does exchange rate variability depress trade flows evidence from error correction models this paper examines the impact of exchange rate volatility on the trade flows of the g 7 countries in the context of a multivariate error correction model the error correction models do not show any sign of parameter instability the results indicate that the exchange rate volatility has a significant negative impact on the volume of exports in each of the g 7 countries assuming market participants are risk averse these results imply that exchange rate uncertainty causes them to reduce their activities change prices or shift sources of demand and supply in order to minimize their exposure to the effects of exchange rate volatility this in turn can change the distribution of output across many sectors in these countries it is quite possible that the surprisingly weak relationship between trade flows and exchange rate volatility reported in several previous studies are due to insufficient attention to the stochastic properties of the relevant time series copyright 1993 by mit press

is social capital green cultural features and environmental performance in the european union this paper analyses the relationship between social capital and environmental performance in the european union in a first stage environmental performance is measured by an index of eco efficiency at the country level computed using data envelopment analysis techniques and data for the year 2013 in a second stage the influence of social capital and other relevant control variables on eco efficiency is assessed by means of truncated regressions and bootstrapping as proposed by simar and wilson j econom 136 1 31 64 2007 for several model specifications tests fail to reject the hypothesis of no effect of social capital on environmental performance and the main driver of environmental performance is found to be the level of economic development measured by gdp per capita furthermore this result is robust to different definitions of social capital and sample periods

household saving in ldcs credit markets insurance and welfare some ways in which farmers in ldcs can protect their living standards against fluctuations in income are discussed after considering the theory of consumption under uncertainty when there is no or limited borrowing the case where some borrowing is allowed is also examined empirical evidence from some ldcs is used to look at i household borrowing and lending their importance and timing and their role in smoothing consumption and ii the life cycle behavior of consumption and income the results suggest that hump lifecycle saving is not likely to be a very important generator of wealth in ldcs and provide further evidence on the limited role of credit markets

demand elasticities for food products in brazil a two stage budgeting system the object of this article is to estimate demand elasticities for a basket of staple food important for providing the caloric needs of brazilian households these elasticities are useful in the measurement of the impact of structural reforms on poverty a two stage demand system was constructed based on data from household expenditure surveys pof produced by ibge the brazilian bureau of statistics in 1987 88 and 1995 96 we have used panel data to estimate the model and have calculated income own price and cross price elasticities for eight groups of goods and services and in the second stage for 11 sub groups of staple food products we estimated those elasticities for the whole sample of consumers and for two income groups

are poor people credit constrained or myopic evidence from a south african panel credit constraints are an almost ubiquitous assumption in development economics yet direct evidence for credit constraints is limited and many observations consistent with credit constraints are equally compatible with myopic non forward looking consumption or precautionary saving using household panel data and a source of widely anticipated income in south africa this paper tests and rejects the standard consumption model with perfect capital markets then myopic consumption and precautionary saving are tested as alternative explanations for the observed jumps in expenditure the standard model with credit constraints cannot be rejected in favour of myopic consumption or precautionary saving

alfred marshall lecture social capital as good culture to explain the extremely long term persistence more than 500 years of positive historical experiences of cooperation putnam 1993 we model the intergenerational transmission of priors about the trustworthiness of others we show that this transmission tends to be biased toward excessively conservative priors as a result societies can be trapped in a low trust equilibrium in this context a temporary shock to the return to trusting can have a permanent effect on the level of trust we validate the model by testing its predictions on the world values survey data and the german socio economic panel we also present some anecdotal evidence that these priors are reflected in novels that originate in different parts of the country jel 04 016 043 p16

the impact of a large scale poverty targeted cash transfer program on intertemporal choice abstractwe use a social experiment to test whether the government of zambia s cash transfer program affects intertemporal choice a cash transfer program may also alter expectations about future qu

matching the gold standard comparing experimental and nonexperimental evaluation techniques for a geographically targeted program abstract we compare nonexperimental impact estimates based on matching methods with those from a randomized evaluation to determine whether the nonexperimental approach can match the so called gold standard the social experiment we use was carried out to evaluate a geographically targeted conditional cash transfer antipoverty program in nicaragua the outcomes we assess include several components of household expenditure and a variety of children s health outcomes including breast feeding vaccinations and morbidity we find that using each of the following improves performance of matching for these outcomes 1 geographically proximate comparison samples 2 stringent common support requirements and 3 both geographic and household level matching variables even for a geographically targeted program in which the selection is at the geographic rather than at the individual or household level and in which it is not possible to find comparison individuals or households in the program locales m

the response of expenditures to anticipated income changes panel data estimates standard models of intertemporal allocation predict that the time path of expenditures should be independent of the time path of income recently two papers parker 1999 and souleles 1999 have suggested that u s households have a high marginal propensity to spend within year anticipated income changes we use an expenditure survey panel from spain to re examine this issue we exploit two important features of the spanish data first we have quarterly panel data that follows households for more than four quarters second we use the fact that workers are exogenously sorted into one of two payment schemes some receive the same amount each month of the year and others receive an extra payment in june and december the extra payment is large and predictable we examine the detailed pattern of expenditures over the year to see whether they differ between the two groups we fail to find even weak differences we complement this with a conventional euler equation analysis of excess sensitivity our predicting equation for quarterly earnings growth is much better than usual and is likely to give a powerful test of the hypothesis that predictable changes in income do not lead to changes in expenditure patterns the results of this analysis confirm the graphical analysis we find no evidence of excess sensitivity we conclude that households in normal times do smooth consumption over the year we suggest a reconciliation of our results with those of parker and souleles

the productivity of trust this paper tests whether social trust affects total factor productivity tfp using both development and growth accounting we find strong evidence of a causal positive effect of social trust on the level and growth of tfp we moreover observe that the effect of social trust on tfp runs through economic judicial institutions but not through political institutions those findings resist a series of robustness checks

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

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

does human capital matter for growth in oecd countries a pooled mean group approach abstract unlike previous panel data studies using an improved dataset and pmg estimators we find a significant impact of human capital on growth the estimated long run elasticity of output to human capital is consistent with the microeconomic evidence on returns to schooling

who trusts others community and individual determinants of social capital in a low income country this study presents new evidence on individual and community specific determinants of social trust using data from 96 villages in bangladesh we find perceived institutional trust to be positively correlated with stated inter personal trust at the same time there is significant social distance among various faith groups in our data both hindus and muslims trust their coreligionists more than they trust those from other religions moreover hindus trust christians buddhists and ngo workers more than muslims and are not distrustful of the wider society trust towards non muslims is negatively correlated with islamic school attendance among muslim respondents while religiosity tends not to play any role compared to religion the effects of institutional trust and local economic development are modest these findings are robust to control for a range of individual and community level correlates and enumerator fixed effects

the demand for m1 in the u s a 1960 1988 estimated u s m1 demand functions appear unstable regularly breaking down over 1960 1988 e g missing money great velocity decline m1 explosion we propose a money demand function whose arguments include inflation real income long term bond yield and risk t bill interest rates and learning curve weighted yields on newly introduced instruments in m1 and non transactions m2 the model is estimated in dynamic error correction form it is constant and with an equation standard error of 0 4 variance dominates most previous models estimating alternative specifications explains earlier breakdowns showing the model s distinctive features to be important in accounting for the data

constitutional verbosity and social trust a common argument in the trust literature is that high trust cultures allow efficient commercial contracts to be shorter covering fewer contingencies we take this idea to the topic of social contracts specifically we ask whether social trust affects the length and detail of constitutions cross country estimates suggest that national trust levels are indeed robustly and negatively associated with the length of countries constitutions

social trust and human capital formation abstract social trust positively contributes to secondary education enrollment rates in a cross section of countries country specific characteristics that are significant in explaining secondary school enrollment include the degree of income inequality and the percent of the population identified as muslim

cross country heterogeneity in intertemporal substitution abstract we collect 2735 estimates of the elasticity of intertemporal substitution in consumption from 169 published studies that cover 104 countries during different time periods the estimates vary substantially from country to country even after controlling for 30 aspects of study design our results suggest that income and asset market participation are the most effective factors in explaining the heterogeneity households in rich countries and countries with high stock market participation substitute a larger fraction of consumption intertemporally in response to changes in expected asset returns micro level studies that focus on sub samples of rich households or asset holders also find systematically larger values of the elasticity

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

export performance in china s regional economies china enjoyed unprecedented economic growth in the 1980s and 1990s associated with this growth was the rapid expansion of exports from the chinese regions this study aims to provide an empirical assessment of export performance in the chinese regions during 1992 2001 it has shown that on an average china s regional economies have only achieved 70 of their export potential leaving substantial scope for improvement there is also considerable variation in export performance among the chinese regions with the noncoastal areas lagging behind in addition this article also shows that several region specific factors e g foreign direct investment government spending infrastructure development and the nonstate sector have affected regional export performance positively furthermore it is found that the development of china s western regions has boosted and will continue to improve the export sectors in these regions

does social trust affect international contracting evidence from foreign bond covenants abstract building on rational choice institutionalism theory and williamson s j econ lit 38 3 595 613 2000 four level social analysis framework we investigate the influence of the informal institution of social trust on debt contract design in an international setting using a sample of non u s firms that issue bonds in the u s debt market we find that yankee bond creditors impose fewer covenants on bond issuers domiciled in countries with a high degree of social trust we further show that the inverse relationship between debt covenants and the informal institution of social trust is more pronounced for firms from countries with weak formal institutions as well as for firms with poor corporate governance and greater information opacity these findings are robust to endogeneity tests within country analysis various empirical models and measures of trust and alternative hypotheses we also show that while a lower level of informal social trust is associated with higher borrowing costs this relationship weakens when formal covenants are added to the debt contract i e a substitution effect our paper contributes to the international business literature by providing new insights into the role of informal institutions social trust in cross border debt contracting

the role of social capital in financial development to identify the effect of social capital on financial development we exploit social capital differences within italy in high social capital areas households are more likely to use checks invest less in cash and more in stock have higher access to institutional credit and make less use of informal credit the effect of social capital is stronger where legal enforcement is weaker and among less educated people these results are not driven by omitted environmental variables since we show that the behavior of movers is still affected by the level of social capital of the province where they were born

causality in demand a co integrated demand system for trout in germany this article focuses on causality in demand a methodology where causality is imposed and tested within an empirical co integrated demand model not prespecified is suggested the methodology allows different causality of different products within the same demand system the methodology is applied to fish demand on the german market for farmed trout and substitutes it is found that supply sources i e aquaculture and fishery are not the only determinant of causality storing tightness of management and aggregation level of integrated markets might also be important the methodological implication is that more explicit focus on causality in demand analyses provides improved information the results suggest that frozen trout forms part of a large european whitefish market where prices of fresh trout are formed on a relatively separate market redfish is a substitute on both markets the policy implication is that increased production of trout causes a downward pressure on fresh trout prices but froz

long run income and price elasticities of demand for colombian nontraditional exports a multivariate cointegration framework a long run income and price elasticities of demand is estimated for colombian nontraditional exports through a multivariate cointegration analysis based on the combination of cointegration and exogeneity concepts and the inclusion of the complete dynamic system the paper shows the existence of a long run relationship among nontraditional exports relative price and foreign demand and higher long run elasticities than those provided by the long run cointegration vector coefficients that are usually reported in the trade literature

where has all the education gone cross national data show no association between increases in human capital attributable to the rising educational attainment of the labor force and the rate of growth of output per worker this implies that the association of educational capital growth with conventional measures of total factor production is large strongly statistically significant and negative these are on average results derived from imposing a constant coefficient however the development impact of education varied widely across countries and has fallen short of expectations for three possible reasons first the institutional governance environment could have been sufficiently perverse that the accumulation of educational capital lowered economic growth second marginal returns to education could have fallen rapidly as the supply of educated labor expanded while demand remained stagnant third educational quality could have been so low that years of schooling created no human capital the extent and mix of these three phenomena vary from country to country in explaining the actual economic impact of education or the lack thereof

the size of human capital externalities cross country evidence human capital accumulation is usually held to generate positive externalities however the empirical evidence on human capital externalities has been scarce and inconclusive the missing evidence appears to be caused by misleading comparisons between private and social rates of return by incorrect interpretations of regression coefficients or by an inappropriate level of aggregation our own estimates point to relatively robust empirical evidence for a human capital externality that is about twice as large as a benchmark estimate which is derived from a standard parameterization of a simple growth model we ponder a possible causal link from human capital to social capital in the context of alternative views of long run development and argue that the grand transition view paldam 2002 is compatible with the existence of a large human capital externality

trust in large organizations several authors suggest that trust is an important determinant of cooperation between strangers in a society and therefore of performance of social institutions we argue that trust should be particularly important for the performance of large organizations in a cross section of countries evidence on government performance participation in civic and professional societies importance of large firms and the performance of social institutions more generally supports this hypothesis moreover trust is lower in countries with dominant hierarchical religions which may have deterred networks of cooperation trust hold up remarkably well on a cross section of countries this abstract was borrowed from another version of this item

history lessons institutions factor endowments and paths of development in the new world the explanations offered for the contrasting records of long run growth and development among the societies of north and south america most often focus on institutions the traditional explanations for the sources of these differences in institutions typically highlight the significance of national heritage or religion we in contrast argue that a hemispheric perspective across the wide range of colonies established in the new world by the europeans suggests that although there were many influences factor endowments or initial conditions had profound and enduring effects on the long run paths of institutional and economic development followed by the respective economies

the effect of real exchange rate uncertainty on exports empirical evidence unless very specific assumptions are made theory alone cannot determine the sign of the relation between real exchange rate uncertainty and exports on the one hand convexity of the profit function with respect to prices implies that an increase in price uncertainty raises the expected returns in the export sector on the other potential asymmetries in the cost of adjusting factors of production for example investment irreversibility and risk aversion tend to make the uncertainty exports relation negative this article examines these issues using a simple risk aversion model export equations allowing for uncertainty are then estimated for six developing countries contrary to the ambiguity of the theory the empirical relation is strongly negative estimates indicate that a 5 percent increase in the annual standard deviation of the real exchange rate can reduce exports by 2 to 30 percent in the short run these effects are substantially magnified in the long run

arch models properties estimation and testing abstract the aim of this survey paper is to provide an account of some of the important developments in the autoregressive conditional heteroskedasticity arch model since its inception in a seminal paper by engle 1982 this model takes account of many observed properties of asset prices and therefore various interpretations can be attributed to it we start with the basic arch models and discuss their different interpretations arch models have been generalized in different directions to accommodate more and more features of the real world we provide a comprehensive treatment of many of the extensions of the original arch model next we discuss estimation and testing for arch models and note that these models lead to some interesting and unique problems there have been numerous applications and we mention some of these as we present different models the paper includes a glossary of the acronyms for the models we describe

legitimacy and the cost of government while previous research documents a negative relationship between government size and economic growth suggesting an economic cost of big government a given government size generally affects growth differently in different countries as a possible explanation of this differential effect we explore whether government legitimacy measured by satisfaction with the way democracy works influences how a certain government size affects growth on the positive side a government perceived as legitimate may get away with being big since legitimacy can affect behavioral response to and therefore the economic growth cost of taxation and government expenditures on the negative side perceived legitimacy may make voters less prone to acquire information which in turn facilitates interest group oriented or populist policies that harm growth a panel data analysis of up to 30 developed countries in which two different measures of the size of government are interacted with government legitimacy reveals that perceived legitimacy exacerbates a negative growth effect of government size in the long run this could be interpreted as governments taking advantage of being regarded as legitimate in order to secure short term support at a long term cost to the economy

using weather variability to estimate the response of savings to transitory income in thailand this paper measures the extent to which farmers are able to use savings and dissavings to smooth consumption in response to unexpected shocks to income time series information on regional rainfall is used to construct estimates of transitory income due to rainfall shocks the relationship between these measures of transitory income and savings indicates that farm households save a significantly higher fraction of transitory income than nontransitory income jel d91 016 the incomes of farm households in developing countries are notorious for being both low and uncertain policies that increase the incomes of farmers may well be different

does social capital matter for european regional growth abstract this paper analyzes the role of different elements of social capital in economic growth for a sample of 85 european regions during the period 1995 2008 despite the remarkable progress that social capital and european regional economic growth literatures have experienced over the last two decades initiatives combining the two are few and entirely yet to come for the post 1990s period recent improvements in data availability allow this gap in the literature to be closed since they enable the researcher to consider the traditionally disregarded eastern and central european ece regions this is particularly interesting as they are all transition economies that recently joined the european union with relatively low levels of social capital on the methodological side we follow the bayesian paradigm which enables us to make direct inferences on the parameters to be estimated and deal with parameter uncertainty leading to a deeper understanding of the relationships being investigated in particular we analyze three indicators of social capital namely social trust associational activities and social norms results suggest that the two former might have some implications for regional growth while social norms are a weaker predictor for growth

cointegrating institutions the time series properties of country institutional measures abstracta country s political and economic institutions are critical for economic prosperity the literature abounds with institutional measures precisely because institutions are multidimensional we use panel unit root and cointegration tests to examine the time series properties of several institutional measures to answer two questions first do institutional changes tend to be permanent second which subsets of institutions tend to converge or move together these answers have important implications for whether permanent institutional reform is possible and whether reforms can be undertaken one institutional area at a time or instead must simultaneously encompass multiple institutional areas

is full banking integration desirable abstract we analyze the links between banking integration and economic development for a sample of oecd countries we measure banking integration considering indicators that merge not only openness but also connectedness with other banking systems we plug these indicators into income regressions also controlling for other relevant variables considered by the literature in contrast to previous initiatives this second stage explicitly takes into account the differing levels of economic development of the countries in our sample since the benefits of enhanced banking integration might not be generalizable to this end we implement quantile regression also considering the presence of endogenous regressors results show that bank connectedness is more important for economic development than bank openness but the combined effect i e banking integration overall is positive and significant the quantile regression models used in the second stage show that the effects are stronger for the poorest economies

family ties and socio economic outcomes in high vs low income countries abstractalesina and giuliano illustrate that strong family ties lead to lower geographical mobility and reduced labour force participation of young and female individuals we extend their analysis by arguing that the effect of strong family ties on economic outcomes depends on a country s level of economic and institutional development this cross country heterogeneity arises because strong family ties not only foster traditional family values which have disruptive effects on economic outcomes but also provide economically valuable social networks especially in societies characterised by weak institutions and limited market access empirical evidence using the european and world value surveys evs wvs are supportive of our theoretical argument

conditional exchange rate volatility and the volume of international trade evidence from the early 1900s exports from britain to the united states from 1900 to 1940 are examined to ascertain the effect of exchange rate volatility on the volume of trade in addition to using a rolling standard deviation measure of exchange rate uncertainty the conditional variance of the exchange rate series modeled as a generalized autoregressive conditional heteroskedastic process is used to generate an alternative measure of exchange rate uncertainty the results of estimation using the two measures of exchange rate volatility suggest that increases in the volatility of the real exchange rate reduce the volume of trade copyright 1992 by mit press

the worldwide governance indicators six one or none abstract aggregate indexes of the quality of governance covering large samples of countries have become popular in comparative political analysis few studies examine the validity or reliability of these indexes to partially fill this gap this study uses factor confirmatory factor and path analysis to test both measurement and causal models of the six worldwide governance indicators they purportedly measure distinct concepts of control of corruption rule of law government effectiveness rule quality political stability and voice and accountability rather than distinguishing among aspects of the quality of governance we find that they appear to be measuring the same broad concept

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

trust us to repay social trust long term interest rates and sovereign credit ratings this paper asks whether the sensitivity of market long term interest rates and credit ratings is associated with cross country differences in informal institutions measured by social trust we note a number of theoretical mechanisms that could imply that similar objective problems are more likely to be effectively dealt with in higher trust societies a set of panel estimates across middle and high income countries reveal that interest rates and ratings are substantially more sensitive to inflation and growth problems in low trust countries this finding sheds light on the differential market reactions to economic problems in seemingly comparable countries jel codes g12 a13

presidential address institutions and culture how and why does distant political and economic history shape the functioning of current institutions this paper argues that individual values and convictions about the scope of application of norms of good conduct provide the missing link evidence from a variety of sources points to two main findings first individual values consistent with generalized as opposed to limited morality are widespread in societies that were ruled by non despotic political institutions in the distant past second well functioning institutions are often observed in countries or regions where individual values are consistent with generalized morality and under different identifying assumptions this suggests a causal effect from values to institutional outcomes the paper ends with a discussion of the implications for future research jel a10 d7 e00

the personal discount rate evidence from military downsizing programs the military drawdown program of the early 1990s provides an opportunity to obtain estimates of personal discount rates based on large numbers of people making real choices involving large sums the program offered over 65 000 separatees the choice between an annuity and a lump sum payment despite break even discount rates exceeding 17 percent most of the separatees selected the lump sum saving taxpayers 1 7 billion in separation costs estimates of discount rates range from 0 to over 30 percent and vary with education age race sex number of dependents ability test score and the size of payment

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

social capital one or many definition and measurement three families of social capital concepts are discussed fa1 trust fa2 ease of cooperation and fa3 network in the language of game theory social capital is the excess propensity to play cooperative solutions in prisoners dilemma games the three families lead to different definitions and thus to different measurement methods some measures are theory near while others are easy to use proxies it is shown that all definitions and measures are related the social capital dream is that all definitions try to catch aspects of the same phenomenon so that all measures tap the same latent variable it is discussed whether this dream is likely to come true