lessons from strange cases democracy development and the resource curse in the u s states the work linking natural resource wealth to authoritarianism and under development suffers from several shortcomings in this article the authors outline those shortcomings and address them in a new empirical setting using a new data set for the u s states spanning 73 years and case studies of texas and louisiana the authors are able to more carefully examine both the diachronic nature and comparative legs of the resource curse hypothesis than previous research has they provide evidence that natural resource dependence contributes to slower economic growth poorer developmental performance and less competitive politics using this empirical setting they also begin parsing the mechanisms that might explain the negative association between resource wealth and political and economic development they draw implications from intranational findings for resource abundant countries across the world and suggest directions for future cross national and cross state work

natural resources and sub national economic performance does sub national democracy matter abstract the differentiation in the impact of resources on economic growth is often explained by the specifics of institutional factors the aim of this paper is to investigate how sub national political differences influence the effect of natural resources on economic growth using a dataset of russian regions this paper demonstrates that sub national democratization influences the growth effects of resources and considers possible mechanisms for this influence the paper finds that in russia natural resources are only capable of promoting growth in the regions with non democratic political systems that at the same time have an efficient and non corrupt bureaucracy

small and large stakes risk aversion implications of concavity calibration for decision theory abstract a growing literature reports the conclusions that a expected utility theory does not provide a plausible theory of risk aversion for both small stakes and large stakes gambles and b this decision theory should be replaced with an alternative theory characterized by loss aversion this paper explains that the arguments in previous literature fail to support these conclusions either concavity calibration has no general implication for expected utility theory or it has problematic implications for all decision theories that involve concave transformations utility or value functions of positive money payoffs which makes loss aversion irrelevant to the argument

keep up with the winners experimental evidence on risk taking asset integration and peer effects the paper reports the result of an experimental game on asset integration and risk taking we find some evidence that winnings in earlier rounds affect risk taking in subsequent rounds but no evidence that real life wealth outside the experiment affects risk taking controlling for past winnings participants receiving a low endowment in a round engage in more risk taking we test a keeping up with the joneses hypothesis and find that subjects seek to keep up with winners though not necessarily with average earnings overall the evidence suggests that risk taking tracks a reference point affected by social comparisons

a rentier theory of subnational regimes fiscal federalism democracy and authoritarianism in the argentine provinces levels of subnational democracy vary significantly within countries around the world drawing on fiscal theories of the state the author argues that this variance is often explained by a type of rentierism that is not geographically determined by natural resources but politically created by certain fiscal federalism arrangements he posits that less democratic regimes are more likely in rentier provinces those that receive disproportionately large central government transfers and practically forgo local taxation intergovernmental revenue sharing rules that produce large vertical fiscal imbalances and favor the economically smaller districts provide their incumbents with generous fiscal federalism rents that allow them to restrict democratic contestation and weaken checks and balances statistical evidence from a panel data set of the argentine provinces strongly confirms this expectation even after controlling for standard alternative explanations such as level of development sensitivity analysis shows that this finding is extremely robust to alternative panel estimators qualitative and quantitative evidence suggests that the effect of heavy public spending on the economic autonomy of political actors is the main causal mechanism at work

anomalies risk aversion economists ubiquitously employ a simple and elegant explanation for risk aversion it derives from the concavity of the utility of wealth function within the expected utility framework we show that this explanation is not plausible in most applications since anything more than economically negligible risk aversion over moderate stakes requires a utility of wealth function that is so concave that it predicts absurdly severe risk aversion over very large stakes we present examples of how the expected utility framework has misled economists and why we believe a better explanation for risk aversion must incorporate loss aversion and mental accounting

consumer demand and the life cycle allocation of household expenditures the purpose of this paper is to estimate the parameters of household preferences that determine the allocation of goods within the period and over the life cycle using micro data in doing so the authors are able to identify important effects of demographics labor market status and other household characteristics on the intertemporal allocation of expenditure they test the validity of the life cycle model using excess sensitivity tests and find that controlling for demographics and labor market status variables can largely explain the excess sensitivity of consumption to anticipated changes in income

oil wealth and regime survival in the developing world 1960 1999 the global oil market and its associated booms and busts have generated a large literature in political science one contention in this literature is that political instability is a near certain long term outcome of oil wealth another line of argument maintains just the opposite that oil makes authoritarian regimes stronger by funding patronage and repressive apparatuses in this article i conduct the first cross national tests of these arguments and investigate the effects of oil wealth and the oil booms and busts on political stability drawing on data from 107 developing countries between 1960 and 1999 i estimate the effects of oil wealth on regime failure antistate social protest and domestic armed conflict thus as a first goal this article addresses an analytic shortcoming in previous studies by separating regime survival empirically from both economic policy and regime type democratic or authoritarian and by focusing on the direct effects of oil wealth on several measures of political stability i address the relationship between oil wealth and these outcomes both by comparing exporters to the rest of the developing world and by comparing oil rich states across pre boom boom and bust periods the results indicate that oil wealth is robustly associated with more durable regimes and significantly related to lower levels of protest and civil war moreover

rejecting small gambles under expected utility this paper contributes to an important recent debate around expected utility and risk aversion rejecting a gamble over a given range of wealth levels imposes a lower bound on risk aversion using this lower bound and empirical evidence on the range of the risk aversion coefficient we calibrate the relationship between risk attitudes over small stakes and large stakes gambles we find that rejecting small gambles is consistent with expected utility contrary to a recent literature that concludes that expected utility is fundamentally unfit to explain decisions under uncertainty paradoxical behavior is only obtained when calibrations are made in a region of the parameter space that is not empirically relevant

where the minimum wage bites hard introduction of minimum wages to a low wage sector between 1993 and april 1999 there was no minimum wage in the united kingdom except in agriculture in this paper we study the effects of the introduction of a national minimum wage nmw in april 1999 on one heavily affected sector the residential care homes industry this sector contains a large number of low paid workers and as such can be viewed as being very vulnerable to minimum wage legislation we look at the impact on both wages and employment our results suggest that the minimum wage raised the wages of a large number of care home workers causing a very big wage compression of the lower end of the wage distribution thereby strongly reducing wage inequality there is some evidence of employment and hours reductions after the minimum wage introduction though the estimated effects are not that sizable given how heavily the wage structure was affected

individual preferences monetary gambles and stock market participation a case for narrow framing we argue that narrow framing whereby an agent who is offered a new gamble evaluates that gamble in isolation may be a more important feature of decision making than previously realized our starting point is the evidence that people are often averse to a small independent gamble even when the gamble is actuarially favorable we find that a surprisingly wide range of utility functions including many nonexpected utility specifications have trouble explaining this evidence but that this difficulty can be overcome by allowing for narrow framing our analysis makes predictions as to what kinds of preferences can most easily address the stock market participation puzzle

do natural resources fuel authoritarianism a reappraisal of the resource curse a large body of scholarship finds a negative relationship between natural resources and democracy extant cross country regressions however assume random effects and are run on panel datasets with relatively short time dimensions because natural resource reliance is not an exogenous variable this is not an effective strategy for uncovering causal relationships numerous sources of bias may be driving the results the most serious of which is omitted variable bias induced by unobserved country specific and time invariant heterogeneity to address these problems we develop unique historical datasets employ time series centric techniques and operationalize explicitly specified counterfactuals we test to see if there is a long run relationship between resource reliance and regime type within countries over time both on a country by country basis and across several different panels we find that increases in resource reliance are not associated with authoritarianism in fact in many specifications we generate results that suggest a resource blessing

revisiting the resource curse natural disasters the price of oil and democracy fluctuations in the price of oil and the contemporaneous political changes in oil producing countries have raised an important question about the link between oil rents political institutions and civil liberties this article presents a sim ple model of the relationship between resource income and political freedom and using an instrumental variables approach estimates the causal effect of shocks to oil revenues on levels of democracy using a new data set multiple measures of democ racy and various specifications ifi nd that the effect of oil price shocks is larger than might be expected and on the order of the effects found from changes in gross domes tic product an umber of studies show that ar esource curse exists that is they demonstrate that relatively large natural resource endowments exert negative effects on politi cal institutions both case studies and analyses based on data drawn from large numbers of countries across long periods of time show that individuals are less able to hold their leaders accountable if they live in countries blessed by abundant natural resources than if they reside in less well endowed nations in contrast to conventional wisdom then at least some types of wealth undermine rather than accelerate the development of democratic political institutions the existing literature however suffers from two problems that cast doubt on their conclusions about the resource curse first contributors to it cannot disen tangle two very different mechanisms 1 changes in resource income produce changes in political institutions and 2 shifts in governments policies explain variations in resource revenues for example oil prices rise when political leaders either consolidate their power russia and venezuela or pursue more radical pol icies iran it is also true however that rising prices can enable leaders to aban don moderate policies postponing for example the pursuit of market oriented

risk aversion and expected utility theory a calibration theorem within the expected utility framework the only explanation for risk aversion is that the utility function for wealth is concave a person has lower marginal utility for additional wealth when she is wealthy than when she is poor this paper provides a theorem showing that expected utility theory is an utterly implausible explanation for appreciable risk aversion over modest stakes within expected utility theory for any concave utility function even very little risk aversion over modest stakes implies an absurd degree of risk aversion over large stakes illustrative calibrations are provided

expo power utility a flexible form for absolute and relative risk aversion a new utility function which i call expo power is proposed that exhibits decreasing constant or increasing absolute risk aversion and decreasing or increasing relative risk aversion depending on parameter values numerical analysis suggests that the expo power function performs well in incorporating these risk preference structures and that arbitrary risk preference specifications may lead to biased risk response estimates

refining the oil curse country level evidence from exogenous variations in resource income is there a resource curse some scholars argue that resource income is associated with slower transitions to democracy others contend that the negative effects of resources are conditional on factors such as institutional quality to test these competing hypotheses this article exploits the price spike caused by the 1973 oil embargo which transformed several countries with latent oil industries into resource reliant states our quasi experimental research design allows for better identification of causation than the associational approaches common in the literature we use the method of synthetic controls to compare the political development of states that received resource derived revenue with how these states would have behaved in a counterfactual world without such revenue we find that there is little evidence that a resource curse systematically prevents democratization or that institutional quality alone determines outcomes nevertheless resource income meaningfully affects outcomes and even con

narrow bracketing and dominated choices an experiment by tversky and kahneman 1981 illustrates that people s tendency to evaluate risky decisions separately can lead them to choose combinations of choices that are first order stochastically dominated by other available combinations we investigate the generality of this effect both theoretically and experimentally we show that for any decisionmaker who does not have constant absolute risk averse preferences and who evaluates her decisions one by one there exists a simple pair of independent binary decisions where the decisionmaker will make a dominated combination of choices we also characterize as a function of a person s preferences the amount of money that she can lose due to a single mistake of this kind the theory is accompanied by both a real stakes laboratory experiment and a large sample survey from the general u s population replicating tversky and kahneman s original experiment where decisionmakers with prototypical prospect theory preferences will choose a dominated combination we find that 28 of the participants do so in the survey we ask the respondents about several hypothetical large stakes choices and find higher proportions of dominated choice combinations a statistical model that estimates preferences from the survey results is best fit by assuming people have utility functions that are close to prospect theory value functions and that about 83 of people bracket narrowly none of these results varies strongly with the personal characteristics of participants we also demonstrate directly that dominated choices are driven by narrow bracketing when we eliminate the possibility of narrow bracketing by using a combined presentation of the decisions the dominated choices are eliminated in the laboratory experiment and are greatly reduced in the survey

risk aversion experimental evidence from south african fishing communities we estimate the risk attitudes of a large sample of individuals from various fishing communities along the west coast of south africa female fishers and rights holders are found to be more risk averse than their male counterparts while rights holders are found to be less risk averse relative to subjects without fishing rights risk attitudes are found to be correlated with compliance with fisheries regulations in particular a greater degree of risk aversion translates into a reduction in compliance furthermore in the case of gender female fishers and rights holders are more likely to comply with fisheries regulations

oil nontax revenue and the redistributional foundations of regime stability nontax revenues make up a substantial amount of government revenue around the world though scholars usually focus on individual sources of such revenue for example foreign aid and state owned oil companies using a theory of regime change that builds on recent models of the redistributional foundations of dictatorships and democracies i generate hypotheses regarding all nontax revenue and regime stability i argue that an increase in nontax revenue should be associated with less taxation of elites in democracies more social spending in dictatorships and more stability for both regime types i find support for all three of these hypotheses in a cross sectional time series analysis covering all countries and years for which the necessary data are available significantly i show that the particular source of nontax revenue does not make a difference they all act similarly with regard to regime stability and the causal mechanisms

more oil less democracy evidence from worldwide crude oil discoveries this article exploits variations in the timing and size of oil discoveries to identify the impact of oil wealth on democracy i find that discovering 100 billion barrels of oil approximately the initial endowment of iraq pushes a country s democracy level almost 20 percentage points below trend after three decades the estimated effect is larger for oilfields with higher quality oil and lower exploration and extraction costs however the estimates become less precise when oil abundance is measured by oil discovery per capita suggesting politicians may care about the level instead of the per capita value of oil wealth

explaining the oil advantage effects of natural resource wealth on incumbent reelection in iran why does natural resource wealth prolong incumbency using evidence from parliamentary elections in the islamic republic of iran the author shows that natural resource revenues boost incumbent reelection rates because they are used to provide public or private goods to constituents which incentivizes voters to reelect incumbents over challengers to test this hypothesis the author employs originally assembled data on five parliamentary elections in iran 1992 2008 in longitudinal hierarchical regression analyses at the district and province levels by leveraging iran s mixed member electoral system he shows that the resource incumbency mechanism works primarily in single member districts with little evidence of an incumbency advantage for politicians in resource rich multimember districts building on the rentier theory of natural resource wealth the results suggest that voting for the incumbent is attributable to patronage and public goods distribution the findings offer new insights into the understudied context of iranian legislative elections illustrate the mechanisms driving the relationship between resource wealth and incumbency advantage at the subnational level in a nondemocratic setting and highlight the mediating effects of electoral institutions on the resource incumbency relationship

an index of loss aversion to a considerable extent risk aversion as it is commonly observed is caused by loss aversion several indexes of loss aversion have been proposed in the literature the one proposed in this paper leads to a clear decomposition of risk attitude into three distinct components basic utility probability weighting and loss aversion the index is independent of the unit of payment the main theorem shows how the indexes of different decision makers can be compared through observed choices

the regional effects of germany s national minimum wage abstract we show that the minimum wage introduced in germany in 2015 led to spatial wage convergence in particular in the left tail of the distribution without reducing relative employment in low wage regions within the first two years

blessing and curse oil and subnational politics in the argentine provinces recent studies on the subnational resource curse contend that subnational rentier units suffer from the same nondemocratic tendency as their national counterparts however subnational rentier states worldwide exhibit contrasting political outcomes why are some subnational rentier units politically competitive whereas others are not this article argues that rent sharing regimes the fiscal institutions for sharing resource revenues among levels of government condition political competitiveness at the provincial level using novel time series cross sectional data on argentina a case with several hydrocarbon rich units with exogenously created rent sharing regimes i show that oil creates negative political effects at the provincial level only when these institutions do not share or share minor amounts of rents with municipal governments conversely political competition emerges when rent sharing regimes distribute rents to municipal governments as this shrinks large provincial budgets allows municipal

a review of the stern review on the economics of climate change how much and how fast should we react to the threat of global warming the stern review argues that the damages from climate change are large and that nations should undertake sharp and immediate reductions in greenhouse gas emissions an examination of the review s radical revision of the economics of climate change finds however that it depends decisively on the assumption of a near zero time discount rate combined with a specific utility function the review s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of assumptions that are consistent with today s marketplace real interest rates and savings rates

risk aversion and expected utility of consumption over time the calibration theorem by rabin rabin m 2000a risk aversion and expected utility theory a calibration theorem econometrica 68 1281 1292 rabin m 2000b diminishing marginal utility of wealth cannot explain risk aversion in kahneman d tversky a eds choices values and frames cambridge university press implies that seemingly plausible small stake choices under risk imply implausible large stake risk aversion this theorem is derived based on the expected utility of wealth model however cox and sadiraj cox j c sadiraj v 2006 small and large stakes risk aversion implications of concavity calibration for decision theory games econ behav 56 45 60 show that such implications do not follow from the expected utility of income model one may then wonder about the implications for more applied consumption analysis the present paper therefore expresses utility as a function of consumption in a standard life cycle model and illustrates the implications of this model with experimental small and intermediate stake risk data from holt and laury holt c a laury s k 2002 risk aversion and incentive effects amer econ rev 92 1644 1655 the results suggest implausible risk aversion parameters as well as unreasonable implications for long term risky choices thus the conventional intertemporal consumption model under risk appears to be inconsistent with the data c 2009 elsevier inc all rights reserved less

natural resource wealth and the survival of autocracy does natural resource wealth impede transitions to democracy this article revisits this question with an event history design that differs from the approach used in other recent statistical tests of rentier state theory the research confirms that autocracy is typically more durable in countries with substantial resource wealth and the author finds this effect is robust to other measures proposed to explain the dearth of democracy in the middle east or the muslim world along the way the author raises concerns about the use of all countries and all years samples to test theories of democratization arguing that this design can obscure important differences in the forces driving stability and change among different types of political regimes

consumption over the life cycle and over the business cycle the main aim of this paper is to assess the validity of the life cycle model of consumption in particular we address an issue that has recently received much attention especially in the macroeconomic literature that of excess sensitivity of consumption growth to income growth we do this using a time series of cross sections and a novel and flexible parameterization of preferences the former allows us to address aggregation issues directly while with the latter we can allow both the discount factor and the elasticity of intertemporal substitution eis to be affected by various observable variables and lifetime wealth the main findings can be summarized as follows i the excess sensitivity of consumption growth to labor income disappears when we control for demographic variables this is true both at life cycle and business cycle frequencies ii estimation of a flexible specification of preferences indicates that the elasticity of intertemporal substitution is a function of several variables including the level of consumption the eis increases with the level of consumption as expected iii the variables that change the eis are also important in explaining why we observe excess sensitivity over the business cycle iv we are able to reconcile our results with those reported both in the macro and micro literature v in our specification the elasticity of intertemporal substitution is not very well determined this result however should be taken with care as we have not made an effort to construct a preferred specification which would probably include additional controls for labor supply behavior the evidence presented shows that the life cycle model cannot be easily dismissed indeed we believe that the model does a good job at representing consumption behavior both over the life cycle and over the business cycle