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

a note on interest on required reserves as an instrument of monetary control abstract the purpose of this paper is to evaluate the potential role of interest on required reserves as a monetary control instrument it is found that an increase in the interest rate paid on reserves held at the federal reserve has counteracting effects on the variability of the money stock hence there is an optimal setting for the interest rate on required reserves that theoretically may include or lie anywhere between the extreme cases of no interest payment and the payment of interest at the maximum feasible level

tourism welfare and de industrialization in a small open economy this paper investigates the effects of an expansion of tourism on welfare output and factor prices in the host country using a general equilibrium international trade model in the absence of taxes foreign ownership and distortions an increase in foreign visitors will increase welfare only if the price of nontradables increases factor mobility and foreign ownership tend to reduce the gains from tourism while commodity taxes tend to increase them conditions under which an increase in tourism can lead to deindustrialization are also discussed copyright 1991 by the london school of economics and political science

defense against an opportunistic challenger theory and experiments abstract this paper considers a contest setting in which a challenger chooses between one of two contests to enter after observing the level of defense at each despite the challenger s chance of success being determined by a proportional contest success function the defenders effectively find themselves in an all pay auction that largely dissipates the value of the defended resources because the challenger will target the weaker defender however if the defenders form a protective alliance then their expected profits increase despite the fact that a successful challenge is theoretically more likely given the overall reduction in defense controlled laboratory experiments designed to test the model s predictions are also reported observed behavior is generally consistent with the comparative static predictions although challengers exhibit the familiar overbidding pattern defenders appear to anticipate this reaction and adjust their behavior accordingly

multiperson tournaments an experimental examination modern hierarchical organizations like corporations must motivate agents to work hard given their pyramid structure it is not surprising that one commonly used motivator is the promotion tournament in such tournaments agents compete to advance to positions at higher organizational levels though these tournaments are common little research has empirically looked at the interface of organizational structure and tournament design this paper aims to take a step in filling this void by comparing the performance of various tournament designs using controlled laboratory techniques

absorbing a windfall of foreign exchange dutch disease dynamics abstract the permanent income rule is seldom the optimal response to a windfall of foreign exchange such as that from a resource discovery absorptive capacity constraints require domestic investment and investment in structures requires non traded inputs the supply of which is constrained by the initial capital stock this particularly when combined with intra sectoral capital immobility delays adjustment and creates short run dutch disease symptoms as the real exchange rate sharply appreciates and overshoots its long run value optimal revenue management requires investing in the domestic non traded goods sector and a slow build up of consumption accumulation of foreign assets adjusts to accommodate the time paths of domestic consumption and investment

macroeconomic policy in an oil exporting economy with foreign exchange controls the sudden and sharp increases in oil prices during the past decade and the discovery and extraction of oil in the north sea have recently contributed to a renewal of interest in the macroeconomic problems of oil exporting countries in general and those of industrialized and semi industrialized oilexporting countries such as the uk and mexico in particular the economic implications of the north sea oil revenues for the british economy have been hotly debated by forsyth and kay 1980 1981 worswick 1980 barker 1981 corden 1981 and byatt et al 1982 the effects of oil and gas revenues on the economies of canada mexico the netherlands norway and the uk have also been the subject of analysis and discussion in barker and brailovsky 1981 despite their important contribution these studies fall short of formulating a comprehensive theoretical framework for the study of macroeconomic policy in oil exporting countries in general the resurgence of interest in the macroeconomics of oil exporting economies and the lack of a satisfactory theoretical framework emphasize the need for the explicit introduction of an oil sector into macroeconomic models of the open economy the more recent studies by buiter and purvis 1983 eastwood and venables 1982 corden and neary 1982 and neary and purvis 1982 have gone some way towards meeting this need but they are better suited to the study of macroeconomic policy in developed oil exporting countries such as the united kingdom where highly developed financial markets already exist 1 without exception all these studies assume that the economy under consideration operates with a floating exchange rate and that the private capital is internationally mobile they also invariably ignore the short term and the long term financial repercussions of changes in oil income that operate via the government budget constraint and the asset position of the private sector these assumptions are however inappropriate for most oil exporting countries in the middle east africa and latin america the purpose of this paper is to examine the short run and long run macroeconomic consequences of an increase in oil revenues in an oil exporting country characterized by strict foreign exchange controls on private capital flows we attempt to do this in the context of a keynesian underemployment model of the type analysed for example by turnovsky and kaspura 1974 branson 1976 and argy and salop 1979 but with domestic prices set according to a mark up rule along the lines advocated for example by fetherston and godley 1978 1981 unlike argy and salop but in line with other recent contributions to the macroeconomic theory of open economies the present paper explicitly allows for the existence of the government budget constraint and analyses the macroeconomic effects of changes in oil revenues both in the short run when

policy adjustments to the oil boom and their evaluation the dutch disease in indonesia abstract this paper analyzes the effects of two policy adjustments namely exchange rate devaluation and the accumulation of budget surpluses to the oil export boom in indonesia by using a simple simulation model our results indicate that exchange rate adjustment had a significant impact on expansion of tradable sectors especially the manufacturing sector by reversing the real exchange rate while officially maintaining the balanced budget principle the government exercised delicate operations whereby the budget surpluses were covertly accumulated as government deposits such operations were executed as a necessary demand management policy to ensure that the effect of devaluation was persistent these policy adjustments were consistent from a macroeconomic management point of view and have contributed to avoiding the dutch disease that indonesia otherwise might have suffered because of its oil bonanza

sweep programs and optimal monetary aggregation abstract this paper examines the admissibility of monetary aggregate groupings for the us over 1993 2001 based upon weak separability we investigate the impact of retail and commercial demand deposit sweep programs on the separability of monetary asset groupings weak separability is tested using the swofford whitney and fleissig whitney tests we use varian s measurement error adjustment procedure to eliminate violations of the generalized axiom of revealed preference garp when funds from both retail and commercial demand deposit sweep programs are placed within checkable deposits all groupings narrow and broad pass garp and weak separability for groupings based on conventional money measures tests tend to favor broad aggregates

interest on bank reserves and optimal sweeping abstract a key rationale offered by the federal reserve for the payment of interest on reserves was to remove the incentive for banks to operate sweep accounts sweeping shifts funds from transactions deposits subject to reserve requirements to non reservable deposits this paper extends a conventional banking model to analyze sweeping behavior sweeping responds positively to increases in bank loan rates and reserve ratios and negatively to increases in the interest rate on reserves or exogenous increases in bank equity sweeping generates greater responsiveness in lending to changes in loan rates or the interest rate on reserves and lower responsiveness to changes in reserve ratios or equity than in its absence empirical analysis of an explicit condition that we derive suggests that with an unchanged reserve requirement the fed could eliminate sweeping by setting the interest rate on reserves to no less than approximately 4 points below the market loan rate

the selection efficiency of tournaments abstract we discuss tournaments in terms of their efficiency as probabilistic mechanisms that select high quality alternatives players in a noisy environment we characterize the selection efficiency of three such mechanisms contests binary elimination tournaments and round robin tournaments depending on the shape of the distribution of players quality the number of players and noise level the results have implications as to how and under what circumstances the efficiency of tournament based selection can be manipulated

assessing ricardian equivalence this paper reviews the literature on ricardian equivalence this hypothesis may be interpreted as a generalisation to the short and the long run of the theories which put no weight on the real effects of public policies on aggregate demand we argue that ricardian equivalence relies on both permanent income hypothesis and the fulfilment of the intertemporal government budget constraint the theoretical literature emphasises several reasons for departures from this hypothesis however the empirical literature is inconclusive when ricardian equivalence is tested in a life cycle framework the hypothesis is usually rejected while when the empirical analysis is based on optimising models it is usually accepted

resource revenue management and wealth neutrality in norway abstract an important idea behind the norwegian oil fund mechanism and the fiscal spending rule is to protect the non oil economy from the adverse effects of excessive spending of resource revenues over the government budget a critical assumption in this respect is that public sector saving is not being offset by private sector dis saving which is at stake with the hypothesis of ricardian equivalence based on a framework of co integrating saving rates this model provides an empirical test of the ricardian equivalence hypothesis on norwegian time series data although the model rejects the strong form presence of ricardian equivalence results indicate that the norwegian approach does not fully succeed in separating spending of resource revenues from the accrual of the same revenues

the current account and precautionary savings for exporters of exhaustible resources abstract exporters of exhaustible resources have historically exhibited higher income volatility than other economies suggesting a heightened role for precautionary savings this paper uses a parameterized small open economy model to quantify the role of precautionary savings for exporters of exhaustible resources when the only source of uncertainty is the price of the exhaustible resource the parameterized model fares moderately well at capturing current account balances in both cross section and time series data the results show that the precautionary motive can generate sizable external sector savings the more so the greater the weight of exhaustible resource revenues in future income

up or out rules in the market for lawyers we examine how up or out rules operate as a screening device in the market for lawyers using data on large new york law firms we show that firm growth is a slow and uncertain process because performance as an associate is not an especially informative signal about whether a lawyer will make a good partner and because the costs of mistaken promotion are relatively high a newly hired associate is unlikely to be a suitable partner and the screening process is relatively imprecise firm growth therefore contributes between 5 7 of the present value of profits of a law firm

commodity price volatility with endogenous natural resources abstract natural resource reserves are exogenous in models of small commodity exporters changes in the stock of reserves play no role in the macroeconomy including in business cycle volatility trade dynamics or exchange rate volatility we consider richer supply dynamics and model exploration and depletion we show that an endogenous supply of reserves is important for capturing the stylised facts associated with commodity price shocks including a commodity currency the crowding out of non commodity activity dutch disease and a volatile business cycle we also consider how exploration and depletion affect the ranking of optimal monetary and taxation policies when natural resource reserves are held fixed monetary policy is an efficient tool for stabilising the effects of commodity price shocks however when exploration and depletion are accounted for using interest rates to stabilise the effects of commodity price changes becomes inefficient using taxes on the resource sector specifically an ad valorem royalty remains efficient

avoiding the resource curse the case norway in many countries natural resources have been detrimental to the economic development the literature on the resource curse shows a bleak relationship countries with large natural resources generally experience lower economic growth than other countries norway does not fit into this picture economic growth has much higher than in most other industrialized countries this paper describes the key features of the norwegian management of the petroleum resources the main focus is on the management of the revenues from the petroleum sector but the effects of the petroleum sector on the norwegian economy more generally are also discussed

the provision of incentives in firms i ncentives are the essence of economics despite many wide ranging claims about their supposed importance there has been little empirical assessment of incentive provision for workers the purpose of this paper is to critically overview existing work on the provision of incentives since the interests of workers and their employers are not always aligned a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm s interest this literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers these include piece rates options discretionary bonuses promotions profit sharing efficiency wages deferred compensation and so on my objective here is to evaluate this literature in the light of a growing empirical literature on compensation where possible i will address the literature from two perspectives first an underlying assumption of this literature is that individuals respond to contracts that reward performance accordingly i consider whether agents behave in this way and whether these responses are always in the firm s interest second i address whether firms write contracts with these responses in mind in other words do contracts look like the predictions of the theory incentives are provided to workers

the economic design of sporting contests what is the optimal number of entrants in a race or the optimal number of teams in a baseball league what is the optimal structure of prizes for a golf tournament or degree of revenue sharing for a football championship how evenly balanced should the competing teams be in the nascar or formula one championships what is the maximum number of entrants per nation to the olympic games that should be permitted what quota of qualifying teams to the soccer world cup should be allocated to the developing nations

on the welfare cost of inflation and the recent behavior of money demand post 1980 u s data trace out a stable long run money demand relationship of cagan s semi log form between the m1 income ratio and the nominal interest rate with an interest semi elasticity of 1 79 integrating under this money demand curve yields estimates of the welfare cost of modest departures from friedman s zero nominal interest rate rule for the optimum quantity of money that are quite small the results suggest that the federal reserve s current policy which generates low but still positive rates of inflation provides an adequate approximation in welfare terms to the alternative of moving all the way to the friedman rule jel e31 e41 e52

industrial policy and exchange rate scepticism the aim of the present paper is to put in historical perspective the development thinking on the relationship between industrial and exchange rate policies the first section focuses on the thought of the so called pioneers of development economics specifically their preference for protectionism and their belated recognition that an exchange rate policy could act as a substitute to it in the second one we analyze the exchange rate skepticism that arises out of the theories that identify a foreign constraint to growth in addition to the one revealed by the pioneers the third section briefly complements the previous discussion with reference to macroeconomic formulations that allow for short run contractionary effects of a devaluation reinforcing the skepticism in question in the fourth section we discuss the revival of development thinking in the 1980s and its discussion about east asian trajectories a literature that placed great emphasis on industrial policy finally in the fifth section we discuss the new historical facts and the new development macroeconomics models that are putting an end to exchange rate skepticism

biased contests for symmetric players in a biased contest one of the players has an advantage in the winner determination process we characterize a novel class of biased contest success functions pertaining to such contests and provide necessary and sufficient conditions for zero bias to be a critical point of arbitrary objectives satisfying certain symmetry restrictions we however challenge the common wisdom that unbiased contests are always optimal when contestants are symmetric ex ante or even ex post we show that contests with arbitrary favorites i e biased contests of symmetric players can be optimal in terms of various objectives such as expected aggregate effort the probability to reveal the stronger player as the winner or expected effort of the winner

harnessing windfall revenues optimal policies for resource rich developing economies a windfall of natural resource revenue or foreign aid faces government with choices of how to manage public debt investment and the distribution of funds for consumption particularly if the windfall is both anticipated and temporary we show that the permanent income hypothesis prescription of an ever lasting increase in consumption financed by borrowing ahead of the windfall and then accumulating a sovereign wealth fund swf is not optimal for capital scarce developing economies such countries should accumulate public and private capital to accelerate their development and only if the windfall is large relative to initial foreign debt is it optimal to build a swf the optimal time profile of consumption is biased towards the near future as compared to the permanent income hypothesis outcomes depend on instruments available to government we study cases where the government can make lump sum transfers to consumers where such transfers are impossible so optimal policy involves cutting distortionary taxation in order to raise investment and wages and where ricardian consumers can borrow against future revenues in which case the policy response to possible over consumption is a high level of investment in infrastructure

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

costs of adjustment portfolio separation and the dynamic behavior of bank loans and deposits this paper develops a model of the banking firm and tests for the presence of portfolio separation the theoretical model generalizes existing intertemporal adjustment costs models by assuming that these costs coexist simultaneously on both sides of the bank s balance sheet our analysis predicts that bank loan demand and deposit supply respond to past current and expected fixture values of the federal funds rate deposit rate and loan rate we estimate the model and find that the restrictions imposed by the portfolio separation assumption are inconsistent with the estimated behavior of the banking firms in our sample we also find some limited empirical support for our extended model of the adjustment cost process copyright 1995 by ohio state university press

the varieties of resource experience natural resource export structures and the political economy of economic growth many oil mineral and plantation crop based economies experienced a substantial deceleration in growth following the commodity boom and bust of the 1970s and early 1980s this article illustrates how countries dependent on point source natural resources those extracted from a narrow geographic or economic base such as oil and minerals and plantation crops are predisposed to heightened economic and social divisions and weakened institutional capacity this in turn impedes their ability to respond effectively to shocks which previous studies have shown to be essential for sustaining rising levels of prosperity analysis of data on classifications of export structure controlling for a wide array of other potential determinants of governance shows that point source and coffee and cocoa exporting countries do relatively poorly across an array of governance indicators these governance effects are not associated simply with being a natural resource exporter countries with natural resource exports that are diffuse relying primarily on livestock and agricultural produce from small family farms do not show the same strong effects and have had more robust growth recoveries

endogenous growth with a limited fossil fuel extraction capacity campbell 1980 and following authors have discussed a limited resource extraction capacity as an augmentation of the well known hotelling model we integrate a limited extraction capacity and related investments in the endogenous growth model of tsur and zemel 2005 to study its effect on economic development the capacity constraint gives rise to three effects on the one hand higher energy costs and the reallocation of production towards capacity investments decrease production available for consumption research and or capital investments energy costs and reallocation effect on the other hand research investments may increase which boosts available production research effect depending on the capital endowment and the strength of the effects long run consumption may be boosted or depressed in particular the capacity constraint may render everlasting consumption growth non optimal in a resource rich economy furthermore we find that capacity investments may be postponed to later points in time if the capital endowment is high

bank behavior interest rate determination and monetary policy in a financial system with an intraday federal funds market abstract this paper has two purposes one is to construct a formal model of the determination of and relationships between interest rates on funds with 24 hour overnight and intraday terms the second is to use this model to examine the likely effects of alternative federal reserve proposals for addressing the issue of intraday extension of federal reserve credit in the form of daylight overdrafts of bank reserve accounts it is demonstrated that present proposals all entail potentially significant drawbacks for monetary policy

sweep programs the fall of m1 and rebirth of the medium of exchange this paper investigates the effect of sweep programs on m1 using dynamic simulations of money demand over 1994 2000 the postsample period constitutes when sweep programs have been in effect all models generate predictions systematically above reported m1 using data on newly initiated programs test findings indicate that sweeps account for the overprediction within the conventional money demand model with a long term interest rate we construct a medium of exchange measure m1s equal to m1 plus estimated holdings of sweep balances m1s velocity compares favorably with that of broader aggregates evidence indicates cointegration within m1s money demand

the savers spenders theory of fiscal policy the macroeconomic analysis of fiscal policy is usually based on one of two canonical models the barro ramsey model of infinitely lived families or the diamond samuelson model of overlapping generations this paper argues that neither model is satisfactory and suggests an alternative in the proposed model some consumers plan ahead for themselves and their descendants while others live paycheck to paycheck this model is easier to reconcile with the essential facts about consumer behavior and wealth accumulation and it yields some new and surprising conclusions about fiscal policy

orchestrating rent seeking contests contests have different sometimes quite complex organisational structures in particular while most of the existing literature focusses on simultaneous contests multistage contests are also quite frequently encountered this paper seeks to provide a rationale for the latter by endogenising the choice of a contest structure which is made by an organiser of a contest interested in maximising the efforts expended by the contenders

monetary policy implementation and the federal funds rate this paper investigates how the implementation of monetary policy affects the dynamics and the volatility of the federal funds rate since the early 1980s the most important changes in the fed s conduct of monetary policy refer to the role of the federal funds rate target and the reserve requirement system we show that the improved communication and transparency regarding the federal funds rate target has significantly increased the fed s influence on the federal funds rate since 1994 by contrast the declining role of required reserves in the u s has contributed to higher federal funds rate volatility our results suggest that the planned introduction of remunerated reserves will further enhance the controllability of the federal funds rate

risk taking in selection contests abstract we study contests where the strategic variable is the degree of risk taking rather than the amount of effort the selection efficiency of such contests is examined we show that the selection efficiency of a contest may be improved by limiting the competition in two ways by having a small number of contestants and by restricting contestant quality

resource boom wages and unemployment theory and evidence from the norwegian petroleum experience the effects of norwegian petroleum activities on nominal wages and the rate of unemployment are analyzed in this paper the theoretical model is based on standard theory of segmented labor markets increased nominal wages in the petroleum sector will unambiguously increase the wage level and the rate of unemployment increased petroleum employment will under realistic assumptions also raise the wage level the effect on the rate of unemployment in this case is ambiguous the empirical model is embedded in reduced forms of the theoretical model and the estimated parameters are consistent with the theoretical results

u s narrow money for the twenty first century i introduction though money retains its fundamental role in a market economy money measures have been noticeably de emphasized within the conduct of u s monetary policy the federal open market committee fomc stopped reporting annual growth objectives for monetary aggregates although it states that money supply still has value for gauging economic conditions board of governors 2000 however a growing body of research calls for returning monetary aggregates to a more prominent role within monetary policy meltzer 1998 asserts that the view of persistent money growth as being the source of inflation is again widely accepted perhaps more firmly held by some central bank governors now than at any time in the twentieth century nelson 2002 provides evidence that base money has a significant effect on output relative to potential in the united states and united kingdom even after controlling for the short term real interest rate nelson 2003 argues that money growth governs the mean and dynamics of inflation in present day new keynesian models leeper and roush 2003 find evidence of an essential role for m2 within the transmission of monetary policy even after controlling for the nominal interest rate 1 this article focuses on the role of sweep programs in properly measuring narrow money in a sweep program banks move a portion of funds from customer demand deposits dds or other checkable deposits ocds into instruments with zero statutory reserve requirements we examine the effects of two types of sweep programs in the united states retail sweep programs and commercial demand deposit sweep programs narrow transactions based money historically has played a key role in the conduct of monetary policy as hafer and wheelock 2001 explain m1 served as the measure of money within the st louis model although monetarists had long been divided over whether a narrow or broad aggregate was the preferable target for monetary policy the fomc appeared to focus on m1 during the 1970s and early 1980s publishing their target ranges for money growth in terms of m1 hafer and wheelock 2001 though state that deviations in m1 velocity from its upward trend beginning in the early 1980s caused instability within the st louis model hoffman and rasche 1991 and hoffman et al 1995 place dummy variables in their vector error correction mechanisms to capture observed shifts in m1 velocity what attention remains on the money supply seems to be focused on broad rather than narrow aggregates but the broad aggregates have not escaped difficulties duca 2000 and hafer and wheelock 2001 document a deviation of m2 velocity from its long run trend in the early 1990s sometimes characterized as the missing m2 episode duca and vanhoose 2004 state that one response was to replace m2 with mzm consistent with the view that heightened substitution between small time deposits and mutual funds other than money market mutual funds mmmfs largely accounted for the instability in m2 velocity but as they go on to discuss m2 and mzm velocity encountered problems in the early 2000s plunging in ways not in line with opportunity cost variables duca and van hoose 2004 state that broader aggregates may have become more vulnerable to portfolio substitution involving stock and mutual funds other than mmmf narrow money has also been used extensively in examining money demand a sizable body of research has emerged that empirically investigates the demand for m1 especially using cointegration techniques hoffman and rasche 1991 hoffman et al 1995 dutkowsky and atesoglu 2001 and ball 2001 provide evidence of a stable long run money demand equation using m1 ball 2002 generates further support with m1 and establishes a correspondence between the partial adjustment formulation and the vector error correction model yet research and policy making using narrow money is currently being hampered by the lack of an accurate measure of transactions based money

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

boom or gloom examining the dutch disease in two speed economies traditional studies of the dutch disease do not account for productivity spillovers between the booming resource sector and other domestic sectors we put forward a simple theory model that allows for such spillovers we then identify and quantify these spillovers using a bayesian dynamic factor model the model allows for resource movements and spending effects through a large panel of variables while also identifying disturbances to other shocks using australia and norway as representative cases studies we find that a booming resource sector has substantial productivity spillovers on non resource sectors effects that have not been captured in previous analysis

oil windfalls and export diversification in oil producing countries evidence from oil booms abstract this paper examines the factors behind export diversification in oil countries specifically we investigate the impact of oil booms on export diversification through an empirical framework the paper finds that economy s export structure before the oil boom determines whether oil windfalls might affect the diversification process thus an oil boom negatively affects export diversification only if countries initially exhibit low levels of diversification in countries with a high level of diversification before the boom an oil boom has no impact on diversification these results are based on a large sample of 134 countries and are robust to various sensitivity analyses they are corroborated with data from the manufacturing sector which show that oil booms only reduce diversification in countries with a small manufacturing sector prior to the boom

aggressive oil extraction and precautionary saving coping with volatility the effects of stochastic oil demand on optimal oil extraction paths and tax spending and government debt policies are analyzed when the oil demand schedule is linear and preferences quadratic without prudence optimal oil extraction is governed by the hotelling rule and optimal budgetary policies by the tax and consumption smoothing principle volatile oil demand brings forward oil extraction and induces a bigger government surplus with prudence the government depletes oil reserves even more aggressively and engages in additional precautionary saving financed by postponing spending and bringing taxes forward especially if it has substantial monopoly power on the oil market gives high priority to the public spending target is very prudent and future oil demand has high variance uncertain economic prospects induce even higher precautionary saving and if non oil revenue shocks and oil revenue shocks are positively correlated even more aggressive oil extraction in contrast prudent governments deliberately underestimate oil reserves which induce less aggressive oil depletion and less government saving but less so if uncertainty about reserves and oil demand are positively correlated

commodity currencies and the real exchange rate abstract this paper shows that a change in the terms of trade of a commodity exporting country could cause the relative price of nontraded goods to rise or fall depending on the strength of income and substitution effects

digging for golden carrots an analysis of research tournaments contracting for research is often infeasible because research inputs are unobservable and research outcomes cannot be verified by a court sponsoring a research tournament can resolve these problems a model is presented in which contestants compete to find the innovation of highest value to the tournament sponsor the winner receives a prespecified prize the tournament game has a unique subgame perfect equilibrium free entry is not optimal because equilibrium effort by each researcher decreases in the number of contestants an optimally designed research tournament balances the probability of overshooting the first best quality level against the probability of falling short copyright 1995 by american economic association

the pareto zipf and other power laws abstract many empirical size distributions in economics and elsewhere exhibit power law behaviour in the upper tail this article contains a simple explanation for this it also predicts lower tail power law behaviour which is verified empirically for income and city size data