war and natural resource exploitation abstract we build a theoretical framework that allows for endogenous conflict behaviour i e fighting efforts and for endogenous natural resource exploitation i e speed ownership and investments while depletion is spread in a balanced hotelling fashion during peace the presence of conflict creates incentives for rapacious extraction as this lowers the stakes of future contest this voracious extraction depresses total oil revenue especially if world oil demand is relatively elastic and the government s weapon advantage is weak some of these political distortions can be overcome by bribing rebels or by government investment in weapons the shadow of conflict can also make less efficient nationalized oil extraction more attractive than private extraction as insecure property rights create a holdup problem for the private firm and lead to a lower license fee furthermore the government fights less intensely than the rebels under private exploitation which leads to more government turnover without credible commitment to future fighting efforts private oil depletion is only lucrative if the government s non oil office rents are large and weaponry powerful which guarantees the government a stronger grip on office and makes the holdup problem less severe

performance related pay and firm productivity evidence from a reform in the structure of collective bargaining the authors investigate the causal effect on firm productivity of a switch from fixed wages to collective performance related pay exploiting a reform in the structure of collective bargaining triggered by a social pact they find that an increase in the adoption of collective performance related pay leads to a 3 to 5 productivity gain but that such effect declines over time they show that the effect on productivity varies substantially by firm size industry affiliation and union density both the size of the bonus and the design of the scheme in terms of number and types of parameters used are also important features for a firm s productivity

adaptation and mitigation in long term climate policies the paper analytically explores the optimal allocation of investments into mitigation and environmental adaptation against climate change damages at a macroeconomic level the economic environmental model is formulated as a social planner problem where adaptation and abatement investments are separate decision variables the existence of a unique steady state is proven a comparative static analysis of optimal investments leads to essential implications for associated long term environmental policies it is shown that the optimal policy mix between adaptation and mitigation is lower for countries with higher economic efficiency for all applicable parameter ranges data calibration and numerical simulations are provided to estimate practical validity of theoretical outcomes

further reflections on hidden unemployment an examination of the off flows from the claimant count in the north west of england one of the most significant set of papers to come out of the portfolio of regional studies association publications in recent years has concerned the exposure of the levels of hidden unemployment in many of the old industrial areas of britain see for instance labour market adjustment in areas of chronic industrial decline the case of the uk coalfields regional studies 30 7 1997 627 640 the authors of these papers christina beatty and stephen fothergill have generated a debate that has uncovered major implications for the way the regional problem is measured perceived and tackled although these are important in terms of regional economic development strategies and policies it remains to be seen how the failure to count the real levels of unemployment will impact on the review of regional policy assisted areas the designation of european structural fund areas and the successful introduction of such initiatives as the new deal and welfare to work underpinning and deepening the rigour of t

a theory of political transitions we develop a theory of political transitions inspired by the experiences of western europe and latin america nondemocratic societies are controlled by a rich elite the initially disenfranchised poor can contest power by threatening revolution especially when the opportunity cost is low for example during recessions the threat of revolution may force the elite to democratize democracy may not consolidate because it is redistributive and so gives the elite an incentive to mount a coup highly unequal societies are less likely to consolidate democracy and may end up oscillating between regimes and suffer substantial fiscal volatility

the curse of natural resources in fractionalized countries abstract this paper develops a model that can explain why natural resources are a blessing for some countries but a curse for others in this model natural resources cause fighting activities between rivalling groups fighting reduces productive activities and weakens property rights making productive activities even less attractive the aggregate production decrease exceeds the natural resources direct positive income effect if and only if the number of rivalling groups is sufficiently large the model thus predicts that natural resources lower incomes in fractionalized countries but increase incomes in homogenous countries empirical evidence supporting this prediction is provided

political foundations of the resource curse a simplification and a comment in this note we show how a considerably simpler model than the one in our original jde 2006 paper generates all the same results we also acknowledge an error in the specification of a utility function in our previous paper

inequality in landownership the emergence of human capital promoting institutions and the great divergence this paper suggests that inequality in the distribution of landownership adversely affected the emergence of human capital promoting institutions e g public schooling and thus the pace and the nature of the transition from an agricultural to an industrial economy contributing to the emergence of the great divergence in income per capita across countries the prediction of the theory regarding the adverse effect of the concentration of landownership on education expenditure is established empirically based on evidence from the beginning of the 20th century in the u s

the first law of petropolitics finalversion received19 april2011 we examine empirically the relationship between crude oil prices and the ebb and ow of democratic insti tutions in order to test the hypothesis that high oil prices undermine democracy and sustain autocracy we use a variety of time series and panel data methods over a wide range of country subsamples and timeperiods nding strictly no evidence in favour of this so called first law of petropolitics friedman2006

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

the voracity effect abstract we analyze an economy that lacks a strong legal political institutional infrastructure and is populated by multiple powerful groups powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock in equilibrium this leads to slow economic growth and a voracity effect by which a shock such as a terms of trade windfall perversely generates a more than proportionate increase in fiscal redistribution and reduces growth we also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks jel f43 o10 o23 o40

an economic theory of leadership turnover abstract in an infinite horizon stochastic model a coup not only disciplines a dictator s policy towards a group of kingmakers but also enables a kingmaker to become a dictator greater competition for the dictator s position a lower impact of the dictator s policy on the kingmakers or lower risks of staging a coup raises the benefit of a coup relative to its opportunity cost and so raises the probability of a coup since periodic shocks affect the efficacy of the dictator s policy a bad enough shock makes it too costly for even talented dictators to avert a coup more talented dictators are able to survive more negative shocks so the worst shock in a dictator s reign is informative about the probability of a coup conditional on the worst shock the probability of a coup is independent of a dictator s duration in office the unconditional probability declines with duration

a lipsetian theory of voluntary power handover we consider an autocracy where the ruling elite control both the resource wealth and ed ucation policies education prompts economic growth and enriches the budget of the elite however education also increases the awareness of citizens capturing their reluctance to accept a dictatorship and their labor market aspirations and forces the elite to ex pand redistribution or handover the power a power handover leads to a more democratic regime where the elite retains at least partially its economic power this trade offis the backbone of our lipsetian theory of voluntary power handover this theory provides new insights on the positive relationship between economic development education and de mocratization and on the negative relationship between inequality and democratization finally we revisit the resources curse hypothesis within our setting

on the timing of political regime changes in resource dependent economies we consider a resource dependent economy initially ruled by the elite the transition from the autocratic to a more democratic regime takes place only if the citizens decide to revolt against the elite the occurrence of a revolution primarily depends on the autocratic regime vulnerability and the level of inequalities both being driven by the elite s redistribution and repression policies first we show that when a political transition is inevitable the elite choose the maximum rate of redistribution to lengthen their period in office second we find that the duration of the autocratic regime is linked to resource abundance and how it relates to the elite s policies more resources lead to a shorter reign of a redistributive regime which may not be the case of a repressive regime finally we interpret the arab spring sequence in light of our findings

natural resources rent seeking and welfare abstract a new and very simple mechanism to explain why natural resource abundance may lower income and welfare is developed in a model with rent seeking a greater amount of natural resources increases the number of entrepreneurs engaged in rent seeking and reduces the number of entrepreneurs running productive firms with a demand externality it is shown that the drop in income as a result of this is higher than the increase in income from the natural resource more natural resources thus lead to lower welfare

institutions and the resource curse countries rich in natural resources constitute both growth losers and growth winners we claim that the main reason for these diverging experiences is differences in the quality of institutions more natural resources push aggregate income down when institutions are grabber friendly while more resources raise income when institutions are producer friendly we test this theory building on sachs and warner s influential works on the resource curse our main hypothesis that institutions are decisive for the resource curse is confirmed our results contrast the claims of sachs and warner that institutions do not play a role

effective property rights conflict and growth abstract this paper shows how the interaction between conflict and growth can give rise to a nonmonotone relationship between property rights and social welfare this interaction is illustrated in a model of endogenous growth in which equilibrium diversion of resources is the cost of securing effective property rights a symmetric equilibrium allocation associated with more secure property rights and faster growth can be pareto dominated by one associated with poorer property rights and slower growth faster growth can exacerbate the problem of diversion whenever property rights are sufficiently poor these results call for caution before a society decides to pursue economic growth independently of the institutional structure of property rights furthermore if this structure is inappropriate piecemeal reform might not be in the interest of society and a substantial reform might be necessary if it is to be welfare improving

resource windfalls political regimes and political stability abstract we study theoretically and empirically whether natural resource windfalls affect political regimes we show that windfalls have no effect on democracies while they have heterogeneous political consequences in autocracies in deeply entrenched autocracies the effect of windfalls is virtually nil while in moderately entrenched autocracies windfalls significantly exacerbate the autocratic nature of the political system to frame the empirical work we present a simple model in which political incumbents choose the degree of political contestability and potential challengers decide whether to try to unseat the incumbents the model uncovers a mechanism for the asymmetric impact of resource windfalls on democracies and autocracies as well as the the differential impact within autocracies

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

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

political foundations of the resource curse in this paper we argue that the political incentives that resource endowments generate are the key to understanding whether or not they are a curse we show 1 politicians tend to over extract natural resources relative to the efficient extraction path because they discount the future too much and 2 resource booms improve the efficiency of the extraction path however 3 resource booms by raising the value of being in power and by providing politicians with more resources which they can use to influence the outcome of elections increase resource misallocation in the rest of the economy 4 the overall impact of resource booms on the economy depends critically on institutions since these determine the extent to which political incentives map into policy outcomes countries with institutions that promote accountability and state competence will tend to benefit from resource booms since these institutions ameliorate the perverse political incentives that such booms create countries without such institutions however may suffer from a resource curse

democratization or repression abstract regimes controlled by a rich elite often collapse and make way for democracy amidst widespread social unrest such regime changes are often followed by redistribution to the poor at the expense of the former elite we argue that the reason why the elite may have to resort to full scale democratization despite its apparent costs to themselves may be that lesser concessions would be viewed as a sign a weakness and spur further unrest and more radical demands the elite may therefore be forced to choose between repression and the most generous concession a transition to full democracy

the elusive curse of oil abstract our goal is to show that contrary to the claims made in several recent papers the effect of a large endowment of oil and other mineral resources on long term economic growth of countries has been on balance positive moreover the claims of a negative effect of oil and mineral wealth on the countries institutions are called into question

commodity windfalls polarization and net foreign assets panel data evidence on the voracity effect this paper examines the effects that windfalls from international commodity price booms have on net foreign assets in a panel of 145 countries during the period 1970 2007 the main finding is that windfalls from international commodity price booms lead to a significant increase in net foreign assets but only in countries that are ethnically homogeneous in highly ethnically polarized countries net foreign assets significantly decreased to explain this asymmetry the paper shows that in ethnically polarized countries commodity windfalls lead to large increases in government consumption expenditures and political corruption the paper s findings are consistent with theoretical models of the current account that have a built in voracity effect