household choices and child development the growth in labor market participation among women with young children has raised concerns about the potential negative impact of the mother s absence from home on child outcomes recent data show that mother s time spent with children has declined in the last decade while the indicators of children s cognitive and noncognitive outcomes have worsened the objective of our research is to estimate a model of the cognitive development process of children nested within an otherwise standard model of household life cycle behavior the model generates endogenous dynamic interrelationships between the child quality and employment processes in the household which are found to be consistent with patterns observed in the data the estimated model is used to explore the eects of schooling subsidies and employment restrictions on household welfare and child development

the political dynamics of economic growth summary we argue that an understanding of the political drivers of economic growth needs an explanation of the political dynamics around the transition from one growth phase to another and that the political drivers of early stage growth accelerations are different from that of growth maintenance informal institutions are likely to play a role in growth acceleration while formal institutions of credible commitment the provisioning of public goods and the overcoming of co ordination failures will be more important in growth maintenance we present empirical evidence drawn from country case studies and cross country econometric analysis that provides support to our theoretical propositions

women s schooling home teaching and economic growth the hypothesis that increases in the schooling of women enhance the human capital of the next generation and thus make a unique contribution to economic growth is assessed on the basis of data describing green revolution india estimates are obtained that indicate that a component of the significant and positive relationship between maternal literacy and child schooling in the indian setting reflects the productivity effect of home teaching and that the existence of this effect combined with the increase in returns to schooling for men importantly underlies the expansion of female literary following the onset of the green revolution

cooperation dynamics in repeated games of adverse selection abstract we study cooperation dynamics in repeated games with markovian private information after any history signaling reveals information that helps players coordinate their future actions but also makes the problem of coordinating current actions harder in equilibrium players may play aggressive or uncooperative actions that signal private information and partners tolerate a certain number of such actions we discuss several applications of our results we explain the cycles of cooperation and conflict observed in trench warfare during world war i show that price leadership and unilateral price cuts can be part of an optimal signaling equilibrium in a repeated bertrand game with incomplete information and show that communication between cartel members may be socially efficient in a repeated cournot game finally we show that the welfare losses disappear as the persistence of the process of types increases and the interest rate goes to zero

some microeconomic evidence concerning the determinants of saving through private pension funds in the u s abstract this note presents some new evidence about determinants affecting the contributions to private pension plans through the bargaining process employer decisions about pensions reflect employee preferences according to our estimation results on a time series basis there is a clear significant relationship between the firm variables social security taxes and saving through private pension plans

raising children to work hard altruism work norms and social insurance children who can count on support from altruistic parents may not try hard to succeed in the labor market moreover parental altruism makes withdrawal of such support non credible to promote work

the impact of centralization on pharmaceutical procurement prices the role of institutional quality and corruption abstractthe impact of centralization on pharmaceutical procurement prices the role of institutional quality and corruption regional studies this paper deals with the open issue regarding centralized versus decentralized public procurement strategy using a unique dataset on tender prices of selected drugs for hospital usage provided by a sample of 52 italian local health service providers aziende sanitarie locali asls between 2009 and 2012 the paper tests which procurement system centralized decentralized or hybrid performs better controlling for several covariates including measures of institutional quality and corruption it finds that centralized and hybrid procurers pay lower prices than decentralized units moreover the results show that in areas in which institutional quality is lower or corruption is higher the effect of centralization in terms of negotiating lower prices is much stronger with savings of up to 60 of the price paid by asls that procure independently

fertility and rural labor market inefficiencies evidence from india abstract informational frictions are an important source of inefficiency in rural labor markets i examine the role of family size in mitigating costs that arise due to these frictions i show that an increase in family size decreases the demand for hired labor in tasks for which worker output and effort are difficult to observe monitoring intensive tasks in contrast in tasks for which worker output is easily observed i find no relationship between family size and hired labor use i provide evidence that supervision costs drive the preference for family labor in monitoring intensive tasks as a consequence larger families spend less time in supervision i develop a theoretical framework that illustrates the empirical challenge of identifying the link between family size and labor demand factors that determine labor demand on the farm also determine family size to address this endogeneity problem i use exogenous variation in fertility induced by both a family planning policy in india which provides cash incentives for sterilization take up and income shocks i show that while neither incentive payments nor income shocks by themselves are valid instruments for completed fertility their interaction is a valid instrument i infer that population control policies must take into account market inefficiencies that make larger families profitable

cyclicality mortality and the value of time the case of coffee price fluctuations and child survival in colombia recent studies demonstrate procyclical mortality in wealthy countries but there are reasons to expect a countercyclical relationship in developing nations we investigate how child survival in colombia responds to fluctuations in world arabica coffee prices and document starkly procyclical child deaths in studying this result s behavioral underpinnings we highlight that 1 the leading determinants of child health are inexpensive but require considerable time and 2 as the value of time declines with falling coffee prices so does the relative price of health we find a variety of direct evidence consistent with the primacy of time in child health production

the lens of contract private ordering james buchanan 2001 p 29 avers that mutuality of advantage from voluntary exchange is the most fundamental of all understandings in economics he further contends that this fundamental understanding is better realized by examining economics through the lens of contract rather than the lens of choice buchanan 1975 because the latter has been the reigning paradigm in economics during the 20th century lionel robbins 1932 melvin w reder 1999 the lens of contract is understandably less fully developed interest in contractual approaches has nevertheless been building up whence the gap between these two has been closing this paper sketches some of these developments with emphasis on private ordering

did high debts distort loan and grant allocation to ida countries summary we examine the allocation of net loans net transfers and grants to ida countries over the period 1982 2008 focusing on the role of debt and debt sustainability in the decisions of multilateral and bilateral donors we find no evidence of defensive lending but strong evidence of defensive granting a significant negative reaction of net loans to the debt ratio indeed characterizes the decisions of both multilateral and bilateral creditors the impact of lower loans on the budget of debtor countries is however accommodated through higher grants in addition to debt relief these findings are consistent with a substitution of grants for loans and with the new approach to debt sustainability but question the efficiency and selectivity of foreign aid

promises and expectations abstract we investigate why people keep their promises in the absence of external enforcement mechanisms and reputational effects in a controlled laboratory experiment we show that exogenous variation of second order expectations promisors expectations about promisees expectations leads to a significant change in promisor behavior we provide evidence that a promisor s aversion to disappointing a promisee s expectation leads her to behave more generously we propose and estimate a simple model of conditional guilt aversion that is supported by our results and nests the findings of previous contributions as special cases

a carrot and stick approach to agenda setting this paper models a legislature in which the same agenda setter serves for two periods showing how he can exploit a legislature completely in the first period by promising future benefits to legislators who support him in equilibrium a large majority of legislators vote for the first period proposal because they thereby maintain the chance of belonging to the minimum winning coalition in the future legislators may therefore approve policies by large majorities or even unanimously that benefit few or even none of them the results are robust but institutional arrangements such as entitlements can reduce the agenda setter s power by reducing his discretion to reward and punish legislators and rules such as sequential voting can increase a legislator s ability to resist exploitation

the institutional reforms debate and fdi flows to the mena region the best ensemble summary this paper empirically examines the theoretical debate on the adoption of a best approach to reforming institutions identified by rodrik 2008 in the context of property rights protection and fdi flows to eight mena countries the first best approach comprises strengthening domestic institutional functions only while the second best comprises in addition entering into force bilateral investment treaties and the interaction between functions and treaties empirically both approaches to reducing investment expropriation risk encourage fdi flows the positive effect of the second best approach depends on the success of the first best approach suggesting the two approaches are complementary

formal and informal institutions in a transition economy the case of vietnam summary we examine the role of informal and formal institutions behind the growth of private sector in vietnam since the official recognition of private enterprises in the early 1990s we show that firms have increasingly taken on risks in their transactions in spite of weak formal institutions risk taking by firms can be explained by the use of informal institutions such as relational contracts and networks along with recourse to emerging formal institutions such as written contracts our results suggest that informal institutions remain important as mechanisms of risk management even as the economy matures and new formal institutions gradually develop

estimating the production function for human capital results from a randomized controlled trial in colombia we examine the channels through which a randomized early childhood intervention in colombia led to significant gains in cognitive and socio emotional skills among a sample of disadvantaged children aged 12 to 24 months at baseline we estimate the determinants of material and time investments in these children and evaluate the impact of the treatment on such investments we then estimate the production functions for cognitive and socio emotional skills the effects of the program can be explained by increases in parental investments which have strong effects on outcomes and are complementary to both maternal skills and child s baseline skills

migration and trade theoretical and empirical research in economics suggests that bilateral migration triggers bilateral trade through a number of channels this paper assesses the functional form of the impact of migration on trade flows in a quasi experimental setting we provide evidence that the relationship is not log linear in particular at small levels of immigration stocks the elasticity of trade to migration is quite high and it declines to zero at about 4 000 immigrants if immigration stocks exceed such a level the evidence suggests that trade will not increase anymore this suggests that for cross country network and other effects flowing from immigration to materialise at a significant level for trade a high enough level of immigrant stocks is necessary but there appears to be satiation as immigrant numbers increase

transaction cost economics past present and future oliver williamson is the founder and chief developer of transaction cost economics tce in this brief essay on the occasion of his nobel memorial prize i offer a partial discussion of williamson s contributions by first summarizing some of the accomplishments of tce past and then sketching some of the opportunities for tce future most of the topics in both sections tce past and tce future start with a quotation from williamson s early work that i think still speaks volumes today that is while fellow travelers and successors have acted on one set of williamson s insights helping to produce the accomplishments of tce past another collection of williamson s insights has gone relatively unremarked creating some of the opportunities for tce future

the impact of terrorism on governance in african countries this study investigates how terrorism affects governance in 53 african countries for the period 1998 2012 four terrorism indicators are used namely domestic transnational unclear and total terrorism ten bundled and unbundled governance indicators are also employed namely political governance consisting of political stability and voice and accountability economic governance encompassing government effectiveness and regulation quality institutional governance entailing corruption control and the rule of law and general governance the governance indicators are bundled by means of principal component analysis the empirical evidence is based on generalized method of moments three key findings are established first all selected terrorism dynamics negatively affect political governance and its constituents second evidence of a negative relationship is sparingly apparent in economic governance and its components third no proof was confirmed in relation to the impact of terrorism and institutional governance with its elements fourth compared with domestic terrorism transnational terrorism more negatively and significantly affects political economic and general governances policy implications are discussed

the signaling effect of corporate social responsibility in emerging economies what signals do firms in emerging economies send to stakeholders when they adopt corporate social responsibility csr practices we argue that in emerging economies firms that adopt csr practices positively signal investors that their firms have superior capabilities for filling institutional voids from an institution based view we hypothesize that the institutional environment moderates the signaling effect of csr on a firm s financial performance based on a sample of firms from ten asian emerging economies we find a positive relationship between csr practices and financial performance this positive relationship is stronger in the less developed capital market than in the more developed one the financial benefits of csr practices are also more salient in the low information diffusion market than in the high one we emphasize that signaling theory and the institution based view can jointly contribute to the csr literature

do family wealth shocks affect fertility choices evidence from the housing market abstract this paper uses wealth changes driven by housing market variation to estimate the effect of family resources on fertility decisions using data from the panel study of income dynamics we show that a 100 000 increase in housing wealth among home owners causes a 16 to 18 increase in the probability of having a child there is no evidence of an effect of msa level housing price growth on the fertility of renters however we also present evidence that housing wealth growth increases total fertility and that the responsiveness of fertility to housing wealth has increased over time commensurate with the recent housing boom

can green building councils serve as third party governance institutions an economic and institutional analysis abstract green building councils gbcs have been established in many different countries in recent years this paper discusses the role such organizations can play in the respective construction and real estate industry and under what circumstances a gbc can contribute positively to the development of a greener or more sustainable stock of buildings the paper investigates the main informational problem of the industry by looking at the relation between a developer and an investor from an economic point of view we argue that the investor s uncertainty about the true quality of a building and the corresponding incentive for the developer to cheat may lock them into a prisoners dilemma trap the corresponding barriers for a transition toward a greener buildings market are analyzed gbcs are described as institutions of economic governance that can assist the economy in overcoming these problems they can act as third party institutions in transactions between developers and investors by certifying the quality of a building they can reduce the risk for the investor to be cheated by the developer and also increase the incentive to develop good quality buildings for the developer this task however raises some severe management challenges for the gbcs

the mobile phone in the diffusion of knowledge for institutional quality in sub saharan africa this study assesses the mobile phone in the diffusion of knowledge for better governance in sub saharan africa from 2000 to 2012 for this purpose we employ generalised method of moments with forward orthogonal deviations the empirical evidence is based on three complementary knowledge diffusion variables innovation internet penetration and educational quality and 10 governance indicators that are bundled and unbundled the following are the main findings first there is an unconditional positive effect of mobile phone penetration on good governance second the net effects on political economic and institutional governances that are associated with the interaction of the mobile phone with knowledge diffusion variables are positive for the most part third countries with low levels of governance are catching up their counterparts with higher levels of governance the above findings are broadly consistent with theoretical underpinnings on the relevance of mobile phones in mitigating bad governance in africa the evidence of some insignificant net effects and decreasing marginal impacts may be an indication that the mobile phone could also be employed to decrease government quality overall this study has established net positive effects for the most part five rationales could elicit the positive net effects on good governance from the interaction between mobile phones and knowledge diffusion among others the knowledge variables enhance reach access adoption cost effectiveness and interaction in a nut shell the positive net effects are apparent because the knowledge diffusion variables complement mobile phones in reducing information asymmetry and monopoly that create conducive conditions for bad governance the contribution of the findings to existing theories and justifications of the underlying positive net effects are discussed

the hazards of piecemeal reform british civil courts and the credit market in colonial india abstract the colonial experience of developing countries provides valuable evidence regarding the impact of legal and institutional innovations on economic growth however there has been little effort by economists to study colonial policies to gain theoretical insights into the process of institutional reform this paper considers the introduction of civil courts in colonial india and its impact on agricultural credit markets in the bombay deccan drawing on historical records and a formal analysis of the credit market the paper finds that the reform led to increased competition among lenders ex ante we expect that this would have raised farmers welfare but increased competition also reduced lenders incentives to subsidize farmers investments in times of crisis leaving them more vulnerable in bad times

bridging trade theory and labour econometrics the effects of international migration this paper surveys current theoretical and empirical research on international migration with a particular emphasis on the links between trade theory and labour empirics

formal measures of the informal sector wage gap in mexico el salvador and peru using comparable micro level data from three countries we ask what type of person works in the informal sector and whether informal workers earn lower wages than observationally equivalent workers in the formal sector the characteristics of informal workers are similar across countries surprisingly when we control for these personal characteristics we find a significant wage premium associated with formal employment in el salvador and peru but a premium associated with work in the informal sector in mexico a model of endogenous selection offers little help in explaining the differences in wage patterns the research casts doubt on the received wisdom that the informal sector always and everywhere is a poorly paid but easily entered refuge for those who have no other employment opportunities this abstract was borrowed from another version of this item

reducing public private sector pay differentials the single spine pay policy as a natural experiment in ghana empirical studies have documented the existence of the public private pay differentials in both developed and developing countries the implementation of policies aiming to reduce this gap has however been mitigated or inconclusive this paper exploits the single spine pay policy sspp in ghana as a natural experiment to examine the effectiveness of wage policies in developing countries the sspp was implemented in 2010 by the government of ghana to address the public private sector wage gap and improve productivity in the public sector using a quantile treatment effect approach based on a difference in difference did estimation we show that the sspp has yet to reduce the wage gap between the public and private sectors across the entire distribution of earnings in ghana the improvement observed is only at the lower tail of the distribution of earnings however the sspp has a larger effect on the earnings of female workers than that of males in the education and health services sector suggesting that the policy was successful in reducing the gender wage gap in that sector moreover the sspp has decreased the productivity of workers across the distribution of earnings mainly due to a decrease in the effort of female public sector workers nevertheless the sspp has had some successes and could be improved by putting in place a good managerial quality in the government agencies in addition it is important that the government pays much attention to various macroeconomic factors that have challenged the success of the sspp

why the gender gap in wages narrowed in the 1980s since 1976 the gender gap in wages on average declined by about 1 per year this article focuses on identifying the factors underlying this trend three data sets are analyzed the current population survey the panel study of income dynamics and the national longitudinal survey we find that convergence in measurable work related characteristics schooling and work experience explains one third to one half the narrowing the remainder is attributable to a relative increase in women s returns to experience as well as to declining wages in blue collar work and other factors

second best institutions the focus of reforms in the developing world has moved from getting prices right to getting institutions right this reflects the recognition that markets are unlikely to work well in the absence of a predictable and legitimate set of rules that support economic activity and dis pense its fruits governance reforms have become the buzzword for bilateral donors and multilateral institutions in much the same way that liberalization privatization and stabiliza tion were the mantras of the 1980s but what kind of institutions should reform ers strive to build it is easier to list the func tions that good institutions perform than it is to describe the shape they should take desirable institutions provide security of property rights enforce contracts stimulate entrepreneurship foster integration in the world economy maintain macroeconomic stability manage risk taking by financial intermediaries supply social insurance and safety nets and enhance voice and account ability but as the variety of institutional forms that prevail in the advanced countries themselves suggests richard freeman 2000 peter hall and david soskice 2001 each one of these ends can be achieved in a large number of different ways rodrik 2007a

fertility and labor supply evidence from the one child policy in china this study provides new evidence on on the causal effect of fertility on maternal labor supply in rural china using the fact that in some parts of rural china couples are allowed to have a second

belief in a just world and redistributive politics international surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate at the same time social ethnographies and experiments by psychologists demonstrate individuals recurrent struggle with cognitive dissonance as they seek to maintain and pass on to their children a view of the world where effort ultimately pays off and everyone gets their just deserts this paper offers a model that helps explain i why most people feel such a need to believe in a just world ii why this need and therefore the prevalence of the belief varies considerably across countries iii the implications of this phenomenon for international differences in political ideology levels of redistribution labor supply aggregate income and popular perceptions of the poor the model shows in particular how complementarities arise endogenously between individuals desired beliefs or ideological choices resulting in two equilibria a first american equilibrium is characterized by a high prevalence of just world beliefs among the population and relatively laissez faire policies the other european equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state more generally the paper develops a theory of collective beliefs and motivated cognitions including those concerning money consumption and happiness as well as religion

gambling reputation repeated bargaining with outside options we study the role of incomplete information and outside options in determining bargaining postures and surplus division in repeated bargaining between a long run player and a sequence of short run players the outside option is not only a disagreement point but reveals information privately held by the long run player in equilibrium the uninformed short run players offers do not always respond to changes in reputation and the informed long run player s payoffs are discontinuous the long run player invokes inefficient random outside options repeatedly to build reputation to a level where the subsequent short run players succumb to his extraction of a larger payoff but he also runs the risk of losing reputation and relinquishing bargaining power we investigate equilibrium properties when the discount factor goes to 1 and when the informativeness of outside options diffuses in both cases bargaining outcomes become more inefficient and the limit reputation building probabilities are interior publication abstract

information transmission and ownership consolidation in aid programs we investigate the degree of leeway donors of foreign aid should grant to recipient governments when their preferences over how to implement the aid are different and both the donor and recipient possess some private information about the most effective policies intuitively our model shows that donors should stay in control of how their aid is spent when their own private information is more important than the private information of the recipient less obviously an increase in the difference of preferences between donors and recipients can increase rather than decrease the leeway that donors should grant the recipients as the recipients information gains in importance relative to those of the donors and recipients become less likely to communicate truthfully we test the model using dyadic data for 28 bilateral aid donors and 112 recipients over the 1995 2010 period our proxy for centralized aid is project aid while budget aid leaves more leeway to the recipient and thus proxies for decentralized aid in line with the model misaligned interests and informational asymmetries indeed influence the shares of aid given as budget and project aid jel c23 d82 f33 o1

contraception as development new evidence from family planning in colombia there has been considerable debate in the last decade about whether or not family planning programmes in developing countries reduce fertility or improve socio economic outcomes this article provides new evidence by studying the expansion of one of the worlds oldest and largest family planning organisations profamilia of colombia it finds that family planning explains less than 10 of colombias fertility decline during its demographic transition as in wealthy countries however lowering the costs of first birth postponement produced important socio economic gains enabling young women to obtain more education and to work more and live independently later in life

economic development legality and the transplant effect abstract we analyze the determinants of effective legal institutions legality using data from 49 countries we show that the way the law was initially transplanted and received is a more important determinant than the supply of law from a particular legal family countries that have developed legal orders internally adapted the transplanted law and or had a population that was already familiar with basic principles of the transplanted law have more effective legality than countries that received foreign law without any similar predispositions the transplanting process has a strong indirect effect on economic development via its impact on legality while the impact of particular legal families is weaker and not robust to alternative legality measures

a neoinstitutionalist interpretation of the changes in the russian oil model this paper deals with the current change of the institutional and organizational framework of the russian oil industry regarding this evolution the main characteristic is the increasing involvement of national oil companies in the upstream activities the point is to explain this reorganization by relying on the new institutional economics framework these theoretical works highlight that institutional environment and governance structures complement each other we argue that the current reorganization in an attempt to increase the coherence of the institutional arrangement governing the transaction between the russian state and the private oil companies

read my lips the role of information transmission in multilateral reform design abstract context specific knowledge is crucial to crafting multilateral reform programs nonetheless local knowledge often consists of unverifiable information thus the quality of countries reports depends on the conflict of interests faced by the recipient and the multilateral we compare the performance of a delegation scheme against a centralization scheme we find that recipients discretion in the choice of reforms delegation should only be increased when the countries local knowledge is strictly more important than the multilateral s information conversely a reduction in the conflict of interests may lead the multilateral in to allowing the recipient less freedom in designing reforms centralization our empirical results support these theoretical predictions

children s resources in collective households identification estimation and an application to child poverty in malawi children s resources matter but they are hard to identify because consumption is typically mea sured at the household level modern collective household models permit some identication of indi vidual household member resources but these models typically either ignore children or treat them as attributes of adults we propose a collective household model in which children are people with their own utility functions possibly assigned to them by parents extending the frameworks of browning chiappori and lewbel 2007 and lewbel and pendakur 2008 we show identication of children s resource shares within households we invoke semiparametric restrictions on individual preferences and use data on the household level consumption of assignable private goods to achieve identication of each individual s resource share within the household we show this without being able to observe consumption by individual household members of goods that are partly or wholly shared goods within the household further we obtain identication using only engel curves and so do not require ob served price variation in the data we estimate our model using data from malawi andnd that as the number of children in a household grows women s resource shares fall and children s resource shares rise and men s resource shares are basically unchanged we alsond evidence of gender bias against girls and observe that the resource shares of mothers and children are increasing in the education level of the mother finally we use our estimates to construct poverty indices at the person level andnd that per capita poverty indices understate the incidence of child poverty in malawi

entitled to work urban property rights and labor supply in peru this brief summarizes the results of a gender impact evaluation study entitled entitled to work urban property rights and labor supply in peru new legal rights were issued in 1996 project teams providing titling service through 2003 in peru the study observed that between 1996 and 2003 the peruvian government issued property titles to over 1 2 million urban households the largest titling program targeted at urban squatters in the developing world this paper examines the labor market effects of increases in tenure security resulting from the program pre program squatters in program neighborhoods were significantly more likely to report improved tenure security by 60 percent similarly program participants were 18 8 percentage points less likely to report a high likelihood of eviction or invasion and 18 8 percentage points more likely to report that their dwelling was currently very secure from eviction or invasion the likelihood of working inside the home significantly falls by 11 6 percentage points for the average squatter family with two program periods

the economics of rotating savings and credit associations supported by the center for energy policy studies m i t and the japanese corporate associates program at the kennedy school of government

returns to capital in microenterprises evidence from a field experiment small and informal firms account for a large share of employment in developing countries the rapid expansion of microfinance services is based on the belief that these firms have productive investment opportunities and can enjoy high returns to capital if given the opportunity however measuring the return to capital is complicated by unobserved factors such as entrepreneurial ability and demand shocks which are likely to be correlated with capital stock the authors use a randomized experiment to overcome this problem and to measure the return to capital for the average microenterprise in their sample regardless of whether they apply for credit they accomplish this by providing cash and equipment grants to small firms in sri lanka and measuring the increase in profits arising from this exogenous positive shock to capital stock after controlling for possible spillover effects the authors find the average real return to capital to be 5 7 percent a month substantially higher than the market interest rate they then examine the heterogeneity of treatment effects to explore whether missing credit markets or missing insurance markets are the most likely cause of the high returns returns are found to vary with entrepreneurial ability and with measures of other sources of cash within the household but not to vary with risk aversion or uncertainty

trade expansion and contract enforcement consider a world of traders separated in geographic economic or social space honest trade offers larger gains for more distant traders but frequencies of meetings and information flows about cheating have local bias honesty is self enforcing only between pairs of sufficiently close neighbors global honesty prevails only in a sufficiently small world the extent of self enforcing honesty is likely to decrease when the world expands beyond this size costly external enforcement is useful only if the world is sufficiently large and its net payoff need not be larger than that of a self governing small community intermediate size worlds fare worst

the influence of governance infrastructure and corporate governance on profit shifting in this article we develop a conceptual model to examine the influence of quality of country level governance infrastructure and corporate governance effectiveness on profit shifting we empirically test propositions derived from the model with a unique firm level data set and using multiple indicators of governance infrastructure quality and corporate governance mechanisms we estimate that on average about 6 of total pre tax income is shifted out of foreign owned firms in india we show that governance infrastructure that improves collective action and transparency in both the foreign and host country reduces shifting on the other hand secure property rights and efficient contracting in the foreign country increases shifting we also find that monitoring by foreign institutional investors restricts shifting

coordination commitment and enforcement the case of the merchant guild we interpret historical evidence in light of a repeated game model to conclude that merchant guilds emerged during the late medieval period to allow rulers of trade centers to commit to the security of alien merchants the merchant guild developed the theoretically required attributes secured merchants property rights and evolved in response to crises to extend the range of its effectiveness contributing to the expansion of trade during the late medieval period we elaborate on the relations between our theory and the monopoly theory of merchant guilds and contrast it with repeated game theories that provide no role for formal organization

the making of policy institutionalized or not this paper develops a framework for analyzing different policymaking styles their causes and their consequences in latin america finding that lower institutionalization and greater use of alternative political technologies apts are more likely the lower the cost of using these technologies the higher the potential damage they can cause the lower the wealth of the economy and the more asymmetric the distribution of de jure political power moreover strategic complementarity exists in the use of alternative political technologies for instance bribes by the rich and protests by the poor are likely to be countervailing forces and will both occur in polities with weaker political institutions

motherhood and female labor supply in the developing world evidence from infertility shocks abstract we introduce a new instrument for family size infertility to investigate the causal relationship between children and female labor force participation infertility mimics an experiment where nature assigns an upper bound for family size independent of a woman s background this new instrument allows us to investigate the differential labor supply without restrictions on initial family size using the demographic and health surveys from 26 developing countries we show that ols estimates are biased upward we find that the presence of children affects neither the likelihood of work nor its intensity but impacts the type of work a woman pursues

fertility at work children and women s labor market outcomes in urban ghana abstract while it is commonly assumed that fertility decreases female labor supply i show theoretically that fertility can increase female labor supply if returns to financial inputs in children are sufficiently high compared to returns to time investments using six rounds of a panel survey from urban ghana i find evidence of countervailing effects behind a net zero effect of young children on women s hours of work labor supply on the extensive margin drops but women who remain in the labor force increase their hours in response to a child women s labor supply particularly increases in response to a young child if there are older siblings or other adults in the household by contrast men s labor supply does not change in response to young children

perspective explaining influence rents the case for an institutions based view of strategy research in strategy has identified and tried to explain four types of rents monopolistic rents efficiency rents quasi rents and schumpeterian rents building on previous work on political and institutional strategies we add a fifth type of rent influence rents influence rents are the extra profits earned by a firm because the rules of the game laws regulations and informal rules are designed or changed to suit it to aid the analysis of the relationship between institutional context and firm performance and to provide a structure to guide research we develop a framework with five key components a an identification of the five fundamental problems of a market economy b a typology that describes the five different types of institutions that emerge to solve these problems c the market ordering mechanisms used by institutions to solve these problems d the common causes of weak institutional performance and e generic strategies used by firms to exploit these weaknesses of an institutional context to enhance firm performance we highlight potential applications of the framework as well as an illustrative research agenda that can advance the development of theory to explain the emergence and persistence of influence rents

the governance institutions of a drug trafficking organization how do drug trafficking organizations organize drug trafficking organizations continue to operate effectively despite incentives for members to defect pressure from damaged communities and government interdiction efforts this paper identifies the problem of defection in this context and applies insights from the literatures on club goods and extralegal governance institutions to explain the puzzling organization and activities of one of mexico s most dangerous drug trafficking organizations la familia michoacana the group uses a reward and punishment scheme to prevent defection from members and to elicit cooperation from the community and government

is there an informal employment wage penalty evidence from south africa abstract we estimate the wage penalty associated with working in the south african informal sector to this end we use a rich data set on non self employed males that allows one to accurately distinguish workers employed in the informal sector from those employed in the formal sector and link individuals over time implementing various econometric approaches we find that there is a gross wage penalty of a little over 18 for working in the informal sector however once we reduce our sample to a group for which we can reasonably calculate earnings net of taxes and control for time invariant unobservables the wage penalty disappears

an investigation of the labor market earnings of panamanian males evaluating sources of inequality this paper presents empirical evidence on the determinants of labor market earnings and inequality for males in panama using newly available microdata we estimate earnings equations based on the measurement framework of mincer 1974 and compare them with those for other countries at various stages of economic development we present evidence on two aspects of inequality in less developed economies labor market segmentation and social stratification we present tests of the segmentation hypothesis including several of the dual labor market hypotheses and discuss their inherent ambiguity we also present evidence on the importance of family background for earnings determination and educational attainment

household bargaining and excess fertility an experimental study in zambia we posit that household decision making over fertility is characterized by moral hazard due to the fact that most contraception can only be perfectly observed by the woman using an experiment in zambia that varied whether women were given access to contraceptives alone or with their husbands we find that women given access with their husbands were 19 less likely to seek family planning services 25 less likely to use concealable contraception and 27 percent more likely to give birth however women given access to contraception alone report a lower subjective well being suggesting a psychosocial cost of making contraceptives more concealable

is trust the missing root of institutions education and development we report evidence that trust is the missing root relating education institutions and economic development we observe that more trust both increases education and improves legal and bureaucratic institutions which in turn spurs economic development we substantiate this intuition with a series of regressions that provide evidence that trust determines both education and the quality of institutions and that education and institutions in turn affect gdp per capita

are the poor less well insured evidence on vulnerability to income risk in rural china the authors test how well consumption is insured against income risk in a panel of sampled households in rural china they estimate the risk insurance models by generalized method of moments treating income and household size as endogenous insurance exists for all wealth groups although the hypothesis of perfect insurance is universally rejected those in the poorest wealth decile are the least well insured with 40 percent of an income shock being passed on to current consumption by contrast consumption by the richest third of households is protected from almost 90 percent of an income shock the extent of insurance in a given wealth stratum varies little between poor and nonpoor areas

partisan alignment effects on total factor productivity aray h partisan alignment effects on total factor productivity regional studies unlike the literature on political effects on real economy that suggests that partisan effects accrue through aggregate demand it is hypothesized that such effects could also accrue through aggregate supply using panel data for the spanish regions over the 1986 2010 period the main results are 1 partisan alignment effects only arise when central government enjoys a majority 2 there exist a positive contemporaneous effect and negative lagged effects and 3 in absolute value such effects vanish over time results are robust to different specifications and measures of total factor productivity tfp and methods of estimation

social structure and cultures of corruption abstract corruption often creates a briber s dilemma each of the clients competing for a rent allocated by a government official has an incentive to pay bribes to try to obtain preferential treatment but they would all be better off if they could mutually commit not to pay bribes this paper uses a model of linked games to show how informal relationships among the clients may enable them to enforce agreements or norms against paying bribes and how historical events can lead to the development of a culture of corruption that can subsequently prove hard to dislodge

government size and growth accounting for economic freedom and globalization we examine the relationship between government size and economic growth controlling for economic freedom and globalization and using bayesian averaging over classical estimates in a panel of rich countries

institutions top down or bottom up a large research program in economics has established a persuasive link between institutions and economic development but what does this imply for development policymaking can a political leader or aid agency seeking to promote development readily change institutions this article starts off wildly general and then moves to specifics

the economics of governance the economics of governance is an effort to implement the study of good order and workable arrangements where good order includes both spontaneous order in the market which is a venerated tradition in economics adam smith 1776 friedrich hayek 1945 kenneth a arrow and gerard debreu 1954 and intentional order of a conscious deliberate purposeful kind chester irving barnard 1938 p 9 also i interpret workable arrangements to mean feasible modes of organization all of which are flawed in comparison with a hypothetical ideal avinash dixit 1996 pp 4 9 the object is to work out the efficiency logic for managing transactions by alternative modes of governance principally spot markets various long term contracts hybrids and hierarchies interest among social scientists economists included in the study and practice of good order and workable arrangements has been steadily growing in contrast with the orthodox lens of choice prices and output supply and demand the economics of governance is a lens of contract construction broadly in the spirit of james buchanan s 2001 p 29 observation that mutuality of advantage from voluntary exchange is the most fundamental of all understandings in economics the economics of governance as herein described is principally an exercise in bilateral private ordering by which i mean that the immediate parties to an exchange are actively involved in the provision of good order and workable arrangements to be sure the need for private ordering varies with the rules of the game as provided by the state distinctions between lawlessness where the state provides limited or unreliable protection for property and contract dixit 2004 and lawfulness where the state undertakes to protect property and enforce contracts in a principled way are pertinent the first of these applies mainly to primitive and transition economies the second is commonly associated with western democracies recourse to private ordering under conditions of lawlessness is altogether understandable given the absence of state support the walter a haas school of business university of california berkeley ca 94720 1900 the paper has benefited from workshop presentations at the university of california berkeley the university of valencia insead fountainebleau and the 2004 annual conference of the international society for new institutional economics an abbreviated version was also given as the horst claus recktenwald lecture at nuremburg on 4 november 2004 comments and suggestions from fred balderston ernesto dalbo avinash dixit robert gibbons witold henisz ian larkin steven tadelis and dean williamson are especially acknowledged 1 lon fuller s 1954 p 477 definition of eunomics as the science theory or study of good order and workable arrangements is very much in the spirit of what i refer to as governance 2 one of the immediate ramifications of insistently comparing feasible alternatives all of which are flawed is that the purported inefficiencies that are ascribed to failures to achieve first best optimality are not dispositive but invite the query as compared with what i return to this issue in section iv 3 excluding corporate governance the numbers of articles that used the word governance during the period 1998 2000 as compared with the period 1977 1979 in selected economics business management sociology organization and political science journals were 60 vs 1 76 vs 4 79 vs 18 and 60 vs 25 where the journals surveyed were the american economic review journal of political economy quarterly journal of economics rand journal of economics and journal of economic perspectives in economics strategic management journal management science academy of management journal and academy of management review in business management administrative science quarterly organization science american journal of sociology american sociological review and annual review of sociology in sociology organization and american political science review political science quarterly journal of politics and political research quarterly in political science combining these four categories articles using the word governance increased from 48 to 275 over this 20 year interval dixit 2004 pp 149 50 reports that the number of web pages that turn up under the search for governance is huge

the political economy of development an assessment research in the field of economic development is increasingly engaged with questions of political economy of how political choices institutional structures and forms of governance influence the economic choices made by governments and citizens we summarize recent developments in the field and introduce a set of papers that illustrate key themes and methodological innovations associated with the new political

missing women and the price of tea in china the effect of sex specific earnings on sex imbalance economists have long argued that the sex imbalance in developing countries is caused by underlying economic conditions this paper uses exogenous increases in sex specific agricultural income caused by post mao reforms in china to estimate the effects of total income and sex specific income on sex differential survival of children increasing female income holding male income constant improves survival rates for girls whereas increasing male income holding female income constant worsens survival rates for girls increasing female income increases educational attainment of all children whereas increasing male income decreases educational attainment for girls and has no effect on boys educational attainment