blessing or curse impacts of the brazilian pre salt oil exploration abstract the discoveries of oil and gas in the so called pre salt layer have triggered a lot of discussions about their economic effect in this paper we discuss in detail a less discussed dimension the impact of pre salt layer in the structure of the brazilian economy especially the composition of the industry and exports similar consequences in the country of dutch disease and deindustrialization due to revenues from oil exports are evaluated the methodology used is a dynamic global general equilibrium model with specific features for the treatment of the issues raised

interest groups and the rise and decline of growth interest groups are known to exert a sclerotic impact on mean growth a la olson 1982 it is unknown however what impact if any groups exert on the volatility of growth an important hindrance to development in this article we first consider what impact we should expect olson groups to have on the volatility of growth we then estimate the relation between groups and growth volatility in a cross country panel using system generalized method of moments the findings indicate that groups are associated with growth stability in addition the findings suggest that interest groups may be a source of the stability observed in democracies

democracy creeping socialism and ideological socialism in rent seeking societies rent seeking societies suffer from a serious distortion of incentives incentives to engage in distributional struggles to seek contrived transfers are strong but incentives to engage in productive work are too weak stagnation and some unemployment should be expected long lasting democracies within unchanged borders create a permissive environment for rent seeking the provision of rents very much depends on government the stronger the governmental involvement in the economy the higher social security spending the more rents the government is likely to generate therefore creeping socialism understood as increased government control of the economy should reinforce the rent seeking society and the corresponding negative effects on growth and employment whether such creeping socialism is backed by ideological socialism or not should make little difference for growth or employment these ideas have been tested and partially supported by a 19 nation sample of industrial democracies using data from the sixties and seventies by and large the rent seeking approach is fairly successful in explaining national differences in economic growth rates but receives ambiguous support or less for unemployment olson s 1982 1983 proposition about the negative impact of long lasting democracy within unchanged borders on economic growth is much better supported than the growth retarding effects of government revenues or social security spending are

can entry or exit event studies inform horizontal merger analysis evidence from grocery retailing this study estimates how prices change following the entry and exit of grocery retailers we estimate the effects of entry exit by comparing affected markets to a set of unaffected markets using both a difference in difference estimator and a synthetic control estimator we find that entry typically results in reduced prices more surprisingly we find that exit is frequently associated with falling prices our estimated effects of entry on grocery prices are similar in magnitude to estimates of merger price effects in the supermarket industry this finding suggests that entry event studies may be a useful tool for horizontal merger analysis jel l11 l4 l81

transaction costs and the robustness of the coase theorem this paper explores the extent to which the presence of ex ante transaction costs may lead to failures of the coase theorem in particular we identify and investigate the basic hold up problem which arises whenever the parties to a coasian negotiation have to pay some ex ante costs for the negotiation to take place we then show that a coasian solution to this hold up problem is not available this is because a coasian solution to the hold up problem typically entails a negotiation about the payment of the costs associated with the future negotiation which in turn is associated with a fresh set of ex ante costs and hence with a new hold up problem

the export effect of immigration into the usa much has been written on the connection between migration and international trade human history provides important examples of migrations leading to increased trade activity with perhaps the most well known example of the overseas chinese this study investigates the trade related importance of chinese and other immigrants into the usa previous studies may have underestimated or overestimated the relationship between trade and migration with nations treated as featureless plains rather than as varied landscapes this study contends that an understanding of the immigration trade relationship can be improved upon by examining the specific pattern and destination of immigration into specific us states using state level export data to 28 immigrant source countries in 1993 a strong immigration trade link is found reinforcing conclusions made by previous research using country level data the compelling connection between immigration and trade found in this study and others suggests that future change

reverse importing and asymmetric trade and fdi a networks explanation abstract this paper considers the impact of business and social networks on international trade and fdi i propose that differences in the strength of network effects across countries can produce asymmetric trade and investment flows that may lead to trade friction a firm from a country with strong network effects has a cost advantage in selling to buyers from its own country this advantage results in lower inward fdi lower total imports but larger volumes of reverse imports into the country with strong network effects the model s predictions match observed asymmetric trade and investment flows that sometimes lead to us japan trade friction

characterising deindustrialisation an analysis of changes in manufacturing employment and output internationally deindustrialisation is typically conceptualised as a decline in manufacturing as a share of total employment from a kaldorian perspective deindustrialisation could have negative implications for long run growth given the special growth pulling properties of manufacturing however defining deindustrialisation purely in terms of employment share is conceptually limiting given that some of the kaldorian processes operate primarily through output rather than employment as well as blunting empirical analysis by not focussing enough on changes in manufacturing share of gross domestic product gdp this study develops a new method using decomposition techniques to analyse changes in manufacturing employment levels and shares in 48 countries over periods of deindustrialisation the analysis separates out changes in the levels and shares of employment manufacturing into components associated with changes in the share of manufacturing in gdp the growth of manufacturing value added the labour intensity of manufacturing production and economic growth the results indicate that in most cases the decline in manufacturing employment is associated primarily with falling labour intensity of manufacturing rather than an overall decline in the size or share of the manufacturing sector we suggest that deindustrialisation should appropriately be defined in terms of a sustained decline in both the share of manufacturing in total employment and the share of manufacturing in gdp copyright the author 2008 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

immigrant specificity and the relationship between trade and immigration theory and evidence studies routinely document that immigrant employment concentrates in non traded goods sectors and that many immigrants have low inter sectoral mobility we consider these observed characteristics of immigrant employment with regard to the question of how immigration affects a nation s pattern of production and trade we model an economy producing three goods one is non traded domestic labor and capital are domestically mobile but internationally immobile allowing that some new immigrants will become specific to the non traded goods sector the model indicates that the effects of immigration on output and trade depend importantly on the sectoral pattern of employment of both new and existing immigrants empirical investigation in a panel data set of oecd countries supports the model s prediction that immigration raises the output of non traded goods consistent with the model we also find that immigration and trade are complements given its empirical support the model s implications for immigration policy are then discussed

do trade missions increase trade in an effort to stimulate trade canada has conducted regular trade missions starting in 1994 often led by the prime minister according to the canadian government these missions generated tens of billions of dollars in new business deals this paper uses bilateral trade data to assess this claim we find that canada exports and imports above normal amounts to the countries to which it sent trade missions however the missions do not seem to have caused an increase in trade in the preferred specification incorporating country pair fixed effects trade missions have small negative and mainly insignificant effects dans un effort pour stimuler le commerce international le canada a mene des missions commerciales depuis 1994 souvent sous la direction du premier ministre selon le gouvernement canadien ces missions ont engendre des dizaines de millions de dollars en relations d affaires ce texte utilise des donnees sur le commerce bilateral pour evaluer cette proposition on decouvre que le canada exporte et importe des quantites au dessus de la normale vers et en provenance des pays ou il a mene des missions commerciales cependant les missions ne semblent pas avoir cause un accroissement du commerce dans la specification preferee incorporant les effets fixes des paires de pays les missions commerciales ont des effets faibles negatifs et en gros insignifiants

do state borders matter for u s intranational trade the role of history and internal migration empirical evidence of the impact of borders on international trade flows using the gravity equation approach abounds this paper examines the empirical relevance of state borders in u s interstate trade for various specifications of the gravity equation we find a large and economically significant subnational border effect for some specifications however two model specifications drastically reduce if not eliminate the border effect i dynamic panel specifications controlling for past levels of trade and ii models conditioning on internal migration les resultats empiriques de l analyse des impacts des frontieres sur les flux de commerce international en utilisant les modeles de gravite sont devenus monnaie courante ce texte examine l impact des frontieres entre etats a l aide de cette technique il s avere que les effets de frontieres infranationales sont grands et significatifs pour certaines specifications du modele cependant deux specifications du modele reduisent dramatiquement s ils n eliminent pas l effet de frontiere i des specifications qui prennent en compte les niveaux anterieurs de commerce et ii des specifications qui dependent de la migration interne

price and expenditure elasticities for fresh fruits in an urban food desert this study addresses the knowledge gap concerning the demand for fresh fruit in an urban food desert where healthy foods are scarce by definition using register data from a non profit greengrocer

interest groups and economic performance some new evidence mancur olson s theory of the decline of nations is path breaking in political economics it has been tested cross sectionally in numerous empirical studies we survey the existing results briefly with a special focus on studies using the number of lobbies as an exogenous variable using data from the period 1973 2006 we then present the field s first time series analysis of the effects of the number of interest groups on the german lobby list and macroeconomic performance gauged in terms of economic growth and inflation the number of interest groups as a proxy for their influence is shown to have an important impact on macro variables interest group activity significantly leads to a decline in the growth rate and a rise in the inflation rate

distributional coalitions and other sources of economic stagnation on olson s rise and decline of nations one of the most important recent contributions to the field of comparative political economy is mancur olson s the rise and decline of nations in that work olson deduces from his logic of collective action a series of implications regarding the impact of social organizations in particular distributional coalitions on economic growth that can explain variations in national growth rates across a wide range of time and space this article considers the assumptions upon which that logic is founded the plausibility of the several implications drawn from that logic and the application of the theory to account for differences among five nations in rates of economic growth in the post world war ii era the analysis suggests that the characteristics of group activity emphasized by olson represent at best only a small perhaps negligible part of the explanation of cross national differences in growth instead it suggests that an important source of the variation among nations in growth rates is the international political and economic system in particular the discussion of the german japanese and british cases suggests that stagnation or growth is to a considerable extent the product of a nation s position in the world economy the policy responses through which governments seek to perpetuate or improve that position and the constraints upon or opportunities for growth oriented domestic economic policy posed by that position

does voluntary participation undermine the coase theorem abstract the coase theorem states that costless enforcement of voluntary agreements yields efficient outcomes we argue that previous treatments fail to recognize the full meaning of voluntary it requires a two stage game a non cooperative participation decision followed by coaseian bargaining only among those who choose to participate we illustrate this in a simple public goods model and find outcomes ranging from extremely inefficient to fully efficient however the efficient equilibrium is not robust to even very small transaction costs thus we cast doubt on coaseian claims of universal efficiency finally we outline a kind of coercion that restores efficiency

relational contracts and the theory of the firm relational contracts informal agreements sustained by the value of future relationships are prevalent within and between firms we develop repeated game models showing why and how relational contracts within firms vertical integration differ from those between nonintegration we show that integration affects the parties temptations to renege on a given relational contract and hence affects the best relational contract the parties can sustain in this sense the integration decision can be an instrument in the service of the parties relationship our approach also has implications for joint ventures alliances and networks and for the role of management within and between firms

subjective performance measures in optimal incentive contracts objective measures of performance are seldom perfect in response incentive contracts often include important subjective components that mitigate incentive distortions caused by imperfect objective measures this paper explores the combined use of subjective and objective performance measures in respectively implicit and explicit incentive contracts naturally objective and subjective measures often are substitutes sometimes strikingly so we show that if objective measures are sufficiently close to perfect then no implicit contracts are feasible because the firm s fallback position after reneging on an implicit contract is too attractive we also show however that objective and subjective measures can reinforce each other if objective measures become more accurate then in some circumstances the optimal contract puts more weight on subjective measures because the improved objective measures increase the value of the ongoing relationship and so reduce the firm s incentive to renege we also analyze the use of subjective weights on objective performance measures and provide case study evidence consistent with our analyses

international trade agreements and international migration despite large potential economic gains bilateral and multilateral negotiations focusing on liberalisation of migration have not shared the high profile of international trade negotiations and agreements migration and trade have been traditionally viewed rather separately and the relevance of the many and complex interdependencies has been given remarkably little attention in the literature to date in this article we focus on the two way interaction between international migration and agreements designed to enhance cross border trade and investment liberalisation of international trade in services and in the movement of people potentially offers much greater economic gains than liberalisation of remaining barriers to goods trade however progress within multilateral frameworks is fraught with difficulty the world trade organization s general agreement on trade in services gats has yielded little real progress so far and negotiations within more flexible unilateral and bilateral frameworks are likely to be more successful in liberalising the movement of labour we discuss a range of specific examples focusing particularly on the interesting case of new zealand we find that trade agreements are increasingly including agreements on migration though typically favouring temporary migration and involving numerically modest quotas we conclude that migration regulatory frameworks are likely to be further and more strongly linked to trade and investment agreements in the future particularly given changing economic and demographic forces the primary focus of migration policies may nonetheless remain different from that of trade policies while further migration liberalisation is likely to be through bilateral and regional agreements it will be important to try to lock in the gains of such agreements while simultaneously working to consolidating these in a way that will help to facilitate future multilateral agreement

do migrants improve governance at home evidence from a voting experiment can international migration promote better institutions at home by raising the demand for political accountability a behavioral measure of the population s desire for better governance was designed to examine this question a postcard was distributed to households promising that if enough postcards were mailed back results from a survey module on perceived corruption would be published in the national media data from a tailored household survey were used to examine the determinants of this behavioral measure of demand for political accountability undertaking the costly action of mailing the postcard and to isolate the positive effect of international emigration using locality level variation the estimated effects are robust to the use of instrumental variables including past migration and macro shocks in the destination countries the estimated effects can be attributed mainly to migrants who immigrated to countries with better governance especially migrants who return home

testing the implications of the olson hypothesis considerable attention has been paid to the hypothesis advanced by olson that accumulations of interest groups build up over time and retard economic performance most previous tests of this hypothesis have been based on comparisons of growth rates in this paper it is argued that comparisons of income levels yield a superior test strong forms of the olson hypothesis in which shocks such as revolution and war yield positive benefits are rejected using this test

out of sight not out of mind education networks and international trade summary university students typically develop between them long lasting ties of friendship and trust as well as an attachment to their university if they are foreign students they also form a bond to their country of study this paper investigates the impact of university ties on the uk s trade with 167 countries during 1999 2009 i find robust evidence that education network ties boost the uk s bilateral trade flows specifically the impact of networks is stronger on trade between the united kingdom and countries with dissimilar institutions and culture and particularly with post communist economies results are robust to different econometric specifications and regressors

determinants of interest group formation it is widely recognized that interest groups affect both microeconomic and macroeconomic outcomes however few researchers have attempted to discern empirically the factors that contribute to interest group activity this paper provides a test of several theories of group formation in a panel setting a nation s stability socioeconomic development political system size and diversity all appear to contribute to interest group formation as predicted by theory

rent seeking distributional coalitions taxes relative prices and economic growth the results clearly indicate that much of the considerable variation in the pace and pattern of economic growth between the various american states is explainable by institutional arrangements amenable to revisions through public policy the findings suggest that long run economic growth would be best served by constraining distributional coalitions be it through constitutional restraints e g balanced budget amendments the item veto statutory changes e g subjecting coalitions like labor unions to the antitrust laws or some other means e g labor and capital fleeing distributional coalitions such as in the movement of workers and plants to nonunion areas

industrial groupings and foreign direct investment we explore worldwide foreign direct investment location decisions by japanese manufacturing firms from 1985 through 1991 our conditional logit estimates provide evidence that firms location decisions are affected by membership in either vertical or horizontal keiretsu consistent with previous studies that stress agglomeration effects on firms location decisions we find that the stock of investment in a region by a firm s vertical keiretsu partners increases the probability of location further we find that the recent flow of investment into a region by a firm s horizontal keiretsu partners increases the probability of investment to the region providing evidence of networking effects

economic performance measurement systems for event planning and investment decision making abstract cities and destinations have assigned a strategic role in tourist and place marketing to events economic impact analyses are one of the tools that policy makers can use to support effective investment decision making in event planning the more precise and accurate these analyses are the more helpful to event planning they will be this paper proposes an innovative methodology to improve the economic impact estimate of events it combines tested action tracking technologies to track the consumer behaviour of visitors to the event radio frequency identification passive rfid with bottom up input output models a case study was carried out on the festival of economics in trento italy a cultural hallmark event aimed at high tourist flows image making and place branding and marketing the paper suggests the inclusion of accurate economic impact analyses of events in the range of instruments used by policy makers to support effective decision making and investment

immigration and the diffusion of technology the huguenot diaspora in prussia abstract this paper analyzes long term effects of skilled worker immigration on productivity for the huguenot migration to prussia in 1685 religiously persecuted french huguenots settled in brandenburg prussia and compensated for population losses due to plagues during the thirty years war we combine huguenot immigration lists from 1700 with prussian firm level data on the value of inputs and outputs in 1802 in a unique database to analyze the effects of skilled immigration to places with underused economic potential exploiting this settlement pattern in an instrumental variable approach we find substantial long term effects of huguenot settlement on the productivity of textile manufactories jel j24 j61 l67 n33 n63 o33 o47

distributional coalitions state strength and economic growth toward a comprehensive theory of economic development high performing economies in the asia pacific region together with only mediocre economic development in latin america prompts the question of what explains differential economic growth rates among developing countries combining a statist perspective with olson s theory of interest group formation this research hypothesizes that nations with weak distributional coalitions will more likely experience high growth and state intervention will be effective using a longitudinal research design this secondary analysis involves a comparative and interactive examination of eight asian pacific and twelve latin american countries by considering the role of the state in interaction with distributional coalitions in society the results indicate that approximately two thirds of the variance in national economic growth is explained

linguistic distance as a determinant of bilateral trade we introduce a measure of language difficulty called linguistic distance into a modified gravity model to determine whether a language being further away from english affects the level of trade our sample of 36 non english speaking countries includes japan and south korea which we argue are special cases because of world war ii the korean war and subsequent close political and economic ties with the united states presence of a stock of immigrants in the home country has been shown to enhance trade with the country of origin controlling for immigrant network and information attributes the special relationship with japan and korea and the standard gravity model variables we find that trade will be less between the united states and a country the further that country s language is from english these results hold for aggregate exports and imports and for exports and imports of consumer and producer manufactures

interest groups and investment a further test of the olson hypothesis mancur olson s institutional sclerosishypothesis may be evident in the effects ofinterest groups on investment in physicalcapital to test this proposition we usecross sectional data on 42 countries forwhich information on the number of interestgroups is available to estimate the effectof those groups on the share of gdp thatgoes into physical investment the resultsindicate that interest groups have adifferent effect on physical investment inoecd and non oecd countries in the oecdcountries we find support for thehypothesis that interest groups harminvestment in physical capital indeveloping countries interest groupseither have no effect on physicalinvestment or they have a slight beneficialimpact

state business cycles and their relationship to the national cycle structural and institutional determinants during business cycles state and regional incomes fluctuate in the same direction as national income in some states and regions income fluctuates more than the national average in other states and regions it fluctuates less although no general explanation for differences in business cycles across states exists an influential set of explanations focuses on differences in price flexibility gordon 2 3 has discussed the employment implications of sticky prices and made some international comparisons of unemployment rates his results imply that decreased price flexibility leads to increased variability of income and employment olson 6 7 and colander and olson 1 have suggested that differences in state unemployment rates arise from differences in price flexibility differences in price flexibility in turn originate in differences in structural characteristics and institutions 2 if a state s structure and institutions allow prices to be flexible most of the adjustment to changes in aggregate demand will be made by prices rather than output if a state s institutions tend to enforce price rigidity most of the adjustment to changes in aggregate demand will be made by output rather than prices the absence of acceptable state price indices prevents direct tests of the hypothesis that differences in price flexibility explain differences in income variability across states the inability to measure price flexibility by state turns out not to be a serious problem however because we are primarily interested in what determines the magnitude of fluctuations in state income institutional and structural differences across states lead to the differences in price flexibility that cause differences in the business cycle price flexibility is merely the transmission mechanism moreover it may not be the only transmission mechanism structural and institutional factors may affect state business cycles through a host of channels we will therefore focus directly on the relationship between structures and institutions and state business cycles by adopting such a procedure we may miss a particular transmission variable but we will be more likely to identify the total effect of structure and institutions on performance institutional and structural variables will be compared across states rather than regions an attractive alternative we used states rather than regions because states embody the political

bureaucratic tenure and economic performance in centrally planned economies murrell and olson 1991 set forth the hypothesis that in centrally planned economies economic interests over time become fragmented as bureaus become more autonomous and form into narrowly based distributional coalitions as a consequence the national leader s encompassing interest in economic growth becomes compromised and growth begins to slow this paper provides the first direct test of the hypothesis that growing bureaucratic autonomy results in declining economic growth in centrally planned economies

immigrant links to the home country empirical implications for u s bilateral trade flows immigrants ties to their home countries can play a key role in fostering bilateral trade linkages immigrant ties include knowledge of home country markets language preferences and business contacts that have the potential to decrease trading transaction costs empirical results for the united states suggest that immigrant links have historically been important in increasing bilateral trade flows with immigrants home countries copyright 1994 by mit press

government expenditure and economic growth in the developed countries 1952 76 in the past decade or more the pace of economic growth has slowed considerably and the share of government expenditure in national product has increased considerably the average annual growth rate of per capita gdp for the 16 most important developed market economies was 6 3 from 1955 73 and 2 0 from 1973 79 the average share of government in gdp went from 27 in 1955 to 34 in 1970 to 43 in 1979 2 the simple correlation proves nothing but it suggests the growth of government might be one of the causes of the slowdown many economists have theorized that government production is staticly less efficient than private sector production with competitive markets see

does the chinese diaspora speed up growth in host countries summary we compiled a new enhanced data set on the population share of overseas chinese covering 147 countries over the period 1970 2010 linking the migration and economic growth literature this article attempts to estimate the impact of the chinese diaspora on economic growth in host countries regression results from both barro type and dynamic panel data models suggest that a country s initial relative endowment with overseas chinese is positively related to subsequent growth results are robust to a number of sensitivity tests the effect is transmitted via increased trade openness enhanced investment and general tfp effects

government special interest groups and economic growth in descending order of robustness and strength the four major conclusions are i the experience of industrial countries in the postwar period indicates that a large welfare state has been associated with a high rate of economic growth ii the olson thesis that powerful special interest groups impede growth receives empirical support iii the relation between growth and the welfare state is non linear with increases in the size of the welfare state beyond some critical level one sixth of gdp according to our estimates resulting in reductions rather than increases in the growth rates and iv the strength of the growth promoting properties of the welfare state is positively related to the strength of special interest groups as proxied by the proportion of the work force unionized one possible interpretation of these results runs as follows a large welfare state may retard economic growth by reducing the incentives to work to save to move and to change on the other hand in a situation where special interest groups have aquired significant power to block change if they so desire the welfare state which offers assistance to those who are the victims of change may play a growth enhancing role in reducing the incentive to block change the fourth conclusion just stated supports this view the welfare state may also foster economic growth through favourable effects on social consensus political stability and labour management relations the results suggest that the growth promoting forces predominate as long as the welfare state is not too large but beyond a certain point which corresponds more or less to the median situation among developed countries today the growth retarding elements come to the fore

brain drain in globalization a general equilibrium analysis from the sending countries perspective according to the economic literature high skilled emigration may either harm or bene t developing economies recent research highlighted several positive and negative channels through which the brain drain operates this paper aims at evaluating the relative magnitudes of various brain drain channels and quantifying their global impact on migrants sending countries for this purpose we develop a 10 region general equilibrium model of the world economy characterized by overlapping generations dynamics our ndings suggest that the short run impact of brain drain on resident human capital is extremely crucial as it affects not only the number of high skilled workers available to domestic production but also the sending economy s capacity to innovate adopt modern technologies this latter effect is particularly important in globalization where capital investments are made in places with high production ef ciencies hence despite positive feedback effects those countries facing prevalent high skilled emigration are the most candid victims to brain drain

getting the properties right to secure property rights dixit s lawlessness and economics this is a review article of lawlessness and economics alternative modes of governance princeton university press 2004 by avinash k dixit

the rise and decline of mancur olson s view of the rise and decline of nations author affiliation j barkley rosser jr department of economics msc 0204 james madison university harrisonburg va 22807 usa rosserjb jmu edu acknowledgment the author thanks roger r betancourt and thomas c schelling for providing either useful comments or materials and dennis coates and jac c heckelman for careful editing of earlier drafts of this paper the author is responsible for any remaining errors or misinterpretations 1 introductionalthough the first book by mancur lloyd olson jr 1the logic of collective action 1965 has been cited more often and can be viewed as more fundamentally innovative at the theoretical level its successor the rise and decline of nations 1982 has been more widely translated and is arguably the magnum opus of his career the grand application of his earlier ideas to the world and history at large 2 the earlier work laid out the problems that groups have in their collective goals as they grow larger with a greater disjuncture arising between the interests of the individual and of the collective group in the final chapter of this work he suggested that his argument could lead to an overturning of the orthodox theory of pressure groups that saw them as a positive force for democracy and efficiency luce 1924 commons 1950 special interest groups representing small numbers of firms in oligopolistic industries could support monopolistic or protectionist legislation such legislation could damage the broader economy especially groups unable to organize themselves that would then have to suffer in silence although olson rarely used the term this argument can be seen as foreshadowing the later theory of rent seeking and in his later works he more openly recognized the affinity of his ideas with the public choice school of thought 3although olson added a number of arguments two crucial innovations appear in rise and decline that underlie its central thesis one is the distinction between distributional coalitions which are seen as leading to outcomes inimical to economic growth and encompassing coalitions which are seen as potentially aiding economic growth in a society because of their greater size the latter are seen as having trouble organizing themselves and achieving influence although they might have a better chance of doing so in a smaller and more homogeneous society such as sweden olson s other innovation was his argument that over time a stable democracy will tend to create more and more distributional coalitions whose political power will accumulate thus gradually impeding the economic growth of the society this becomes the key to his most famous argument in rise and decline he especially focused on the post world war ii performance of germany and japan compared with the united kingdom he argued that the defeat of germany and japan in the war led to the overthrow of the power of narrow special interest groups that impeded growth whereas in the united kingdom such groups reached a peak of power that was responsible for the relatively weak performance of the british economy he emphasized that this was not a sudden development but that after leading the world in economic growth during the industrial revolution during the long eighteenth century 1688 1834 britain began to fall behind in the mid 19th century compared with such rising powers as germany and the united states this deceleration and relative decline only worsening in the aftermath of world war ii although he discussed a variety of other examples this was the book s central inspiring case of course even as rise and decline was being published the united kingdom began to undergo a substantial political and economic transformation during the period of rule by margaret thatcher that triggered a global movement to privatization and marketization even though britain was not invaded and did not experience a violently revolutionary upheaval

the political economy of chile s fast economic growth an olsonian interpretation a conceptual framework inspired by mancurolson s contributions to political economyis used to explain chile s recent economicand political performance with particularemphasis on the hidden hand politicalstability rent seeking policy makingquality institutions cultural attitudesand cultural change fortunate historicalaccidents critical masses and virtuouscircles and other positive loops theanalysis combines very long term withshort term perspectives examining the warof arauco basque immigration open economypolicies families educational investment economic technocrats female labour forceparticipation managerial perceptions oflabour and other old myth shattering some future trends are also predicted

economic growth regressions for the american states a sensitivity analysis i introduction researchers motivated by a variety of questions turn to data on the economic performance of the american states to analyze their ideas empirically the appeal of cross state empirical analysis derives from the fact that while states differ in relevant dimensions they are not so different as to make omitted variables an overwhelming source of error for example the state economies operate under the same monetary regime the federal reserve comparable legal institutions the u s constitution and borders open to the flow of productive factors knowledge and products cross state analysis avoids the myriad structural differences that encumber cross national empirical analysis thus investigators feel secure in considering a relatively small number of control variables in attempting to establish a statistical relationship between state economic performance and a particular variable of interest the availability of uniform and accurate time series data for the states adds to the appeal of cross state regression models despite the advantages associated with evaluating institutionally similar economies researchers who rely on state regressions find little systematic guidance concerning which variables to include and other basic specification issues for instance do demographic and geographic characteristics vary sufficiently across states to require independent controls do cultural or climatic conditions affect growth or are these variables correlated with other factors that may affect growth such as labor force participation rates or education levels a review of the extensive literature reveals that few studies control for the variables analyzed by other researchers these specification differences make it hard to evaluate and compare the results of existing studies bartik 1991 and phillips and goss 1995 illustrate this problem as they attempt to garner the effect of taxes on state economic development from dozens of studies that employ alternative specifications and methodologies they use meta regression analysis mra to test whether specification changes and alternative variables significantly affect the estimated elasticity of state growth with respect to taxes the mra technique focuses on the sensitivity of the estimated coefficients for state tax variables to model variation in this paper we employ a technique to assess the sensitivity of numerous control variables identified in the state growth literature we also introduce several new control variables the approach identifies which variables are robust to small changes in the conditioning information set our procedure closely follows that in levine and renelt 1992 which for its part relies on the extreme bounds analysis eba suggested by learner 1983 1985 1 the main difference is that we employ annual panel data on the american states pooling cross sectional and time series data whereas levine and renelt employ cross country data averaged over 20 year or even longer time intervals the cross country studies such as those assessed in levine and renelt that average long time periods generally seek to identify factors associated with long run steady state growth the u s state studies using annual panel data do not share a comparable unifying purpose relationships estimated from yearly data reveal short term responses and pick up business cycle effects which confounds drawing implications about growth theory with this qualification in mind the results presented below indicate which variables included in past studies are robust and provide a set of core variables as a starting point for future research that relies on state growth regressions and annual panel data finally the findings demonstrate that several important conclusions in the literature depend on how variables are measured for example the relationship between state growth and government size reverses sign depending on whether we denominate government size in per capita terms or as a share of state income

booming sector and de industrialisation in a small open economy this paper presents a theoretical analysis of the dutch disease the phenomenon whereby a boom in one traded goods sector squeezes porfitability in other traded goods sectors both by directly bi

interpreting suboptimal business outcomes in light of the coase theorem lessons from sidmouth international festival abstract the management team of the world famous sidmouth festival resigned in 2004 after failing to secure bad weather underwriting worth 200 000 and amidst widespread fears that the festival was doomed while claims of a local economic impact of 5 million are seriously flawed it is highly likely that the local economy did benefit by at least several times the amount of the required insurance failure to capture these net positive benefits is linked to ill defined property rights rising transaction costs incomplete information from unreliable sources and actual or feared free riding these conditions prevented the type of efficient bargaining solution in the face of externalities envisioned by the coase theorem practically all of the problems preventing the ideal coasean solution could have been addressed by granting key stakeholders individual ownership rights hence while the coase solution was not applicable the theorem s predictions or its corollary s predictions were confirmed

the trade facilitation impact of the chinese diaspora using an enhanced data set on the population share of overseas chinese in 1970 and 1990 this paper analyses the impact of the chinese diaspora on facilitating china s bilateral trade during the period 1973 2013 our findings suggest substantial trade creation effects resulting from the presence of ethnic chinese in the trade partner population diaspora impacts on chinese bilateral imports are in general higher than those found for exports coethnic networks play a larger role as long as the partner country does not have an rta with china in place among export sectors effects found were strongest for food as well as for machinery and transport equipment in regard to imports coethnic networks matter mostly for raw materials machinery and transport equipment and chemicals

model unvertainty political learning and institutions a broader view on mancur olson s theory of institutional sclerosis in his rise and decline of nations mancur olson argues that politically stable countries suffer from declining growth rates caused by the growing influence of distributional coalitions that accumulate over time the empirical literature supports the notion of a negative relationship between a country s duration of political stability and its growth rates but finds only weak support for a negative influence of distributional coalitions on growth this paper sketches a simple model of party competition under model uncertainty which may explain this mixed empirical picture it shows that politically stable democracies are less well equipped to adjust to shifts in their economic environment than democracies with a shorter history of political stability in a further step the paper relates the major theme of this theory and olson s theory to the more recent literature on institutions and growth directions for further research are discussed

explaining differences in state growth catching up versus olson in this paper we have tested various explanations for differences in rates of economic growth across states we found no evidence consistent with olson s hypothesis that differences in state age a proxy for the strength of special interest groups can explain differences in state growth furthermore our results indicate that a regression containing only initial income explains most of the variation in the growth of state income in sum a good part of the more rapid growth of southern and other fast growing states is simply a convergence to the national average this convergence is an expected result of basic economic theory given free trade in goods and factors our results are however not necessarily a rejection of the olson hypothesis it may well be that the hypothesis should only be applied to comparisons between nation states not to comparisons between political divisions of the same nation state the institutional and political similarities of the american states may swamp the differences and make the olson hypothesis inapplicable the tendencies cited by olson may indeed be present in the american economy but their differential effect is much too small to explain any of the variation in economic performance across states

special interest groups and growth this paper explores empirically the relation between special interest groups and economic growth our analysis exploits new data on the number of groups observed across countries and time in order to mitigate the identification problems associated with earlier studies also in contrast to earlier work we examine the impact of groups on two sources of growth capital accumulation and technological change in addition to the impact of groups on output growth the findings are consistent with olson s the rise and decline of nations the political economy of economic growth stagflation and social rigidities new haven yale 1982 claim that societies with greater numbers of interest groups grow slower accumulate less capital and experience reduced productivity growth relative to others

efficiency gains from liberalizing labor mobility in this paper we quantify the effect of a complete liberalization of cross border migration on the world gdp and its distribution across regions we build a general equilibrium model endogenizing bilateral migration and income disparities between and within countries our calibration strategy uses data on effective and potential migration to identify total migration costs and visa costs by education level data on potential migration reveal that the number of people in the world who have a desire to migrate is around 400 million this number is much smaller than that predicted in previous studies and reflects the existence of high incompressible migration costs in our benchmark framework liberalizing migration increases the world gdp by 11 5 12 5 percent in the medium term our robustness analysis reveals that the gains are always limited in the range of 7 0 percent with schooling externalities to 17 9 percent if network effects are accounted for

a sequential game of endowment effect and natural property rights abstract this study develops a sequential game between the incumbent and the intruder to examine how endowment effect decides natural property rights of a territory without third party intervention

consistent estimates of the impact of special interest groups on economic growth empirical studies designed to testolson s 1982 theory of institutional sclerosis aretypically forced to rely upon proxies to measure theability of special interest groups to engage inredistributive activities which in turn areexpected to hinder economic growth this note showsthat reliance on proxies biases the estimates towardzero here instrumental variable routines areutilized which increase the estimated impact ofspecial interests on the economy

supply side subsidies to improve food access and dietary outcomes evidence from the new markets tax credit in an effort to improve diet and health outcomes policymakers have increasingly turned to supply side subsidies aimed at encouraging investment by supermarkets and other food retailers in low income areas this article examines whether the us federal government s new markets tax credit nmtc has affected the entry of retail food establishments and in turn food shopping and purchasing patterns in low income communities to identify the impacts of the programme we take advantage of a discontinuity in nmtc funding generated by the formula used to determine the eligibility of census tracts for investment under the programme we find that the nmtc program has had modest but positive impacts on supermarket entry in low income communities based on household level scanner data there are no detectable effects on households food purchasing patterns in affected neighbourhoods at least in the short run

decentralized international exchange traditional models of international trade take place within trading environments in which trade is coordinated by a walrasian auctioneer who instantly matches buyers and sellers in world markets this assertion seems inconsistent with evidence suggesting that trading arrangements seem to economize on transactions costs associated with international trade recognizing these insights we depart from standard models of international trade by incorporating the difficulties in the coordination of exchange within a two country random matching model of international trade we capture a motivation for trade through comparative advantage and interpret trade across economies to be associated with an agent s endogenous choice to participate in foreign markets although an individual may decide to search abroad to obtain additional gains from trade resulting from comparative advantage she is less likely to meet trading partners abroad as search frictions are higher in the foreign country than in the domestic market using this framework we show that international trade is associated with convergence in relative prices across countries we also show that the extent of market frictions in the foreign country affects relative prices the volume of international trade and welfare levels due to market participation externalities associated with international trade we show that a movement from autarky to free trade may actually lower welfare levels we conclude by examining the possible inefficiencies associated with international trade due to the decentralized nature of exchange and the policy implications of our model

uncertainty risk and trust russian and american credit card markets compared the strategies that russian and american banks use to evaluate the creditworthiness of prospective credit card holders are compared drawing on knight s theory of risk and uncertainty the authors argue that uncertainty inherent in any credit transaction can only be reduced to measurable risk if there are institutions that create stability over time categorize events properly and allow for verification and accumulation of information in the united states the gradual evolution of institutions underpinning rational calculation permits the transformation of uncertainty into risk in russia however such institutions are absent and a great degree of uncertainty prevails in consumer credit using data from original fieldwork in moscow this study demonstrates that when actors face uncertainty and are unable to calculate risk they rely on trust russian banks use and extend their existing social ties or in some cases build new ties they also exploit cardholders own networks unrelated to the bank to increase their accountability through anchoring these strategies however keep the market embedded limited in size and uninsurable the authors conclude that calculation of probabilities and economic rationality in its formal sense is not an innate human ability but a social capacity that exists courtesy of institutional arrangements

familiarity breeds investment diaspora networks and international investment what explains cross national patterns of international portfolio and foreign direct investment fdi while existing explanations focus on the credibility of a policy maker s commitment we emphasize the role of diaspora networks we hypothesize that diaspora networks connections between migrants residing in investing countries and their home country influence global investment by reducing transaction and information costs this hypothesis is tested using dyadic cross sectional data for both portfolio and fdi the findings indicate that even after controlling for a multitude of factors disapora networks have both a substantively significant effect and a statistically significant effect on cross border investment

information and the coase theorem abstract some economists think the coase theorem implies a lot about the proper scope of government intervention in the economy and about the welfare consequences of laissez faire others see it as a mere tautology that if people negotiate efficiently then every outcome will be efficient the coase theorem is important only if we believe that efficient negotiation is likely of course we can attribute inefficiencies to bargaining imperfection but it may not be useful to do so such attitudes sometimes seem to depend more on ideology than on reason this article gives one economist s reasoned view it discusses the coase theorem as a decentralization result and why decentralization results are interesting it considers mechanism design for revealing private information and describes the problems of centralization should the coase theorem should be viewed as a second best result property rights are more efficient than some reasonable alternative does the coase theorem recommend an institution or make

interest group politics and economic growth in the u s states mancur olson s model of economic growth has attracted great attention as a theoretical account of how interest groups influence the rate of economic growth over time moreover the model appears to have received strong empirical support in olson s tests employing u s state data however the specification of the olson construct in these tests is insufficiently attentive to the complex causal chain implicit in olson s argument inadequately accounts for precisely how interest groups matter and employs a static research design that obfuscates the cause and effect relationships posited by the model we review these issues and develop a more complete specification of the olson model the respecified model is then tested using u s state data for the period of the late 1970s and early 1980s using new measures of interest group influence

the impact of mandated employment verification systems on state level employment by foreign affiliates faced with diminishing prospects for a comprehensive immigration reform at the federal level states have started to take immigration matters into their own hands for example many states have been mandating the use of employment verification e verify systems to confirm work eligibility some of the consequences of these e verify mandates remain unclear in this article we focus on the effect of anti illegal immigrant laws on foreign investment specifically we exploit the state level and time variation in the enactment and implementation of e verify mandates to explore if punitive measures against the firm impact states ability to attract foreign direct investment fdi we quantify fdi through the employment by u s affiliates owned by foreign firms our results suggest that e verify mandates adversely affect employment among these majority owned u s affiliates and therefore work against states trying to attract fdi

market government and malaysia s new economic policy leading economic institutions such as the world bank have argued that liberalisation holds the key to growth poverty alleviation and redistribution even recent efforts to model increasing returns within the framework of new growth theories have not resulted in prescriptions for stronger roles for governments the fast growing southeast asian economies are still being used to demonstrate causation between liberalisation and growth poverty alleviation and redistribution using malaysia as an example this paper argues that growth poverty alleviation and redistribution in the country was achieved under circumstances of both interventionist policies as well as market coordination throughout the new economic policy nep period 1970 90 strong incentives were offered to both the import substitution and exportoriented manufacturing sectors and the state made strong forays into the market to redress poverty and inequality the paper also argues that poorly coordinated government intervention generated substantial unproductive rent seeking

are international trade and factor mobility substitutes abstract this paper analyzes whether factor flows and commodity trade are substitutes or complements i e whether increasing the level of one impacts adversely or favorably on the volume of the other it derives with the aid of a new general equilibrium framework of the world which allows possible differences in factor endowments tastes and technologies across the two trading countries the necessary and sufficient condition for substitutability and complementarity the results are then further examined in two special cases a survey of different concepts of substitutability and complementarity which have appeared in the literature is also given

migrants ancestors and foreign investments we use 130 years of data on historical migrations to the u s to show a causal effect of the ancestry composition of u s counties on foreign direct investment fdi sent and received by local firms to isolate the causal effect of ancestry on fdi we build a simple reduced form model of migrations migrations from a foreign country to a u s county at a given time depend on 1 a push factor causing emigration from that foreign country to the entire u s and 2 a pull factor causing immigration from all origins into that u s county the interaction between time series variation in origin specific push factors and destination specific pull factors generates quasi random variation in the allocation of migrants across u s counties we find that doubling the number of residents with ancestry from a given foreign country relative to the mean increases the probability that at least one local firm engages in fdi with that country by 4 percentage points we present evidence that this effect is primarily driven by a reduction in information frictions and not by better contract enforcement taste similarities or a convergence in factor endowments

teaching new markets old tricks the effects of subsidized investment on low income neighborhoods abstract this paper examines the effects of investment subsidized by the federal government s new markets tax credit nmtc program which provides tax incentives to encourage private investment in low income neighborhoods i identify the impacts of the program by taking advantage of a discontinuity in the rule determining the eligibility of census tracts for nmtc subsidized investment using this discontinuity as a source of quasi experimental variation in commercial development across tracts i find that subsidized investment has modest positive effects on neighborhood conditions in low income communities though spillovers appear to be small and crowd out incomplete the results suggest that some of the observed impacts on neighborhoods are attributable to changes in the composition of residents as opposed to improvements in the welfare of existing residents

the positive effects of the schengen agreement on european trade enacted in 1985 the schengen agreement is widely heralded as both a symbol and major institutional advancement of the european project by eliminating passport requirements for workers the compact ostensibly produces gains from travel ease of market access and economies of scale yet despite these optimistic predictions scholars know little about the actual effects of schengen on trade we fill this void by identifying why labour mobility should expand the cross country exchange of goods and services and then test our theory with data from europe spanning the period 1980 to 2011 we argue that labour mobility resulting from schengen yields positive effects on trade by increasing demand for foreign goods improving awareness of low cost producers abroad and lowering the risks associated with buying and selling outside the country using the gravity model of trade we show empirically that schengen membership makes european states more robust trading partners

reconciling the pattern of trade with the pattern of migration aspects of the brain drain are considered in a theoretical context the emphasis is on the migration of those with managerial skills between countries with abundant skilled labor and those with abundant unskilled labor the results indicate that countries with abundant skilled labor therefore export managers e g through multinational subsidiaries and skilled labor intensive goods yet import skilled employees the brain drain excerpt

the coase theorem is tautological incoherent or wrong the coase theorem is commonly understood to mean that costless bargaining ensures efficiency in the economy for any assignment of property rights the standard demonstration of the theorem suggests that costless bargaining ensures efficiency without an assignment of property rights 1998 elsevier science s a all rights reserved

an examination of the factors affecting the formation of interest groups in oecd countries perhaps the best way to summarize the empirical results is to classify the hypotheses into three groups those which can be readily accepted because they are supported in all tests those which can be readily rejected because no test results support them and those upon which one should remain agnostic because the test results are not consistent in the first group are population pop decentralization of government dcnt and length of time of modernization date one can state quite confidently that these three variables are determinants of interest group activity in the second group are the variables measuring characteristics of the political system poly dem1 dem2 pfrc one can with ease reject the hypotheses to which these variables are relevant there is a large group of variables which stand in the middle group however for these variables there are gradations of success in the tests the variables on socioeconomic development inc agri news and number of industries and political subdivisions nind regp are only significant in the one variable tests especially important is their failure to obtain the correct signs in the tests reported in table 3 the variables on ethnic fractionalization efrc and olson s hypothesis on destruction of groups ndfo have the correct signs in table 3 and are significant in table 1 thus it is more difficult to reject efrc and ndfo as determinants of interest group activity than inc nind and regp finally it should be mentioned that once appropriate simultaneous equations techniques are applied government size is no longer supported as a significant variable this paper will conclude with comments of a more conjectural nature on the implications of the results in the case of three specific variables first the results on hypothesis 3 suggest that population affects the number of interest groups independently of indirect effects through other variables this direct effect occurs because groups become proportionately smaller and more homogeneous as population increases hence one can expect the political economy of larger countries to be significantly different from that of smaller countries the results suggest that larger countries will have a denser array of interest groups and that these groups because of their homogeneity will find it easier to decide on and pursue policies in the narrow interests of their members secondly the results support olson s claim that there will be a gradual accumulation of interest groups in developed democracies given that olson attributes to interest groups a large role in determining the economic fortunes of a country the fact that his accumulation hypothesis is supported is a result of some significance finally if one accepts the two stage least squares results it has been shown that changes in government size do not induce changes in interest group activity an important conclusion can be reached when this result is taken in combination with the results of other studies which show that interest groups induce changes in the size of government mccormick and tollison 1981 and mueller and murrell 1983 these results do not support the capture theory of government that governmental institutions are created perhaps in the public interest and then dominated by interest groups rather the results support the theory that the institutions themselves are the creatures of interest group activity

explaining the rain the rise and decline of nations after 25 years in the quarter century since the publication of mancur olson s rise and decline of nations a large literature has evolved testing the central hypothesis regarding olson s thesis on institutional sclerosis these tests have taken the form of both econometric regression analysis involving a sample of various nations and detailed narrative case studies of specific nations tests have appeared in both economics and political science journals as well as in collected volumes and independent books performed primarily by authors from america and europe a review of over 50 separate works reveals that on the whole the theory of institutional sclerosis is generally but certainly not universally supported no systematic bias in favor of or opposition to olson is found to have arisen on the basis of methodology publication outlet or authorship location

immigrant remittances and the venture investment environment of developing countries despite the increasing importance of financial and social remittances to developing countries their impact on home country venture investing environments has been largely overlooked i develop a framework grounded in transaction costs economics and social knowledge theories to investigate relationships between remittances and home country 1 capital availability 2 new business creation and 3 economic internationalization my framework also accounts for individual and collective immigrant attributes that may moderate the impact of remittances on these alternative indicators of the venture investment environment analyses of immigrant remittances to 61 developing countries from 2002 2007 indicate that they increase general and more narrowly defined venture capital availability as well as broader openness to international trade remittances also increase new business start up rates when the developing country s public sector is sufficiently small positive venture funding effects of remittances are magnified when coming from immigrants living in highly concentrated communities but are diminished when coming from highly educated immigrants overall results suggest that developing country immigrants of varying backgrounds play an important role in venture funding founding and integration with the world economy