crisis or opportunity economic degrowth for social equity and ecological sustainability introduction to this special issue abstract this article reviews the burgeoning emerging literature on sustainable degrowth this is defined as an equitable downscaling of production and consumption that increases human well being and enhances ecological conditions at the local and global level in the short and long term the paradigmatic propositions of degrowth are that economic growth is not sustainable and that human progress without economic growth is possible degrowth proponents come from diverse origins some are critics of market globalization new technologies or the imposition of western models of development in the rest of the world all criticize gdp accounting though they propose often different social and ecological indicators degrowth theorists and practitioners support an extension of human relations instead of market relations demand a deepening of democracy defend ecosystems and propose a more equal distribution of wealth we distinguish between depression i e unplanned degrowth within a growth regime and sustainable degrowth a voluntary smooth and equitable transition to a regime of lower production and consumption the question we ask is how positive would degrowth be if instead of being imposed by an economic crisis it would actually be a democratic collective decision a project with the ambition of getting closer to ecological sustainability and socio environmental justice worldwide most articles in this issue were originally presented at the april 2008 conference in paris on economic degrowth for ecological sustainability and social equity this conference brought the word degrowth and the concepts around it into an international academic setting articles of this special issue are summarized in this introductory article hueting d alessandro and colleagues van den bergh kerschner spangenberg and alcott discuss whether current growth patterns are un sustainable and offer different perspectives on what degrowth might mean and whether and under what conditions it might be desirable matthey and hamilton focus on social dynamics and the obstacles and opportunities for voluntary social action towards degrowth lietaert and cattaneo with gavalda offer a down to earth empirical discussion of two practical living experiments cohousing and squats highlighting the obstacles for scaling up such alternatives finally van griethuysen explains why growth is an imperative in modern market economies raising also the question whether degrowth is possible without radical institutional changes

democracy and economic growth a meta analysis despite a sizeable theoretical and empirical literature no firm conclusions have been drawn regarding the impact of political democracy on economic growth this article challenges the consensus of an inconclusive relationship through a quantitative assessment of the democracy growth literature it applies meta regression analysis to the population of 483 estimates derived from 84 studies on democracy and growth using traditional meta analysis estimators the bootstrap and fixed and random effects meta regression models it derives several robust conclusions taking all the available published evidence together it concludes that democracy does not have a direct impact on economic growth however democracy has robust significant and positive indirect effects through higher human capital lower inflation lower political instability and higher levels of economic freedom democracies may also be associated with larger governments and less free international trade there also appear to be country and region specific democracy growth effects overall democracy s net effect on the economy does not seem to be detrimental

examining the hayek friedman hypothesis on economic and political freedom abstract this paper examines empirically the hypothesis made famous by nobel laureates friedrich a hayek and milton friedman that societies with high levels of political freedom must also have high levels of economic freedom in our judgment the hayek friedman hypothesis holds up fairly well to historical scrutiny using data on economic and political freedom for a sample of up to 123 nations back as far as 1970 we find relatively few instances of societies combining relatively high political freedom without relatively high levels of economic freedom in addition we find that these cases are diminishing over time finally we examine several cases of countries on different economic and political freedom journeys

institutions capital and growth the international development community has encouraged investment in physical and human capital as a precursor to economic progress recent evidence shows however that increases in capital do not always lead to increases in output we develop a growth model where the allocation and productivity of capital depends on a country s institutions we find that increases in physical and human capital lead to output growth only in countries with good institutions in countries with bad institutions increases in capital lead to negative growth rates because additions to the capital stock tend to be employed in rent seeking and other socially unproductive activities

global foreign direct investment flows the role of governance infrastructure abstract it is widely argued that a country s economic performance over time is determined to a great extent by its political institutional and legal environment we refer to these institutions and policies as the governance infrastructure of a country we utilize newly developed indices to examine the effects of governance infrastructure on both foreign direct investment fdi inflows and outflows for a broad sample of developed and developing countries over 1995 97 in addition we examine the role of other forms of infrastructure including human capital and the environment the results clearly indicate that governance infrastructure is an important determinant of both fdi inflows and outflows investments in governance infrastructure not only attract capital but also create the conditions under which domestic multinational corporations emerge and invest abroad it would appear that investments in governance infrastructure are subject to diminishing returns so that the benefits in terms of inflows are most pronounced for smaller and developing economies

long run welfare under externalities in consumption leisure and production a case for happy degrowth vs unhappy growth in this paper we contribute to the debate on the relationship between growth and well being by examining an endogenous growth model where we allow for externalities in consumption leisure and production we analyze three regimes a decentralized economy where each household makes isolated choices without considering their external effects a planned economy where a myopic planner fails to recognize both leisure and consumption externalities but recognizes production externalities and a planned economy with a fully informed planner we first compare the balanced growth paths under the three regimes and then we numerically investigate the transition to the optimal balanced growth path we provide a number of findings first in a decentralized economy growth or labor or both are greater than in the regime with a fully informed planner and hence are sub optimal from a welfare standpoint second a myopic intervention which overlooks consumption and leisure externalities leads to more growth and labor than in both the decentralized and the fully informed regime third we provide a case for happy degrowth a transition to the optimal balanced growth path that is associated with downscaling of production a reduction in private consumption and an ongoing increase in leisure and well being

an analysis of turkey s accession to the european union we build a two country dynamic general equilibrium model to study whether european citizens would bene t from the eventual accession of turkey to the european union eu the results of the simulations show that turkey s accession is welfare enhancing for europeans provided that turkish total factor productivity tfp increases suf ciently after enlargement in the benchmark model with no capital mobility the europeans are better off if the turkish tfp increase bridges more than 21 of the initial tfp gap between turkey and the eu this gure increases to 33 when capital mobility is introduced

railway development from the japanese occupation period to the present using kaohsiung city as an example abstractthis study intended to discuss the interactive influence of the emergence transformation and decline of the railway in kaohsiung port on urban development the population the activities and the economy in the region during the period of 1895 2010 from the perspectives of urban planning railway development population and industry this study used the crossover analysis method and used the factors of railway development and urban planning within a fixed time period to explore the chain dependence relationship among the industry the population the regional economy and the railway stations in kaohsiung city this study found that urban planning economic development railway development and industry have an interactive influence on the overall urban development urban planning promotes the rapid growth of the population and economic development propels the growth and shaping of the regional economy thus increasing employment opportunities in addition the railway development process moves

societal metabolism working hours and degrowth a comment on sorman and giampietro can we choose whether to degrow sorman and giampetro in this special issue argue that degrowth can only be forced upon us it will never be the outcome of voluntary or collective choice in this commentary i argue instead that although sooner or later we will have to degrow because of bio physical limitations we still have a choice of how to do it constructing a positive vision of degrowth as an inspirational political project that mobilizes citizens increases the likelihood of a prosperous way down i agree with the authors that in an energy scarce world we will have to work more to maintain the same level of material affluence but i contend that under conceivable conditions we might be equally happy with less work less energy and less material affluence a multi scalar analysis of societal metabolism is essential for the evaluation of degrowth policies and trajectories however unlike what sorman and giampietro suggest there is nothing in existing metabolic analyses that suggests that a prosperous degrowth trajectory is a priori impossible

the aggregation of climate change damages a welfare theoretic approach the economic value of environmental goods is commonly determined using the concepts of willingness to pay wtp or willingness to accept wta however the wtp wta observed in different countries or between individuals will differ according to socio economic characteristics in particular income this notion of differentiated values for otherwise identical goods say a given reduction in mortality risk has been criticized as unethical most recently in the context of the social cost chapter of the ipcc second assessment report these critics argue that being a function of income wtp wta estimates reflect the unfairness in the current income distribution and for equity reasons uniform per unit values should therefore be applied across individuals and countries this paper analyses the role of equity in the aggregation of climate change damage estimates using basic tools of welfare economics it shows one way of how wtp wta estimates can be corrected in aggregation if the underlying income distribution is considered unfair it proposes that in the aggregation process individual estimates be weighted with an equity factor derived from the social welfare and utility functions equity weighting can significantly increase aggregate global damage figures although some specifications of weighting functions also imply reduced estimates the paper also shows that while the postulate of uniform per unit values is compatible with a wide range of reasonable utility and welfare specifications there are also cases where the common value notion is not compatible with defensible welfare concepts

the adoption of new technology by the farmers in taiwan this study addresses the technologies the farmers adopted their reasons for adopting these technologies and the result of adopting these technologies the design and strategy used to collect the data needed are both qualitative and quantitative farmers who practised traditional farming methods and those who adopted the new technologies were both given survey questionnaires and were interviewed the result of the study shows that the technologies applied by the farmers are the use of tractors in tilling the ground the use of machinery in planting the practice of irrigation and the use of a combination of organic and commercial fertilizers the reasons for the adoption of the latter are the availability of chemicals and the convenience of their use and this is used to enhance the growth of plants the results of the new technology adoption are high yields of produce production of hybrid crops and the saving of labour thus increasing the income of the farmers

new evidence on the relationship between democracy and economic growth it is often maintained that democracy is a luxury which comes at a price in terms of subsequent slower increases in national living standards however various recent cross section studies on economic growth have found evidence that lack of civil and political liberties is negatively correlated with economic growth using a new measure of democracy which is based upon the number of years that a country can be regarded as a democracy the robustness of this relationship is examined both direct and indirect effects of lack of democratic liberties are analysed our main conclusion is that the relationship between democracy and economic growth is not rubust

market oriented institutions and policies and economic growth a critical survey this paper surveys recent evidence suggesting that market oriented institutions and policies are strongly related to economic growth focusing on studies using the economic freedom ef indicator of the fraser institute this index is critically discussed also various serious shortcomings of empirical studies using this index are identified nevertheless there are strong indications that liberalization i e an increase in the ef index stimulates economic growth this paper also reviews studies on the determinants of ef political liberalization is often found to enhance economic liberalization whereas there is less evidence for causality running in the other direction

does economic freedom cause prosperity an iv approach a positive statistical and economic significant relation between growth income level and the economic freedom of the world efw index has been amply documented most analyses however use ols methods which in the presence of endogenous variables do not establish causality and produce biased and inconsistent estimates this paper uncovers the exogenous component of efw using iv methods and finds a robust channel from economic freedom to prosperity the findings including instrument validity tests support the importance of policies and institutions for development and warrants policy advice aimed at increasing economic freedom to foster prosperity

are autocratic rulers also inside traders cross country evidence i introduction this article explores one aspect of the relation between a country s political structure and its regulation of economic activity the central premise is that authoritarian governments operate at least in part for the purpose of enriching their rulers consequently economic regulations are enforced or not so as to benefit the autocrats and their supporters by its nature insider trading is clandestine it is therefore unobservable and its existence must be inferred from indirect evidence my approach is to examine the enforcement of insider trading regulation more than 100 countries have stock markets most also have laws ostensibly designed to protect the general investing public from trading with insiders possessing superior material information regarding the value of particular firms enforcement has occurred however in less than one half of the countries with laws my key hypothesis is that enforcement is less likely in autocracies where government officials and their supporters both control the regulatory and judicial systems and are likely to engage in inside trading put simply they will be disinclined to prosecute themselves data are available that identify countries with stock markets those with insider trading laws and those that enforce them also available are indexes that gauge levels of political freedom economic freedom and corruption for almost all countries these serve as measures of the degree of autocratic rule my statistical analysis indicates a strong correlation between the presence of autocratic government and the absence of insider law enforcement supporting the main hypothesis ii background the economic theories of regulation and public choice presume that government officials are self interested utility maximizers whose behavior is substantially affected by the personal costs and benefits of exercising their political power 1 in autocracies officials generally have significant control over economic activity and are unconstrained by democratic institutions such as political competition elections the rule of law an independent judiciary and a free press opportunities for personal aggrandizement are therefore more readily available including in particular financial enrichment all such behavior amounts to wealth transfers from the population at large and a tax on productive economic activity 2 government regulation of the economy is ostensibly about rectifying market failure for example market entry restrictions are justified by arguments that consumers are protected from incompetent unstable or dishonest firms various other government imposed requirements and permits for the conduct of business are justified under the guise of protecting workers saving the environment nurturing infant industries earning foreign exchange and a variety of other public interest grounds all such regulation however can be viewed alternatively as creating tollgates through which entrepreneurs must pass to legally conduct business 3 unrestrained government officials charged with regulatory enforcement can extract tolls bribes for personal gain given this potential autocratic rulers have an incentive to impose numerous regulations simply to create opportunities to enrich themselves and their supporters 4 if a law or regulation is to serve as a tollgate enforcement must occur the threat of prosecution must be real to create the incentive for market participants to pay bribes autocrats must establish that attempts at circumvention without payment or compliance involve real costs that are greater through their control of government regulatory agencies and the judicial system they can exempt bribe payers while others are subject to prosecution that is enforcement occurs but is selective more generally autocrats might view all types of economic activity within their country as providing opportunities for personal economic gain

economic freedom democracy and the quality of life summary many empirical studies indicate that economic freedom in society is positively correlated with prosperity and growth while democracy exhibits mixed correlations however these studies do not control for the possible interaction of these two types of freedoms or their respective influences on social welfare this empirical analysis examines the interaction of economic freedom and democracy on measures of health education and disease prevention in society the results imply that greater economic freedom consistently enhances these welfare measures even among more democratic countries democracy has a smaller positive influence that disappears for many welfare measures in countries with more economic freedoms

pharmaceutical innovation and parallel trade abstract this paper proposes a north south model to study the interaction between price regulation policies and parallel trade with a particular focus on the pharmaceutical sector we show that under parallel trade r d investment can rise only when the south government takes into full account its impact both on investment and on the firm s decision to supply the regulated country this arises because of a complete withdrawal from price regulation when policy choices are endogenized indeed the south wants to achieve this level of full commitment when it is large in size when instead it is smaller in size the south chooses an intermediate form of commitment whereby it anticipates its effect only on local distribution and delivery but not on global r d investment as a response to these credible levels of price control commitments the north reacts by allowing parallel imports from the south

financial development and economic growth convergence or divergence abstract this study tests for convergence in financial development and economic growth by incorporating the interaction between the real and financial sectors into an otherwise traditional test for convergence the results show strong evidence for conditional convergence middle and high income countries conditionally converge to parallel growth paths not only in per capita gdp but also in financial development the mutually reinforcing relationship between financial development and economic growth is stronger in the early stage of economic development and this relationship diminishes as sustained economic growth gets under way as such low income countries with a relatively well developed financial sector are more likely to catch up to their middle and high income counterparts and those with a relatively under developed financial sector are more likely to be trapped in poverty this finding explains the observed great divergence between poor and rich countries another finding is that while human capital is more important to growth in the early stage of economic development economic freedom becomes more important in the later stage

are political freedoms converging this article tests for convergence o f freedom using freedom house s 2002 indices of political rights and civil liberties in 136 countries from 1972 to 2001 time series tests using structural breaks are employed to test for stochastic and beta convergence cross section tests are performed to examine the impact of legal systems education natural resources economic freedom and other variables we find that political freedoms are converging for one half of the countries additionally we find that the level of freedom is significantly related to the legal system education economic freedom and natural resources

rights equity and economic efficiency the adelman morris premise that economic development and equity are incompatible is not supported by the evidence of a strong relationship between equality of rights and the income distribution the premise that equity requires the denial of individual rights and the affirmation of state control is an oxymoron what has been overlooked in the literature on growth and equity is the effect of the rights structure on both economic efficiency and on the income distribution the evidence is that free societies have much larger shares of income going to the middle 60 percent of the distribution than is observed in societies where men are not free to choose in politically open societies compared to politically closed regimes the share of income to the middle three quintiles is q2 10 7 vs 8 0 q3 16 0 vs 11 5 and q4 22 9 vs 17 9 in the aggregate the shares to the middle quintiles are 49 6 vs 37 4 in nations that obey the rule of law compared to regimes in which the rights of the state relative to the individual are paramount the comparisons are q2 11 2 vs 7 4 q3 16 3 vs 10 6 q4 23 0 vs 17 3 summing the three quintiles yields a comparison of 50 5 vs 35 3 in countries that have private property market allocation of resources and minimum intervention by the state compared to command economies the shares of income to the middle quintiles are q2 10 8 vs 8 0 q3 16 0 vs 11 1 and q4 22 8 vs 17 7 aggregated the shares of the middle class in regimes with high levels of economic liberty are 49 6 vs 36 8 for regimes with restricted private economic rights

in defence of degrowth abstract this article defends the proposal of sustainable degrowth a starting premise is that resource and co2 limits render further growth of the economy unsustainable if degrowth is inevitable the question is how it can become socially sustainable i e a prosperous and stable rather than a catastrophic descent pricing mechanisms alone are unlikely to secure smooth adaptation a full ensemble of environmental and redistributive policies is required including among others policies for a basic income reduction of working hours environmental and consumption taxes and controls on advertising policies like these that threaten to harm the economy are less and less likely to be implemented within existing market economies whose basic institutions financial property political and redistributive depend on and mandate continuous economic growth an intertwined cultural and political change is needed that will embrace degrowth as a positive social development and reform those institutions that make growth an imperative sustainable degrowth is therefore not just a structuring concept it is a radical political project that offers a new story and a rallying slogan for a social coalition built around the aspiration to construct a society that lives better with less

rule and policy spaces and economic progress lessons for third world countries despite greater rates of capital accumulation per capita growth rates among third world nations particularly africa are much lower than among the advanced capitalist nations in this paper i examine the critical roles of the rule space and policy on economic growth empirically nations with poor institutions and policies grow at about a fifth of the rate of nations with good institutions and policies

economic freedom culture and growth how do economic freedom and culture impact economic growth this paper argues that culture as measured by the world values surveys and economic institutions associated with economic freedom are both independently important for economic prosperity but the strength of their impact can be better understood only when both are included in the growth regression our results indicate that economic freedom is more important than culture for growth outcomes suggesting substitutability between the two we posit that culture is important for growth when economic freedom is absent diminishing in significance once economic freedom is established

institutions investment and growth new cross country and panel data evidence this paper outlines the alternative channels through which institutions affect growth and studies the empirical relationship between institutions investment and growth the empirical results indicate that i free market institutions have a positive effect on growth ii economic freedom affects growth through both a direct effect on total factor productivity and an indirect effect on investment iii political and civil liberties may stimulate investment iv an important interaction exists between freedom and human capital investment v milton friedman s conjectures on the relation between political and economic freedom are correct vi promoting economic freedom is an effective policy toward facilitating growth and other types of freedom jel o17 o40 p51

a study of degrowth paths based on the von neumann equilibrium model abstract this paper revisits the von neumann equilibrium model from a degrowth perspective degrowth can be either planned or autonomous based on voluntary simplicity vs characterized by voluntary constraints on the private consumptions any share of the working population is allowed to limit their private consumptions or ecological footprint degrowth means a lower economic growth rate as well as reductions in the usage of materials and fossil energy however when the economy cannot fit within the biophysical boundary despite such reductions degrowth can also mean a deliberate transition towards lesser and cleaner production of a smaller number of goods taking ecological boundaries into consideration may thus switch the direction of an economy from growth to degrowth degrowth is consistent with economic equilibrium in the dynamic input output model degrowth equilibrium results when a critical mass of the population prioritizes diminishing the ecological deficit over increasing the output levels green growth can take place during degrowth while the economy gradually shrinks the interest profit rate in macroeconomic equilibrium is negative due to the conservation target excessive consumption has negative value to vs type agents degrowing private consumptions implies less work more leisure and better quality of the environment improving social welfare degrowth can be advanced by adopting a more cooperative production system or by imposing high ecological taxes the equilibrium model yields an argument for basic income as a means of supporting welfare during degrowth and of compensating for unpaid work the open economy version of the model shows reduced scope for intra industry trade between similar countries

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

tinpots totalitarians and democrats an empirical investigation of the effects of economic growth on civil liberties and political rights ronald wintrobe 1990 1998 has recently provided atheoretical foundation for estimating equations that attemptto explain the dependence of civil liberties and politicalrights in non democratic regimes on the history of economicgrowth this theory suggests that data from different kinds ofnon democratic countries should not be pooled without allowingcoefficients to vary with regime type it also placesinteresting restrictions on the signs of the coefficients ofeconomic growth in equations explaining freedom in the typesof regimes wintrobe identifies in this paper we employ theserestrictions to test wintrobe s theory some additionalhypotheses about the difference between democratic andnon democratic regimes and about the role of education notconsidered by wintrobe are also investigated the results indicate clearly that the relationship between thedegree of freedom as measured by the sum of the gastilindexes of civil liberties and political rights andeconomic growth varies significantly across all types ofregimes totalitarians that attempt to maximize power areclearly different than tinpots that just attempt to maintainpower in this respect and non democratic regimes differ fromdemocracies other aspects of the theory are partiallyconfirmed in particular in totalitarian regimes positivegrowth reduces freedom and negative growth increases it insome specifications the theory predicts the opposite patternfor tinpots and we do find that negative growth reducesfreedom in tinpot regimes however positive growth in tinpotsalso appears to reduce freedom in some cases which is not inaccord with the theory secondary schooling has a positive effect on freedom as inprevious empirical work a result that is shown here to holdeven when each type of regime is considered separately butthe effect of primary schooling is different in tinpot andtotalitarian regimes but not in democracies primaryschooling is associated with reduced freedom

the institutional framework and economic development the compound growth rates of per capita output and farrell type efficiency measures for 115 market economies over the period 1960 80 were compared with measures of political civil and economic liberty it was found that the institutional framework has significant and large effects on the efficiency and growth rate of economies politically open societies which subscribe to the rule of law to private property and to the market allocation of resources grow at three times the rate and are two and one half times as efficient as societies in which these freedoms are abridged

the political economy of public research investment and commodity policies in agriculture an empirical study the paper tests a political economy theory of simultaneous government decision making on income redistribution through commodity policies and on public research investment in agriculture we use data from 37 countries on agricultural protection and public agricultural research expenditures pari the empirical results are consistent with the political economy hypotheses the analysis suggest that structural changes in the economy have important effects on the political incentives for governments not only to subsidize or tax farmers but also to invest in public agricultural research furthermore the analysis supports the hypotheses that the impact of such structural changes on government decision making on pari is non linear and conditional on other factors regarding the impact of political institutions the results suggest that more democracy neither leads to more distortionary transfers agricultural protection nor to lower investment in public goods pari

global trade integration and economic convergence of developing countries gerschenkron hypothesized that lower income countries would tend to grow more rapidly than higher income countries and therefore that their average incomes would converge since that time the record indicates that the industrialized nations have had relatively slow growth rates while many less developed countries ldcs have had relatively rapid rates of growth although many others have had slower rates of growth and some have been negative furthermore the rates of growth have varied considerably during the four and one half decades since 1952 both among countries and within a country from one year to the next thus convergence remains an issue among development economists and others interested in the topic with frequent concern being expressed about a growing gap between average incomes in the moreand less developed economies of the world in this article we examine convergence and divergence due to differential rates of growth factors that affect growth the role of international trade in the process the policy frameworks that enhance or detract from growth and the research needs and opportunities for agricultural and resource economists a controversial aspect is the influence of trade on the process since most development economists tend to believe that more

the drug bargaining game pharmaceutical regulation in australia many countries including australia regulate the price consumers pay for pharmaceuticals in this paper the australian pharmaceutical benefits scheme pbs is modelled as a multi stage game played between the regulator and pharmaceutical firms conditions are derived under which vertically differentiated firms are regulated and a number of issues are discussed these include efficiency regulated firm profitability leakage and price discrimination an extension examines the introduction of new drugs and concludes that if all the benefits of a new drug are to be realised then existing agreements and transfers per unit subsidies need to be renegotiated

intergenerational trade longevity and economic growth we develop an overlapping generations model of endogenous growth in which human capital is the engine of growth and the generations are linked through material and emotional interdependencies within the family parents invest in their children to achieve both old age support care and emotional gratification and material support from children is determined through self enforcing implicit contracts we show that optimal intergenerational trade can then lead to maximization of growth opportunities our model produces a theory of the demographic transition linking longevity fertility and economic growth we also show that while population aging may raise the growth rate an increase in young age longevity is likely to produce a greater increase in the growth rate and a reduction in the fertility rate in a growth equilibrium these predictions and the model s implications concerning the behavior of private savings during the takeoff period appear consistent with empirical evidence

2008 presidential address institutions economic freedom and cross country differences in performance this address describes the history of the economic freedom of the world efw project and the development of the efw index this index is a measure of the extent to which the institutions and policies of various countries are coordinated by personal choice voluntary exchange open markets and clearly defined and enforced property rights the index contains 42 different components and is currently available for 141 countries data for approximately 100 countries are available back to 1980 the efw index incorporates many of the elements that new institutional economists argue are important sources of growth thus it facilitates empirical investigation of the institutional theory of growth and crosscountry comparisons of economic performance in this regard the paper considers 10 propositions that have been addressed with the index and what has been learned from this analysis

income inequality and economic freedom in the u s states this paper examines the impact of economic freedom on income inequality using cross sectional data for u s states while previous research has explored this relationship internationally the results have been conflicting in addition while it seems obvious that the large institutional differences across countries will impact income inequality it isn t so obvious that the smaller variation in policies among u s states can have a measurable impact can improvements in income inequality be used as a justification for marginal pro market policy reforms at the state level or is this argument applicable only to national level institutional reforms

should the us allow prescription drug reimports from canada as a result of public outrage over lower prescription drug prices in canada congress passed legislation that would allow these drugs to be imported into the us the lower canadian prices reflect price regulation opponents of allowing these imports have argued that the us will import canadian price controls and that profits of pharmaceutical companies will be hurt in this paper a model is developed in which a good sold in the foreign country is subject to a negotiated price which is determined in a nash bargaining game when imports back into the home country are allowed this negotiated price also becomes the domestic price this causes the home firm to make fewer price concession in the nash bargaining game home firm profits are found to rise under the reimport regime for both of the demand functions analyzed in this paper

de growth and welfare in an equilibrium model with heterogeneous consumers this paper studies equilibrium growth and voluntary degrowth allowing for heterogeneous and time varying preferences the approach is based on applying a dynamic equilibrium model with externalities in production consumption and leisure preference heterogeneity regarding status competition is modeled by asymmetric consumption externality parameters whereas heterogeneity regarding voluntary simplicity is incorporated by allowing for agent specific restrictions on maximum consumption equilibrium is studied in terms of a balanced growth path bgp numerical examples suggest that degrowth triggered by voluntary simplicity by a subset of consumers less affected by status competition has a positive effect on the aggregate welfare under externalities in consumption and leisure a reduction in status competition increases the aggregate welfare and reduces the equilibrium growth rate simulations suggest that a time varying equilibrium in the heterogeneous preference model with two consumer classes is well approximated by a constant bgp

the effects of economic freedom regulatory quality and taxation on the level of per capita real income a preliminary analysis for oecd nations and non g8 oecd nations this study of the impact of economic freedom regulatory quality and the relative burden of taxation on the level of per capita real income gdp among oecd nations over the period 2003 to 2007 adopts a modified version of the overall economic freedom index computed by the heritage foundation 2013 one with the fiscal freedom and business freedom indices removed this study then provides panel least squares fixed effects estimates for five linear specifications models each nation during this time frame can be regarded either as a nation per se or as a de facto economic region within the oecd the analysis first focuses upon all of the oecd nations and then as a robustness test subsequently focuses only on non g8 oecd member nations the estimations in this study all provide strong empirical support for the three central hypotheses proffered here namely 1 the higher the overall degree of economic freedom the higher the per capita real income gdp level 2 the higher the level of regulatory qua

pharmaceutical prices with insurance coverage and formularies in this paper the author evaluates the success of formulary pricing formulary pricing is a price tendering system used to generate competition among drug suppliers the paper develops a model of pricing in an uncertain auction from the point of view of a typical firm the ability to make side payments in the form of kickbacks to pharmacists segments the transaction into two stages after the first stage bidding the second stage involves a renegotiation between pharmacists and the supplying firm an econometric test for this model is developed and the empirical evidence is found to support the model well

has wal mart buried mom and pop the impact of wal mart on self employment and small establishments in the united states this paper explores the widely accepted view that wal mart causes significant harm to the traditional small mom and pop business sector of the u s economy we present the first rigorous econometric investigation of this issue by examining the rate of self employment and the number of small employer establishments using both time series and cross sectional data we also examine alternative measures and empirical techniques for robustness contrary to popular belief our results suggest that the process of creative destruction unleashed by wal mart has had no statistically significant long run impact on the overall size and profitability of the small business sector in the united states jel l81 d59 c21 wal mart has indeed set prices low enough to drive mom pop stores out of business all over the country and kept the prices that low forever 1 during the last 20 years wal mart has moved into communities and destroyed them wiping out stores slashing the tax base and turning downtown areas into ghost towns 2 i introduction the argument that wal mart inflicts significant harm on the small mom and pop business sector of the u s economy is so widely accepted that one of the paper s opening quotes is actually from a pro wal mart article which goes on to discuss the merits and efficiency enhancements that result claiming that i n a free market large suppliers of nearly every thing will drive most small suppliers out of business even president clinton s former secretary of labor robert b reich writes in the new york times that wal mart will turn main streets into ghost towns by sucking business away from small retailers 3 wal mart watch one of the largest anti wal mart organizations features an article claiming that in iowa wal mart s expansion has been responsible for widespread closings of mom and pop stores including 555 grocery stores 298 hardware stores 293 building suppliers 161 variety shops 158 women s stores and 116 pharmacies previous estimates of the negative impact of wal mart on other businesses such as the numbers cited above however are misleading for several reasons first these estimates come from a series of applied policy studies that simply compare averages for counties with wal mart stores to those without wal mart stores 5 while the findings from these studies have garnered significant media publicity and widespread public acceptance they are problematic because no econometric methods are employed making it hard to know if the differences are statistically significant and whether or not the difference is really due to the many other economic and demographic factors that differ between counties with wal mart stores and those without the second and biggest problem with these previous studies is that they employed data only for directly competing retail business sectors within that specific county 6 because of its sheer size wal mart s true impact on the overall u s small business sector stretches far beyond the impact any one store has in any one county the idea of creative destruction first eloquently stated by schumpeter 1934 explains how entrepreneurs like sam walton are a disruptive force in an economy 7 schumpeter emphasized the beneficial aspects of this process of creative destruction one in which the introduction of new products results in the obsolescence or failure of others schumpeter pointed out that while these inventions do indeed result in business failures in certain areas they result in overall net gains because of the positive impacts on economic activity in other areas 8 these impacts are however widespread and often hard to identify 9 similarly wal mart s openings while resulting in the failure of some small businesses create opportunities for new businesses both large and small not only in that local area but also in other more distant places

governance structures and the durability of economic reforms evidence from inflation stabilizations abstract this paper investigates the relationship between a country s political economic and institutional environment and its ability to implement sustainable economic reform programs the policy issue on which the study focuses is inflation stabilization it consists principally of econometric estimations of the relationship between the success of stabilizations in a large sample of countries and several political and economic explanatory variables the hypotheses tested are drawn both from the recent macroeconomic literature on policy credibility and from political science the major findings include the following 1 a despite the conventional wisdom to the contrary political repression does not appear to be an effective means for implementing sustainable stabilization policies durable economic reforms and political freedoms appear to be complementary 2 b as has been previously argued theoretically and demonstrated empirically political instability is detrimental to policy reform 3 c the political will and popular consensus for stabilization policies are enhanced during a severe economic crisis 4 d there is weak evidence that intervention by the international monetary fund rather than supporting reform programs can undermine their credibility

the impact of international standards certification on the performance of firms in less developed countries this paper examines the effects of international standards certification isc on both productivity and sales performance for firms from a wide set of countries exhibiting different degrees of institutional development against a large dataset of manufacturing firms operating in 59 countries we find that isc raises productivity and sales performance of firms through efficiency gains and quality signaling with the effects being larger in countries where market supporting institutions are weak the largest gain in performance comes from direct productivity improvements helping firms to climb the technological ladder and closing the productivity gap with firms based in developed countries

price regulation of pharmaceuticals in canada abstract patent holding pharmaceutical firms are modeled as price discriminating international monopolies in an unregulated world market firms set monopoly prices in each national market three types of regulatory rules i reasonable relationship rule ii international price comparison rule and iii therapeutic class comparison rule are examined while price regulation may lead to lower introductory prices for new drugs the price of existing drugs may increase domestic price regulation may increase foreign prices canadian data supported the model s predictions policy makers should anticipate these responses that affects the entire vector of drug prices and not just those subject to specific regulations

proxies for economic freedom a critique of the hanson critique economic freedom indicators have become quite popular recently as a useful tool to quantify the relationship between a country s institutions and its prosperity in a recent article hanson 2003 criticizes these types of studies for i failing to adequately distinguish between different proxies for economic freedom ii not considering the potential for endogeneity and iii accepting significance of economic freedom s ability to promote prosperity even though regression analysis generates nonsensical results closer inspection reveals that most of his arguments are questionable do not apply to much of the literature or are not original and that he is guilty of misinterpreting his own econometric evidence relating freedom to the level of gdp

the institutional environment for infrastructure investment the empirical evidence that links political institutions to economic outcomes has grown dramatically in recent years however virtually all of this analysis is undertaken using data from the past three decades this paper extends this empirical framework by performing a two century long historical analysis of the determinants of infrastructure investment in a panel of over 100 countries the results demonstrate that political environments that limit the feasibility of policy change are an important determinant of investment in infrastructure copyright 2002 oxford university press

an equilibrium framework for the analysis of a degrowth society with asymmetric agents sharing and basic income abstract this paper presents a novel equilibrium framework allowing for asymmetries in the initial wealth allocations labour supplies as well as in the preferences of optimizing agents the framework is applied to study a degrowth society where a subset of agents voluntarily limit their material consumption thereby complying with voluntary simplicity vs at micro level the utility maximization problems of asymmetric agents are formulated and solved for optimal labour supplies new macro level equilibrium solutions accounting for wealth inequality are presented based on different labour supply models the equilibrium welfare is measured using a bernoully nash aggregate an increase in the share of the vs type agents implies a degrowth transition to a lower level of average consumption analysis of the equilibrium framework shows that degrowth whereby average market based consumption falls improves the equilibrium welfare assuming the vs type agents have sufficient resources enabling a reduction in labour supplies sharing collaborative consumption and basic income support welfare increasing degrowth any growing economy can eventually reach the size at which degrowth would improve the welfare simulations suggest that degrowth can also yield a pareto improvement in welfare

national competitive advantage and the roles of economic and political freedom evidence from hong kong the equivocal interrelationships between economic performance and the institu tions of respectively economic and political freedom are examined using data from firms op erating in hong kong an economy where both an erstwhile paramount international business reputation for competitiveness and the institutional basis on which it was predicated have come into question in recent years it is hypothesized that i both economic and political freedom declines will be associated with a proxy for future economic performance competitiveness decline but that ii the correlation of economic freedom declines with competitiveness de cline will be mediated by political freedom declines hierarchical regression analyses tend to support these hypotheses although results vary by firm origin

politics and productivity i introduction economic studies of long run performance are focusing increasingly on political legal financial and social factors development is no longer regarded as a gradual inevitable transformation from self sufficiency to specialization and participation in the division of labor instead progress follows the creation and evolution of institutions that support social and commercial relationships the new institutional economics explains that growth requires that the potential hazards of trade shirking opportunism risk and so on be controlled by institutions like secure property rights reliable procedures for resolving disputes and means of enforcing contracts in the absence of close social ties these institutions reduce information costs encourage capital formation and capital mobility allow risks to be priced and shared and otherwise facilitate cooperation north and thomas 1973 north 1990 drobak and nye 1997 levine 1997 in particular political authorities must make credible commitments not to expropriate private resources once investments have been made 1 despite widespread agreement that institutions matter there is no consensus on how they should be incorporated into the analysis even the best empirical studies of productivity and growth treat institutional characteristics in an eclectic way barro s 1991 influential article for example uses the numbers of assassinations and revolutions per capita as proxies for political instability finding these measures negatively correlated with growth and investment scully 1988 regresses growth rates on dummy variables derived from gastil s 1982 ordinal rankings of political and economic liberty king and levine 1993a 1993b 1993c derive various measures of the quality of financial intermediaries and show that these measures are good predictors of growth this article presents a different approach to analyzing the relationship between institutions and aggregate economic performance following the modem productivity literature see for example fried et al 1993 we model economic performance with a stochastic production frontier frontier analysis is a form of benchmarking it analyzes a group of branches firms nations or other units by identifying best practices and evaluating each member s performance relative to the best practice frontier the results produce not only qualitative rankings of the group members but also numerical efficiency scores that can be used to assess the effects of various policies and characteristics for this reason frontier analysis is well suited for studying the effects of legal and political institutions on the economic performance of nations to capture institutional factors we use two comprehensive indexes of legal regulatory and political conditions working with a broad sample of countries from 1975 to 1990 we incorporate a widely used measure of economic freedom along with a new measure of policy stability to represent a country s institutional environment the new institutional economics suggests that countries with high levels of economic freedom protection of private property rights respect for the rule of law an unhampered price system and so on and policy stability commitment not to change the rules of the game ex post will be closer to the best practice frontier in our model economic freedom and policy stability affect economic performance by enhancing technical efficiency in other words these institutions do not alter the state of technology but they allow producers to squeeze more out of current technology for instance countries with more stable policies attract more foreign investment than countries with less stable policies ceteris paribus this leads to increased competition among producers which in turn brings efficiency gains similarly countries with lower taxes milder regulatory burdens lower inflation fewer restrictions on foreign ownership and so on are likely to produce output more efficiently than countries with policies that restrict production inhibit capital formation and reduce competition

economic institutions and comparative economic development a post colonial perspective summary existing literature suggests that either colonial settlement conditions or the identity of colonizer were influential in shaping the post colonial institutional environment which in turn has impacted long run economic development these two potential identification strategies have been treated as substitutes we argue that the two factors should instead be treated as complementary and develop an alternative and unified iv approach that simultaneously accounts for both settlement conditions and colonizer identity to estimate the potential causal impact of a broad cluster of economic institutions on log real gdp per capita for a sample of former colonies using population density in 1500 as a proxy for settlement conditions we find that the impact of settlement conditions on institutional development is much stronger among former british colonies than colonies of the other major european colonizers conditioning on several geographic factors and ethno linguistic fractionalization our baseline 2sls estimates suggest that a standard deviation increase in economic institutions is associated with a three fourth standard deviation increase in economic development our results are robust to a number of additional control variables country subsample exclusions and alternative measures of institutions gdp and colonizer classifications we also find evidence that geography exerts both an indirect and direct effect on economic development

growth degrowth and climate change a scenario analysis article i nfo article history the paper proceeds with a discussion of the interplay of scale and intensity in determining greenhouse gas emissions this is followed by the presentation of several macroeconomic scenarios using lowgrow a simulation model of the canadian economy the scenarios considered are business as usual which is a projection into the future of past trends selective growth in which differential growth rates are applied to parts of the economy according to their direct and indirect greenhouse gas emissions and degrowth where the average gdp capita of canadians is reduced towards a level more consistent with a world economy the size of which respects global environmental limits the paper ends with a comparison of the scenarios 2011 published by elsevier b v

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 freedom and technical efficiency the impact of institutions on economic performance is currently the subject of much research in this study we use panel data to estimate a stochastic production frontier and the sources of inefficiency for a broad set of countries a maximum likelihood procedure is used to estimate the parameters for the stochastic production frontier and the determinants of inefficiency simultaneously our results show that institutions that promote greater economic freedom in turn promote efficiency

natural resources and the tradeoff between authoritarianism and development abstract why do african and middle eastern countries seem cursed by an abundance of natural resources yet usa australia and norway seem blessed a growing literature has argued that the benevolence or malignance of natural resources depends upon the quality of institutions this paper offers a new explanation based on associational freedom and its interaction with the political system the model predicts that natural resources have an adverse impact on economic performance and transition to democracy in authoritarian regimes but not in democracies it also predicts that repression of associational freedom will be increasing in natural resources in authoritarian regimes i test the model s predictions using fixed effects regressions on an international panel from 1975 to 2000 and find support

economic de growth vs steady state economy in recent years the concept of economic de growth decroissance based on the literature of nicolas georgescu roegen e g 1 3 has found a revival in france italy spain and other countries in the popular as well as in the academic literature therein authors took on board georgescu roegens categorical rejection of a steady state economy sse as proposed by herman daly 4 they argue that economic degrowth is the only viable alternative goal to the growing economy this position is challenged in this article and it is concluded that the two concepts are in fact complements economic de growth is not a goal in itself but the rich north s path towards a globally equitable sse moreover the de growth literature can benefit from the strong economic historic roots of the sse and from daly s macroeconomic concepts while in return being able to give lessons about bottom up approaches this would be particularly important for the population issue where daly proposes limited birth licences unfortunately statements on demography are inconsistent and underdeveloped in the de growth literature further it is concluded that most criticisms of the sse are due to a too narrow and technocratic interpretation of the concept instead the sse should be defined as a quasi steady state resting in a dynamic equilibrium and as an unattainable goal which can and probably should be approximated

trust and development in this paper we examine linkages between social trust and economic development using for the first time a panel of data we confirm earlier cross sectional studies finding that trust is a significant factor in development and also show for the first time that trust significantly interacts with both investment in physical and human capital we provide a robustness analysis of our results via a set of jackknife experiments on our main equations and the trust coefficients and interactions are very tightly distributed indicating that the results are not highly sample dependent we also consider whether trust directly influences investment and find that in a panel framework it does not unless we allow for a trust education interaction in the investment equation

why not africa growth and welfare effects of secure property rights this paper presents the long run equilibrium and developmentdynamics in the neoclassical growth model and a simple modelof endogenous growth when property rights are absent theresults are compared to the outcome in a corresponding modelwith secure property rights the main findings are that thereexists a considerable gain in level and growth of consumptionfrom establishing secure property rights that economicperformance without property rights worsens with an increasingnumber of competing social groups and that the existence orabsence of property rights explains conditional convergence

do pro market economic reforms drive human rights violations an empirical assessment 1981 2006 liberals argue that economic policy reforms will benefit most in terms of better access to goods less inflation and better economic opportunities critics of market reforms among them marxists critical theorists skeptics of globalization as well as a large portion of the ngo community see the majority as losers from such reform expecting resistance that would lead to political repression they suggest that free market policy reforms are analogous to swallowing the bitter pill we make use of the change in the index of economic freedom as a measure of market liberalizing reforms employing data from a panel of 117 countries for the period from 1981 2006 our results show a strong positive association between reforms towards more free markets with regard to governments respect for human rights controlling for a host of relevant factors including the possibility of endogeneity the results are robust in relation to sample size alternative data and methods and a sample of only developing countries and they are substantively quite large our results support those who argue that freer markets generate better economic conditions and higher levels of social harmony and peace and it seems as if getting there is less problematic than people generally think in fact halfhearted measures and backsliding that prolong crises could be more dangerous to human rights