natural resources curse or blessing are natural resources a curse or a blessing the empirical evidence suggests that either outcome is possible this paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources these include that a resource bonanza induces appreciation of the real exchange rate deindustrialization and bad growth prospects and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law corruption presidential democracies and underdeveloped financial systems another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad induces corruption especially in nondemocratic countries and keeps in place bad policies finally resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets the survey also offers some welfare based fiscal rules for harnessing resource windfalls in developed and developing economies

buyer power with atomistic upstream entry can downstream consolidation increase production and welfare abstract this paper investigates the effects of buyer power on entry into an atomistic upstream market and economic welfare under reasonable market conditions we show that industries with a few buyers induce more upstream entry than industries with a larger number of firms in particular monopsony can be more conducive to entry and lead to higher social welfare than more fragmented industry structures this seeming paradox arises because a single buyer better internalizes the positive effects of entry on later periods supply conditions than a collection of firms this result is relevant in a number of market settings including markets for specialized labor and processing markets for agricultural products

do better schools matter parental valuation of elementary education the evaluation of numerous school reforms requires an understanding of the value of better schools given the difficulty of calculating the relationship between school quality and student outcomes i turn to another method and use house prices to infer the value parents place on school quality i look within school districts at houses located on attendance district boundaries houses then differ only by the elementary school the child attends i thereby effectively remove the variation in neighborhoods taxes and school spending i find that parents are willing to pay 2 5 percent more for a 5 percent increase in test scores this finding is robust to a number of sensitivity checks

entrepreneurial drain under moral hazard a high yield sector curse we describe a two sector general equilibrium model of productive sorting under output risk and incomplete information risk neutral entrepreneurial individuals can either produce alone or acting as employers insurers team up with risk averse non entrepreneurial individuals although the latter option has the potential to generate more surplus when effort is unobservable and risk is high the moral hazard problem in mixed matches may be too severe for mixing to be attractive to both risk aversion types leading to a segregated equilibrium in which risk averse individuals select low risk low yield activities an increase in the profitability of the riskier sector can then trigger a switch from a mixed to a segregated equilibrium and cause aggregate output to fall evidence from a panel of non oecd countries showing that the presence of uninsured small scale mining firms has a negative impact on the relationship between natural resource exports and agrarian productivity suggests that this high yield sector curse might be present in natural resource rich low income countries

facilitating practices the effects of advance notice and best price policies even if firms in a market choose discount prices noncooperatively the use of most favored customer and meet or release contracts enables those firms to adopt quantity choice strategies consequently there can be a range of list prices that are impervious to unilateral nonselective discounts but this range does not include prices above the level determined in a cournot equilibrium the practice of advance public notification of list price increases can facilitate the establishment of such supracompetitive list prices as was argued in the recent ftc ethyl case the possibility of offering discounts selectively results in a much more competitive situation

secession with natural resources we look at the formation of new indian states in 2001 to uncover the effects of political secession on the comparative economic performance of natural resource rich and natural resource poor areas resource rich constituencies fared comparatively worse within new states that inherited a relatively larger proportion of natural resources we argue that these patterns reflect how political reorganisation affected the quality of state governance of natural resources we describe a model of collusion between state politicians and resource rent recipients that can account for the relationships we see in the data between natural resource abundance and post breakup local outcomes

a study of cartel stability the joint executive committee 1880 1886 this article employs weekly time series data on the joint executive committee railroad cartel from 1880 to 1886 to test empirically the proposition that observed prices reflected switches from collusive to noncooperative behavior an equilibrium model of dynamic oligopoly with asymmetric firms together with explicit functional form assumptions about costs and demand determines the estimating equations and stochastic structure of the econometric model the hypothesis that no switch took place so that price and quantity movements were solely attributable to exogenous shifts in the demand and cost functions is then tested against this alternative and rejected

an experimental examination of the volunteer s dilemma the volunteer s dilemma is an n person binary choice game in which a single contributor volunteer is all that is needed for a given benefit to be enjoyed by all players examples include casting a politically costly veto or attempting an emergency rescue the contribution decision is costly and the symmetric nash equilibrium involves mixed strategies these nash predictions have the intuitive property that the probability of volunteering is a decreasing function of the number of players there is however a surprising feature the equilibrium probability of obtaining no volunteers is increasing in the number of players and may be quite large depending on parameters even as the number of players goes to infinity these predictions are evaluated with a laboratory experiment the data show deviations from both nash and quantal response equilibria and alternative explanations e g a combination of quantal response and inequity aversion are explored note most of this is from an earlier version that was only based on data from uva for group sizes of 2 3 and 6 the power point has the new data

rent seeking and resource booms abstract this paper develops a model of rent seeking in which the opportunity cost of rent seeking is foregone entrepreneurship it provides conditions under which resource booms tend to lead to an increase in rent seeking activity and those in which they induce entrepreneurship we identify an important difference between the two activities which leads resource booms to bias gains in favour of rent seeking over entrepreneurship but we also show that this bias depends on the nature of the initial equilibrium

election cycles and electricity provision evidence from a quasi experiment with indian special elections abstract we present evidence from india showing that state governments induce electoral cycles in electricity service provision our data and research strategy allow us to build on models of political business cycles and targeted distribution in two important ways first we demonstrate that by manipulating the flow of critical inputs into economic activity like electricity elected leaders can influence economic outcomes even in contexts where they have constrained fiscal capacity second we identify the effect of elections on electricity provision by focusing on special elections held for exogenous reasons our results show that state governments induce substantive increases in electricity service to constituencies that hold special elections manipulation of the power supply is stronger in contested constituencies and during special elections held in states where the government commands only a small majority overall we find no evidence of positive welfare effects from the electoral manipulation of electricity supply

the logit equilibrium a perspective on intuitive behavioural anomalies costs associated with deviations from the nash equilibrium these payoff asymmetry effects are incorporated in an approach that introduces noisy behavior via a logit probabilistic choice function in the resulting logit equilibrium behavior is characterized by a probability distribution that satisfies a rational expectations consistency condition the beliefs that determine players expected payoffs match the decision distributions that arise from applying the logit rule to those expected payoffs we prove existence of a unique symmetric logit equilibrium and derive comparative statics results the paper provides a unified perspective on many recent laboratory studies of games in which nash equilibrium predictions are inconsistent with both intuition and experimental evidence

the private returns to public office we study the wealth accumulation of indian state politicians using public disclosures required of all candidates the annual asset growth of winners is 3 5 percent higher than that of runners up a difference that holds also in a set of close elections the relative asset growth of winners is greater in more corrupt states and for those holding ministerial positions these results are consistent with a rent seeking explanation for the relatively high rate of growth in winners assets

the political economy of the maoist conflict in india an empirical analysis we study the maoist naxalite conflict in india by constructing a comprehensive district level database combining conflict data from four different terrorism databases to socioeconomic and geography data from myriad sources using data on 360 districts for three time periods we find that land inequality and lower incomes are important factors behind the conflict exploiting the micro structure of the data we show that growth of incomes of scheduled tribes significantly decreases the intensity of the conflict finally we show that historical property rights institutions from colonial times that go back centuries affect present day conflict outcomes

economic science an experimental approach for teaching and research economics experiments have been used to study theories and policies that are often difficult to evaluate with data from naturally occurring markets this paper is a selective summary of my work in the main areas of experimental economics markets individual decisions games and public choice the discussion pertains both to scientific discoveries and teaching innovations

subjective probabilities in games an application to the overbidding puzzle this article illustrates how the joint elicitation of subjective probabilities and preferences may help us understand behavior in games we conduct an experiment to test whether biased probabilistic beliefs may explain overbidding in first price auctions the experimental outcomes indicate that subjects underestimate their probability of winning the auction and indeed overbid when provided with feedback on the precision of their predictions subjects learn to make better predictions and to curb significantly overbidding the structural estimation of different behavioral models suggests that biased probabilistic beliefs are a driving force behind overbidding and that risk aversion plays a lesser role than previously believed

learning and noisy equilibrium behavior in an experimental study of imperfect price competition we consider a duopoly pricing game with a unique bertrand nash equilibrium the high price firm has a nonvanishing market share however and intuition suggests that observed prices may be positively related to this market share this relationship is implied by a model in which players make noisy logit best responses to expected payoff differences the resulting logit equilibrium model was used to design an experiment in which the high price firm s market share varies the model accurately predicts the final period price averages a naive learning model predicts the observed differences in the time paths of average prices

a bright idea for measuring economic growth most readers of this article are already familiar with images of the earth at night which are really montages showing satellite views of visible lights 1 looking at such images it is easy to see that the brightness of visible lights is strongly related to both population density and income per capita the effect of population density shows up in the visibility of urban agglomerations coastlines river valleys and even the higher density of population along the paths of highways and railroads similarly the northeastern united states is far brighter than the mountain west even though they have similarly levels of income the effect of income is similarly easy to see sharp economic boundaries such as the inter korean border show up plainly india with a population density slightly higher than japan is significantly dimmer the observation that income per capita is one of the determinants of visible light suggests that one might potentially use visible light to help measure income in this paper we explore the usefulness of these night lights data to economists studying issues related to economic growth and the national or local level in particular we ask the extent to which lights data can augment or entirely replace data on gross domestic product 2 there are a number of obstacles to using lights visible from space to measure income broadly falling into two categories first the relationship between economic activity and the true amount of light emanating from the earth s surface is not constant across time and space light visible from space is a byproduct of consumption and production activities but light is hardly produced in a fixed ratio to output some productive activities such as steelmaking produce a lot of light others such as software design produce very little countries or regions may differ in the fraction of their economic activity that takes place after dark for example las vegas vs salt lake city patterns of settlement for example whether people live in multi storey buildings the availability of hydropower etc may all affect how much light is visible from space for a given level of income and population second true light is imperfectly measured by the satellites humidity reflectivity and time periods excluded from coverage because of sunlight moonlight and cloud cover contamination all differ across the globe sensor scale for recording lights in practice varies across satellites and as satellites age over time if one is measuring economic growth some of the location specific factors are differenced out the rest we treat as measurement error in the relationship between gdp growth and light growth we note that while we focus on measuring total income growth of regions one might be also interested in growth in income per capita we don t pursue that here although we have explored the issue by using population growth numbers to supplement lights growth population is both conceptually and practically easier to measure than is income so it is also feasible to alternatively focus on income growth per capita despite problems the night lights data have several advantages the first has to do with the nature of measurement error in lights data a number of studies have recently reminded economists that much of the data on gdp growth in developing countries is plagued by serious measurement error for example johnson et al 2009 study revisions in the penn world tables a standard measure of gdp they find that comparing version 6 1 of that data released in 2002 with version 6 2 released in 2006 the standard deviation of the change in countries average growth over the period 1970 1999 was 1 1 per year which is very large relative to the average growth rate of 1 56 per year this indicates that at least one of the measures and presumably both contained a great deal of error we do not claim that the measurement error in the night lights data is smaller than that in conventional data but we do think that the two forms of measurement error are poorly or not correlated it is well know that combing two problematic measures can produce a composite with smaller measurement error than either of them a second advantage of the night lights data is that they are available for regions for which standard gdp measures are not these include sub national units such as cities and regions as well as entities that cross national borders like biomes economic analysis of growth and of the impacts of policies and events on cities and regions of many countries is hindered by a complete absence of any regular measure of local economic activity much of the interesting variation in economic growth takes place within rather than between countries however for the vast majority of economics research empirical analysis of growth has become synonymous with use of national accounts data the night lights data offer a tool that allows the researcher to set aside this limitation the rest of this paper is organized as follows in section i we briefly discuss the night lights data section ii outlines our statistical approach to combining data from lights with conventional measures of gdp and presents results of an exercise applying our technique to a set of low and middle income countries section iii discusses an application beyond the measurement of national income we refer the reader to our companion paper henderson storeygard and weil 2009 for more detailed discussion of many of the technical and statistical issues raised here

the evolution of culture and institutions evidence from the kuba kingdom we use variation in historical state centralization to examine the long term impact of institutions on cultural norms the kuba kingdom established in central africa in the early 17th century by king shyaam had more developed state institutions than the other independent villages and chieftaincies in the region it had an unwritten constitution separation of political powers a judicial system with courts and juries a police force a military taxation and significant public goods provision comparing individuals from the kuba kingdom to those from just outside the kingdom we find that centralized formal institutions are associated with weaker norms of rule following and a greater propensity to cheat for material gain this finding is consistent with recent models where endogenous investments to inculcate values in children decline when there is an increase in the effectiveness of formal institutions that enforce socially desirable behavior consistent with such a mechanism we find that kuba parents believe it is less important to teach children values related to rule following behaviors

anomalous behavior in a traveler s dilemma the notion of a nash equilibrium has joined supply and demand as one of the two or three techniques that economists instinctively try to use first in the analysis of economic interactions moreover the nash equilibrium and closely related game theoretic concepts are being widely applied in other social sciences and even in biology where evolutionary stability often selects a subset of the nash equilibria many people are uneasy about the stark predictions of the nash equilibrium in some contexts where the extreme rationality assumptions seem implausible kaushik basu s 1994 traveler s dilemma is a particularly convincing example of a case where the unrelenting logic of game theory is at odds with intuitive notions about human behavior the story associated with the dilemma is that two travelers purchase identical antiques while on a tropical vacation their luggage is lost on the return trip and the airline asks them to make independent claims for compensation in anticipation of excessive claims the airline representative announces

political centralization and government accountability boffa acknowledges financial support from the free university of bolzano ww82 piolatto from the spanish ministry of science and innovation eco 2012 37131 and the government of catalonia 2014 sgr 420 ponzetto from the spanish ministry of science and innovation jci 2010 08414 and eco 2011 25624 the spanish ministry of economy and competitiveness ryc 2013 13838 the government of catalonia 2009 sgr 1157 and 2014 sgr 830 the barcelona gse and the bbva foundation through its first grant for researchers innovators and cultural creators

institutions and the resource curse countries rich in natural resources constitute both growth losers and growth winners we claim that the main reason for these diverging experiences is differences in the quality of institutions more natural resources push aggregate income down when institutions are grabber friendly while more resources raise income when institutions are producer friendly we test this theory building on sachs and warner s influential works on the resource curse our main hypothesis that institutions are decisive for the resource curse is confirmed our results contrast the claims of sachs and warner that institutions do not play a role

impact of valuation ranking information on bidding in first price auctions a laboratory study abstract landsberger et al landsberger m rubinstein j wolfstetter e zamir s 2001 first price auctions when the ranking of valuations is common knowledge review of economic design 6 461 480 identified optimal bidder behavior in first price private value auctions when the ranking of valuations is common knowledge and they derived comparative statics predictions regarding the auctioneer s expected revenue and the efficiency of the allocation the experiment reported here tests the behavioral components of these comparative statics predictions the results support the prediction that buyers are inclined to bid more aggressively when they learn they have the low value contrary to the theory buyers are inclined to bid less when they learn they have the high value consistent with theory the overall proportion of efficient allocations is lower than in the first price auction before information is revealed but as a result of high value bidders decreasing their bids the expected revenue does not increase on a regular basis contrary to the theory s predictions

an experimental study of jury decision rules we present experimental results on groups facing a decision problem analogous to that faced by a jury we consider three treatment variables group size three or six number of votes needed for conviction majority or unanimity and pre vote deliberation we find evidence of strategic voting under the unanimity rule a large fraction of our subjects vote for a decision analogous to conviction even when their private information indicates a state analogous to innocence this is roughly consistent with the game theoretic predictions of feddersen and pesendorfer although individual behavior is explained well by the game theoretic model there are discrepancies at the level of the group decision contrary to feddersen and pesendorfer in our experiments there are fewer outcomes analogous to incorrect convictions under unanimity rule than under majority rule in the case of no deliberation we simultaneously account for the individual and group data using quantal response equilibrium

pricing behavior in asymmetric markets with differentiated products abstract we experimentally test bertrand nash equilibria in markets with differentiated products in contrast to the existing literature we choose asymmetric market settings in which pure strategy equilibria do not exist our results show that bertrand nash equilibria do remarkably well in predicting price distributions and comparative statics inaccuracies can be explained by boundedly rational decision making other equilibrium concepts are not able to explain the data

cooperating over losses and competing over gains a social dilemma experiment evidence from studies in international relations the politics of reform collective action and price competition suggests that economic agents in social dilemma situations cooperate more to avoid losses than in the pursuit of gains to test whether the prospect of losses can induce cooperation we let experimental subjects play the traveler s dilemma in the gain and loss domain subjects cooperate substantially more over losses furthermore our results suggest that this treatment effect is best explained by reference dependent risk preferences and reference dependent strategic sophistication we discuss the implications of our results and relate our findings to other experimental games played in the loss domain

buyer search and price dispersion a laboratory study we study markets with costly buyer search in which sellers simultaneously post prices buyers costlessly observe one or with probability 1 q two of the posted prices and can accept one or pay to search again the experiment varies q the search cost and the number of buyers equilibrium theory predicts a unified very low high price for q 0 q 1 and predicts specific distributions of dispersed prices for q 1 3 and 2 3 actual prices conform closely to the predictions in some treatments buyers reservation prices are biased away from the extremes however and sellers prices have positive autocorrelation and cross sectional correlation

the political resource curse this paper studies the effect of additional government revenues on political corruption and on the quality of politicians both with theory and data the theory is based on a political agency model with career concerns and endogenous entry of candidates the data refer to brazil where federal transfers to municipal governments change exogenously at given population thresholds allowing us to implement a regression discontinuity design the empirical evidence shows that larger transfers increase observed corruption and reduce the average education of candidates for mayor these and other more specific empirical results are in line with the predictions of the theory jel d72 d73 h77 o17 o18