the origins of ethnolinguistic diversity this study explores the determinants of ethnolinguistic diversity within as well as across countries shedding light on its geographic origins the empirical analysis conducted across countries virtual countries and pairs of contiguous regions establishes that geographic variability captured by variation in regional land quality and elevation is a fundamental determinant of contemporary linguistic diversity the findings are consistent with the proposed hypothesis that differences in land endowments gave rise to location specific human capital leading to the formation of localized ethnicities jel j15 j24 z13

systemic risk contributions a credit portfolio approach we put forward a merton type multi factor portfolio model for assessing banks contributions to systemic risk this model accounts for the major drivers of banks systemic relevance size default risk and correlation of banks assets as a proxy for interconnectedness we measure systemic risk in terms of the portfolio expected shortfall es banks marginal risk contributions are calculated based on partial derivatives of the es in order to ensure a full risk allocation among institutions we compare the performance of an importance sampling algorithm with a fast analytical approximation of the es and the marginal risk contributions furthermore we show empirically for a portfolio of large international banks how our approach could be implemented to compute bank specic capital surcharges for systemic risk or stabilisation fees we nd that size alone is not a reliable proxy for the systemic importance of a bank in this framework in order to smooth cyclical uctuations of the risk measure we explore a time varying condence level of the es

do better schools matter parental valuation of elementary education the evaluation of numerous school reforms requires an understanding of the value of better schools given the difficulty of calculating the relationship between school quality and student outcomes i turn to another method and use house prices to infer the value parents place on school quality i look within school districts at houses located on attendance district boundaries houses then differ only by the elementary school the child attends i thereby effectively remove the variation in neighborhoods taxes and school spending i find that parents are willing to pay 2 5 percent more for a 5 percent increase in test scores this finding is robust to a number of sensitivity checks

competition for advertisers and for viewers in media markets standard models of advertising financed media assume consumers patronise a single media platform precluding effective competition for advertisers such competition ensues if consumers multi home the principle of incremental pricing implies that multi homing consumers are less valuable to platforms then entry of new platforms decreases advertisement prices while a merger increases them and advertisement financed platforms may suffer if a public broadcaster carries advertisements platforms may bias content against multi homing consumers especially if consumers highly value overlapping content and or second impressions have low value

the proper scope of government theory and an application to prisons when should a government provide a service in house and when should it contract out provision we develop a model in which the provider can invest in improving the quality of service or reducing cost if contracts are incomplete the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee has however the private contractor s incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on noncontractible quality the model is applied to understanding the costs and benefits of prison privatization

on the salience of ethnic conflict ray acknowledges support from the national science foundation under grants 0421852 and 0617827 esteban is a member of barcelona economics xrea and is grateful for support from the generalitat de catalunya and the cicyt sej 2006 00369 this research is part of the polarization and conflict research project cit2 ct 2004 506084 funded by the european commission dg research sixth framework program

media competition and electoral politics we build a framework linking competition in the media market to political participation media outlets report on the ability of candidates running for office and compete for audience through their choice of slant citizens consume news only if the expected utility of being informed about candidates ability is sufficiently large for their group collectively our results can reconcile seemingly contradictory empirical evidence showing that entry in the media market can either increase or decrease turnout while information pushes up independent turnout partisans adjust their turnout to the ability of their preferred candidate and on average they vote less when informed

this time is the same using bank performance in 1998 to explain bank performance during the recent financial crisis are some banks prone to perform poorly during crises if yes why in this paper we show that a bank s stock return performance during the 1998 crisis predicts its stock return performance and probability of failure during the recent financial crisis this effect is economically large our findings are consistent with persistence in a bank s risk culture and or aspects of its business model that make its performance sensitive to crises banks that relied more on short term funding had more leverage and grew more are more likely to be banks that performed poorly in both crises

post 1500 population flows and the long run determinants of economic growth and inequality we construct a matrix showing the share of the year 2000 population in every country that is descended from people in different source countries in the year 1500 using this matrix we analyze how post 1500 migration has influenced the level of gdp per capita and within country income inequality in the world today indicators of early development such as early state history and the timing of transition to agriculture have much better predictive power for current gdp when one looks at the ancestors of the people who currently live in a country than when one considers the history on that country s territory without adjusting for migration measures of the ethnic or linguistic heterogeneity of a country s current population do not predict income inequality as well as measures of the ethnic or linguistic heterogeneity of the current population s ancestors an even better predictor of current inequality in a country is the variance of early development history of the country s inhabitants with ethnic groups originating in regions having longer histories of agriculture and organized states tending to be at the upper end of a country s income distribution however high within country variance of early development also predicts higher income per capita holding constant the average level of early development

explaining divergence in the long term effects of precolonial centralization on access to public infrastructure services in nigeria abstract although the literature has discussed the benefits of precolonial centralization for development in africa the findings and the mechanisms provided do not explain the heterogeneity in access to public services of formerly centralized regions using new survey data from nigeria a significant negative association between precolonial centralization and access to certain public services is observed while the mechanisms driving these patterns are complex i use historical evidence to suggest that the negative association may be partly driven by centralized regions whose leaders failed to comply with the autocratic federal regime and whose jurisdictions may have been subsequently punished by underinvestment in these services with impacts lasting until today the results are robust to extensive controls and multiple empirical tests to differentiate among alternative explanations for the finding

micro targeting and polarization abstract this paper connects the rise in polarization to changes in media technology which allow for higher precision in the advertising strategy of candidates candidates place ads in media outlets whose audiences differ in ideology and size we develop the concept of media centrality which takes into account differences in the media network and in ideology media centrality leads to a simple characterization of both the optimal targeting strategy and policy we show that generally a more fragmented media landscape leads to an increase in polarization

retailing public goods the economics of corporate social responsibility abstract this paper explores the feasibility and desirability of corporate social responsibility csr we identify csr with creation of public goods or curtailment of public bads using a model with profit maximizing firms the paper shows that there is a direct parallel between csr and traditional models of private provision of public goods indeed firms that use csr will produce public goods at exactly the same level as predicted by the standard voluntary contribution equilibrium for public goods we compare csr with government provision and charitable provision discussing when csr by private for profit firms could have a comparative advantage in dealing with public goods provision

accountability with large electorates we show that ignorant voters can succeed in establishing high levels of electoral accountability in our model an incumbent politician is confronted with a large number of voters who receive fuzzy private signals about her performance a sampling effect enables the incumbent to form a precise estimate of the median voter s signal and the resulting level of accountability is as if the incumbent faced a perfectly informed social planner public information or ideological preferences can impair the beneficial impact of the sampling effect on accountability overconfidence of voters can restore the full benefit of the sampling effect

mass media instrumental information and electoral accountability journalism is widely believed to be crucial for holding elected officials accountable at the same time economic theory has a hard time providing an instrumental explanation for the existence of accountability journalism according to the common downsian reasoning rational voters should not be willing to pay for information out of purely instrumental motives because the individual probabilities of casting the decisive vote are typically very low we show that this rationale does not apply when a group of voters shares a common goal such as accountability and information is delivered via mass media in contrast to the pessimistic downsian view rational voters can have a considerable willingness to pay for the provision of instrumental information in these scenarios our model thus reconciles the rational voter approach with the common perception of journalism as a watchdog that holds elected officials accountable

ideological segregation online and offline we use individual and aggregate data to ask how the internet is changing the ideological segregation of the american electorate focusing on online news consumption offline news consumption and face to face social interactions we define ideological segregation in each domain using standard indices from the literature on racial segregation we find that ideological segregation of online news consumption is low in absolute terms higher than the segregation of most offline news consumption and significan tly lower than the segregation of face to face interactions with neighbors co workers or family members we find no evidence that the internet is becoming more segregated over time

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

a theory of credibility this paper presents models in which one agent must decide whether to trust another whose motives are uncertain reliability can only be communicated through actions in this context it pays for people to build a reputation based on reliable behaviour someone becomes credible by consistently providing accurate and valuable information or by performing useful services the theory provides a justification for long term arrangements without binding contracts it also describes those situations where it pays an agent to cash in on his reputation many decisions depend on trusting someone consumers must decide whether to believe advertisements banks need to judge the reliability of loan applicants and employers must decide how much responsibility to delegate to their employees this paper attempts to model situations that arise when someone is uncertain about whether to trust the people he deals with in this context reputations for reliability are valuable an agent becomes credible by consistently providing accurate valuable information or by always acting responsibly i analyse a series of simple abstract models of information transmission in the basic model there are two agents the sender s and the receiver r who are to play the game a known finite number of times at each stage both players learn the value of a parameter measuring the importance of that period s play of the game that is the value of making a correct decision and s obtains payoff relevant information s then sends a signal to r who makes a decision that affects the welfare of both players after both players learn the consequences of r s decision the process repeats at each stage r must decide what action to take in order to do that he must assess the credibility of s the difficulty arises because r is uncertain about s s preferences when play begins i model this by assuming that with positive probability s has identical preferences to r s is a friend and with positive probability s has completely opposed preferences to r s is an enemy this uncertainty creates a trade off for enemy senders at each stage providing honest information enhances s s reputation but only at the expense of foregoing an opportunity for immediate gain by duping r the possibility that s is a friend lends credibility to what he says but this credibility may also be exploited by an enemy s the principal equilibrium has the following form in the basic model where s has no control over the importance of a given play s typically conveys accurate information for the first several periods r raises the probability he places on s being friendly after receiving accurate information if he believes that an enemy would have lied to him with positive probability the more important the information the more likely an enemy will attempt to deceive r an enemy will eventually take advantage of r by misleading him when this happens the sender loses all opportunities for deception in the future i

independent auditors bias and political agency abstract this paper analyzes political agency with endogenous information collection and revelation by third party auditors while increasing incentives for auditors to provide information straightforwardly improves political control a small amount of pro incumbent bias can also be useful for maintaining high levels of control when the equilibrium level of control is high most investigations uncover positive information about the incumbent since positive information increases reelection rates mildly pro incumbent auditors are willing to work harder than unbiased auditors in these equilibria for moderate levels of control pro incumbent auditors are again useful due to their extra effort even though they may suppress some negative information in equilibrium only when market incentives are low so equilibrium control is weak are unbiased or anti incumbent biased auditors better for voters than mildly pro incumbent auditors

the slave trade and the origins of mistrust in africa in a recent study nunn 2008 examines the long term impacts of africa s slave trade he finds that the slave trade which occurred over a period of more than 400 years had a significant negative effect on long term economic development although the article arguably identifies a negative causal relationship between the slave trade and income today the analysis is unable to establish the exact causal mechanisms underlying this reduced form relationship in this article we examine one of the channels through which the slave trade may affect economic development today combining contemporary individual level survey data with historical data on slave shipments by ethnic group we ask whether the slave trade caused a culture of mistrust to develop within africa initially slaves were captured primarily through state organized raids and warfare but as the trade progressed the environment of ubiquitous insecurity caused individuals to turn on others including friends and family members and to kidnap trick and sell each other into slavery sigismund wilhelm koelle 1854 p e h hair 1965 charles piot 1996 we hypothesize that in this environment a culture of mistrust may have evolved which may persist to this day we show that current differences in trust levels within africa can be traced back to the transatlantic and indian ocean slave trades combining contemporary individual level survey data with historical data on slave shipments by ethnic group we find that individuals whose ancestors were heavily raided during the slave trade are less trusting today evidence from a variety of identification strategies suggests that the relationship is causal examining causal mechanisms we show that most of the impact of the slave trade is through factors that are internal to the individual such as cultural norms beliefs and values jel j15 n57 z13

competition and truth in the market for news in this essay we evaluate the case for competition in news markets from the perspective of economics first we consider the simple proposition that when more points of view are heard and defended beliefs will converge to the truth this concept of competition is several steps removed from market competition among actual media firms but it has played a prominent role in the legal arguments for a free press we then explore three mechanisms by which increasing competition or more precisely increasing the number of independently owned firms can limit bias or distortions that originate on the supply side of the media market first when governments attempt to manipulate news competition can increase the likelihood that the media remain independent second when news providers have an interest in manipulating consumers beliefs diversity in such incentives can reduce the risk of information being suppressed or distorted third competition may drive firms to invest in providing timely and accurate coverage overall we argue that there are robust reasons to expect competition to be effective in disciplining supply side bias next we ask how the effect of competition changes when distortions originate on the demand side of the market when consumers themselves demand biased or less socially relevant news we find that increased competition may or may not improve welfare in these cases though we caution against using this as a justification for concentrating media power in the hands of state controlled or regulated firms

quantity restrictions on advertising commercial media bias and welfare abstract we study the welfare effect of a quantity restriction on advertising in free to air television and other advertising financed media in the presence of commercial media bias broadcasters face a trade off between increasing the number of viewers by sending content that is highly valued by viewers and increasing the price of advertising by choosing advertiser friendly content a cap on advertising drives the per viewer price of ads up thus content improves for viewers therefore the cap can be welfare enhancing even when viewers are not ad averse competition among broadcasters makes it more likely that a cap on advertising improves welfare thus there is a complementarity between regulation and competition on this market we also show that a tax on advertising revenues has quite different effects than a cap on advertising quantity

bias in economic news the reporting of nominal exchange rate behavior in colombia proquest denotes formulae omitted the behavior of the nominal exchange rate ner is regularly reported and commented on in colombian newspapers editorials and op eds however the number and flavor of the news and commentary seem to increase disproportionately during revaluation in contrast to periods of devaluation 1 during the course of a revaluation it is common to read claims not facts in the press of firms and entire industries in distress owing to revaluation and arguments about the benefits of outdated policies such as fixed and multiple exchange rates implemented after 1967 with the enactment of law 444 congreso de colombia 1967 if not a dollarization of the economy 2on one hand many news articles and op ed pieces often maintain that revaluation is devastating for the macroeconomic performance of the country owing to the reduced income for exporters and holders of foreign debt and the subsequent effects on the employment and wages of workers in related industries on the other hand when devaluation occurs little attention is paid in news editorials or op eds there are no complaints addressing the plausible effects of a devaluation such as inflation from higher prices of foreign capital machinery and equipment or imported raw materials this asymmetry in media reporting is hard to understand why would revaluation be more important to report and discuss than devaluation why are there claims of the benefits of a fixed exchange rate when the country has already gone through the crippling effects of an exchange rate black market premium easterly 2002 p 222 describes a high black market premium as a punitive tax on exporters not a good incentive for growth finally why after almost twenty years of experience with a market determined nominal exchange rate is revaluation still reported as harmful for the economy even though there have been more devaluation episodes than revaluation ones 3 one answer to these questions lies in media bias in reporting the behavior of the ner the existence of an interest group supplying media outlets with news to increase the awareness of readers and government officials of the catastrophic consequences of revaluation is considered when this is the case the media benefit from a larger audience and subsequent higher income from advertising revenues the interest group s goal is further satisfied when the fiscal authority offers subsidies or the monetary authority intervenes in the exchange rate market when a government related institution steps in to tame the expressions of discomfort it fulfills the goal of increasing political affection and public acceptance there is a growing literature on the economics of media bias and media slant gentzkow and shapiro 2008 and larcinese puglisi and snyder 2011 offer a review of the theoretical and empirical approaches to this topic the literature describes both supply and demand side models on the supply side the distortions of the news its relationship with the private sector and the government capture of media are the core subjects on the demand side the distortion comes from the public and its preference for news with a certain bias or slant and the media competition for their attention the empirical evidence of media bias shown in this paper fits into the supply side models and the idea of media capture not by the government but by an interest group specifically the work of corneo 2006 is an appropriate analytic framework for the alleged sources of media bias and slant in this paper corneo 2006 builds a voting model of media capture at the hands of special interests to begin with the interest group looking for a policy that will favor its current status seeks to form a coalition with the media the media can accept or refuse the formation of a coalition when they do refuse media demonstrate their independence and commitment to honest reporting

concentration and self censorship in commercial media within a simple model of non localized hotelling type competition among arbitrary numbers of media outlets we characterize quality and content of media under dierent ownership structures assuming advertising sponsored prot maximizing outlets we show that i topics sensitive to advertisers can be underreported self censored by all outlets in the market ii self censorship increases with the concentration of ownership iii adding outlets while keeping the number of owners xed may even increase self censorship the latter result relies on consumers most preferred outlets being potentially owned by the same media companies we argue that externalities resulting from self censorship could be empirically large

time scarcity and the market for news abstract we develop a theory of news coverage in environments of information abundance time constrained consumers browse through news items across competing outlets they choose which outlets to access and which stories to read or skip thus indirectly deciding how much time to spend on a given outlet firms decide on rankings of news items that maximize their profits we show that even when readers or television viewers and firms are rational and unbiased they spend more time on the news than they would like and not necessarily on the topics they prefer in particular relevant news items may be crowded out we then study how reader efficient standards can be restored and derive implications on diverse aspects of new and traditional media these include tabloidization and polarization of the news and other aspects relevant for the political economy of the media including political knowledge gaps and voter turnout

the political economy of public goods some evidence from india we are interested in how public goods get allocated by a centralized state we use data on public goods and social structure from parliamentary constituencies in rural india to understand the allocation of these goods over the 1970s and 1980s national policies and political agendas during this period emphasized universal access to basic amenities and financed a rapid expansion in rural infrastructure we find evidence of considerable equalization in many of these facilities reflecting perhaps the importance of these commitments among the historically disadvantaged social groups those that mobilized themselves politically gained relative to the others measures of social heterogeneity that have been emphasized in the recent empirical literature on public goods are relevant but not overwhelming in their importance

media markets special interests and voters abstract this paper examines the role of mass media in countering special interest group influence i use the concentration of campaign contributions from political action committees to proxy for special interests capture of us senate candidates from 1980 to 2002 and compare the reaction of voters to increases in concentration in two different types of media markets in state media markets and out of state media markets unlike in state media markets out of state markets focus on neighboring states politics and elections thus if citizens punish political capture increases in concentration of special interest contributions to a particular candidate should reduce his vote share in in state counties relative to the out of state counties where the candidate receives less coverage i find that a one standard deviation increase in concentration of special interest contributions to incumbents reduces their vote share by about 0 5 to 1 5 percentage points in in state counties relative to the out of state counties robustness checks suggest that these results are not driven by omitted senator characteristics or by differences between in state and out of state counties along dimensions other than the media environment

testing macroprudential stress tests the risk of regulatory risk weights we compare the capital shortfall measured by regulatory stress tests to that o fa benchmark methodology the v lab stress test that employs only publicly available market data we find that when capital shortfalls are measured relative to risk weighted assets the ranking of financial institutions is not well correlated to the ranking of the v lab stress test whereas rank correlations increase when required capitalization is a function of total assets we show that the risk measures used in risk weighted assets are cross sectionally uncorrelated with market measures of risk as they do not account for the risk that risk will change furthermore the banks that appeared to be best capitalized relative to risk weighted assets were no better than the rest when the european economy deteriorated into the sovereign debt crisis in 2011

why resource poor dictators allow freer media a theory and evidence from panel data every dictator dislikes free media yet many nondemocratic countries have partially free or almost free media in this article we develop a theory of media freedom in dictatorships and provide systematic statistical evidence in support of this theory in our model free media allow a dictator to provide incentives to bureaucrats and therefore to improve the quality of government the importance of this benefit varies with the natural resource endowment in resource rich countries bureaucratic incentives are less important for the dictator hence media freedom is less likely to emerge using panel data we show that controlling for country fixed effects media are less free in oil rich economies with the effect especially pronounced in nondemocratic regimes these results are robust to model specification and the inclusion of various controls including the level of economic development democracy country size size of government and others

the long term effects of africa s slave trades can part of africa s current underdevelopment be explained by its slave trades to explore this question i use data from shipping records and historical documents reporting slave ethnicities to construct estimates of the number of slaves exported from each country during africa s slave trades i find a robust negative relationship between the number of slaves exported from a country and current economic performance to better understand if the relationship is causal i examine the historical evidence on selection into the slave trades and use instrumental variables together the evidence suggests that the slave trades have had an adverse effect on economic development

media and polarization this paper provides an economic framework to explain the impact of the media on political polarization we start from a context where media environments characterized by their levels of accessibility and ideological content variety aect citizens ideological views and political motivation from this we derive comparative statics in a model of electoral competition with endogenous turnout in which politicians react to those media inuenced attitudes we identify two channels the ideology eect whereby a decrease in media ideological variety leads to convergence in citizens views and hence to lower polarization and the composition eect whereby a lowering of barriers to media accessibility increases turnout and hence aects the composition of the electorate as the inow of new citizens who turn out are relatively more moderate we show that the composition eect aects the extensive and intensive margins for political parties chasing voters so that its ultimate direction depends on the political system lower polarization in majoritarian systems but higher polarization under proportional representation we test the model s predictions in the us context of the introduction of broadcast tv in the 1940s and 1950s and radio in the 1920s and 1930s consistent with our model the evidence shows that tv decreased polarization and exposure to radio was associated with lower polarization the evidence suggests that the composition eect predominated in the case of radio while the ideology eect was more important in the case of tv

what factors drive systemic risk during international financial crises abstract we analyze the determinants of the contribution of international banks to both global and local systemic risk during prominent financial crises we find no empirical evidence supporting conjectures that bank size leverage non interest income or the quality of the bank s credit portfolio are persistent determinants of systemic risk across financial crises in contrast our results show that global systemic risk in particular is predominantly driven by characteristics of the regulatory regime we also confirm for the subprime crisis that the banks contribution to moderately bad tail events in the past predicts the financial sector s crash risk

competition and bias we attempt to measure the effect of competition on bias in the context of analyst earnings forecasts which are known to be excessively optimistic because of conflicts of interest our natural experiment for competition is mergers of brokerage houses which result in the firing of analysts because of redundancy e g one of the two oil stock analysts is let go and other reasons such as culture clash we use this decrease in analyst coverage for stocks covered by both merging houses before the merger the treatment sample to measure the causal effect of competition on bias we find that the treatment sample simultaneously experiences a decrease in analyst coverage and an increase in optimism bias the year after the merger relative to a control group of stocks consistent with competition reducing bias the implied economic effect from our natural experiment is significantly larger than estimates from ols regressions that do not correct for the endogeneity of coverage this effect is much more significant for stocks with little initial analyst coverage or competition

financial regulation and securitization evidence from subprime loans we examine the consequences of existing regulations on the quality of mortgage loans originations in the originate to distribute otd market the information asymmetries in the otd market can lead to moral hazard problems on the part of lenders we find using a plausibly exogenous source of variation in the ease of securitization that the quality of loan origination varies inversely with the amount of regulation more regulated lenders originate loans of worse quality we interpret this result as a possible evidence that the fragility of lightly regulated originators capital structure can mitigate moral hazard in addition we find that incentives which require mortgage brokers to have skin in the game and stronger risk management departments inside the bank partially alleviate the moral hazard problem in this setting finally having more lenders inside a mortgage pool is associated with higher quality loans suggesting that sharper relative performance evaluation made possible by more competition among contributing lenders can also mitigate the moral hazard problem to some extent overall our evidence suggests that market forces rather than regulation may have been more effective in mitigating moral hazard in the otd market the findings caution against policies that impose stricter lender regulations which fail to align lenders incentives with the investors of mortgage backed securities

corruption via media capture the effect of competition in this article we compare a government s optimal choice of whether to engage in corruption by capturing the media outlets through bribery in two alternative media market structures monopoly versus duopoly while there is an extra bribe claimant in a media duopoly relative to monopoly it may also be harder for each firm to individually expose corruption when the rival co opts with the government we find that when the latter effect is stronger than the former media is captured at lower bribes under duopoly relative to monopoly and in such instances media competition facilitates rather than hindering corruption

the evolution of culture and institutions evidence from the kuba kingdom we use variation in historical state centralization to examine the long term impact of institutions on cultural norms the kuba kingdom established in central africa in the early 17th century by king shyaam had more developed state institutions than the other independent villages and chieftaincies in the region it had an unwritten constitution separation of political powers a judicial system with courts and juries a police force a military taxation and significant public goods provision comparing individuals from the kuba kingdom to those from just outside the kingdom we find that centralized formal institutions are associated with weaker norms of rule following and a greater propensity to cheat for material gain this finding is consistent with recent models where endogenous investments to inculcate values in children decline when there is an increase in the effectiveness of formal institutions that enforce socially desirable behavior consistent with such a mechanism we find that kuba parents believe it is less important to teach children values related to rule following behaviors

can we prove a bank guilty of creating systemic risk a minority report because increasing a bank s capital requirement to improve the stability of the financial system imposes costs upon the bank a regulator should ideally be able to prove beyond a reasonable doubt that banks classified as systemically risky really do create systemic risk before subjecting them to this capital punishment evaluating the performance of two leading systemic risk models we show that estimation error alone prevents the reliable identification of the most systemically risky banks we conclude that it will be a considerable challenge to develop a riskometer that is sound and reliable enough to provide an adequate foundation for macroprudential policy

a theory of yardstick competition in the typical regulatory scheme a franchised monopoly has little incentive to reduce costs this article proposes a mechanism in which the price the regulatedfirm receives depends on the costs of identical firms in equilibrium each firm chooses a socially efficient level of cost reduction the mechanism generalizes to cover heterogeneous firms with observable differences medicare s prospective reimbursement of hospitals by using diagnostically related groups is a scheme very similar to the one outlined here

government control of the media abstract we present a formal model of government control of the media to illuminate variation in media freedom across countries and over time media bias is greater and state ownership of the media more likely when the government has a particular interest in mobilizing citizens to take actions that further some political objective but are not necessarily in citizens individual best interest however the distinction between state and private media is smaller large advertising markets reduce media bias in both state and private media but increase the incentive for the government to nationalize private media media bias in state and private media markets diverge as governments become more democratic whereas media bias in democracies and autocracies converge as positive externalities from mobilization increase

are market based measures of global systemic importance of financial institutions useful to regulators and supervisors we analyze whether four market based measures of the global systemic importance of financial institutions offer early warning signals during three financial crises the tests based on the 2007 2008 crisis show that only one measure covar consistently adds predictive power to conventional early warning models however the additional predictive power remains small and it is not normally confirmed for the asian and the 1998 crises we conclude that it is problematic to identify a market based measure of systemic importance that remains valid across crises with different features the same criticism also applies to several conventional proxies of systemic importance of which size is the most consistent performer

capital shortfall a new approach to ranking and regulating systemic risks the financial crisis of 2007 2009 has given way to the sovereign debt crisis of 2010 2012 yet many of the banking issues remain the same we discuss a method to estimate the capital that a financial firm would need to raise if we have another financial crisis this measure of capital shortfall is based on publicly available information but is conceptually similar to the stress tests conducted by us and european regulators we argue that this measure summarizes the major characteristics of systemic risk and provides a reliable interpretation of the past and current financial crises

systemic risk and bank size abstract in this paper we analyse firm level systemic risk for us and european banks from 2004 to 2012 we observe that common systemic risk indicators are primarily driven by firm size which implies an overriding concern for too big to fail institutions however smaller banks may still pose considerable systemic threats as exemplified by the northern rock debacle in 2007 by introducing a simple standardisation we obtain new risk measures that often prove to be superior predictors of financial distress during the 2007 2009 subprime crisis we conclude that the new measures could be a valuable addition to the existing indicators employed in basel iii to identify systemically important banks

television and voter turnout i use variation across markets in the timing of television s introduction to identify its impact on voter turnout the estimated effect is significantly negative accounting for between a quarter and a half of the total decline in turnout since the 1950s i argue that substitution away from other media with more political coverage provides a plausible mechanism linking television to voting as evidence for this i show that the entry of television in a market coincided with sharp drops in consumption of newspapers and radio and in political knowledge as measured by election surveys i also show that both the information and turnout effects were largest in off year congressional elections which receive extensive coverage in newspapers but little or no coverage on television

competition in persuasion we study symmetric information games where a number of senders choose what information to communicate we show that the impact of competition on information revelation is ambiguous in general we identify a condition on the information environment i e the set of signals available to each sender that is necessary and sufficient for equilibrium outcomes to be no less informative than the collusive outcome regardless of preferences the same condition also provides an easy way to characterize the equilibrium set and governs whether introducing additional senders or decreasing the alignment of senders preferences necessarily increases the amount of information revealed

the market for news we investigate the market for news under two assumptions that readers hold beliefs which they like to see confirmed and that newspapers can slant stories toward these beliefs we show that on the topics where readers share common beliefs one should not expect accuracy even from competitive media competition results in lower prices but common slanting toward reader biases on topics where reader beliefs diverge such as politically divisive issues however newspapers segment the market and slant toward extreme positions yet in the aggregate a reader with access to all news sources could get an unbiased perspective generally speaking reader heterogeneity is more important for accuracy in media than competition per se

ideological media bias abstract i develop a model of the market for news in which consumers and reporters both ideologically misinterpret information and have biased beliefs about the extent to which others misinterpret information i show that for some parameter values in equilibrium i a monopolist media outlet hires a politically moderate reporter but duopolist outlets use relatively extreme differentiated reporters ii in duopoly consumers think of their preferred outlet s news reporter as relatively unbiased and the other outlet s reporter as relatively biased iii consumers in the aggregate may be less informed in duopoly than monopoly despite more consumers receiving news in duopoly

cross country causes and consequences of the crisis an update abstract we update rose and spiegel forthcoming rose and spiegel 2010 and search for simple quantitative models of macroeconomic and financial indicators of the great recession of 2008 09 we use a cross country approach and examine a number of potential causes that have been found to be successful indicators of crisis intensity by other scholars we check a number of different indicators of crisis intensity and a variety of different country samples while countries with higher income and looser credit market regulation seemed to suffer worse crises we find few clear reliable indicators in the pre crisis data of the incidence of the great recession countries with current account surpluses seemed better insulated from slowdowns

on the number and size of nations this paper studies the equilibrium determination of the number of countries in different political regimes and in different economic environments with more or less economic integration we focus on the trade off between the benefits of large jurisdictions and the costs of heterogeneity of large and diverse populations our model implies that i democratization leads to secessions ii in equilibrium one generally observes an inefficiently large number of countries iii the equilibrium number of countries is increasing in the amount of economic integration

does competition induce analyst effort evidence from a natural experiment of broker mergers abstract hong and kacperczyk 2010 document that decreases in analyst competition due to broker mergers encourage analysts to please managers leading to greater consensus optimism bias we propose three additional effects of analyst competition the analyst effort hypothesis suggests that weaker competition reduces analysts incentives to collect and analyze information the herding hypothesis argues that weaker competition reduces analysts career concerns which in turn reduces herding incentives the strategic deviation hypothesis implies that weaker competition alleviates analysts incentives to strategically deviate from others we find that after broker mergers analysts follow fewer firms and switch their coverage from firms with more to those with less r d expenses they weigh their private information less when it is unfavorable at the same time their forecasts become more dispersed all these findings appear to be more consistent with the analyst effort hypothesis than the herding or strategic deviation hypothesis

war and stature growing up during the nigerian civil war the nigerian civil war of 1967 70 was precipitated by secession of the igbo dominated south eastern region to create the state of biafra it was the first civil war in africa the predecessor of many we investigate the legacies of this war four decades later using variation across ethnicity and cohort we identify significant long run impacts on human health capital individuals exposed to the war at all ages between birth and adolescence exhibit reduced adult stature and these impacts are largest in adolescence adult stature is portentous of reduced life expectancy and lower earnings

analysis of banks systemic risk contribution and contagion determinants through the leave one out approach abstract in this paper we develop an in depth analysis of the systemic risk and contagion determinants through the differential effects of excluding one bank on the banking system the measure allows for splitting the contribution of individual banks into systemic risk as the sum of two components the stand alone bank risk and the contagion risk and measuring the role of assets riskiness capitalization and interconnectedness as determinants of each of the two components results show that the variables determining the stand alone risk component are different from those determining the contagion risk component so that a bank which is relatively safe with respect to stand alone risk can be an important contagion vehicle or vice versa results also show that crisis severity significantly affects results so that the severity of different crises results in different weights for the input variables and different contributions for the banks considered these results add highly significant information for macroprudential regulation not only from the cross sectional point of view but also with reference to the time dimension

who owns the media the authors examine patterns of media ownership in 97 countries around the world they find that almost universally the largest media firms are controlled by the government or by private families government ownership is more pervasive in broadcasting than in the printed media government ownership is generally associated with less press freedom fewer political and economic rights inferior governance and most conspicuously inferior social outcomes in education and health the adverse effects of government ownership on political and economic freedom are stronger for newspapers than for television the adverse effects of government ownership of the media do not appear to be restricted solely to instances of government monopoly the authors present a range of evidence on the adverse consequences of state ownership of the media state ownership of the media is often argued to be justified on behalf of the social needs of the disadvantaged but if their findings are correct increasing private ownership of the media through privatization or by encouraging the entry of privately owned media can advance a variety of political and economic goals especially those of meeting the social needs of the poor

chiefs economic development and elite control of civil society in sierra leone we study the effect of constraints on chiefs power on economic outcomes citizens attitudes and social capital a paramount chief in sierra leone must come from a ruling family originally recognized by british colonial authorities in chiefdoms with fewer ruling families chiefs face less political competition and development outcomes are significantly worse today variation in the security of property rights over land is a potential mechanism paradoxically with fewer ruling families the institutions of chiefs authority are more highly respected and measured social capital is higher we argue that these results reflect the capture of civil society organizations by chiefs

relying on the information of interested parties we investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information we find that if the decisionmaker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties competition may be unnecessary to achieve this result if the decisionmaker is unsophisticated or not well informed competition is not generally sufficient if the interested parties interests are sufficiently opposed however or if the decisionmaker is seeking to advance the parties welfare then competition can reduce or even eliminate the decisionmaker s need for prior knowledge about the relevant variables and for strategic sophistication in other settings only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow effective decisionmaking