group lending repayment incentives and social collateral abstract in this paper we investigate the impact on repayment rates of lending to groups which are made jointly liable for repayment this type of scheme especially in the guise of the grameen bank in bangladesh has received increasing attention we set up and analyze the repayment game which group lending gives rise to our analysis suggests that such schemes have both positive and negative effects on repayment rates the positive effect is that successful group members may have an incentive to repay the loans of group members whose projects have yielded insufficient return to make repayment worthwhile the negative effect arises when the whole group defaults even when some members would have repaid under individual lending we also show how group lending may harness social collateral which serves to mitigate its negative effect

keep your friends close the effect of local social networks on child human capital outcomes abstract social networks can affect demand for human capital investments by relaxing household time or budget constraints or by defining and reinforcing human capital preferences however empirically identifying the effect of social networks on human capital investment is usually problematic because households self select their networks in ways that may be correlated with their abilities to make these investments in northern ugandan internally displaced persons camps networks were not entirely self selected rebel activity which forced households into camps in 2002 disrupted pre existing social networks in ways that were exogenous to household human capital preferences this paper uses the exogenous variation in network disruption to identify a positive impact of networks on children s long term nutritional outcomes

does industrialization build or destroy social networks abstract this article estimates the relationship between changes in industrialization and changes in social networks measures in indonesia during 1985 97 using repeated cross sections of nationally representative surveys we analyze a rich set of social interaction measures including various measures of voluntary associational activity levels of trust and informal cooperation districts that experienced rapid industrialization showed significant increases in most measures of social interaction however districts that neighbor rapidly industrializing areas exhibited high rates of out migration significantly fewer community credit cooperatives and a reduction in mutual cooperation as assessed by village elders manufacturing growth can be thought of as a proxy for income growth here the findings are contrary to several recent claims regarding the role of social capital in economic development

the flat rental puzzle 4cars and replace them after 2 years or when their odometer exceeds 34 000 km this is a very costly 5 strategy caused by rapid depreciation in used car prices we show how economic theory predicts that 6 in a competitive market cars are rented out covering their full economic lifespan and rental prices are 7 a declining function of their odometer value our solution to these puzzles is that actual rental markets 8 are not fully competitive and firms may be behaving suboptimally we provide a case study of a large 9 car rental company that provided us access to its operating data we develop a model of the company s 10 operations that predicts that the company can significantly increase its profits by keeping its rental cars 11 twice as long as it currently does and also by discounting the rental cost of older vehicles to induce 12 its customers to rent them the company undertook an experiment to test our model s predictions 13 we report initial findings from this experiment which involved over 4500 rentals of over 500 cars in 14 4 locations over a 5 month period the results are consistent with the predictions of our model and 15 suggest that a properly chosen declining rental price function can increase overall revenues profits 16 also increase significantly since doubling the holding period of rental cars cuts discounted replacement 17 costs by nearly 40 18

ethnic diversity social sanctions and public goods in kenya abstract this paper examines ethnic diversity and local public goods in rural western kenya the identification strategy relies on the stable historically determined patterns of ethnic land settlement ethnic diversity is associated with lower primary school funding and worse school facilities and there is suggestive evidence that it leads to poor water well maintenance the theoretical model illustrates how inability to impose social sanctions in diverse communities leads to collective action failures and we find that school committees in diverse areas do impose fewer sanctions on defaulting parents we relate these results to the literature on social capital and economic development and discuss implications for decentralization in less developed countries

eliciting and utilizing willingness to pay evidence from field trials in northern ghana we utilize the becker degroot marschak 1964 mechanism to estimate the willingness to pay for clean drinking water technology in northern ghana the bdm mechanism has attractive properties for empirical research allowing us to directly estimate demand compute heterogeneous treatment effects and study the screening and causal effects of prices with minor modifications to a standard field experiment setting we demonstrate the implementation of bdm along these three dimensions compare it to the standard take it or leave it method for eliciting willingness to pay and discuss practical issues for implementing the mechanism in true field settings jel classifications c93 d12 d82 l11 l31

the role of financial systems for cross country differences in the link between income and consumption inequality abstractthis article discusses why consumption inequality stays low despite high income inequality in the u s but income inequality is closely followed by consumption inequality in china we show that different financial systems can play a critical role in shaping the cross country different links between income and consumption inequality this phenomenon is consistent with the cross country different relationships between income inequality and saving rates consumer credit expansion in the u s makes inequality much less serious for consumption than for income and this result holds to an even larger extent if more domestic credit can be financed by foreign savings but this is not the case in china whose financial system focuses only on investment and trade while neglecting liquidity constraints on consumption our assertions accord well with evidence found from the u s china and other related economies

ethnic diversity and human capital development in india a disaggregated analysis at the state and district levels abstractthis study contributes to the development literature by providing a new perspective on understanding factors that influence human capital development in india we examine the effects of eth

pass through in retail and wholesale this paper studies how prices comove across products firms and locations to gauge the relative importance of retailer versus manufacturer level shocks in determining prices i make use of a large panel data set on prices for a cross section of retailers in the u s i analyze prices at the barcode or universal product code upc level for individual stores i find that only 16 of the variation in prices is common across stores selling an identical product 65 of the price variation is common to stores within a particular retail chain but not across retail chains while 17 is completely idiosyncratic to the store and product product categories with frequent temporary sales exhibit a disproportionate amount of completely idiosyncratic price variation my results suggest that most of the observed price variation arises from retail level rather than manufacturer level demand and supply shocks however the behavior of prices is difficult to relate to observed variation in costs and demand at the retail level this suggests that retail prices may vary largely as a consequence of dynamic pricing strategies on the part of retailers or manufacturers rather than static demand and supply shocks this abstract was borrowed from another version of this item

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

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

house prices and consumer welfare we develop a new approach to measuring changes in consumer welfare due to changes in the price of owner occupied housing in our approach an agent s welfare adjustment is defined as the transfer required to keep expected discounted utility constant given a change in current house prices we demonstrate that up to a first order approximation there is no aggregate change in welfare due to price increases in the existing housing stock this follows from a simple market clearing condition where capital gains experienced by sellers are exactly offset by welfare losses to buyers we show that this result holds approximately even in a model that accounts for changes in consumption and investment plans prompted by current house price changes there can however be changes in welfare due to additions to the stock of housing or to changes in the price of renovating and upgrading the existing stock of housing for the united states we estimate the welfare cost of house price appreciation to be an average of 127 per household per year over the 1984 1998 period

us and them the origin of identity and its economic implications we investigate the origins of identity and the innate proclivity to draw a distinction between insiders and outsiders we propose an evolutionary explanation we argue that identity arises because it facilitates survival in an evolutionary setting we endogenize preferences and demonstrate that the evolutionarily stable preferences fashioned by natural selection would draw a distinction between insiders and outsiders we then work out the implications of such preferences in two contemporary scenarios one entailing rent seeking behavior and the other involving public good provision our results are in conformity with empirical evidence

tribe or nation nation building and public goods in kenya versus tanzania this article examines how government policies affect ethnic relations by comparing outcomes across two nearby districts one in kenya and one in tanzania using colonial era boundary placement as a natural experiment despite similar geography and historical legacies governments in kenya and tanzania have followed radically different language education and local institutional policies with tanzania consistently pursuing more serious nation building the evidence suggests that nation building has allowed diverse communities in rural tanzania to achieve considerably better local public goods outcomes than diverse communities in kenya to illustrate while kenyan communities at mean levels of diversity have 25 percent less local school funding than homogeneous communities on average the comparable figure in the tanzanian district is near zero the kenya tanzania comparison provides empirical evidence that serious reforms can ameliorate social divisions and suggests that nation building should take a place on policy agendas especially in africa

ethnic diversity energy poverty and the mediating role of trust evidence from household panel data for australia abstract energy poverty is now a major concern on the public policy agenda in many countries however evidence on the determinants of energy poverty is relatively scant our study contributes to the debate on the determinants of energy poverty by being the first to examine the impact of ethnic diversity on household energy poverty using 12 waves of longitudinal data from the household income and labour dynamics in australia hilda survey we find that in australia ethnic diversity is positively associated with energy poverty our preferred instrumented estimates suggest that a standard deviation increase in ethnic diversity is associated with a 0 103 0 422 standard deviation increase in energy poverty depending on how energy poverty is measured this finding is generally robust to alternative ways of measuring ethnic diversity and energy poverty we identify trust as an important channel through which ethnic diversity operates and point to the need for policies that engender social capital in multicultural societies as a means to harness the benefits of diversity

who thinks about the competition managerial ability and strategic entry in us local telephone markets we examine us local telephone markets shortly after the telecommunications act of 1996 the data suggest that older experienced educated managers tend to enter markets with fewer competitors this motivates a structural econometric model based on behavioral game theory that allows heterogeneity in managers ability to correctly conjecture competitor behavior we find that manager characteristics are key determinants in managerial ability furthermore our estimate of ability predicts out of sample success counterfactuals provide insight into the industry s struggles despite substantial indirect subsidies it is only when the ability to correctly conjecture competitor behavior is high that firms enter empty markets

music for a song an empirical look at uniform song pricing and its alternatives economists have well developed pricing theories that challenge the wisdom of the common practice of uniform song pricing this paper explores the profit and welfare implications of various alternatives including song specific pricing various forms of bundling two part tariffs nonlinear pricing and third degree price discrimination using survey based data on nearly 500 students valuations of 50 popular songs in early january 2008 we find that various alternatives including simple schemes such as pure bundling and two part tariffs can raise both producer and consumer surplus revenue could be raised by nearly 10 percent relative to profit maximizing uniform pricing and by over a fifth relative to current 0 99 uniform pricing moreover revenue could be increased by a tenth while maintaining consumer surplus at the high level accompanying current 0 99 uniform song pricing while person specific uniform pricing can raise revenue by three quarters none of the non discriminatory schemes raise revenue s share of surplus above 35 percent even with sophisticated pricing much of the area under the demand curve for this product cannot be appropriated as revenue

tribal mobilization fragmented groups and public goods provision in jordan diversity has been blamed for poor public goods provision in a number of different contexts it is associated with reduced spending on services meager rates of tax collection and poor policies i argue in this article however that in semidemocratic or authoritarian countries where political parties are weak diversity can be an important source of electoral competition leading to better services in diverse communities where multiple identity groups are politically mobilized candidates are forced to seek the support of voters outside of their group who are more likely to vote based on qualifications than on group affiliation resulting in better public officials who provide superior services moreover i find internal group fragmentation to be important in understanding the impact of heterogeneity on public goods provision candidates in areas where only one identity group is politically mobilized but where that group is politically fragmented will also seek votes from other groups within the comm

can social cohesion be harnessed to repair market failures evidence from group lending in guatemala the success of group lending in developing countries has been attributed to the ability of the institution to mitigate asymmetric information problems in credit markets previous research has offered a number of explanations for this phenomenon social ties between borrowing group members internal group pressure to repay loans and peer monitoring this research presents empirical tests on borrowing group data from guatemala which indicate that peer monitoring significantly effects borrowing group performance through stimulating intra group insurance group pressure is found to have a small effect in deterring moral hazard while the effect of social ties among members is statistically insignificant

crossing party lines the eects of information on redistributive politics this paper explores how the quality of information available to voters in uences the choices they make in the polling booth and in turn aects the strategies of political parties competing for their support to do so the paper builds a model of redistributive politics under asymmetric information and then tests the resulting propositions with data from recent elections in sierra leone using the lindbeck and weibull 1987 model as a foundation i incorporate a new determinant of voting choice candidate quality which is only imperfectly observed by voters i show that voters with better information about candidates are more likely to cross ethnic party lines to support a high quality candidate furthermore since information encourages voters to consider characteristics like candidate charisma that are di cult for parties to observe it makes party forecasting of expected vote shares more uncertain such electoral uncertainty in turn induces parties to spread their resources more evenly across jurisdictions two institutional attributes of the empirical setting ethnicity based politics and decentralization enable direct tests of these informational propositions as well as a novel identi cation strategy for the classic swing voter hypothesis my results suggest that information could break the low accountability equilibrium in which citizens cast their votes blindly along partisan lines creating little incentive for political parties to invest in candidate quality or provide resources to areas outside the most tightly contested jurisdictions

on economic theory and recovery of the financial crisis this paper presents a new economic theory to explain the evolution of a financial crisis and why a major crisis may take a long time to recover it suggests that asymmetric psychological reactions of market players to gains and losses are the principal cause of a crisis and responsible for prolonging recovery three different shapes of recovery v u and l are defined and explained during the current financial crisis some countries such as china and india may have a v shaped recovery others such as the uk and the us may have a u shaped recovery an important policy implication is that effective macroeconomic policies should be designed to smooth market movements and implementation of such policies has to be countercyclical rather than pro cyclical

the economic psychology of stock market bubbles in china the chinese stock markets were extremely volatile during the period 2005 08 the shanghai stock exchange sse composite index increased more than sixfold from 1 012 in 2005 to 6 124 by the end of 2007 it then declined continuously to reach a low of 1 929 on 17 september 2008 or a drop of 70 per cent from its peak in less than 10 months although the market downturn may have been affected by the financial crisis in the united states and the rest of the world the extreme fluctuations of stock prices signify a big market bubble and the burst of that bubble must be explained by intrinsic characteristics or the economic psychology of chinese investors based on a detailed market data analysis this paper attributes the development of the stock market bubble to three key psychological factors greed envy and speculation and the burst of the bubble to three contrasting factors fear lack of confidence and disappointment it concludes that only after chinese companies become really commercialised and profitable and investors become rational can the stock markets become stable without extreme volatility as seen in the past government policies can play a role in soothing market volatility detrimental to shareholders and the wider economy but investors should not depend on government for making their own investment decisions journal compilation 2009 blackwell publishing ltd

minimum wage and real wage inequality evidence from pass through to retail prices this paper considers the impact of the minimum wage on both labor and product markets using detailed store level scanner data i provide empirical evidence that a 10 increase in the minimum wage r

informational rigidities and the stickiness of temporary sales abstract how do retailers react to cost changes while temporary sales account for 95 of price change in our data retail prices respond to a wholesale cost increase entirely through the regular price sales actually respond temporarily in the opposite direction from regular prices as though to conceal the price hike additional evidence from responses to commodity cost and local unemployment shocks as well as broader evidence from bls data reinforces these findings institutional evidence indicates that sales are complex contingent contracts determined substantially in advance in a standard price discrimination model these institutional practices leave little money on the table

randomized evaluations of educational programs in developing countries some lessons this paper reviews recent randomized evaluations of educational programs in developing countries including programs to increase school participation to provide educational inputs and to reform education it then extracts some lessons for education policy and for the practice and political economy of randomized evaluations

environmental performance in socially fragmented countries social fragmentation is often associated with reduced co operative behaviour which undermines public goods provision such as environmental protection the few studies linking social fragmentation and environmental performance have been confined to using ethnic fractionalisation as the only measure of social heterogeneity in this paper we contribute to the literature in a twofold manner first we bring into the analysis alternative measures of social fragmentation i e religious fractionalisation ethnic religious polarisation that have received considerable attention in development economics in recent years second this is the first study to our knowledge that makes use of a large panel dataset of several environmental indicators to explore links between ethnic religious diversity and the environment we find that all indices of social fragmentation are negatively linked to measures of environmental quality although for some of them the size of the effect is larger in the case of polarisation

industrial policy in an imperfect world theoretical analyses of industrial policy normally restrict the range of possible outcomes by abstracting from either market or government failures this paper thus studies industrial policy and its effectiveness in a model that includes both market and government imperfections we introduce a public agency responsible for industrial policy into the model of hausmann and rodrik 2003 and assume that this agency has limited information and is partly politically motivated we further extend the model to allow the public agency to communicate with entrepreneurs and the entrepreneurs to engage in rent seeking we find that industrial policies are ineffective if the public agency is poorly informed but that they are not necessarily ineffective if the public agency is highly politically motivated given a highly politically motivated public agency industrial policies are effective if and only if the institutional setting ensures that such policies are modest e g by restricting the public agency s budget moreover our model helps us to understand why the same industrial policies that have failed elsewhere have been relatively successful in south korea and taiwan

the aggregate implications of regional business cycles during the last recession and its aftermath aggregate price growth and aggregate nominal wage growth remained robust despite the high rate of unemployment we document that u s states with weaker labor markets experienced lower price growth lower nominal wage growth and lower real wage growth during the great recession given that reliable measures of local prices do not exist we create our own state price indices using scanner data from the nielsen retail scanner database the main innovation of the paper is the development of an econometric procedure that combines cross region data with aggregate time series data to infer the underlying shocks driving both aggregate and regional business cycles applying our procedure to the great recession we find that a combination of both demand and supply shocks are necessary to account for the joint dynamics of aggregate prices wages and employment during the 2007 2012 period in contrast we find that only demand shocks are needed to explain the cross region variation the results suggest that only using cross region variation to explain aggregate fluctuations is insufficient when shocks do not have a substantive regional component

collective action in diverse sierra leone communities scholars have identified ethnic divisions as a leading cause of underdevelopment due partially to their adverse effects on public goods we investigate this issue in post war sierra leone one of the world s poorest and most ethnically diverse countries to address concerns over endogenous local ethnic composition we use an instrumental variables strategy using earlier census data on ethnicity and include several historical and geographic covariates perhaps surprisingly we find that local diversity is not associated with worse public goods provision across multiple outcomes and specifications with precisely estimated zeros we investigate the role of historical factors in generating the findings

the effect of ownership structure on prices in geographically differentiated industries i analyze how ownership structure and market geography jointly influence fast food prices i estimate a model of demand and supply that accounts for the market geography and run counterfactual experiments that demonstrate how mergers affect prices i find that the impact of mergers can be large that this impact decreases as the merging outlets are farther apart that mergers among market leaders generally increase prices more than mergers among weaker firms and that mergers can increase prices even if the outlets are so far apart that neither outleti s presence affects prices at the other before the merger

corruption perceptions vs corruption reality abstract this paper examines the accuracy of corruption perceptions by comparing indonesian villagers reported perceptions about corruption in a road building project in their village with a more objective measure of missing expenditures in the project i find that villagers reported perceptions do contain real information and that villagers are sophisticated enough to distinguish between corruption in a particular road project and general corruption in the village the magnitude of the reported information however is small in part because officials hide corruption where it is hardest for villagers to detect i also find that there are biases in reported perceptions the findings illustrate the limitations of relying solely on corruption perceptions whether in designing anti corruption policies or in conducting empirical research on corruption

are housing prices improving gdp or vice versa a cross regional study of china this study applies the bootstrap panel granger causality test to examine the relationship between housing prices hps and gdp across provinces in china empirical results show that hps granger cau

free riding and ethnic heterogeneity abstract this paper provides a new explanation for lower levels of public good provision in heterogeneous societies compared to their homogeneous counterparts social sharing norms force rich individuals to share part of their income with their poor relatives but do not apply across different ethnic groups because there is a more extensive redistribution in more homogeneous societies the cost of contributing to the public good is lower the model predicts the level of public goods provision and welfare monotonically decreases with the number of different ethnic groups

determinants of store level price elasticity using weekly scanner data representing 18 product categories the authors estimated store specific price elasticities for a chain of 83 supermarkets they related these price sensitivities to a com

ethnic diversity and preferences for redistribution in recent decades the immigration of workers and refugees to europe has increased substantially and the composition of the population in many countries has consequently become much more heterogeneous in terms of ethnic background if people exhibit in group bias in the sense of being more altruistic to one s own kind such increased heterogeneity will lead to reduced support for redistribution among natives this paper exploits a nationwide program placing refugees in municipalities throughout sweden during the period 1985 94 to isolate exogenous variation in immigrant shares we match data on refugee placement to panel survey data on inhabitants of the receiving municipalities to estimate the causal eects of increased immigrant shares on preferences for redistribution the results show that a larger immigrant population leads to less support for redistribution in the form of preferred social benet levels this reduction in support is especially pronounced for respondents with high income and wealth we also establish that ols estimators that do not properly deal with endogeneity problems as in earlier studies are likely to yield positively biased i e less negative eects of ethnic heterogeneity on preferences for redistribution

the loser s curse decision making and market efficiency in the national football league draft a question of increasing interest to researchers in a variety of fields is whether the biases found in judgment and decision making research remain present in contexts in which experienced participants face strong economic incentives to investigate this question we analyze the decision making of national football league teams during their annual player draft this is a domain in which monetary stakes are exceedingly high and the opportunities for learning are rich it is also a domain in which multiple psychological factors suggest that teams may overvalue the chance to pick early in the draft using archival data on draft day trades player performance and compensation we compare the market value of draft picks with the surplus value to teams provided by the drafted players we find that top draft picks are significantly overvalued in a manner that is inconsistent with rational expectations and efficient markets and consistent with psychological research this paper was accepted by uri gneezy behav

on the new economic policies promoted by the 17th ccp congress in china the 17th chinese communist party congress in october 2007 attracted attention within and outside china for the bold development agenda that was placed before delegates after 30 years of economic reform that has produced a remarkable improvement in living standards and china s reintegration into the world economy the party unveiled a programme that would push china to become a world superpower over the next 30 years china s ambition is to become a technologically innovative state to make china a moderately prosperous and harmonious society with a scientific outlook on development and to achieve full industrialisation and sustainable prosperity whether china is able to attain its objectives will critically depend on the party s ability to implement the new economic policies and address the social and political challenges that economic growth has created the aim of the paper is to examine the policies motivations and constraints that china faces in achieving the objectives laid out at the party congress

an economic evaluation of the moneyball hypothesis in his 2003 book moneyball financial reporter michael lewis made a striking claim the valuation of skills in the market for baseball players was grossly inefficient the discrepancy was so large that when the oakland athletics hired an unlikely management group consisting of billy beane a former player with mediocre talent and two quantitative analysts the team was able to exploit this inefficiency and outproduce most of the competition while operating on a shoestring budget the publication of moneyball triggered a firestorm of criticism from baseball insiders lewis 2004 and it raised the eyebrows of many economists as well basic price theory implies a tight correspondence between pay and productivity when markets are competitive and rich in information as would seem to be the case in baseball the market for baseball players receives daily attention from the print and broadcast media along with periodic in depth analysis from lifelong baseball experts and academic economists indeed a case can be made that more is known about pay and quantified performance in this market than in any other labor market in the american economy in this paper we test the central portion of lewis s 2003 argument with elementary econometric tools and confirm his claims in particular we find that hitters salaries during this period did not accurately reflect the contribution of various batting skills to winning games this inefficiency was sufficiently large that knowledge of its existence and the ability to exploit it enabled the oakland athletics to gain a substantial advantage over their competition further we find

national institutions and subnational development in africa we investigate the role of national institutions on subnational african development in a novel framework that accounts both for local geography and cultural genetic traits we exploit the fact that the political boundaries in the eve of african independence partitioned more than two hundred ethnic groups across adjacent countries subjecting similar cultures residing in homogeneous geographic areas to different formal institutions using both a matching type and a spatial regression discontinuity approach we show that differences in countrywide institutional structures across the national border do not explain within ethnicity differences in economic performance as captured by satellite images of light density the average non effect of national institutions on ethnic development masks considerable heterogeneity partially driven by the diminishing role of national institutions in areas further from the capital cities

is diversity detrimental ethnic fractionalization public goods provision and the historical legacies of stateness existing research has shown that highly diverse countries tend to provide less public goods this article argues by contrast that the relationship is spurious both contemporary ethnic heterogeneity and low public goods provision represent legacies of a weakly developed state capacity inherited from the past classical theories of state formation are then tested to show that favorable topography and climate high population densities as well as a history of warfare are conducive to state formation using an instrumental variable approach i show that previous ethnic diversity is not consistently an impediment to the formation of indigenous states and thus to contemporary public goods provision empirically this article uses three different measurements of public goods provision and data on pre colonial levels of state formation in asia and africa to test these various hypotheses

the geography of linguistic diversity and the provision of public goods abstract this paper analyzes the importance of local interaction between individuals of different ethnolinguistic groups for the provision of public goods at the national level the conceptual framework we develop suggests that a country s public goods i decrease in its overall ethnolinguistic fractionalization and ii either increase or decrease in its local global ethnolinguistic complementarity a measure of how local interaction affects antagonism towards other groups in the society at large after constructing a 5 km by 5 km dataset on language use for 223 countries we empirically explore these theoretical predictions while overall fractionalization worsens public goods outcomes local interaction mitigates this negative association conditional on a country s overall diversity public goods outcomes are maximized when there are a few large sized groups and the diversity of each location mirrors that of the country as a whole

immigration ethnic diversity and political outcomes evidence from denmark i study the impact of immigration and increasing ethnic diversity on political outcomes in immigrant receiving countries focusing on immigration and election outcomes in danish municipalities 1981 2001 a rich set of control variables isolates ethnic diversity eects from those of other immigrant characteristics and a novel iv strategy based on historical housing stock data addresses issues of endogenous location choices of immigrants increases in local ethnic diversity lead to right ward shifts in election outcomes by shifting electoral support away from traditional big government left wing parties and towards anti immigrant nationalist parties in particular these eects appear in both local and national elections

local political business cycles evidence from philippine municipalities abstract this paper establishes the existence of short term political business cycles in the philippines over the period 2003 2009 examining a balanced panel of 1143 municipalities shows that employment levels increase in the two pre electoral quarters and drop sharply in the two quarters following elections further results are consistent with the cycles being generated by incumbents attempts to increase their chances of re election cycles are stronger in sectors that incumbents are more able to influence and when they expect stronger electoral competition evidence suggests that these cycles are detrimental to development

rigid prices evidence from u s scanner data this paper uses over two years of weekly scanner data from two small us cities to characterize time and state dependence of grocers pricing decisions in these data the probability of a nominal adjustment declines with the time since the last price change even after controlling for heterogeneity across store product cells and replacing sale prices with regular prices we also detect state dependence the probability of a nominal adjustment is highest when a store s price substantially diers from the average of other stores prices however extreme prices typically reflect the selling store s recent nominal adjustments rather than changes in other stores prices

real time price indices inflation spike and falling product variety during the great lockdown we characterize inflation dynamics during the great lockdown using scanner data covering millions of transactions for fast moving consumer goods in the united kingdom we show that there was a significant and widespread spike in inflation first aggregate month to month inflation was 2 4 in the first month of lockdown a rate over 10 times higher than in preceding months over half of this increase stems from reduced frequency of promotions consumers purchasing power was further eroded by a reduction in product variety second 96 of households have experienced inflation in 2020 while in prior years around half of households experienced deflation third there was inflation in most product categories including those that experienced output falls only 13 of product categories experienced deflation compared with over half in previous years while market based measures of inflation expectations point to disinflation or deflation these findings indicate a risk of stagflation should not be ruled out we hope our approach can serve as a template to facilitate rapid diagnosis of inflation risks during economic crises leveraging scanner data and appropriate price indices in real time

development path of china and india and the challenges for their sustainable growth the segmentation of global manufacturing and services provided china and subsequently india with a golden opportunity to make full use of their absolute advantage low cost yet educated labour to integrate into the world economy within a comparatively shorter period of time than some earlier industrialisers though international trade functioned as a vent of surplus in view of the narrowness of their domestic markets at the beginning of their economic catch up the label of export led model may not reflect the real picture as imports underwent dramatic increases during their respective growth periods in particular for china foreign direct investment has played a pivotal role in their economic growth and has major presence in international trade and investment in leading sectors of both countries giving rise to certain special features and weak links for their economic expansion and sustainability of fast

food deserts and the causes of nutritional inequality we study the causes of nutritional inequality why the wealthy eat more healthfully than the poor in the united states exploiting supermarket entry and household moves to healthier neighborhoods we reject that neighborhood environments contribute meaningfully to nutritional inequality we then estimate a structural model of grocery demand using a new instrument exploiting the combination of grocery retail chains differing presence across geographic markets with their differing comparative advantages across product groups counterfactual simulations show that exposing low income households to the same products and prices available to high income households reduces nutritional inequality by only about 10 while the remaining 90 is driven by differences in demand these findings counter the argument that policies to increase the supply of healthy groceries could play an important role in reducing nutritional inequality

china coming to grips with the new global player this paper analyses china s economic performance in the last 25 years and discusses its prospect for growth in the future exports and investment have been the two driving forces for the high annual gdp growth rates fdi plays an important role however structural issues such as the loss making state owned firms and the fragile banking industry have to be solved monetary policy is complicated by the accumulation of reserves which however provide an insurance for the fragile banking system property rights a crucial element in transforming a communist society are far from being clearly developed major policy issues in the future include the correction of the distorted growth process and of the institutional deficits especially with respect to the rule of law and the lack of democracy

community composition and collective action analyzing initial mail response to the 2000 census this paper analyzes how community heterogeneity influences resident decisions to undertake actions generating public benefits the decision in question is completing and returning the 2000 census questionnaire an action which secures a significant amount of federal grants for the community the model developed to explain this action allows members of societal groups to differentially value public benefits that accrue to other group members racial generational and socioeconomic class heterogeneity all predict significantly lower response rates at the county level the potential for endogenous sorting into heterogeneous counties implies that the magnitude of true behavioral effects exceeds these estimates

measuring market power in the ready to eat cereal industry the ready to eat cereal industry is characterized by high concentration high price cost margins large advertising to sales ratios and numerous introductions of new products previous researchers have concluded that the ready to eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense nonprice competition this paper empirically examines this conclusion in particular i estimate price cost margins but more importantly i am able empirically to separate these margins into three sources i that which is due to product differentiation ii that which is due to multi product firm pricing and iii that due to potential price collusion the results suggest that given the demand for different brands of cereal the first two effects explain most of the observed price cost margins i conclude that prices in the industry are consistent with noncollusive pricing behavior despite the high price cost margins leading firms are able to maintain a portfolio of differentiated products and influence the perceived product quality it is these two factors that lead to high price cost margins

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

war and local collective action in sierra leone abstract we study the brutal 1991 2002 sierra leone civil war using nationally representative household data on conflict experiences postwar economic outcomes local politics and collective action individuals whose households directly experienced more intense war violence are robustly more likely to attend community meetings more likely to join local political and community groups and more likely to vote tests using prewar controls and alternative samples suggest that selection into victimization is unlikely to be driving the results more speculatively the findings could help partially explain the rapid postwar political and economic recoveries observed in sierra leone and after several other recent african civil wars

collective action and the group size paradox according to the olson paradox larger groups may be less successful than smaller groups in furthering their interests we address the issue in a model with three distinctive features explicit intergroup interaction collective prizes with a varying mix of public and private characteristics and nonlinear lobbying costs the interplay of these features leads to new results when the cost of lobbying has the elasticity of a quadratic function or higher larger groups are more effective no matter how private the prize with smaller elasticities a threshold degree of publicness is enough to overturn the olson argument and this threshold tends to zero as the elasticity approaches the value for a quadratic function we also demonstrate that these results are true irrespective of whether we examine group sizes over the cross section in some given equilibrium or changes in the size of a given group over different equilibria

decentralization and pollution spillovers evidence from the re drawing of county borders in brazil decentralization can improve service delivery but it can also generate externalities across jurisdictional boundaries we examine the nature and size of water pollution externalities as rivers flow across jurisdictions panel data on water pollution in brazilian rivers coupled with county splits that change the locations of borders allow us to identify the spatial patterns of pollution as rivers approach and cross borders controlling for fixed effects and trends specific to each location the theory of externalities predicts that pollution should increase at an increasing rate as the river approaches the downstream exit border that there should be a structural break in the slope of the pollution function at the border and that a larger number of managing jurisdictions should exacerbate pollution externalities we find support for all four predictions in the data satellite data on growth in night time lights along rivers show that local authorities allow more settlements to develop close to rivers in the downstream portions of counties which is the likely underlying mechanism the border effects on pollution are not as pronounced when the cost of inter jurisdictional coordination is lower

market volatility and investor behavior it appears that speculative asset prices tend to show excess volatility relative to simple present value efficient markets models and that prices are partly forecastable as tending to returning to mean appropriately defined but what does this tell us about how speculative prices are determined are there fads in prices and if so how do they behave the question has arisen recently whether there is really room for fads in speculative prices whether or not speculative prices are too volatile if stock prices are highly correlated with dividends we might conclude that the movements in stock prices are driven by fundamentals not fads a question of longer standing is whether fads models that entail feedback from price change to price change are consistent with the observed approximate random walk price behavior that is rather low serial correlation of short run price changes we can also ask whether the feedback models are consistent with the observed relation of stock prices to dividends and earnings

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

uniform pricing in us retail chains we show that most u s food drugstore and mass merchandise chains charge nearly uniform prices across stores despite wide variation in consumer demographics and competition demand estimates reveal substantial within chain variation in price elasticities and suggest that the median chain sacrifices 16 million of annual profit relative to a benchmark of optimal prices in contrast differences in average prices between chains are broadly consistent with the optimal benchmark we discuss a range of explanations for nearly uniform pricing highlighting managerial inertia and brand image concerns as mechanisms frequently mentioned by industry participants relative to our optimal benchmark uniform pricing may significantly increase the prices paid by poorer households relative to the rich dampen the response of prices to local economic shocks alter the analysis of mergers in antitrust and shift the incidence of intranational trade costs

monetary policy vagabonding liquidity and bursting bubbles in new and emerging markets an overinvestment view credit booms have globally fuelled hikes in stock raw material and real estate markets which have culminated in the recent us subprime market crisis we explain the global asset market booms since the mid 1980s based on the overinvestment theories of hayek wicksell and schumpeter we argue that ample liquidity supply originating in the large industrialized countries has contributed to overinvestment cycles in japan east asia new markets in the industrial countries and many emerging market economies expansionary monetary policies in response to the burst of bubbles are argued to have contributed to vagabonding bubbles around the globe

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

regressive sin taxes with an application to the optimal soda tax a common objection to sin taxes corrective taxes on goods that are thought to be overconsumed such as cigarettes alcohol and sugary drinks is that they often fall disproportionately on low income consumers this paper studies the interaction between corrective and redistributive motives in a general optimal taxation framework and delivers empirically implementable formulas for sufficient statistics for the optimal commodity tax the optimal sin tax is increasing in the price elasticity of demand increasing in the degree to which lower income consumers are more biased or more elastic to the tax decreasing in the extent to which consumption is concentrated among the poor and decreasing in income effects because income effects imply that commodity taxes create labor supply distortions contrary to common intuitions stronger preferences for redistribution can increase the optimal sin tax if lower income consumers are more responsive to taxes or are more biased as an application we estimate the optimal nationwide tax on sugar sweetened beverages using nielsen homescan data and a specially designed survey measuring nutrition knowledge and self control holding federal income tax rates constant our estimates imply an optimal federal sugar sweetened beverage tax of 1 to 2 1 cents per ounce although optimal city level taxes could be as much as 60 lower due to cross border shopping

price gaps at the border evidence from multi country household scanner data abstract studies employing micro price data to examine the extent of international goods market integration tend to find that borders imply arbitrage impeding transaction costs inducing market segmentation within monetary unions these effects are found to be very minor though at least when online prices are considered however analyzing household scanner price data from three euro area member states belgium germany and the netherlands we document that households face and pay significantly different prices for identical goods across these countries in the vast majority around 75 of cases considered for regions within countries as a counterfactual however no evidence for such effects exists employing cross border shopping information we are able to draw direct conclusions about the question of integration of markets for a substantial number of goods in addition we can also derive a measure of border costs for most of them for goods for which no cross border shopping take place we provide a lower bound for border costs in the majority of cases in line with existing evidence our findings suggest considerable heterogeneities in border costs median values generally range between 15 and 20 of the price of a good for exact border cost estimates and between 18 and 20 for the derived lower bounds considering the distribution of values obtained suggests that most values lie in a range of 40 since our data set comprises purchase information from all major retailers present in a given market we are also able to examine the role of retailer heterogeneity for cross border price gap estimates differences in retailer composition turn out to be fairly small however grouping goods by various characteristics reveals that goods purchased more often tend to exhibit somewhat bigger border estimates considering the price or the goods category however does not yield any conclusive insights

housing development and urbanisation in china rapid urbanisation and rising income have led to a strong demand for housing in urban china however housing development has been distorted by speculation income inequality and lack of government support for low cost houses in recent years house prices become so high making the vast majority of urban residents unable to afford whereas rich families are able to buy many and leave them vacant income inequality is a major cause for rising house prices which in turn exaggerates income inequality further this vicious relationship has caused social tension between the rich and the poor and unhappiness among the middle and low income groups this paper discusses the factors responsible for the housing bubble in china and recommends appropriate policies to resolve this problem

the harambee movement and efficient public good provision in kenya abstract those familiar with kenya since independence will know of the importance of the harambee system the term harambee has come to mean the provision of goods usually social infrastructure through the voluntary cooperation of members of the community provision of public goods in this way is an important alternative to the more normal method provision through tax finance here we compare these two methods of provision with a view towards determining first the circumstances under which harambee might be more effective and second what policies might be pursued to best utilize this system

international prices costs and markup differences relative cross border retail prices in a common currency comove closely with the nominal exchange rate using product level prices and wholesale costs from a grocery chain operating in the united states and canada we decompose this variation into relative costs and markup components the high correlation of nominal and real exchange rates is driven mainly by changes in relative costs national borders segment markets retail prices respond to changes in costs in neighboring stores within the same country but not across the border prices have a median discontinuous change of 24 percent at the border and 0 percent at state boundaries jel f31 l11 l81

the morphology of price dispersion this paper is a study of the shape and structure of the distribution of prices at which an identical good is sold in a given market and time period we find that the typical price distribution is symmetric and leptokurtic with a standard deviation between 19 and 36 only 10 of the variance of prices is due to variation in the expensiveness of the stores at which a good is sold while the remaining 90 is due in approximately equal parts to differences in the average price of a good across equally expensive stores and to differences in the price of a good across transactions at the same store we show that the distribution of prices that households pay for the same bundle of goods is approximately normal with a standard deviation between 9 and 14 half of this dispersion is due to differences in the expensiveness of the stores where households shop while the other half is mostly due to differences in households choices of which goods to purchase at which stores we find that households with fewer employed members pay lower prices and do so by visiting a larger number of stores rather than by shopping more frequently

on income convergence among china hong kong and macau hong kong and macau were reunited with china in the late 1990s as two special administrative regions sars over the last half century they were china s good examples of economic development windows of openness and investors owing to historical reasons china lagged far behind hong kong and macau in terms of per capita incomes however rapid economic growth in china over the last three decades must have brought about a significant convergence of the three economies china s economic success has benefited from the integration of its two sars and the coastal provinces especially guangdong in terms of technological spillover massive investment and trade the economic trickledown direct investment and trade must have been important drivers of economic integration and income convergence this paper aims to analyse the trend and studies the determinants of income convergence between china and its two sars both parametric and non parametric techniques are employed to quantify the pace of convergence on per capita incomes in hong kong macau and the chinese provinces over a period of more than 40 years we find no evidence of convergence in the pre reform period but strong evidence of both absolute and conditional convergence in the post reform period over the reform period the pace of convergence is less than 1 per cent per annum without controlling for trade and more than 2 per cent conditional on trade

ethnic segregation and public goods evidence from indonesia this article contributes to the study of ethnic diversity and public goods provision by assessing the role of the spatial distribution of ethnic groups through a new theory that we call spatial interdependence we argue that the segregation of ethnic groups can reduce or even neutralize the diversity penalty in public goods provision that results from ethnic fractionalization this is because local segregation allows communities to use disparities in the level of public goods compared with other communities as leverage when advocating for more public goods for themselves thereby ratcheting up the level of public goods across communities we test this prediction on highly disaggregated data from indonesia and find strong support that controlling for ethnic fractionalization segregated communities have higher levels of public goods this has an important and underexplored implication decentralization disadvantages integrated communities vis a vis their more segregated counterparts

creating micro marketing pricing strategies using supermarket scanner data micro marketing refers to the customization of marketing mix variables to the store level this paper shows how prices can be profitably customized at the store level rather than adopting a uniform pricing policy across all stores historically there has been a trend by retailers to consolidate independent stores into large national and regional chains this move toward consolidation has been driven by the economies of scale associated with these larger operations however some of these large chains have lost the adaptability of independent neighborhood stores micro marketing represents an interest on the part of managers to combine the advantages of these large operations with the flexibility of independent neighborhood stores a basis for these customized pricing strategies is the result of differences in interbrand competition across stores these changes in interbrand competition are measured using weekly store level scanner data at the product level obviously this presents a huge estimation problem since we wish to measure substitution between each product at a store level for a chain with 100 stores and 10 products in a category we would need to estimate over 100 000 parameters to reliably estimate these individual store differences we phrase our problem in a hierarchical bayesian framework essentially each store level parameter can be thought of as a combination of chain level and random store specific effects the improvement in estimating this model comes from exploiting the common chain level component in addition we relate these store specific changes to demographic and competitive characteristics of the store s trading area which helps explain why these differences are present these estimated differences in price response are in turn used to set store level prices to simplify and focus the problem we limit our attention to everyday price changes i e the prices of products that are not advertised there are many marketing variables that can be adjusted at a storelevel e g promotions and product assortments the reason we concentrate upon everyday pricing is driven by its importance in the marketing mix that most profits are earned on products sold at their everyday price and the amenability of everyday prices to store level customizations a limitation of this approach is that it yields only a partial solution to the retailer s global optimization problem a challenge for the retailer in implementing micro marketing pricing strategies is to retain a consistent image while altering prices that adapt to neighborhood differences in demand our approach is to search for price changes that leave image unchanged we argue that a sufficient condition for holding the input to store image constant from everyday pricing is to hold average price and revenues at their current levels we implement this condition by introducing constraints into the profit maximization problem future research into store choice may yield more efficient conditions a benefit of holding the retailer s image constant is that it does not require costly new information about competitors and promotional activity instead retailers are able to derive these store level customizations based largely upon scanner data this is very advantageous since this information is already being collected and is readily available our results indicate that micro marketing pricing strategies would be profitable and could increase gross profit margins by 4 percent to 10 percent when these gross profit gains are considered after administrative and operating costs are taken into account they could increase operating profit margins by 33 percent to 83 percent these gains come from encouraging consumers through everyday price changes to switch to more profitable bundles of products and not through overall price changes at the chain level these results show that the information contained in the retailer s store level scanner data is an under utilized resource by exploiting this information using newer and more powerful computational techniques managers can better appreciate its value the implication is that profits could be increased and gains can be made by using this information as the basis for micro marketing

multi category competition and market power a model of supermarket pricing in many competitive settings consumers buy multiple product categories and some prefer to use a single firm generating complementary cross category price effects to study pricing in supermarkets an organizational form where these effects are internalized we develop a multi category multi seller demand model and estimate it using uk consumer data this class of model is used widely in theoretical analysis of retail pricing we quantify crosscategory pricing effects and find that internalizing them substantially reduces market power we find that consumers inclined to one stop rather than multi stop shopping have a greater pro competitive impact because they generate relatively large cross category effects

the cyclicality of sales regular and effective prices business cycle and policy implications author s coibion olivier gorodnichenko yuriy hong gee hee abstract we study the cyclical properties of sales regular price changes and average prices paid by consumers effective prices using data on prices and quantities sold for numerous retailers across many us metropolitan areas inflation in the effective prices paid by consumers declines significantly with higher unemployment while little change occurs in the inflation rate of prices posted by retailers this difference reflects the reallocation of household expenditures across retailers a feature of the data which we document and quantify rather than sales we propose a simple model with household store switching and assess its implications for business cycles and policymakers jel d12 e31 e32 l25 l81

religious conversion in colonial africa within economics there has been a recent effort to better understand the notion of culture typically defined as beliefs values and norms held by individuals empirical work has focused on identifying systematic cultural differences between individuals from different ethnic and national backgrounds more recently attention has turned to the historical origins of cultural differences e g luigi guiso paolo sapienza and luigi zingales 2008 nathan nunn and leonard wantchekon 2009 colonial africa provides a natural laboratory to examine how an external intervention can have lasting impacts on people s beliefs and values this study examines the effect of european missionary activities in colonial africa on the subsequent evolution of culture as measured by religious beliefs the empirical results show that descendants of ethnic groups that experienced greater missionary contact are today more likely to self identify as christian this correlation provides evidence that foreign missionaries altered the religious beliefs of africans and that these beliefs persist as they are passed on from parents to children put differently the results show that historic events can have a lasting impact on culture the findings also provide rare empirical evidence of the historical determinants of longrun religious conversion studies of conversion typically focus on contemporary determinants see jason hwang and robert barro 2007 and the references therein although a number of studies have examined the long term impacts of missionary activities they have not considered their long run impacts on religious beliefs and values e g robert d woodberry 2004 one of the few papers that consider a historical determinant of long run conversion is by murat religious conversion in colonial africa

risk and return abstract this paper examines the seasonality in the basic relationship between expected return and risk during 1935 82 the results reveal that the positive relationship between return and risk is unique to january the risk premiums during the remaining eleven months are not significantly different from zero

causal relationship between asset prices and output in the united states evidence from the state level panel granger causality test emirmahmutoglu f bacilar m apergis n simo kengne b d chang t and gupta r causal relationship between asset prices and output in the united states evidence from the state level panel granger causality test regional studies this paper investigates the causal relationship between asset prices and output across us states using a bootstrap panel granger causality approach which allows not only for heterogeneity and cross sectional dependence to be accounted for but also interdependency between asset markets empirical results from a trivariate vector autoregression var comprising real house prices real stock prices and real per capita personal income over 1975 2012 reveal the existence of a unidirectional causality running from both asset prices to output this confirms the leading indicator property of asset prices for the real economy while also substantiating the wealth and or collateral transmission mechanism

learning through noticing theory and evidence from a field experiment we consider a model of technological learning under which people learn through noticing they choose which input dimensions to attend to and subsequently learn about from available data using this model we show how people with a great deal of experience may persistently be off the production frontier because they fail to notice important features of the data they possess we also develop predictions on when these learning failures are likely to occur as well as on the types of interventions that can help people learn we test the model s predictions in a field experiment with seaweed farmers the survey data reveal that these farmers do not attend to pod size a particular input dimension experimental trials suggest that farmers are particularly far from optimizing this dimension furthermore consistent with the model we find that simply having access to the experimental data does not induce learning instead behavioral changes occur only after the farmers are presented with summaries that highlight previously unattended to relationships in the data jel codes d03 d83 o13 o14 o30 q16

what is the price of tea in china goods prices and availability in chinese cities author s feenstra robert c xu mingzhi antoniades alexis abstract abstract we examine the price and variety of a sample of consumer goods at the barcode level in cities within china unlike the position in the united states in china the prices of goods tend to be lower in larger cities we explain that difference between the countries by the more uneven spatial distribution of manufacturers sales and retailers in china and we confirm the pro competitive effect of city size on reducing markups there in both countries there is a greater variety of goods in larger cities but that effect is more pronounced in china combining the lower prices and greater variety the price indexes in china for the goods we study fall with city size by around seven times more than in the united states

scraped data and sticky prices i use daily prices collected from online retailers in five countries to study the impact of measurement bias on three common price stickiness statistics relative to previous results i find that o

financial globalisation and emerging markets volatility the volatility of capital flows to emerging market em countries and frequency of financial crises have imposed high welfare costs on the countries involved the empirical literature provides at best a mixed picture on the relationship between long run em country growth and financial integration meanwhile the prevailing policy discourse regarding reform of the international financial system remains incomplete the focus has largely been on either institutional and policy measures required of em countries or international crisis resolution procedures the role played by private financial markets and institutions in the developed world has not received adequate attention this paper describes some of the structural features inherent in today s financial markets that directly contribute to the instability in em capital flows