strategic export policy with foreign direct investment and import substitution abstract the paper examines discretionary and strategic foreign direct investment fdi incentives in the export sector relative to a non interventionist policy the analysis is based on a two country model with both countries seeking to attract fdi countries differ in cost levels and in their levels of tariff protection on intermediate inputs a shift in the trade policy regime toward the strategic promotion of exports results in a decrease in fdi allocated to the low cost country when it has a low level of protection on intermediate inputs and an increase in fdi when it has a high level of protection on intermediates inputs furthermore even if fdi increases with export policy activism relative to non intervention welfare may be lower

rural transformation inequality and the origins of microfinance abstract what determines the development of rural financial markets starting from a simple theoretical framework we derive the factors shaping the market entry of rural microfinance institutions across time and space we provide empirical evidence for these determinants using the expansion of credit cooperatives in the 236 eastern counties of prussia between 1852 and 1913 this setting is attractive as it provides a free market benchmark scenario without public ownership subsidization or direct regulatory intervention furthermore we exploit features of our historical set up to identify causal effects the results show that declining agricultural staple prices as a feature of structural transformation leads to the emergence of credit cooperatives similarly declining bank lending rates contribute to their rise low asset sizes and land inequality inhibit the regional spread of cooperatives while ethnic heterogeneity has ambiguous effects we also offer empirical evidence suggesting that credit cooperatives accelerated rural transformation by diversifying farm outputs

occupational choice and the process of development this paper models economic development as a process of institutional transformation by focusing on the interplay between agents occupational decisions and the distribution of wealth because of capital market imperfections poor agents choose working for a wage over self employment and wealthy agents become entrepreneurs who monitor workers only with sufficient inequality however will there be employment contracts otherwise there is either subsistence or self employment thus in static equilibrium the occupational structure depends on distribution since the latter is itself endogenous we demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long run effects in one case the economy develops either widespread cottage industry self employment or factory production employment contracts depending on the initial distribution in the other example it develops into prosperity or stagnation

quantitative restrictions and the welfare effects of capital inflows abstract this paper explores the welfare effects of capital inflows when some imports are subject to quantitative restrictions it is shown that in a heckscher ohlin model where all imports are restricted by quotas and some fraction of the initial domestic capital stock is foreign owned a capital inflow is welfare improving regardless of the ranking of sectoral factor intensities with sector specific capital stocks and both tariff ridden and quota restricted imports the consequences of direct foreign investment in any sector are uncertain and depend upon whether the two imports are compensated substitutes or complements as well as the characteristics of production

the political economy of linguistic cleavages article i nfo this paper uses a linguistic tree describing the genealogical relationship between all 6912 world languages to compute measures of diversity at different levels of linguistic aggregation by doing so we let the data inform us on which linguistic cleavages are most relevant for a range of political economy outcomes rather than making ad hoc choices we find that deep cleavages originating thousands of years ago lead to better predictors of civil conflict and redistribution the opposite pattern emerges when it comes to the impact of linguistic diversity on growth and public goods provision where finer distinctions between languages matter 2011 elsevier b v all rights reserved

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

is there a link between globalisation and civil conflict this research has benefited from the financial support of the spanish ministry of economy and competitiveness projects eco2011 29314 c02 01 and eco2015 64330 p

the tragedy of the commons and economic growth why does capital flow from poor to rich countries we analyze a differential game in which all interest groups have access to a common capital stock we show that the introduction of a technology that has inferior productivity but enjoys private access may ameliorate the tragedy of the commons we use this model to analyze capital flight in many poor countries property rights are not well defined since safe bank accounts in rich countries the inferior technology are available to citizens of these countries they engage in capital flight we show that the occurrence of capital flight does not imply that opening the capital account reduces growth and welfare

common property resources storage facilities and ownership structures a cournot model of the oil market during the last decade economists have tried hard to convince meadows and his followers that market forces do not tend to exhaust our natural resources too rapidly as compared with the requirements of an intertemporal pareto optimum it is well known now that under well defined property rights and correct price expectations a competitive extraction industry brings about a pareto optimal depletion path and it has been shown that oligopolistic and monopolistic market structures may even produce a bias towards conservation 1 it is still an unresolved issue however which extraction path will result if property rights are imperfectly defined following the pioneering work of gordon 1954 there has been a large body of literature demonstrating that in the extreme case of free entry and myopic profit maximization there are strong reasons for excessive extraction 2 but this literature hardly yields reliable conclusions for the perhaps more realistic case where firms derive their behaviour from intertemporal optimization and where there is a common ownership but limited access to the resource the basic intuition behind the common pool problem is that the individual agent chooses an extraction policy other than the one he would choose under well defined property rights since he is afraid that part of the resource he leaves underground will be extracted and sold by others 3 despite the simplicity of this intuition there does not seem to be any publication that analyses it within an intertemporal equilibrium model with rational and far sighted agents this is the motivation for the present approach the approach studies the common pool problem in the context of an oligopolistic world market for oil it posits a given number of identical firms extracting oil from holdings between some of which there is mutual seepage the firms sell the extracted oil in the same market or they store it in privately owned seepage proof tanks each firm derives its behaviour from intertemporal optimization under perfect foresight of the time paths of the model variables but cournotesque conjectures about the reactions of its competitors except for the assumption of storage facilities this specification is closely related to models previously studied by khalatbari 1977 and kemp and long 1980 essay 10 4 the two models are very similar but they yield strikingly different conclusions while kemp and long find that the extraction path chosen by the firms is pareto optimal i e that the price of the resource rises at a rate given by the market rate of interest khalatbari contends that there is over extraction kemp and long convincingly demonstrate that khalatbari s model suffers from an inconsistency in the way the individual firm expects its rivals to respond to its own actions and they argue that this inconsistency is the reason for the divergence in results thus the casual reader gets the

monopoly extraction of a nonrenewable resource facing capacity constrained renewable competition abstract this paper studies monopoly extraction of a nonrenewable resource with the presence of a competitively supplied capacity constrained renewable substitute the monopolist staves off the renewable supply when the latter becomes competitive and then lets the resource price jump up

contractual responses to the common pool prorationing of crude oil production this paper examines bargaining among firms to mitigate rent dissipation following the major oil discoveries of 1926 35 because of high bargaining costs firms chose prorationing instead of consolidation and unitization and success varied the analysis also shows that prorationing took the form it did because concession such as per well quotas were required to draw in small operations and the quotas led to predictable responses regarding rent dissipation prorationing despite its costs controlled total field production and costs conserved natural reservoir energies and lengthened field life when private agreements failed the parties successfully appealed for state enforcement since similar heterogeneities influnce regulations elsewhere in the economy detailed analysis of bargaining among firms is essential for insight into the emergence of various institutional forms 33 references 3 tables

do giant oilfield discoveries fuel internal armed conflicts we use new data to examine the effects of giant oilfield discoveries around the world since 1946 on average these discoveries increase per capita oil production and oil exports by up to 50 percent but these giant oilfield discoveries also have a dark side they increase the incidence of internal armed conflict by about 5 8 percentage points this increased incidence of conflict due to giant oilfield discoveries is especially high for countries that had already experienced armed conflicts or coups in the decade prior to discovery

skill transferability migration and development evidence from population resettlement in indonesia we use a natural experiment in indonesia to provide causal evidence on the role of location specific human capital and skill transferability in shaping the spatial distribution of productivity from 1979 1988 the transmigration program relocated two million migrants from rural java and bali to new rural settlements in the outer islands villages assigned migrants from regions with more similar agroclimatic endowments exhibit higher rice productivity and nighttime light intensity one to two decades later we find some evidence of migrants adaptation to agroclimatic change overall our results suggest that regional productivity differences may overstate the potential gains from migration

the effects of periodic quotas limiting the stock of imports of durables abstract analyses of trade quotas typically assume that the quota restricts the flow of some nondurable good many real world quotas however restrict the stock of durable imports we consider the cases where 1 anyone is free to export against such quotas and where 2 only those allocated portions of the total quota are free to export against such quotas recent econometric investigations of such quotas have focused on the price of the durable as an indicator of tightness induced by the quota we show why this is an inappropriate indicator and suggest alternatives

natural resource economics under the rule of hotelling abstract natural resource stocks held in situ are physical assets equilibrium in the assets market requires that their rates of return be such that their owners are just willing to hold on to them rather than invest elsewhere i discuss a number of factors relating to the evolution of extraction costs to the durability of the resource to market structure and to uncertainty that are important in correctly characterizing the rate of return on holding exhaustible natural resource stocks the emphasis is put on how those factors can potentially help bridge the gap between the basic hotelling s rule of natural resource exploitation and the historical behaviour of the flow price of a number of resources i also highlight some theoretical and empirical issues that need further attention

cap and trade programs under delayed compliance consequences of interim injections of permits virtually every analysis of cap and trade programs assumes that rms must surrender permits as they pollute however no program existing or proposed requires such continual compliance some e g the acid rain program limiting so2 emissions require compliance once a year others e g the regional greenhouse gas initiative limiting co2 emissions require compliance every three years the paths of emissions and permit prices would be invariant to compliance timing holland moore 2013 if the government never injected additional permits between successive compliance dates however virtually all emissions trading programs require such injections through either 1 interim permit auctions or 2 sales from cost containment reserves intended to cap permit prices in such cases analyses which abstract from delayed compliance may mislead policy makers for example a cost containment reserve judged sucient to cap prices at a ceiling over a year may sell out in a single day

does the human capital educational sorting debate matter for development policy if education increases human capital subsidizing education can generate economic growth and combat poverty estimates of its return suggest that education is a good social investment in sorting models the return reflects in part the information about productivity revealed by the worker s education thus the social and private returns diverge it might appear that if we believe the sorting model we should be less swayed by evidence that estimated returns to education exceed the social discount rate and therefore less likely to support education based development policies this conclusion is shown to be incorrect this abstract was borrowed from another version of this item

workers of the world unite franchise extensions and the threat of revolution in europe 1820 1938 abstract we test the hypothesis that the extension of the voting franchise in europe was related to the threat of revolution we contend that international diffusion of regime contention and information about revolutionary events happening in neighboring countries generate the necessary variation in the perceived threat of revolution using two samples of european countries covering the period from 1820 to 1938 we find robust evidence which is consistent with the threat of revolution hypothesis we also find some evidence that war triggered suffrage reform

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

on price taking behavior in a nonrenewable resource cartel fringe game abstract we consider a nonrenewable resource game with one cartel and a set of fringe members we show that i the outcomes of the closed loop and the open loop nonrenewable resource game with the fringe members as price takers the cartel fringe game a la salant 1976 coincide and ii when the number of fringe firms becomes arbitrarily large the equilibrium outcome of the closed loop nash game does not coincide with the equilibrium outcome of the closed loop cartel fringe game thus the outcome of the cartel fringe open loop equilibrium can be supported as an outcome of a subgame perfect equilibrium however the interpretation of the cartel fringe model where from the outset the fringe is assumed to be price taker as a limit case of an asymmetric oligopoly with the agents playing nash cournot does not extend to the case where firms can use closed loop strategies

extracting information or resource the hotelling rule revisited under asymmetric information we characterize the optimal extraction path when a concessionaire has private information on the initial stock of resource under asymmetric information a virtual hotelling rule describes how the resource price evolves over time and how extraction costs are compounded with information costs along an optimal extraction path in sharp contrast with the case of complete information elds which are heterogeneous in terms of their initial stocks follow di erent extraction paths some resource might be left unexploited in the long run as a way to foster incentives the optimal contract may sometimes be implemented through royalties and license fees with a market of concessionaires asymmetric information leads to a virtual her ndahl principle and to a new form of heterogeneity across active concessionaires under asymmetric information the market price converges faster to its long run limit exhibiting more stability

holding on ethnic divisions political institutions and the duration of economic declines abstract we analyze the duration of large economic declines and provide a theory of delayed recovery we show theoretically that uncertain post recovery incomes lead to a commitment problem which limits the possibility of cooperation in ethnically heterogeneous countries strong constraints on the executive solve this problem by reducing the uncertainty associated with cooperative behavior we test the model using standard data on linguistic heterogeneity and detailed data on ethnic power configurations our findings support the central theoretical prediction countries with more constrained political executives experience shorter economic declines the effect is large in ethnically heterogeneous countries but virtually non existent in homogeneous societies our main results are robust to a variety of perturbations regarding the estimation method the estimation sample measures of heterogeneity and measures of institutions

agricultural expansion and deforestation modelling the impact of population market forces and property rights abstract this paper compares four different modelling approaches to agricultural expansion and deforestation and explores the implications of assumptions about the household objectives the labour market and the property rights regime a major distinction is made between population and market based explanations many of the popular policy prescriptions are based on the population approach assuming subsistence behaviour and limited market integration within a more realistic particularly for the long term effects market approach well intentioned policies such as agricultural intensification programmes may boost deforestation many forest frontier contexts are also characterized by forest clearing giving farmers land rights deforestation becomes an investment to the farmer and a title establishment strategy land titling and credit programmes may therefore increase deforestation

an evaluation of does economic inequality breed political conflict studies contradictory findings that economic inequality may have a positive negative or no impact on political conflict are a puzzle for conflict studies three approaches have been used t o explain the inconsistent findings of the ei pc economic inequality political conflict nexus statistical modeling formal modeling and theory building because analysts have tended to possess different research skills these three approaches have been employed in isolation from one another singly however all three approaches have proved deficient and are unlikely to solve the ei pc puzzle the most fruitful approach is to combine the assumptions of the theory builders and the deductive approach of the formal modelers with the various empirical tests of the statistical modelers such an approach to the ei pc puzzle produces a crucial test of the deprived actor and rational actor theories of conflict the approach is also our best hope for solving the other long standing puzzles in conflict studies

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

do natural resources fuel authoritarianism a reappraisal of the resource curse a large body of scholarship finds a negative relationship between natural resources and democracy extant cross country regressions however assume random effects and are run on panel datasets with relatively short time dimensions because natural resource reliance is not an exogenous variable this is not an effective strategy for uncovering causal relationships numerous sources of bias may be driving the results the most serious of which is omitted variable bias induced by unobserved country specific and time invariant heterogeneity to address these problems we develop unique historical datasets employ time series centric techniques and operationalize explicitly specified counterfactuals we test to see if there is a long run relationship between resource reliance and regime type within countries over time both on a country by country basis and across several different panels we find that increases in resource reliance are not associated with authoritarianism in fact in many specifications we generate results that suggest a resource blessing

poverty political freedom and the roots of terrorism this article provides an empirical investigation of the determinants of terrorism at the country level in contrast with the previous literature on this subject which focuses on transnational terrorism only i use a new measure of terrorism that encompasses both domestic and transnational terrorism in line with the results of some recent studies this article shows that terrorist risk is not significantly higher for poorer countries once the effects of other country specific characteristics such as the level of political freedom are taken into account political freedom is shown to explain terrorism but it does so in a non monotonic way countries in some intermediate range of political freedom are shown to be more prone to terrorism than countries with high levels of political freedom or countries with highly authoritarian regimes this result suggests that as experienced recently in iraq and previously in spain and russia transitions from an authoritarian regime to a democracy may be accompanied by temporary increases in terrorism finally the results suggest that geographic factors are important to sustain terrorist activities this abstract was borrowed from another version of this item

history institutions and economic performance the legacy of colonial land tenure systems in india we analyze the colonial land revenue institutions set up by the british in india and show that differences in historical property rights institutions lead to sustained differences in economic outcomes areas in which proprietary rights in land were historically given to landlords have significantly lower agricultural investments and productivity in the post independence period than areas in which these rights were given to the cultivators these areas also have significantly lower investments in health and education these differences are not driven by omitted variables or endogeneity problems they probably arise because differences in historical institutions lead to very different policy choices

growth and violence argument for a per capita measure of civil war the economics literature typically uses counts of casualties as a measure of conflict intensity despite the fact that the units of observation vary considerably in population size when analysing the impact of conflict on economic growth the use of counts relies on the assumption that a given number of casualties affects large and small populations in the same way using within and between country evidence this paper demonstrates that this standard assumption can be rejected a per capita model of conflict intensity that captures local effects of violence provides a more consistent empirical framework for both between country and within country studies

the cycle of violence in the second intifada causality in nonlinear vector autoregressive models we contest jaeger and paserman s claim jaeger and paserman 2008 the cycle of violence an empirical analysis of fatalities in the palestinian israeli conflict american economic review 98 4 1591 1604 that palestinians did not react to israeli aggression during intifada 2 we address the differences between the two sides in terms of the timing and intensity of violence estimate nonlinear vector autoregression models that are suitable when the linear vector autoregression innovations are not normally distributed identify causal effects rather than granger causality using the principle of weak exogeneity and introduce the kill ratio as a concept for testing hypotheses about the cycle of violence the israelis killed 1 28 palestinians for every killed israeli whereas the palestinians killed only 0 09 israelis for every killed palestinian

colonialism and modern income islands as natural experiments abstract using a new database of islands throughout the atlantic pacific and indian oceans we find a robust positive relationship between the number of years spent as a european colony and current gdp per capita we argue that the nature of discovery and colonization of islands provides random variation in the length and type of colonial experience we instrument for length of colonization using variation in prevailing wind patterns we argue that wind speed and direction had a significant effect on historical colonial rule but do not have a direct effect on gdp today the data also suggest that years as a colony after 1700 are more beneficial than earlier years we also find a discernable pecking order among the colonial powers with years under u s british french and dutch rule having more beneficial effects than spanish or portuguese rule our finding of a strong connection between modern income and years of colonization is conditional on being colonized at all since each of the islands in our da

conflict and distribution abstract we develop a behavioral model that links the level and pattern of social conflict to the societywide distribution of individual characteristics the model can be applied to groups that differ in characteristics such as wealth ethnicity religion and political ideology we settle questions of existence and uniqueness of conflict equilibrium conflict is seen to be closely connected with the bimodality of the underlying distribution of characteristics however in general the conflict distribution relationship is nonlinear and surprisingly complex our results on conflict patterns also throw light on the phenomena of extremism and moderation journal of economic literature classification numbers d63 d72 d74

ethnicity and conflict an empirical study this paper examines the impact of ethnic divisions on conict the empirical specication is informed by a theoretical model of conict esteban and ray 2011 in which equilibrium conict is related to just three distributional indices of diversity ethnic polarization ethnic fractionalization and a greenberg gini index constructed across ethnic groups our empirical ndings verify that these distributional measures are signicant correlates of conict the underlying theory permits us to use these results to make inferences about the relative importance of public goods in conict as well as the extent of within group cohesion in conictual activity these eects are further strengthened as we introduce country specic measures of group cohesion and the relative importance of public goods and combine them with the distributional measures exactly as specied by the theory

linking conflict to inequality and polarization in this paper we study a behavioral model of conflict that provides a basis for choosing certain indices of dispersion as indicators for conflict we show that a suitable monotone transform of the equilibrium level of conflict can be proxied by a linear function of the gini coefficient the herfindahl hirschman fractionalization index and a specific measure of polarization due to esteban and ray jel classification d74 d31

state capacity conflict and development the absence of state capacities to raise revenue and to support markets is a key factor in explaining the persistence of weak states this paper reports on an ongoing project to investigate the incentive to invest in such capacities the paper sets out a simple analytical structure in which state capacities are modeled as forward looking investments by government the approach highlights some determinants of state building including the risk of external or internal conflict the degree of political instability and dependence on natural resources throughout we link these state capacity investments to patterns of development and growth

wheat agriculture and family ties abstract several recent contributions to the literature have suggested that the strength of family ties is related to various economic and social outcomes for example alesina and giuliano 2014 highlight that the strength of family ties is strongly correlated with lower gdp and lower quality of institutions however the forces shaping family ties remain relatively unexplored in the literature this paper proposes and tests the hypothesis that the agricultural legacy of a country matters for shaping the strength of its family ties using data from the world values survey and the european values study the results show that societies with a legacy of cultivating wheat tend to have weaker family ties analysis at the sub national level us data and the country level corroborate these findings the estimations allow for alternative hypotheses which propose that pathogen stress and climatic variation can potentially also give rise to the formation of family ties the results suggest that the suitability of land for wheat production is the most influential factor in explaining the variation in the strength of family ties across societies and countries

investor protection and corporate governance recent research has documented large differences among countries in ownership concentration in publicly traded firms in the breadth and depth of capital markets in dividend policies and in the access of firms to external finance a common element to the explanations of these differences is how well investors both shareholders and creditors are protected by law from expropriation by the managers and controlling shareholders of firms we describe the differences in laws and the effectiveness of their enforcement across countries discuss the possible origins of these differences summarize their consequences and assess potential strategies of corporate governance reform we argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank centered and market centered financial systems

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

dynamic government performance honeymoons and crises of confidence we use a formal theoretical framework to explore the interplay between a government s longevity and its performance ministers perform well when their careers are valuable this is so when the government s duration is expected to be long the government s survival depends on its popularity and finally that popularity depends on its ministers performance the feedback loop between performance and longevity means that multiple rational expectations equilibria can arise ministers work hard for a popular government but divert efforts elsewhere if they believe the government is doomed these alternatives are both self fulfilling prophecies however the presence of perhaps small random events that buffet the performance and popularity of a government is sufficient to pin down a unique equilibrium we explore the dynamics that arise a crisis of confidence involving the rapid collapse of a government s performance is sparked when a sequence of negative shocks push the popularity of the government below a unique critical threshold

rural reforms and agricultural growth in china this paper employs province level panel data to assess the contributions of decollectivization price adjustments and other reforms to china s agricultural growth in the reform period decollectivization is found to improve total factor productivity and to account for about half of the output growth during 1978 84 the adjustment in state procurement prices also contributed positively to output growth its impact came mainly from the responses in input use the effect of other market related reforms on productivity and output growth was very small reasons for slowdown in agricultural growth after 1984 are also analyzed copyright 1992 by american economic association

unemployment and foreign capital the relative opportunity costs of domestic labour and welfare the consequences of increased foreign capital for an economy with unemployment are analyzed under different assumptions that influence the relative oportunity costs of domestic labor the investigation suggests that the implications of the literature on the welfare effect of increased foreign capital are misleading the paper shows that welfare gains result from increased foreign capital if the opportunity costs of labor are sufficiently low relative to the wages earned by laborers employed by new foreign capital a number of cases where this occurs are presented the findings of the paper suggest that cases where increased foreign capital must be welfare harming represent extreme parameterizations in the set of possibilities copyright 1991 by the london school of economics and political science

rulers and the ruled patterned inequality and the onset of mass political violence the theory of patterned inequality between rulers and ruled provides a valuable analytic approach to the relationship between inequality and political violence under conditions of a bifurcated pattern of inequality the probability of political violence is likely to be greater than under a more generalized inequality typically measured by the gini index a strong systematic relationship between patterned inequality in latin american landholdings and deaths from political violence was discovered using the exponential distribution as a model for the lower portion of the land distribution and the log exponential for the upper this degree of association was far stronger than that found between the gini index of land inequality in latin america and deaths from political violence evidence supporting the theory was also found in an analysis of middle eastern landholdings

cultural diversity and economic growth evidence from the us during the age of mass migration we exploit the large inflow of immigrants to the us during the 1870 1920 period to examine the effects that within county changes in the cultural composition of the us population had on output growth we construct measures of fractionalization and polarization to distinguish between the different effects of cultural diversity our main finding is that increases in cultural fractionalization significantly increased output while increases in cultural polarization significantly decreased output we address the issue of identifying the causal effects of cultural diversity by using the supply push component of immigrant inflows as an instrumental variable

inequality does cause underdevelopment insights from a new instrument consistent with the provocative hypothesis of engerman and sokoloff 1997 2000 this paper confirms with cross country data that agricultural endowments predict inequality and inequality predicts development the use of agricultural endowments specifically the abundance of land suitable for growing wheat relative to that suitable for growing sugarcane as an instrument for inequality is this paper s approach to problems of measurement and endogeneity of inequality the paper finds inequality also affects other development outcomes institutions and schooling which the literature has emphasized as mechanisms by which higher inequality lowers per capita income it tests the inequality hypothesis for development institutional quality and schooling against other recent hypotheses in the literature while finding some evidence consistent with other development fundamentals the paper finds high inequality to independently be a large and statistically significant barrier to prosperity good quality institutions and high schooling

collectivization and china s agricultural crisis in 1959 1961 the agricultural crisis in china in 1959 61 after the initial success of the collectivization movement resulted in 30 million extra deaths in this paper a game theory hypothesis proposes the main cause of this catastrophe i argue that because of the difficulty in supervising agricultural work the success of an agricultural collective depends on a self enforcing contract in which each one promises to discipline oneself a self enforcing contract however can be sustained only in a repeated game in the fall of 1958 the right to withdraw from a collective was deprived the nature of the collectivization was thus changed from a repeated game to a one time game as a result the self enforcing contract could not be sustained and agricultural productivity collapsed the empirical evidence is consistent with this hypothesis

war and conflict in economics theories applications and recent trends we review the main economic models of war and conflict these models vary in details but their implications are qualitatively consistent highlighting key commonalities across a variety of conflict settings recent empirical literature employing both laboratory and field data in many cases confirms the basic implications of conflict theory however this literature also presents important challenges to the way economists traditionally model conflict we finish our review by suggesting ways to address these challenges

war signals a theory of trade trust and conflict we construct a dynamic theory of civil conflict hinging on inter ethnic trust and trade the model economy is inhabitated by two ethnic groups inter ethnic trade requires imperfectly observed bilateral investments and one group has to form beliefs on the average propensity to trade of the other group since conflict disrupts trade the onset of a conflict signals that the aggressor has a low propensity to trade agents observe the history of conflicts and update their beliefs over time transmitting them to the next generation the theory bears a set of testable predictions first war is a stochastic process whose frequency depends on the state of endogenous beliefs second the probability of future conflicts increases after each conflict episode third accidental conflicts that do not reflect economic fundamentals can lead to a permanent breakdown of trust plunging a society into a vicious cycle of recurrent conflicts a war trap the incidence of conflict can be reduced by policies abating cultural barriers fostering inter ethnic trade and human capital and shifting beliefs coercive peace policies such as peacekeeping forces or externally imposed regime changes have instead no persistent effects

tariffs foreign capital and national welfare with sector specific factors abstract this paper examines the effect on national welfare of an endogenously determined inflow of foreign capital in the context of a well known model with sector specific inputs both for the case of unrestricted international trade and investment and in the presence of a tariff the second best problem of the optimal tax on foreign investment for a given tariff level is also investigated by application of the concept of shadow prices for primary factors in distorted open economies the results obtained are then related to analogous propositions derived previously for the standard heckscher ohlin model

inequality and insurgency maldistribution of land in agrarian societies is commonly thought to be an important precondition of mass political violence and revolution others argue that because of the difficulty of mobilizing rural populations for political protest land maldistribution is irrelevant except as part of an inegalitarian distribution of income nationwide these rival inequality hypotheses have significant implications with respect to the kinds of reforms likely to reduce the potential for insurgency in a society they are tested using the most comprehensive cross national compilation of data currently available on land inequality landlessness and income inequality support is found for the argument that attributes the greater causal import to income inequality moreover the effect of income inequality on political violence is found to hold in the context of a causal model that takes into account the repressiveness of the regime governmental acts of coercion intensity of separatism and level of economic development

implications of an economic theory of conflict hindu muslim violence in india we model intergroup conflict driven by economic changes within groups we show that if group incomes are low increasing group incomes raises violence against that group and lowers violence generated by it we then apply the model to data on hindu muslim violence in india our main result is that an increase in per capita muslim expenditures generates a large and significant increase in future religious conflict an increase in hindu expenditures has a negative or no effect these findings speak to the origins of hindu muslim violence in post independence india

economic history and modern india redefining the link this paper argues that to restore the link between economic history and modern india a different narrative of indian economic history is needed an exclusive focus on colonialism as the driver of india s economic history misses those continuities that arise from economic structure or local conditions in fact market oriented british imperial policies did initiate a process of economic growth based on the production of goods intensive in labor and natural resources however productive capacity per worker was constrained by low rates of private and public investment in infrastructure excessively low rates of schooling social inequalities based on caste and gender and a delayed demographic transition to lower birthrates and the resultant heavy demographic burden placed on physical capital and natural resources

genetic diversity and the origins of cultural fragmentation despite the importance attributed to the effects of diversity on the stability and prosperity of nations the origins of the uneven distribution of ethnic and cultural fragmentation across countries have been underexplored building on the role of deeply rooted biogeographical forces in comparative development this research empirically demonstrates that genetic diversity predominantly determined during the prehistoric out of africa migration of humans is an underlying cause of various existing manifestations of ethnolinguistic heterogeneity further exploration of this uncharted territory may revolutionize the understanding of the effects of deeply rooted factors on economic development and the composition of human capital across the globe

state capacity and repression a model of colonial rule abstract state capacity in colonial regimes can have spillover effects on the welfare of citizens if the colonizer is removed this work shows that when spillovers are positive investments in state capacity and repression by the colonizer are strategic complements the colonizer needs a larger repression when state capacity is high because the latter increases the incentives of the colonized to rebel therefore determinants of investment in repression such as geographic factors or idiosyncratic features of the colonizer can affect state capacity this work contributes to explain the heterogeneous levels of state capacity in non settler colonies and has policy implications for present autocratic regimes

together or separate post conflict partition ethnic homogenization and the provision of public schooling abstract the partitioning of political jurisdictions is becoming an increasingly common component of agreements to end ethnic conflict although its impact on post conflict recovery remains unclear this paper studies the effects of the partition which ended the 1992 1995 bosnian war on the post war provision of public schooling i find that partitioned municipalities provide 58 more primary schools and 37 more teachers per capita driven mainly by convergent preferences for ethnically oriented schools however this arrangement delivers distributional consequences in partitioned municipalities ethnic majority children are more likely to complete primary schooling while for ethnic minority children it is the opposite

labor market distortions the structure of protection and direct foreign investment abstract this paper analyzes the welfare effects of direct foreign investment in a general model that allows for labor market distortions trade in both intermediate inputs and final goods export subsidies and protection in the form of either tariffs or quotas it is shown that contrary to the conventional wisdom there is not in general any strong connection between the orientation of the trade regime sectoral capital intensity rankings and the desirability of attracting foreign investment

private storage of common property abstract many resources extracted under the rule of capture are not utilized immediately but are stored instead for later use oil is stockpiled fish are frozen groundwater is bottled rivers are dammed land deforested as the way to establish title remains uncultivated we examine the positive and normative effects of such storage privatization of common property through storage may eliminate inefficiencies altogether but the accelerated extraction it induces may also exacerbate them even if rapid extraction does not reduce ultimate recovery once storage commences extraction accelerates until the open access reserves are drained in limiting cases these speculative acquisitions are instantaneous the naturally occurring analogue of policy induced speculative attacks studied in the international finance literature when some reserves are privately owned while others are open access the order of extraction no longer follows the progression from lowest to highest per unit cost first noted by o c herfindahl in extractive resources and taxation m gaffney ed univ of wisconsin press madism 1997 instead the common property may be extracted in its entirety before any private reserves are extracted even if it has the higher per unit extraction cost

behavioural and material determinants of production relations in agriculture in this essay we develop a framework for analysing the major institutions governing the production and exchange of output and the primary factors of production in rural areas the analysis incorporates general considerations of risk and information constraints jointly with the principal material attributes of agriculture and of agricultural production factors the framework is used to analyse barriers to the existence of the major intertemporal and factor markets it is applied specifically to land scarce environments for which it provides an internally consistent explanation for many of the well documented institutional features of such settings in addition the analysis provides new implications for among other phenomena the inter relationships among ownership holdings operational scale family size and factor productivity for the scarcity of animal rental markets and use of animals as collateral for the renting out of land by small landowners and for the existence of plantations for certain crops

contracts hold up and exports textiles and opium in colonial india trade and export it is argued spur economic growth this paper studies the microeco nomics of exporting we build a heuristic model of transactions between exporters and producers and relate it to east india company operations in colonial bengal our model and the historical record stress two difficulties the exporter and its agents might not uphold payment agreements and producers might not honor sales contracts the model shows when procurement succeeds or fails highlighting the tension between these two hold up problems we analyze several cases including the east india company s cotton textile venture the famous opium monopoly and present day contract farming

economic backwardness and social tension we propose that relative economic backwardness contributes to the build up of social tension and non violent and violent conflict we test our hypothesis using data on organized mass movements and armed civil conflict the findings show that greater economic backwardness is consistently linked to a higher probability of onset of violent and especially non violent forms of civil unrest we provide evidence that the relationship is causal in instrumental variables estimations using new instruments including mailing speeds and telegram charges around 1900 the magnitude of the effect of backwardness on social tension increases in the two stage least squares estimations

banking on extinction endangered species and speculation many wildlife commodities such as tiger bones bear bladders ivory and rhino horn have been stockpiled in large quantities by speculators who expect that future price increases justify forgoing the interest income associated with current sales when supply from private stores competes with supply from wild populations in nature and when speculators are able to collude it may be optimal to coordinate on an extinction strategy we analyse the behaviour of a speculator who has access to a large initial store and finds that it is optimal to deter poachers entry either by depressing prices carefully timing own supply or by depressing wild stocks which strategy maximizes profits critically depends on the initial wildlife stock and initial speculative stores we apply the model to the case of black rhino conservation and conclude it is likely that banking on extinction is profitable if current speculators are able to collude contrary to conventional wisdom we also find that extinction is favoured by such factors as low discount rates or high growth rates

empowerment and efficiency tenancy reform in west bengal the paper analyzes the effect of agricultural tenancy laws offering security of tenure to tenants and regulating the share of output that is paid as rent on farm productivity theoretically the net impact of tenancy reform is shown to be a combination of two effects a bargaining power effect and a security of tenure effect analysis of evidence on how contracts and productivity changed after a tenancy reform program was implemented in the indian state of west bengal in the late 1970s suggests that tenancy reform had a positive effect on agricultural productivity there

elections ethnicity and political instability this article provides a new perspective on the impact of elections on violent political instability in ethnically divided states a number of scholars argue that elections may provoke large scale violence in ethnically divided states in this article we theorize that elections have a pacifying effect in the most ethnically fractionalized countries as they reduce endemic uncertainty and encourage coalition building lowering the rate at which electoral losers discount the future probit regressions using cross national data for the period 1960 2010 support the notion that instability onsets are less likely in ethnically fractionalized states during election periods and especially in the year after a national election

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

a contest success function for networks abstract this paper models conflict as a contest within a network of friendships and enmities we assume that each player is either in a friendly or in an antagonistic relation with every other player and players compete for winning by exerting costly efforts we axiomatically characterize a success function which determines the win probability of each player given the efforts and the network of relations in an extension we allow for varying intensities of friendships and enmities this framework allows for the study of strategic incentives and friendship formation under conflict as well as the application of stability concepts of network theory to contests

fractionalization polarization and economic growth identifying the transmission channels in this article we examine empirically both the direct and indirect links between ethnic fragmentation and economic growth we find that both ethnic fractionalization and polarization are negatively associated with growth if considered in isolation an effect that is though primarily attributed to their link to other growth related activities i e investment conflict control of corruption fertility we study the corresponding transmission channels and calculate their relative importance in explaining a development curse based on ethnic diversity for both measures of ethnic fragmentation we find the corruption channel to be the most important one

culture ethnicity and diversity we investigate the empirical relationship between ethnicity and culture defined as a vector of traits reflecting norms attitudes and preferences using surveys of individual values in 76 countries we find that ethnic identity is a significant predictor of cultural values yet that within group variation in culture trumps between group variation thus in contrast to a commonly held view ethnic and cultural diversity are unrelated we explore the correlates of cultural diversity and of the overlap between culture and ethnicity finding that the level of economic development is positively associated with cultural diversity and negatively associated with the overlap between culture and ethnicity finally although only a small portion of a country s overall cultural heterogeneity occurs between groups this does not imply that cultural differences between groups are irrelevant indeed we find that civil conflict becomes more likely when there is greater overlap between ethnicity and culture