are consumption taxes really better than income taxes abstract we use political equilibrium theory and the neoclassical growth model to compare consumption and income tax systems if government outlays are used for redistribution through transfers then steady state equilibria in societies that use income taxes are not necessarily worse in welfare terms and may even be better income taxes are attractive precisely because they are more distortionary since this implies low equilibrium transfer levels we also find that switching tax systems typically does not benefit the median voter moreover a change from income to consumption taxes may make everybody worse off

a step toward understanding wind power development policy barriers in advanced economies abstract a widely accepted premise regarding wind power development policy is that implementation of economic policy instruments which are designed to close the cost gap between wind power and entrenched fossil fuel power generation technologies will significantly catalyze enhanced levels of wind power development activity this paper contests this premise by arguing that non economic barriers to wind power development have the capacity to significantly inhibit wind power development in industrialized nations despite the implementation of economic policy instruments forces which deter wind power development in four economically advanced economies that exhibit phlegmatic progress in wind power development australia canada japan and taiwan are identified and amalgamated into a step framework describing social technical economic and political forces that inhibit wind power development the conclusions of this analysis are twofold first failure to mitigate these step forces may undermine the efficacy of any given economic policy instrument that aims to close the cost gap between wind power and entrenched generation technologies second attempts to mitigate these impediments might represent a way to achieve better policy results with less government financial commitment

democracy and macroeconomic performance in underdeveloped countries an empirical analysis in this study the author examines how inflation and economic growth differ in more and less democratic regimes and in new and mature democracies the analysis is based on a panel research design featuring annual data from a large sample of underdeveloped countries and two way fixed effects regression analysis the author s central finding is that more democratic countries have higher inflation and slower growth than less democratic countries inflation apparently is higher than more democratic countries mainly because they have higher fiscal deficits and faster wage growth this higher inflation marginally reduces economic growth in these countries the author also finds that new and mature democracies do not have significantly different inflation and growth rates the findings suggest that unrestrained political participation and the resulting demands placed on state officials undermine democratic performance

fertility social mobility and long run inequality dynastic altruistic models with endogenous fertility have been shown to be unable to generate enough intergenerational persistence using a bewley model with endogenous fertility we show that it is possible to recover persistence key ingredients for our result include exponential child discounting discrete number of children diminishing costs of child rearing and an elasticity of intergenerational substitution larger than one our model provides a unified framework of analysis for long run inequality that incorporates fertility choices

renewable energy finance and project ownership the impact of alternative development structures on the cost of wind power abstract this paper uses traditional financial cash flow techniques to examine the impact of different ownership and financing structures on the cost of renewable energy specifically wind power most large non hydroelectric renewable energy projects are developed owned and financed by private non utility generators recently however us utilities have begun to consider owning and financing their own wind power facilities rather than purchasing power from independent renewable energy suppliers utilities in other countries have also expressed interest in direct renewable energy investments a primary justification for utility ownership of wind turbine power plants is that utility self financing and ownership is cheaper than purchasing wind energy from non utility renewable energy suppliers the results presented in this paper support that justification although some of the estimated cost savings associated with utility ownership are a result of suboptimal utility analysis procedures and implicit risk shifting financing terms and variables are shown to significantly impact wind power costs

frank ramsey s a mathematical theory of saving in 1928 frank ramsey a british mathematician and philosopher at the time aged only 25 published an article ramsey 1928 whose content was utterly innovative and sowed the seeds of many subsequent developments beside the theory of optimal growth as developed in cass 1965 and koopmans 1965 one could argue that the essence of several subsequent influential theories such as the permanent income life cycle theory of consumption to model individual saving choices were already contained in that seminal article ramsey f p 1928 a mathematical theory of saving economic journal vol 38 152 pp 543 59

do demographics prevent consumption aggregates from reflecting micro level preferences abstract most simulated micro founded macro models use solely consumer demand aggregates in order to estimate preference parameters of a representative consumer for use in policy evaluation focusing on dynamic models with time separable preferences we show that aggregation holds if and only if momentary utility functions fall in the identical shape harmonic absolute risk aversion ishara utility class identifying which parameters of ishara utility functions are allowed to vary over time given this theoretical result it should be easy to empirically reject the aggregation properties that the macroeconomic representative consumer identification approach requires it suffices to show that permanent incomes guaranteeing the same living standard across households of different size violate an affine relationship in order to test the validity of this affine equation we develop a vignette survey that produces appropriate data without demand estimation restrictions imposed by models surprisingly in six countries this equation is not rejected lending support to using consumer demand aggregates

regulating technological change the strategic reactions of utility companies towards subsidy policies in the german spanish and uk electricity markets abstract this paper focuses on how incumbent electric utilities strategically react to subsidy schemes supporting renewable energy technologies in the uk germany and spain firms coordinate the development of their technological capabilities and their political activities to shape their regulatory environment analysing the diffusion of wind power in these countries we show that the different ways in which firms coordinate their technological and political strategies lead to very different market outcomes both for the firms market share and the size of the overall market although incumbents are usually seen as being resistant to change in energy systems we show that spanish utilities proactively drive the diffusion of wind power we speculate about the relation between the ownership structure of the energy system and its inertia with respect to the integration of new technologies we derive novel policy implications that explicitly take into account the strategic actions of incumbent firms shaping the technological and regulatory system

a comparative analysis of the costs of onshore wind energy is there a case for community specific policy support abstract there is growing policy interest in increasing the share of community owned renewable energy generation this study explores why and how the costs of community owned projects differ from commercially owned projects by examining the case of onshore wind in the uk based on cross sectoral literature on the challenges of community ownership cost differences are attributed to six facets of an organisation or project internal processes internal knowledge and skills perceived local legitimacy of the project perceived external legitimacy of the organisation investor motivation and expectations and finally project scale these facets impact not only development costs but also project development times and the probability that projects pass certain critical stages in the development process using survey based and secondary cost data on community and commercial projects in the uk a model is developed to show the overall impact of cost time and risk differences on the value of a hypothetical 500 kw onshore wind project the results show that the main factors accounting for differences are higher pre planning costs and additional risks born by community projects and suggest that policy interventions may be required to place community owned projects on a level playing field with commercial projects

quantifying the relationship between wealth distribution and aggregate growth in the ramsey model abstract this paper provides an explicit characterization of the relationship between growth and wealth distribution among agents when an economy a la ramsey approaches its steady state the result is used to evaluate the distributional consequence of an increase in the income tax rate

welfare effects of unanticipated policy changes with complete asset markets abstract this paper analyzes the welfare effects of unanticipated policy changes in a model with complete asset markets and heterogeneous agents there are two effects an effect of the change in wealth and a direct effect from the price change

economic growth and inequality the role of public investment the relationship between growth and inequality is complex after discussing some general background issues motivated by extensive empirical evidence this paper focuses on public investment as a key determinant of the relationship two alternative frameworks each offering sharply contrasting perspectives are presented the first employs the representative consumer theory of distribution where agent heterogeneity originates with wealth endowments it yields an equilibrium in which aggregate dynamics drives distributional dynamics in the second agent heterogeneity arises from idiosyncratic productivity shocks and generates an equilibrium in which distributional dynamics drive growth the impact of government investment on growth and inequality are shown to contrast sharply in the two approaches thus illustrating the complexity of the growth inequality relationship

natural resources aid and democratization a best case scenario natural resources and aid give dictators revenue to maintain power attempts are being made therefore to funnel these resources away from nondemocratic governments and toward their citizens using formal analysis and building on existing theories of democratization i analyze the effects of such institutional solutions when they function perfectly the best case scenario the models show that even with institutional safeguards these resources diminish chances for democratization in addition to their practical importance the results have an important theoretical implication the political resource curse may not be due to dictators use of these resources but simply to their existence in nondemocracies

transitional dynamics and the distribution of wealth in a neoclassical growth model abstract the evolution of the personal distribution of wealth in a standard neoclassical growth model is studied if the economy is growing toward the steady state and preferences are such that marginal utility from consumption is infinite finite at some all positive non negative consumption level s then the average saving propensity of agents is positively negatively related to their wealth if the economy is decaying toward the steady state these relationships are reversed if wealth and average saving propensity are positively negatively related the distribution of current period wealth lorenz dominates is lorenz dominated by next period s distribution of wealth

u s inequality debt constraints or incomplete asset markets abstract to examine the role of debt constraints and incomplete asset markets lack of insurance markets in explaining u s inequality we run horse races between competing models for a widely used model we decompose inequality into its fundamental driving forces the underlying source of inequality in all models is uninsurable idiosyncratic risk both debt constraints and incomplete asset markets are needed to account for inequality but asset market incompleteness is the key friction it better accounts for the concentration and dispersion of wealth and is the most costly friction in terms of welfare tight debt constraints are important for explaining the lower tail of the wealth distribution

the reductionist gamble open economy politics in the global economy international political economy ipe should transition to third wave scholarship because open economy politics oep which dominates current american ipe scholarship can generate inaccurate knowledge oep can produce inaccurate knowledge because it studies domestic politics in isolation from international or macro processes this methodological reductionism is often inappropriate for the phenomena ipe studies because governments inhabit a complex social system as a result the political choices that oep strives to explain are typically a product of the interplay between domestic politics and macro processes when oep omits causally significant macro processes from empirical models the models yield biased inferences about the domestic political relationships under investigation although scholars tolerated such errors when the gains from oep were large these errors are less tolerable now that oep has matured consequently the field should transition toward research that is nonreductionist problem driven and pluralistic

initial conditions at emancipation the long run effect on black white wealth and earnings inequality abstract black white wealth inequality is much greater than black white earnings inequality in the united states the existing empirical literature has not been able to fully explain the wealth gap this paper investigates how much of current black white income and wealth inequality can be explained by initial conditions at emancipation and nearly 100 years of segregated schools a two sector model with group specific human capital accumulation and school expenditure differences can explain the path of black white convergence in earnings over the past 130 years the model also reproduces the fact that black white wealth ratios remain much lower than black white earnings ratios

on the distributional effects of reducing capital taxes this article asks whether household heterogeneity and market incompleteness have quantitatively important implications for the welfare effects of tax changes we compare a representative agent economy to an economy in which households face idiosyncratic uninsurable income risk the income process is consistent with empirical estimates and implies a realistic wealth distribution we find that capital tax cuts imply large welfare gains in the representative agent economy however when households are heterogeneous substantial redistribution during transition means that only a minority will support capital tax cuts whereas most households can expect large welfare losses

equilibrium portfolios in the neoclassical growth model abstract this paper studies equilibrium portfolios in the standard neoclassical growth model under uncertainty with heterogeneous agents and dynamically complete markets preferences are purposely restricted to be quasi homothetic the main source of heterogeneity across agents is due to different endowments of shares of the representative firm at date 0 fixing portfolios is the optimal equilibrium strategy in stationary endowment economies with dynamically complete markets however when the environment displays changing degrees of heterogeneity across agents the trading strategy of fixed portfolios cannot be optimal in equilibrium very importantly our framework can generate changing heterogeneity if and only if either minimum consumption requirements are not zero or labor income is not zero and the value of human and non human wealth are linearly independent

why there should be no political foreign aid curse summary this paper considers the causality underlying the so called political aid curse which proposes that foreign aid like oil should hinder democracy using a theoretical model which identifies repression and appeasement as the primary alternatives to democratization it argues that aid revenue should not produce a political curse because it is less fungible more conditional and less constant than state oil revenue making it difficult for recipient governments to use their aid to fund either repression or appeasement using several different measures associated with repression and appeasement the statistical results show that aid cannot be associated with any of these dependent variables

time patience and specialization patterns in the presence of asset trade specialization patterns in an open economy two sector growth model with endogenous capital accumulation are examined in the presence of free international lending and borrowing without free international lending and borrowing it is known that whereas the less time patient country decumulates real capital the more patient country accumulates real capital and eventually specializes in a capital intensive industry however free trade of international financial assets causes a dramatic change in long run specialization patterns in this case the less patient country may well specialize in the capital intensive industry and the more patient country in the labor intensive industry

how citizens participate in macroeconomic policy international experience and implications for poverty reduction summary many developing and transitioning countries have difficulty sticking to sound macroeconomic policy international donors are pushing recipient countries to forge a public consensus on macroeconomic policy as a means to enhance sustainability and impacts on the poor finance and budget officials central bank staff and economic policymakers however often assume that citizens cannot understand or contribute to macroeconomic policy yet the poor often do not trust the government to make the right decisions for them how can citizen participation help bridge this gap based on a review of international experience the paper explores this question and identifies how development administrators can employ civic participation in macroeconomic policy the discussion highlights where citizens have the greatest options for participation and notes the impacts participation can have on fostering policies and outcomes that target poverty reduction 2003 elsevier science ltd all rights reserved

the political economy of imf lending in africa why has imf lending achieved such poor results in africa is it because the fund imposes the wrong conditions or because it fails to enforce them analysis of monthly data on 53 african countries from 1990 to 2000 shows that the imf s loans for reform contract lacks credibility because donor countries intervene to prevent rigorous enforcement countries that have influence with developed country patrons as measured by u s foreign aid membership in postcolonial international institutions and voting profiles in the un are subject to less rigorous enforcement shorter program suspensions they have more frequent program suspensions because they violate their conditions more often the imf will have to become more independent in order to become an effective champion of reform

preference shocks from aggregation time series data evidence we investigate the impact of preference shocks on the aggregate dynamics of the u s economy in the context of a neoclassical growth model derived from aggregation the aggregation result we use is as follows if markets are complete and if agents have identical preferences of the addilog type then the heterogeneous agent economy where agents are subject to idiosyncratic productivity shocks behaves as if there was a representative consumer who faces shocks to preferences and technology we estimate the parameters in the aggregation based model from the aggregate time series data and compute the numerical solution we find that the preference shocks play an important role in the aggregate labor market fluctuations

foreign aid and statehood in africa has foreign aid destroyed state institutions in africa african states depend on development assistance to conduct basic government operations yet few of these states are well governed or effective at providing public goods the two trends mounting foreign aid and static or diminishing state performance raise an obvious question is aid dependency contributing to misrule and state failure in africa many critics argue the two phenomena are related i find they are not my analysis fails to show a negative association between aid receipts and two measures of democracy and economic freedom instead the evidence is consistent with a small positive relationship between aid and these indicators of state performance since the international community seems bent on reducing foreign aid an important issue is how african states can maintain and improve their performance with less foreign assistance

can poor countries lobby for more us bilateral aid summary this article explores if countries can lobby the us government for the allocation of us bilateral foreign aid we consider an informational lobby model where lobbying has two effects first a direct effect by informing us policymakers about their countries needs second an indirect effect on policymakers by informing them about common interests in economic or geopolitical terms the lobbyist thus influences the decisions about the allocation of aid resources we estimate the effect of the recipient country s lobbying agents in obtaining foreign aid the econometric results show that lobbying positively affects the amount of bilateral aid received

incomplete markets labor supply and capital accumulation we explore the accumulation of capital in the presence of limited insurance against idiosyncratic shocks borrowing constraints and endogenous labor supply in the exogenous labor supply case e g aiyagari 1994 huggett 1997 the presence of limited insurance increases the demand for savings for precautionary reasons as a consequence capital and output are higher under incomplete markets we show that if labor hours are endogenous labor supply is likely to be lower under incomplete markets because those agents who experience a high shock to productivity are ex post richer and they work fewer hours in some cases this wealth effect can overcome the aggregate precautionary savings and give rise to lower savings and output under incomplete

wealth varying intertemporal elasticities of substitution evidence from panel and aggregate data abstract this paper constructs and estimates a model of consumer preferences in which the intertemporal elasticity of substitution ies of consumption expenditure rises with the level of wealth the purpose of this paper is to measure the effect that systematic variation in the ies of poor and rich consumers has on the ies of aggregate consumption expenditure we find economically significant differences in the ies of poor and rich consumers in indian panel data on the consumption of individual households we also find economically significant differences in the ies measured in aggregate time series data for the u s and india

comparative democracy the economic development thesis in comparative politics an established finding that economic development fosters democratic performance has recently come under challenge we counter this challenge with a dynamic pooled time series analysis of a major but neglected data set from 131 nations the final generalized least squares autoregressive moving averages estimates n 2 096 appear robust and indicate strong economic development effects dependent in part on the nation s position in the world system for the first time rather hard evidence is offered on the causal relationship between economics and democracy according to granger tests economic development causes democracy but democracy does not cause economic development overall the various tests would seem to advance sharply the modeling of democratic performance

heterogeneity in capital and skills in a neoclassical stochastic growth model does a heterogeneous agents version of a neoclassical model with labor leisure choice replicate the distributions of consumption and working hours observed in the cross sectional data does incorporating heterogeneity enhance the aggregate performance of the representative agent model we address these questions in a complete market model economy with two sources of heterogeneity initial endowments and non acquired skills we find positive answers to both questions

why do europeans work so little market work per person is roughly 10 higher in the united states than in sweden however if we include the work carried out in home production the total amount of work only differs by 1 i set up a model and show that differences in policy mainly taxes can account for the discrepancy in both labor supply and home production between sweden and the united states these results are independent of the elasticity of labor supply

does high income promote democracy the authors construct a statistical model with which to test whether the regularity that democracy is more commonly found among wealthy countries stems from a democratizing effect of high income or is due entirely to other factors such as the historical context various features of the institutional setting and simultaneity with the process of leadership change even after correcting for these many other influences the democratizing effect of income remains as a statistically significant factor promoting the emergence of democratic political institutions the authors go on to find that leaders risks of losing power rise during their time in office and that these risks are higher in more democratic countries the authors confirm the finding by burkhart and lewis beck that the democracy promoting effect of income is stronger among the european countries they suggest that high income has a more powerful democratizing effect among the southern european countries because it interacts with pressure from major trading partners to democratize this suggests a revaluation of policies designed to foster the replacement of authoritarian regimes by democratic ones through free trade

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

distributional dynamics in a neoclassical growth model the role of elastic labor supply we examine the evolution of the distributions of wealth and income in a ramsey model in which agents differ in their initial capital endowment and where the labor supply is endogenous the assumption that the utility function is homogeneous implies that the macroeconomic equilibrium is independent of the distribution of wealth and allows us to characterize fully income and wealth dynamics we find that although the dynamics of the distribution of wealth are similar under fixed and flexible labor those of the income distribution are not in response to a structural change income inequality may move in opposite ways depending on whether or not the labor supply is fixed

did aid promote democracy in africa the role of technical assistance in africa s transitions did foreign aid impede or catalyze democratization in africa in the 1990s we argue that after the cold war donors increased their use of technical assistance in aid packages improving their monitoring capacity and thus reducing autocrats ability to use aid for patronage to remain in power autocrats responded by conceding political rights to their opponents from legalizing opposition parties to staging elections we test our theory with panel data for all sub saharan african countries while other factors played pivotal roles in africa s political liberalization we find technical assistance helps to explain the timing and extent of africa s democratization

rate of time preference intertemporal elasticity of substitution and level of wealth the rate of time preference rtp and the intertemporal elasticity of substitution ies are two important factors shaping intertemporal consumption decisions models in which the rtp and or the ies differ systematically between rich and poor households have different empirical and policy implications for economic development growth and the distribution of income and consumption from those of standard models in which these parameters are constant across households in this chapter we estimate a model in which both rtp and ies are allowed to differ across rich and poor households using household level panel data from india our empirical results are consistent with the view that the rtp is constant across poor and rich households but the ies is larger for the rich than it is for the poor

governance and growth in sub saharan africa real income per head in much of sub saharan africa grew rapidly in the 1960s but faltered following the first opec oil price shock in 1973 74 and then stagnated or fell from the late 1970s to the early 1990s africa also saw a broad wave of authoritarian rule sweep the continent in the 1960s and early 1970s since 1990 however the african political landscape has experienced significant changes many in the direction of greater pluralism and democracy moreover where civil strife has been avoided africa has seen a broad tendency towards rapid growth for several years after 1995 this sequence of events suggests that political economy may offer useful perspectives on africa s growth record over the last several decades we begin with a summary of africa s growth patterns and the evolution of african political regimes we then examine models of authoritarian rule for insights into the conditions under which elites may sacrifice the general interest to extract rents and retain power or in which leaders may find ways of making growth enhancing policy politically acceptable it would be premature to conclude that africa s political reforms of the 1990s have helped to generate economic progress however we do believe that the increase in political pluralism in combination with greater unity among african aid donors bodes well for a continuation of africa s growth recovery

endogenous market incompleteness with investment risks abstract this paper studies a general equilibrium economy in which agents have the ability to invest in a risky technology the investment risk cannot be fully insured with optimal contracts because shocks are private information we show that the presence of investment risks lead to under accumulation of capital relative to an economy where idiosyncratic shocks can be fully insured we also show that the availability of state contingent optimal contracts compared to simple debt contracts brings the aggregate stock of capital close to the complete markets level institutional reforms that make possible the use of these contracts have important welfare consequences

is there a majority to support a capital tax cut abstract a capital income tax cut must in general be financed by increasing other taxes and thus will have redistributive effects this paper studies analytically the redistribution implied by a capital income tax cut in the ramsey cass koopmans neoclassical growth model when agents differ in wealth and human capital and markets are frictionless a few parameters affect the efficiency costs and redistributive benefits of capital taxation and determine the set of agents who are in favor of a capital income tax cut for plausible parameter values a majority would lose from the tax cut i e high capital taxes may be politically sustainable

the relative income hypothesis abstract despite its theoretical dominance the empirical case in favor of the permanent income hypothesis is weak contrary to one of its basic implications a growing body of evidence suggests that rich households save a higher proportion of their permanent income than poor households we propose an overlapping generations economy where households care about relative consumption as a result an individual s consumption is driven by the comparison of his lifetime income and the lifetime income of his reference group a permanent income version of duesenberry s 1949 relative income hypothesis across households the savings rate increases with income while aggregate savings are independent of the income distribution

consumption and labor supply with partial insurance an analytical framework we develop a model with partial insurance against idiosyncratic wage shocks to quantify risk sharing closed form solutions are obtained for equilibrium allocations and for moments of the joint distribution of consumption hours and wages we prove identification and demonstrate how labor supply data are informative about risk sharing the model estimated with us data over the period 1967 2006 implies that i 39 percent of permanent wage shocks pass through to consumption ii the share of wage risk insured increased until the early 1980s and iii preference heterogeneity is important in accounting for observed dispersion in consumption and hours jel e21 e23 e31 e52

on the size of u s government political economy in the neoclassical growth model we study a dynamic version of meltzer and richard s median voter model of the size of government taxes are proportional to total income and they are redistributed as equal lump sum transfers voting takes place periodically over time and each consumer votes for the tax rate that maximizes his equilibrium utility we calibrate the model to u s data key elements in the calibration are the income and wealth distribution and the parameters governing the leisure and consumption choices the total size of transfers predicted by our political economy model is quite close to the size of transfers in the data

political sources of growth a critical note on measurement this note critically reviews the research on the link between political systems and economic growth empirical attempts to capture this patent relationship have been met with mixed success we conclude that the political variables used in these studies i e democracy and political instability do not adequately reflect the investors problem we suggest that a political variable that encompasses all kinds of potential discretionary state interventions would be more effective in explaining cross country differences in economic growth

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

development aid and growth in transition countries empirical studies normally analyze diverse and heterogeneous groups of countries producing very mixed evidence on the effectiveness of development aid in promoting growth we focus on whether aid promotes economic growth in transitional economies we find that aid on average has had a positive impact on growth for this specific group of countries this result is robust to samples estimators and the use of alternate instruments to address endogeneity aid effectiveness is not conditional on good policy and there is little evidence of non linear growth effects arising from aid

consumption and risk sharing over the life cycle a striking feature of u s data on income and consumption is that inequality increases with age this paper asks if individual specific earnings risk can provide a coherent explanation we find that it can we construct an overlapping generations general equilibrium model in which households face uninsurable earnings shocks over the course of their lifetimes earnings inequality is exogenous and is calibrated to match data from the u s panel study on income dynamics consumption inequality is endogenous and matches well data from the u s consumer expenditure survey the total risk households face is decomposed into that realized before entering the labor market and that realized throughout the working years in welfare terms the latter is found to be more important than the former

financial market globalization symmetry breaking and endogenous inequality of nations this paper investigates the effects of financial market globalization on the inequality of nations the world economy consists of inherently identical countries which differ only in their levels of capital stock each country is represented by the standard overlapping generations model modified only to incorporate credit market imperfection an integration of financial markets affects the set of stable steady states as it changes the balance between the equalizing force of the diminishing returns technology and the unequalizing force of the wealth dependent borrowing constraint the model is tractable enough to allow for a complete characterization of the stable steady states in the absence of the international financial market the world economy has a unique steady state which is symmetric and stable in the presence of the international financial market symmetry breaking occurs under some conditions that is the symmetric steady state loses its stability and stable asymmetric steady states come to exist in the stable asymmetric steady states the world economy is endogenously divided into the rich and poor countries the borrowing constraints are binding in the poor but not in the rich the world output is smaller the rich are richer and the poor are poorer in any of the stable asymmetric steady states than in the unstable symmetric steady state

foreign aid responses to political liberalization this paper analyzes the impact of political liberalization on receipt of foreign aid it distinguishes different types of donors facing different constraints in rewarding democratization with foreign aid notably bilateral donors the world bank and the european commission based on a sample of 174 recipient countries from 1995 to 2009 the paper jointly examines short term dynamics and long term effects of sustained liberalization except for the world bank donors react to regime change bilateral donors are found to reward political liberalization in the second year after transition

taxation and income distribution dynamics in a neoclassical growth model we examine how changes in tax policies affect the dynamics of the distributions of wealth and income in a ramsey model in which agents differ in their initial capital endowment the endogeneity of the labor supply plays a crucial role in determining inequality as tax changes that affect hours of work will affect the distribution of wealth and income reinforcing or offsetting the direct redistributive impact of taxes our results indicate that tax policies that reduce the labor supply are associated with lower output but also with a more equal distribution of after tax income we illustrate these effects by examining the impact of recent tax changes observed in the us and in european economies

the small blessing of foreign aid further evidence on aid s impact on democracy in an empirical contribution to the literature of foreign aid we estimate the impact of foreign aid on democracy in a panel of 93 developing economies during 1971 2010 we find that foreign aid promotes democracy with the result robust to different estimation methodologies and control variables and to instrumenting for foreign aid

poverty traps and human capital accumulation in this paper i show that persistent inequality in the distribution of human capital and a negative relation between initial inequality and steady state aggregate output may follow from the fact that the poor require relatively higher returns to increase expenditure on education moreover i show that poverty traps emerging in models where individual transitions do not depend on aggregate dynamics though not robust to the introduction of idiosyncratic uncertainty may still be relevant observationally if idiosyncratic shocks occur with low probability in this context i also analyse the implications of introducing a public education system

dynamics of income distribution in this paper we have obtained closed form solutions in cass koopmans growth models with heterogeneous agents the relationship between the form of the production function and the dynamics of income distribution is made explicit we then use this relationship to determine what production structure is simultaneously consistent with facts on growth and income inequality our empirical findings give support to models with decreasing returns in the reproducible factor jel classification d3 o1 o4 dans ce memoire les auteurs obtiennent des solutions pour des modeles de croissance a la cass koopmans dans le cas ou les agents sont heterogenes on explicite la relation entre la forme de la fonction de production et la dynamique de la repartition des revenus on utilise alors cette relation pour determiner quelle structure de production est arrimee aux faits connus a la fois quant a la croissance economique et a la repartition des revenus les resultats empiriques supportent les modeles ou les rendements sur les acteurs de production reproductibles sont decroissants

safety nets and index based insurance historical assessment and semiparametric simulation for northern ghana abstract this article considers index based safety nets aimed at assuring participants a minimum income at the village level set by a prespecified poverty line the participating villages collectively manage a pooled budget offering an index based per capita indemnity to the villages financed from a uniform per hectare premium possibly supplemented by an external subsidy the scheme involves implicit cross subsidies in favor of the poorest villages otherwise it focuses on covariate risk leaving it to mutual arrangements to deal with intravillage idiosyncratic risk its design is obtained from a risk minimizing model for the collective of villages with constraints of two kinds the first is the budget that ensures that payments receive adequate finances the second concerns the set of admissible schedules requiring that payments are triggered by a flexible function of only a few variables for this we propose a semiparametric form from kernel learning noting its capacity to combine a priori on the i

africa s overgrown state reconsidered bureaucracy and economic growth how close is the link between outsized states and economic stagnation in africa this article shows that african public bureaucracies are not as large as often portrayed that they have been getting smaller and that reducing their size alone has not bee n a prescription for economic revival to the contrary the countries with higher levels of public employment such as botswana and mauritius are apt to have the better economic records these findings suggest that a superabundance of public personnel is not in itself a major impediment to growth in africa too much attention has been paid to quantitative or first generation bureaucratic problems and too little attention has been given the second generation issues of bureaucratic quality