to study the implications of changes in political insti tutions for economic institutions a change in political institutions alters the distribution of de jure political power but creates incentives for investments in de facto political power to partially or even fully offset change in de jure power the model can imply a pattern of captured democracy whereby a democratic regime may survive but choose economic institutions favoring an elite the model provides conditions under which economic or policy outcomes will be invariant to changes in political institutions and economic institutions them selves will persist over time jel d02 d72 the domination of an organized minority over the unor ganized majority is inevitable the power of any minority is irresistible as against each single individual in the majority who stands alone before the totality of the organized minor ity at the same time the minority is organized for the very reason that it is a minority

economic freedom government policy and the trade off between equity and economic growth this study investigates the role that economicfreedom plays in economic growth and in the distribution in marketincome the role of government policy in advancingeconomic progress and in promoting income equality and the effectthat the rate of economic progress has on thedistribution of market income structural and reduced formmodels are estimated that reveal that economic freedompromotes both economic growth and equity and that there is apositive but relatively small trade off between growth andincome inequality

searching for leviathan comment and extension in a recent article wallace oates 1985 investigated whether fiscal decentralization tended to act as a constraining influence on the overall size of the public sector this hypothesis has been advanced by several alternative theories of government behavior including richard musgrave s 1959 model of how the distribution function of government would be carried out by subnational governments geoffrey brennan and james buchanan s 1980 leviathan model and the more traditional public choice model for example walter hettich and stanley winer 1984 all contend that the decentralization of tax and spending decisions introduces competition among governmental units seeking to attract citizens and other mobile resources and thereby constrains taxing power oates analyzed two data sets one pertaining to the state and local sector in the united states and the other consisting of a sample of 43 countries and found little empirical support for the decentralization hypothesis the purpose of this paper is to reconsider his analysis in the case of state and local governments specifically it will be argued that oates s measures of decentralization may be inappropriate to test the hypothesis furthermore by taking into account the structure or composition of local governmental jurisdictions within a state empirical support of the decentralization hypothesis can be marshaled for general purpose local governments such as counties and municipalities i measuring fiscal decentralization among the states

productivity in the united states and its relationship to government activity an analysis of 57 years 1929 1986 under the classical supply side paradigm of productivity grouth raising government economic above rudimentary levels integrates markets and provides useful public goods which enhance growth beyond some point however increasing government activity discourages growth through tax disincentives and by rewarding dependence on government expenditures defining government economic activity to be government expenditures as a percentage of gnp this study looks first at data for the period 1889 1986 and shows that the u s economy has experienced what is predicted by the supply side paradigm in addition the study presents an econometric analysis of government s effects on productivity for the period 1929 1986 using a standard neoclassical growth model this analysis validates the classical supply side paradigm and shows that maximum productivity growth occurs when government expenditures represent about 20 of gnp far less than the 35 which existed in 1986

does the internet reduce corruption evidence from u s states and across countries the authors test the hypothesis that the internet is a useful technology for controlling corruption in order to do so the authors develop a novel identification strategy for internet diffusion power disruptions damage digital equipment which increases the user cost of information technology it capital and thus lowers the speed of internet diffusion a natural phenomenon causing power disruptions is lightning activity which makes lightning a viable instrument for internet diffusion using ground based lightning detection censors as well as global satellite data the authors construct lightning density data for the contiguous united states u s states and a large cross section of countries empirically lightning density is a strong instrument for internet diffusion and the authors fourth estimates suggest that the emergence of the internet has served to reduce the extent of corruption across u s states and across the world

factor endowments inequality and paths of development among new world economies whereas traditional explanations of differences in long run paths of development across the americas generally point to the significance of differences in national heritage or religion we highlight the relevance of stark contrasts in the degree of inequality in wealth human capital and political power in accounting for how fundamental economic institutions evolved over time we argue moreover that the roots of these disparities in the extent of inequality lay in differences in the initial factor endowments dating back to the era of european colonization we document through comparative studies of suffrage public land and schooling policies systematic patterns by which societies in the americas that began with more extreme inequality or heterogeneity in the population were more likely to develop institutional structures that greatly advantaged members of elite classes and disadvantaging the bulk of the population by providing them with more political influence and access to economic opportunities the clear implication is that institutions should not be presumed to be exogenous economists need to learn more about where they come from to understand their relation to economic development our findings not only contribute to our knowledge of why extreme differences in the extent of inequality across new world economies have persisted for centuries but also to the study of processes of long run economic growth past and present

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

divided we stand united we fall the hume north jones mechanism for the rise of europe the great divergence in incomes between europe and the rest of the world occurred relatively recently why was it that western europe once a backward outpost on the fringes of the eurasian continent able to dominate in terms of income and technology the previously successful eastern economies several mechanisms have been identi ed to account for the rise of europe this paper formalizes one important mechanism the intellectual origins of which can be traced back to hume and weber and which was fully though informally articulated by e l jones this mechanism emphasizes the contrast between the european states system and the eastern empires political competition for a mobile tax base in a states system forces rulers to expropriate less from their subjects and to supply relatively more public services by effectively limiting the exit options of the ruled an empire rewards its ruler with a captive tax base that can be subjected to relatively higher levels of expropriation without a similar rise in public services provided the states system thus encourages higher levels of capital accumulation while the empire stises it the successes of the eastern empires in their consolidation phase are due to the competition they initially faced from neighboring states since europe escaped such consolidation the process of accumulation there never faced the impediments its eastern counterparts did the paper thus also provides a structural explanation for the emergence of institutions in europe that led to relatively secure property rights

moral choice and the declining influence of traditional value orientations within the financial sector of a rapidly developing region of the people s republic of china this paper describes the results of a field experiment involving 400 employees from ten financial institutions operating within the shenzhen special economic zone of the people s republic of china it was found that when faced with an agency based problem employees indicated they would be less inclined to advise management of the existence of unethical work practices younger employees without supervisory experience displayed significant risk aversion traditional chinese values associated with confucian work dynamism were shown to be poor predictors of moral choice response a parsimonious regression model was developed that provides evidence that the universal trait masculinity femininity human heartedness acted to offset the negative influence of the agency problem on the other hand an operative s level of education attainment exerted a negative influence on moral response scores

tax reform and the political economy of the tax base abstract this paper studies the political prospects for reform in a model where the tax base and statutory rate are separate instruments of tax policy the model suggests that large changes in the tax code may be easier to enact than marginal reforms the tax base faces a tipping point where even the beneficiaries from tax exemptions support reform at this tipping point tax reform is pareto improving politically feasible tax reform occurs when fiscal needs are large but may nonetheless involve reductions in marginal tax rates there is strategic complementarity in lobbying for tax exemptions resulting in multiple equilibria the model s main predictions are consistent with recent tax reforms in oecd countries

decentralization and economic growth revisited an empirical note abstract although it is theoretically expected that decentralization leads to efficient provision of local public services and stimulates economic development there is a mixed picture of the decentralization effect on economic growth across earlier empirical studies using the instrument variables iv technique with the latest cross country data for the period from 1997 to 2001 this paper found that fiscal decentralization has a significant positive impact on per capita gdp growth therefore when the focus is placed on the latest information on the economic situation in the latter 1990s decentralization particularly on the fiscal expenditure side is instrumental in economic growth

institutional causes macroeconomic symptoms volatility crises and growth countries that have pursued distortionary macroeconomic policies including high inflation large budget deficits and misaligned exchange rates appear to have suffered more macroeconomic volatility and also grown more slowly during the postwar period does this reflect the causal effect of these macroeconomic policies on economic outcomes one reason to suspect that the answer may be no is that countries pursuing poor macroeconomic policies also have weak institutions including political institutions that do not constrain politicians and political elites ineffective enforcement of property rights for investors widespread corruption and a high degree of political instability this paper documents that countries that inherited more extractive institutions from their colonial past were more likely to experience high volatility and economic crises during the postwar period more specifically societies where european colonists faced high mortality rates more than 100 years ago are much more volatile and prone to crises based on our previous work we interpret this relationship as due to the causal effect of institutions on economic outcomes europeans did not settle and were more likely to set up extractive institutions in areas where they faced high mortality once we control for the effect of institutions macroeconomic policies appear to have only a minor impact on volatility and crises this suggests that distortionary macroeconomic policies are more likely to be symptoms of underlying institutional problems rather than the main causes of economic

barriers to entry and development we ask whether barriers to entry are a quantitatively important reason for the income gap between developing countries and the united states we develop a tractable general equilibrium model that captures the effects of barriers to entry and the other main distortions typically considered in the development literature we carry our model to the data and ask it to match the main development facts from the penn world table we find that this requires large barriers to entry in developing countries which account for about half of the income gap with the united states

pigou tiebout property taxation and the underprovision of local public goods abstract pigou s proposition that the use of distorting taxes rather than neutral head taxes reduces public service levels is examined in this paper a simple model with a national system of competing local governments is utilized to demonstrate that the use of a distorting property tax on mobile capital decreases the level of residential public services the case where public services are an intermediate producer good is also considered

reviving leviathan fiscal federalism and the growth of government this article revisits the influential leviathan hypothesis which pos its that tax competition limits the growth of government spending in decentralized countries i use panel data to examine the effect of fiscal decentralization over time within countries attempting to distinguish between decentralization that is funded by intergovernmental transfers and local taxation first i explore the logic whereby decentralization should restrict government spending if state and local governments have wide ranging authority to set the tax base and rate especially on mobile assets in countries where this is most clearly the case decentralization is associated with smaller government second consistent with theoretical arguments drawn from wel fare economics and positive political economy i show that governments grow faster as they fund a greater portion of public expenditures through intergovernmental transfers

government size decentralization and growth empirical evidence from italian regions abstractthe aim of this study is to empirically assess the relationship among government size decentralization and economic growth in italian ordinary regions the empirical analysis based on a panel dataset on italian regions provides evidence in support of the existence of an inverted u shaped relationship between public expenditure and economic growth that depends on the degree of fiscal decentralization in particular according to our estimates on the specific italian case the optimal degree of decentralization is around 32 while the optimal government size value is approximately 52

the injustice of inequality in many countries the operation of legal political and regulatory institutions is subverted by the wealthy and the politically powerful for their own benefit this subversion takes the form of corruption intimidation and other forms of influence we present a model of such institutional subversion focusing specifically on courts and of the effects of inequality in economic and political resources on the magnitude of subversion we then use the model to analyze the consequences of institutional subversion for the law and order environment in the country as well as for capital accumulation and growth we illustrate the model with historical evidence from gilded age united states and the transition economies of the 1990s we also present some cross country evidence consistent with the basic prediction of the model

player and referee roles held jointly the effect of state ownership on china s regulatory enforcement against fraud this article examines the impact of the prevailing state ownership in the chinese stock market on corporate governance and the financial regulatory system respectively as the internal and external monitoring mechanisms to deter corporate fraud and protect investors in line with the literature that state ownership exaggerates the agency problem we find that the retained state ownership in privatised firms increases the incidence of regulatory enforcements against fraud for the state owned enterprises soes however larger state ownership is associated with a lower incidence of enforcement actions this is attributed to the mutual political affiliation of the fraudulent soes and the regulatory commission a new regulation solutions for listed firm checks promulgated in march 2001 has mitigated this effect by empowering the regulatory commission to increase the severity of regulatory conditions our evidence confirms the improvement in the regulatory environment and investor protection in the chinese stock market brought about by the regulatory reform and development

institutions and growth in limited access societies we build a dynamic political economy model with a two class society workers and the elite in which the elite formation the innovation rate and fiscal policy are endogenous the model generates a mapping between institutions and patterns of growth consistent with empirical evidence ex ante when facing constraints in choosing institutions the elite may delegate policy control to some of its members even though such delegation exacerbates the conflict within the elite and causes policy failures committing to such institutional arrangements prevents more harmful outcomes such as rapid entry and subsequent deterioration of the elite s economic and political power

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

international exchanges as the basis for conceptualizing ethics in international business extant business ethics literature available for application to international business demonstrates some variety but no comprehensive principles while the domains of both international business and business ethics are expanding they are also becoming increasingly divergent at the same time the primacy accorded to the multinational enterprise in both fields ignores the socio cultural and political embeddedness of economic activities and multiple agencies in international business individuals firms nations etc some international business theorists have offered the view that international exchange should be the central building block for theories on international business in this paper it is argued that international exchange could be the fundamental unit of analysis for international business ethics as well the potentially unifying features of exchange norms and ethical principles leads the author to develop some core exchange ethics principles that are tested on three recent international business practices

redistributive promises and the adoption of economic reform this paper analyzes the relationship between economic reform and the democratic process to ask the following question does the likelihood of adoption of an economic reform increase with an increase in the efficiency benefits from that reform a priori we might expect that this likelihood should increase monotonically for two reasons first economic reform results in an increase in the size of the national pie if the government has the ability to make compensatory tax transfers an increase in each citizen s income is possible second a larger economic reform results in a greater number of winners this might also be expected to reinforce the political support for economic reform so we should expect a reform with greater efficiency benefits to a larger population to have a greater chance of adoption by the government however in this paper we show that this intuition is mistaken in particular we demonstrate that there exists a certain non monotonicity between the distribution of winners from economic reform and the probability of its adoption an increase in the number of winners may lower rather than increase the likelihood of adoption of economic reform in particular even though reforms that benefit a minority or an overwhelming majority are adopted reforms that benefit a smaller majority are not adopted

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

evidence on economic growth and government size the purpose of this article is to explore the effect of government size on economic growth in the united states using time series data over the period 1950 to 1998 a multi equation model is developed to examine the relationship between economic growth and government size the results indicate that government size has a significant and negative effect on economic growth

fiscal decentralization and economic growth a cross country study abstract we use a panel data set of 46 countries over the 1970 1989 period to investigate the relationship between fiscal decentralization and economic growth we find a negative relationship between fiscal decentralization and growth in developing countries but none in developed countries several explanations are offered for our findings

vested interests in a positive theory of stagnation and growth we study a positive theory of stagnation and growth aimed at understanding the large variations in growth outcomes across actual economies the theory points to the fundamental role played by vested interests in determining policies which are key to the growth process some agents seek to prevent the adoption of new technologies we develop a model of technology adoption and show how technological innovation may sow the seeds of its own destruction in particular we find that the equilibrium is characterized by a long cycle of stagnation and growth over this cycle incumbents are phased out of the economy will new innovation occur in formalizing our theory we make a methodological contribution by characterizing dynamic voting equilibria when voters must forecast the effects of different current policies on future prices and policy outcomes

fiscal decentralization and government size an extension this paper analyzes one method governments employ to circumvent the discipline of a competitive system of fiscal federalism intergovernmental collusion in the form of intergovernmental grants grants it is argued serve to encourage the expansion of the public sector by concentrating taxing powers in the hands of the central government and by weakening the fiscal discipline imposed on governments forced to self finance their expenditures the results reported suggest that intergovernmental grants do encourage growth in the public sector the results offer further support for the use of monopoly government assumptions in public sector modeling

integrating the ethical dimension into the analytical framework for the reform of state owned enterprises in china s socialist market economy a proposal the discussions about the reform of state owned enterprises are so far dominated by economic and legal considerations while the ethical dimension of this highly complex problem is being barely addressed explicitly much less developed systematically and integrated into a broader analytical framework for companies in china this paper is a proposal to introduce this kind of ethical considerations first the main features of the reform of state owned enterprises are briefly summarized and a number of critical issues are identified second the balanced concept of the firm is presented and compared with other approaches to corporate ethics in chiefly western literature discussions on corporate social responsibility the stakeholder approach and social contract theories finally the relevance of this balanced concept of the firm for the reform of state owned enterprises is briefly discussed

foreign aid and economic growth the role of flexible labor supply this paper examines the link between foreign aid economic growth and welfare in a small open economy external transfers impinge on the recipient s macroeconomic performance by affecting resource allocation decisions and relative prices the endogeneity of the labor leisure choice plays a crucial role in the propagation of foreign aid shocks the efficacy of foreign aid also depends on externalities associated with the public good that it helps finance the impact of tied and untied aid on the recipient government s intertemporal fiscal balance is examined finally the transitional adjustment to a foreign aid shock is shown to be sensitive to the elasticity of substitution in production and the relative importance of the labor leisure choice in utility

government spending and economic growth this study reviewed recent empirical studies providing fresh evidence of the impact of government spending on economic growth it is followed by a new theoretical synthesis and this as well as the other models are in turn subjected to empirical validation the empirical validation is conducted for both developed and less developed economies based on simultaneous equations as well as single equation models with or without adjusting for differences in th total factor productivity growth government size is estimated to have positive impact on economic growth in the short run but not in the intermediate run 25 years in this study

legislature size and government spending in italian regions forecasting the effects of a reform we analyze the effect of different legislature size on per capita regional expenditure in italy according to the theory legislature size has an indefinite effect on government spending because logrolling and transaction costs may have canceling effects we find a large and significantly positive effect of the number of legislators we use these findings to forecast the effects of the increase in the number of legislators that is taking place in some regions a 10 increase in legislature size commands on average a 12 increase in per capita regional expenditure

searching for leviathan an empirical study in several papers and a recent book geoffrey brennan and james buchanan 1977 1978 1980 have put forth a striking and controversial view of the public sector drawing by analogy on the conventional theory of monopoly in the private sector they envision a monolithic government that systematically seeks to exploit its citizenry through the maximization of the tax revenues that it extracts from the economy from this perspective they develop a fiscal constitution whose central purpose is to constrain leviathan by limiting in various ways its access to tax and other fiscal instruments while the leviathan hypothesis has been the source of lively debate and a wide range of policy proposals it has not been the subject of much systematic empirical work or testing this is a matter of some importance since the policy implications of the leviathan view are disturbing to put it mildly in particular brennan and buchanan virtually stand on their heads many of the basic theorems in public finance for an efficient and equitable tax system if in fact the leviathan view is an inaccurate depiction of the functioning of the public sector the introduction of their policy proposals is likely to make a sorry mess of the fiscal system the leviathan model does however have some straightforward implications for observable fiscal behavior it is the purpose of this paper to examine one of these testable implications brennan and buchanan stress that fiscal decentralization is itself a powerful constraint on leviathan competition among governments in the context of the interjurisdictional mobility of persons in pursuit of fiscal gains can offer partial or possibly complete substitutes for explicit fiscal constraints on the taxing power 1980 p 184 such competition among governments in a federal system that places heavy reliance on local fiscal decisions will greatly limit the capacity of leviathan to channel resources into the public sector in short as indicated by the epigraph to this paper the leviathan model implies that other things equal the size of the public sector should vary inversely with the extent of fiscal decentralization 2