banking crises and short and medium term output losses in emerging and developing countries the role of structural and policy variables summary the aim of this paper is to assess the dynamic impact of banking crises on output for a panel of developing economies using an unbalanced panel of 159 countries from 1970 to 2006 the paper shows that banking crises produce significant output losses output losses are larger for relatively richer economies characterized by a higher level of financial deepening and larger current account imbalances flexible exchange rates fiscal and monetary policy and liquidity support policies have been found to attenuate the effect of the crises

voter preferences and state regulation of smoking i introduction tobacco taxation and smoking restrictions are two areas of regulation for which states have maintained a high level of control relative to the federal government 1 given this flexibility states have established a wide range of restrictions on smoking in areas such as government workplaces restaurants bars shopping malls indoor arenas and hospitals 2 although most states restrict smoking in hospitals there is considerable variation among states in restrictions in other areas in the 1998 99 period of this study about two thirds of states restricted smoking in restaurants whereas only four states restricted smoking in bars what has led to variation in smoking restrictions across states in a democratic society one would expect voter preferences to play an instrumental role in determining which policies are enacted and which are not this article provides the first empirical exploration of whether state level smoking restrictions are consistent with preferences of the citizenry taking into account both voting behavior and the role of smoking status in influencing whether an individual votes specifically we examine whether voters preferences for smoking restrictions in restaurants bars malls indoor sporting events and hospitals are consistent with state level restrictions on smoking in each of these public areas 3 our research draws on public choice models of policy making by state and local governments voters preferences typically play a central role because voting affects legislators incentives to support regulations 4 public choice research also finds that nonvoter factors may influence state and local policy making 5 in the case of smoking regulations public health advocates or tobacco industry lobbyists might influence regulatory policies the specific building block of our analysis of state restrictions on smoking is information on individuals voting behavior which we link to their smoking status and preferences over smoking restrictions our analysis uses measures of political pressure that account for individual preferences as well as their voting behavior to examine the possible role of interest group pressures we also control for nonvoter influences on smoking regulation including the proportion of the state population who smoke measures of state ideology and size of the tobacco industry with the exception of smoking in bars there is majority support for smoking restrictions unsurprisingly smokers are less supportive of restrictions than are nonsmokers nonetheless even smokers demonstrate a high level of support for many restrictions smokers are also less likely to vote than are nonsmokers even after controlling for other demographic factors the lower voting rate diminishes voter opposition to antismoking regulation but is usually not critical in view of the substantial support that most smoking restrictions have among smokers the political pressure indices for restrictions on smoking in each public area are generally significantly related to the probability that a state restricts smoking in that public area the nonvoter factors such as the smoking rate in the state and tobacco s role in the state economy are rarely influential policy debates over the desirability of smoking restrictions emphasize possible health risks due to exposure to environmental tobacco smoke ets and effects on business profitability the primary argument for expanding smoking restrictions is to protect workers and customers from exposure to ets 6 as our results show voters are generally supportive of smoking restrictions in public areas which would thereby protect workers as well as themselves and other customers however there is a substantial controversy over the extent of health risks associated with exposure to ets the basis for the push by the u s occupational and safety health administration osha for increased smoking restrictions to protect workers is the highly controversial u

strategic extremism why republicans and democrats divide on religious values party platforms differ sharply from one another especially on issues with religious content such as abortion or gay marriage given the high return to attracting the median voter why do vote maximizing politicians take extreme positions in this paper we find that strategic extremism depends on an intensive margin where politicians want to induce their core constituents to vote or make donations and the ability to target political messages toward those core constituents our model predicts that the political relevance of religious issues is highest when around one half of the voting population attends church regularly using data from across the world and within the united states we indeed find a nonmonotonic relationship between religious extremism and religious attendance

the role of collateral in credit markets with imperfect information abstract the paper analyzes the structure of credit market equilibrium under imperfect information collateralization and credit rationing are compared as alternative means to cope with problems of adverse selection and moral hazard it is shown that lenders may use collateral as a self selection and incentive mechanism rationing occurs only if the borrowers collaterizable wealth is too small to allow perfect sorting or to create sufficiently strong incentives whenever there is rationing in an equilibrium some borrowers are charged the maximum amount of collateral

life is unfair in latin america but does it matter for growth summary i analyze the effect of inequality on economic growth in latin america where inequality is measured as the area of family farms as a percentage of the total area of agricultural holdings using data from 18 latin american countries during 1960 2004 i find that inequality has a nonlinear effect on economic growth overall for the countries included in this analysis the share of family farms has a positive significant effect on economic growth these findings are robust to controlling for several factors using a different indicator of inequality land gini and addressing for endogeneity

credit rationing in small scale enterprises special microenterprise programmes in ecuador small scale enterprises receive several forms of aid but many are denied access to formal loans a demand and supply model is estimated to analyse the factors lenders use to ration credit in special microenterprise programmes the results reveal that suppliers do not discriminate against less profitable enterprises and entrepreneurs who have not completed their high school education however these entrepreneurs have a smaller demand for external finance from the microenterprise programmes than more profitable enterprises and entrepreneurs who have graduated from high school

capital budgets borrowing rules and state capital spending abstract this paper compares the level and composition of government spending in u s states that maintain separate budgets for capital and operating expenditures with that in states that employ unified budgets it also investigates the effects of pay as you go financing rules for capital projects the empirical findings suggest that states with separate capital budgets spend more on public capital projects than comparable states with unified budgets there is no evidence that the presence or absence of a capital budget affects the level of non capital spending pay as you go requirements for financing capital projects are associated with lower levels of both capital and non capital spending

government policy and the firm s capital structure abstract the purpose of this paper is to examine the effects of commonly observed forms of government intervention on the firm s capital structure we show that since market claims against the firm are always properly priced the firm is forced to take market claimants interests into account on the other hand since government claims are usually not adjusted for risk the firm can take advantage of the government it does so by choosing strategies that extract maximum value minimum cost from these policies in particular the firm uses its capital capital structure to maximize the value of the policy thus leading to a determinate capital strucure

economic development institutional change and the political economy of agricultural protection an econometric study of belgium since the 19th century this empirical study uses 100 years of annual data on 11 agricultural commodities from belgium to measure the impact of structural changes coinciding with economic development and changes in political institutions on agricultural protection the analysis shows that changes in agricultural protection are caused by a combination of factors governments have increased protection and support to farmers when world market prices for their commodities fell and vice versa offsetting market effects on producer incomes other economic determinants were the share of the commodities in total consumer expenditures negative effect and in total output of the economy positive effect with belgium a small economy there was no impact of the trade position changes in political institutions have affected agricultural protection democratic reforms which induced a significant shift in the political balance towards agricultural interests such as the introduction of the one man one vote system led to an increase in agricultural protection the integration of belgian agricultural policies in the common agricultural policy in 1968 coincided with an increase in protection ceteris paribus both institutional factors related to changes in access to and information about the decision making at the eu level and structural changes in the agricultural and food economy may explain this effect

the case for restricting fiscal policy discretion this paper studies the effects of discretionary fiscal policy on output volatility and economic growth using data for 91 countries we isolate three empirical regularities 1 governments that use fiscal policy aggressively induce significant macroeconomic instability 2 the volatility of output caused by discretionary fiscal policy lowers economic growth by more than 0 8 percentage points for every percentage point increase in volatility 3 prudent use of fiscal policy is explained to a large extent by the presence of political constraints and other political and institutional variables the evidence in the paper supports arguments for constraining discretion by imposing institutional restrictions on governments as a way to reduce output volatility and increase the rate of economic growth

on the political economy of guest worker programs in agriculture guest workers have provided a source of agricultural labor supply in many countries recent legislative proposals on immigration reform in the united states have renewed discussions about the role of guest worker programs and highlighted the arguments for and against such programs even within the agricultural sector there has not been strong broad based support for an expansion in the number of guest workers a model is developed that considers competing interests between commodity groups horticulture crops and grain crops to explain this lack of support and then a series of simulations are conducted to highlight the possible economic effects of an expanded guest worker program results suggest that an increase in the labor supply would have much larger economic impacts for horticultural producers and firms in the supporting input markets furthermore under some conditions simulation outcomes show how an increase in the labor supply may lead to small revenue losses for both producers and input suppliers in grain markets

financial crises output losses and the role of structural reforms financial crises take a heavy toll on output growth we assess the role of structural reforms in reducing the output losses resulting from financial crises across advanced economies emerging and developing economies and low income developing economies we also revisit the role of macroeconomic policies in this context the impact of crises on output growth differs between types of crises and economies thus warranting sample splits along these lines some but not all reforms and policies help to reduce the output losses of crises in the medium term highlighting the need not to overgeneralize the effectiveness of reforms and policies further research is warranted to further explore the heterogeneity in the impact of financial crises on output growth and to better understand when and how specific structural reforms and macroeconomic policies can mitigate the output costs of financial crises jel e32 e44 e63 g28 o47

classifying exchange rate regimes deeds vs words abstract most of the empirical literature on exchange rate regimes uses the imf de jure classification based on the regime announced by the governments despite the recognized inconsistencies between reported and actual policies in many cases to address this problem we construct a de facto classification based on data on exchange rates and international reserves from all imf reporting countries over the period 1974 2000 which we believe provides a meaningful alternative for future empirical work on the topic the classification sheds new light on several stylized facts previously reported in the literature in particular we find that the de facto pegs have remained stable throughout the last decade although an increasing number of them shy away from an explicit commitment to a fixed regime hidden pegs we confirm the hollowing out hypothesis but show that it does not apply to countries with limited access to capital markets we also find that pure floats are associated with only relatively minor nominal exchange rate volatility and that the recent increase in the number of de jure floats goes hand in hand with an increase in the number of de facto dirty floats fear of floating

discontinuity of output convergence within the united states why has the course changed has the progress of output convergence changed within the united states this article examines the output convergence among u s states for the last five decades by making several improvements over the extant literature by applying a battery of convergence tests designed to capture nonlinear transitional dynamics to real output per worker data i e nominal values deflated by state level price we find that output convergence has not been a feature of the continental united states since the 1970s instead output convergence has proceeded among four subgroups within which constituent states have certain characteristics in common our regression analysis suggests that state level characteristics related to technology and human capital play a crucial role in accounting for the formation and composition of convergence clubs in agreement with the recent theoretical models of growth and development e g aghion et al 2009 gennaioli et al 2013b the level of technology proxied by patents turns out to be a consistently significant determinant even after controlling for endogeneity suggesting that frictions in the diffusion of technology and human capital may have led to clustering of states with different levels of productivity our results therefore cast doubt on the common view that diffusion of knowledge and technology across state borders is frictionless jel o47 o51

financial development and economic growth international evidence the importance of the relationship between financial development and economic growth has been well recognized and emphasized in the field of economic development 1 although recent writings on this subject seem to accept the hypothesis that financial development is crucial for successful economic growth 2 patrick asked the critical question which sector financial or real leads in the dynamic process of economic development patrick identified two possible patterns in the causal relationship between financial development and economic growth in the first growth induces an expansion of the financial system 3 according to this view called demand following the lack of financial growth is a manifestation of the lack of demand for financial services as the real side of the economy develops its demands for various new financial services materialize and these are met rather passively from the financial side in the second pattern the expansion of the financial system precedes the demand for its services channeling scarce resources from small savers to large investors according to relative rates of return the financial sector precedes and induces real growth the deliberate establishment and promotion of financial institutions in many less developed countries ldcs might reflect this belief in the supply leading relationship between the two developments a natural question then concerns the direction of causality between financial development and economic growth patrick asserted that the direction of causality changes over the course of development in his view financial development is able to induce real innovation type investment before sustained modern economic growth gets under way and as the process of real growth occurs the supply leading impetus gradually becomes less important and the demand following financial response

what explains the speed of recovery from banking crises abstract while a large body of research has explored the causes and effects of banking crises less is known about what determines recovery from banking crises despite large variations in post crisis performances across countries in order to identify local and global factors that determine the length of recovery i e the time it takes until countries reach their pre crisis level of per capita gdp this exploratory paper employs event history analysis on 138 incidents of banking crises between 1970 and 2012 regarding domestic factors the simultaneous occurrence of currency crises large financial sectors overvalued currencies and large primary deficits are associated with later recovery whereas higher debt to gdp ratios or inflation levels do not exhibit a negative effect on post crisis performances regarding external factors a low growth of world trade as well as indicators of uncertainty in financial markets are correlated with later recovery global interest rate shocks are particularly harmful for the speed of recovery among middle income countries with a strong reliance on external capital the results are similar when using the length of recessions as an alternative indicator of post crisis performances

budgetary policy with unified and decentralized appropriations authority the divestiture of the house appropriations committee in the1880 s has received considerable attention of an empiricalnature this paper presents a formal model of legislativedecisionmaking using a common agency formulation to representinterest group lobbying of legislators this framework is usedto analyze the effects of decentralizing appropriationsauthority the conditions under which decentralization leadsto higher spending are characterized it is argued that theconventional view that divestiture caused higher levels ofspending only holds if decentralization created barriers tolobbying and political bargaining across different committees in addition the role of specialized committee knowledge isexamined

under investing in public goods evidence causes and consequences for agricultural development equity and the environment a common factor that explains why agriculture causes too much environmental degradation grows too slowly and has been ineffective in reducing rural poverty is the generalized tendency by governments to under invest in public goods despite the high rates of return to such investments a large share of rural public expenditures is deviated to private goods mostly subsidies to the wealthy which generally have low or even negative rates of return behind such an obviously aberrant choice are political economy forces a highly unequal political lobby market leads to government policies that are biased in favor of economic elites and detrimental for both the environment and rural development globalization may affect this important distortion on the allocation of government expenditures in various ways one such way is by restricting the ability of governments to repress the political mobilization of the poor to counter the almost unchallenged power of the elites in the lobby market this may contribute toward creating conditions that are more consistent with sustainable and socially equitable development

pricing and regulating affect environmental ethics effluent charges and tradeable permits are economically efficient but rarely used a new explanation for this discrepancy is offered pricing may crowd out environmental ethics in the pricing and via spillovers also in non pricing sectors pricing may therefore increase pollution providing a reason why decision makers tend to reject environmental pricing five propositions showing the conditions for counterproductive effects are advanced they are consistent with available empirical evidence regulation by setting standards and subsidies damage environmental ethics less than pricing because pollution is condoned damaging environmental ethics may prevent political action in favor of the environment

ideological conviction and persuasion in the rent seeking society abstract the paper develops a model of rent seeking in a democratic political context where voting as well as rent seeking matters in this context the paper demonstrates that voter ideology is a constraint on the rent seeking game as well as a possible avenue of rent seeking in a setting where there are both rent seeking and ideological interest groups rent seekers can free ride on the efforts of ideologues which tends to reduce rent seeking effort in a setting where complementary economic and ideological interest groups coordinate their efforts both rent seeking and ideological conflict tend to increase

empirical measurement of credit rationing in agriculture a methodological survey empirical analysis of rural credit market failure has been of key scientific and political interest in recent years the aim of this article is to give an overview of the various methods for measuring credit rationing that are employed in the literature furthermore the methods are subjected to a comparative evaluation of their specific strengths or shortcomings six approaches are distinguished measurement of loan transaction costs analysis of qualitative information collected in interviews analysis of quantitative information collected in interviews using the credit limit concept analysis of spill over effects with regard to secondary credit sources econometric household modeling and the econometric analysis of dynamic investment decisions an explicit comparison with a first best solution is impossible in the first three approaches since they essentially rely on a subjective assessment of borrowers access to credit based on qualitative or quantitative indicators the fifth and sixth approaches allow a rigorous interpretation in the framework of neoclassical equilibrium theory the fourth approach takes an intermediate position since spill over on segmented loan markets reveals a willingness to pay with regard to the supposedly less expensive but rationed primary source the approaches are fairly data demanding in general usually requiring specific data on loan transactions even so most approaches are applicable to cross sectional household data with the exception of the first all methods surveyed might plausibly be used to empirically detect credit rationing

voting and paying for public goods an application of the theory of the core abstract let any coalition with a majority of all voters have the power to choose the quantities of public goods under rule i a majority coalition bears a cost of its decision that is proportional to its size under rule ii it must bear the whole cost of its decision thus rule i imposes costs on minorities although they have no power to choose the quantities of public goods while rule ii allows goods to have some attributes of semiprivate goods it is shown that a nonempty core under rule i implies a nonempty core under rule ii but not conversely necessary and sufficient conditions in terms of the properties of the von neumann morgenstern characteristic function are given

how bad are twins output costs of currency and banking crises we investigate the output effects of banking and currency crises in emerging markets focusing on whether twin crises entail especially large losses recent literature emphasizes the costs of financial crises and suggests that twin crises are particularly damaging to the real economy using a panel data set for 1975 97 we find that currency banking crises are very costly reducing output by about 5 8 8 10 over a 2 4 year period the cumulative loss of both types of crises is therefore very large we do not find however additional feedbacks or interactive effects associated with twin crises further damaging the economy

economic transition and growth some extensions of neoclassical growth models are discussed that allow for cross section heterogeneity among economies and evolution in rates of technological progress over time the models oer a spectrum of transitional behavior among economies that includes con vergence to a common steady state path as well as various forms of transitional divergence and convergence mechanisms for modeling such transitions and measuring them econo metrically are developed in the paper a new regression test of convergence is proposed its asymptotic properties are derived and some simulations of its nite sample properties are reported transition curves for individual economies and subgroups of economies are estimated in a series of empirical applications of the methods to regional us data oecd data and penn world table data

divided the two americas examining club convergence in the u s this paper finds club convergence within the 50 u s states using the phillips and sul regression based convergence test with per capita real state domestic product from 1997 to 2017 two clubs wit

peasant household behaviour with missing markets some paradoxes explained a model of peasant household behavior under varying degrees of household specific food and labor market failures is constructed to show that these structural features can explain several well known patterns of peasant response which have often been attributed to peculiar motives presumed specific to peasants the model explains sluggish response to cash crops prices and high instability in perceived food and labor scarcities the key role of manufactured consumer goods prices in stimulating peasants effort in cash crops production the effectiveness of taxation as opposed to incentives in stimulating cash crops production and the key role of technological change in food production to enhance cash crop production results are obtained analytically in the case of one market failure and by numerical simulation with more than one

the bias in favor of pro tariff lobbies abstract we show that the probability of success of the pro tariff lobby defined as a decreasing function of the ratio of consumer loss to producer gain rent generated by the tariff rises with the tariff under very general conditions this appears as an exception to becker s view that less distortionary measures tend to be adopted over their more distortionary counterparts we then provide a micro foundation for our probability definition using the imperfectly discriminating lobbying framework

the macroeconomic effects of fiscal rules in the us states abstract fiscal policy restrictions are often criticized for limiting the ability of governments to react to business cycle fluctuations and consequently the adoption of quantitative restrictions is viewed as inevitably leading to increased macroeconomic volatility in this paper we use data from 48 us states to investigate how budget rules affect fiscal policy outcomes our key findings are that 1 strict budgetary restrictions lead to lower policy volatility i e less aggressive use of discretion in conducting fiscal policy and 2 fiscal restrictions reduce the responsiveness of fiscal policy to output shocks these two results should have opposite effects on output volatility while less discretion should reduce volatility less responsiveness of fiscal policy might amplify business cycles we provide empirical support for the first effect restrictions by reducing discretion in fiscal policy can reduce macroeconomic volatility

random errors dirty information and politics rational voters assessments of candidates and policy proposals are unbiased but affected by random errors clean information decreases these errors while dirty information increases them in politics most voting procedures weigh random individual errors asymmetrically thus such errors do not counterbalance one another in the aggregate they systematically affect politics this illuminates the roles of political propaganda and interest groups it helps to explain various puzzles in public choice e g the frequent use of inefficient policy instruments institutional conditions are identified that shape the aggregate impact of individual errors and the politicians incentives to produce dirty information

informality and the labor market effects of financial crises abstract we provide evidence based on a large sample of countries on the effects of financial crises on key labor market indicators including official and unofficial employment unemployment and the participation rate crises are followed by a drop in the official market participation rate and by an increase in informal employment these responses are strongly persistent empirical results are then interpreted with a dsge model which accounts for informality and for financial and labor market frictions in this framework the informal sector acts as a buffer which absorbs workers in bad times and vice versa our simulations suggest the informal sector also is a crisis amplifier for the official economy for a given financial shock the ensuing contraction in the official economy is deeper and more persistent the larger the initial size of the unofficial sector this implies that in less developed economies financial crises cause a relatively stronger reallocation of inputs towards less efficient sectors expose a larger fraction of the population to the adverse effects of informality cause a sharper deterioration of public finances limiting governments ability to supply public goods and to engage in countercyclical fiscal policies

rent seeking market structure and growth we study the role of productive and unproductive entrepreneurship in economic growth in a setting where firms compete in both economic and political markets specifically firms compete for market share through cost reducing technological innovation and they vie for influence over government transfer policy through rent seeking activities we find that rent seeking affects growth in two ways it allows firms to ignore economic competition leading to less innovation and it alters the number of firms that are supported in equilibrium the former effect is negative while the latter is ambiguous we show how these effects depend on various characteristics of economic and political markets

appropriation violent enforcement and transaction costs a critical survey this paper focuses on the extension of transaction costs to appropriative activity and coercive power in the property rights approach it has been argued that including the costs of appropriation and violent enforcement in transaction costs is based on the assumption that coaseian bargaining can be extended to any institutional scenario i e voluntary as well as coercive exchange however voluntary transactions cannot capture the logic of coercive power this means that the assumption of an efficient political market is not valid and that the political coase theorem lacks the logical consistency to provide a cornerstone for political theory

how costly are debt crises the aim of this paper is to assess the short and medium term impact of debt crises on gdp using an unbalanced panel of 154 countries from 1970 to 2008 the paper shows that debt crises produce significant and long lasting output losses reducing output by about 10 percent after 8 years the results also suggest that debt crises tend to be more detrimental than banking and currency crises the significance of the results is robust to different specifications identification and endogeneity checks and datasets

the economics of special interest politics the case of the tariff this paper investigates the interaction of politicians and special interest lobbies the goal is to model the equilibrium levels of redistributive policies such as taxes subsidies tariffs and regulatory decisions the model is applied throughout to the setting of tariffs by contributing to political campaigns special interest lobbies generate economic returns higher tariffs generate revenue for import competing industries through higher product prices higher milk support prices raise dairy farm income and so forth the lobby invests to maximize these net economic returns in evaluating their chances of election politicians weigh the favorable effects of special interest money against the unfavorable association with the lobby and the social cost of the redistributive policy section i explores the lobby s problem it describes a formalization of mancur olson s discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns section ii describes determination of the equilibrium tariff positions of each politician in a political campaign

a socio economic study of the borrowing process the case of microentrepreneurs in jordan this paper investigates the socio economic determinants of four stages of borrowing process of the jordanian microfinance market the equations and functions corresponding to the stages of the borrowing process are estimated using a sample of 474 microentrepreneurs the main results are as follow variables that reflect the repayment ability are the main determinants of credit rationing in the microfinance market religious beliefs social responsibilities availability of local microfinance provides application costs level of knowledge about microfinance providers significantly affect the borrowing process of microentrepreneurs credit rationing is found to be a problem for some applicants but not for the majority

transaction costs institutional design and the separation of powers abstract the internal organization of the government can be used as a constraint on the capture of political decision makers in a setting where multiple interest groups try to influence policy outcomes centralization i e the choice of a single agency dealing with all interest groups is costly because it induces a better coordination of their influences the choice of specialized agencies is better because it increases the overall transaction costs of capture making agencies more immune to capture by interest groups more generally we discuss how an institutional design relying on separation of powers among specialized agencies may improve policy outcomes

openness country size and government abstract this paper shows that smaller countries have a larger share of public consumption in gdp and are also more open to trade these empirical observations are consistent with recent theoretical models explaining country formation and break up and may account for the observed positive empirical relationship between trade openness and government size

the fiscal cost implications of an accommodating approach to banking crises abstract in recent decades a majority of countries have experienced a systemic banking crisis requiring a major and expensive overhaul of their banking system budgetary outlays whether immediate or deferred have exceeded 50 of gdp in some cases this paper uses cross country econometric evidence to examine whether the design of crisis containment and resolution policies can systematically influence the overall magnitude of fiscal costs we find that accommodating policies such as blanket deposit guarantees open ended liquidity support repeated partial recapitalizations debtor bail outs and regulatory forbearance all tend to add significantly and sizably to fiscal costs

the policy roots of socioeconomic stagnation and environmental implosion latin america 1950 2000 abstract the persistence of growth and its equity and environmental effects heavily depend on the composition of asset investments physical human and natural capital are the key assets behind the development process market failures tend to affect the accumulation of such assets asymmetrically leading to underinvestment in human and natural capital public policy in latin america has generally exacerbated such market failures by promoting physical capital investments using massive public subsidies instead of relying on the expansion of public and semipublic assets that complement physical capital the result economic stagnation deep social inequities and environmental destruction

regulation competition and liberalization in many countries throughout the world regulators are struggling to determine whether and how to introduce competition into regulated industries this essay examines the complexities involved in the liberalization process while stressing the importance of case specific analyses this essay distinguishes liberalization policies that generally are procompetitive from corresponding anticompetitive liberalization policies

explaining price policy bias in agriculture the calculus of support maximizing politicians a model is developed to explain observed patterns of policy intervention in agriculture we analyze the interaction between political support seeking politicians and supportsupplying citizens society consists of a rural and urban group we determine the effects on transfers of relative group size disparities in income endowments between groups and the deadweight loss of redistribution the framework advanced is an alternative to that of the interest group model and is used to explain for example why the export sectors in developing countries are taxed more and why the united kingdom is less adamant for higher price supports than germany

the effects of systemic banking crises in the inter war period abstract this paper examines the time profile of the impact of systemic banking crises on gdp and industrial production using a panel of 24 countries over the inter war period and compares this to the post war experience of these countries we show that banking crises have effects that induce medium term adjustments on economies focussing on an eight year horizon it is clear that the negative effects of systemic banking crises last over the entirety of this time horizon the effect has been identified for gdp and industrial production the adverse effect on the industrial sector stands out as being substantially larger in magnitude relative to the macroeconomic effect comparing the results across long run historical periods for the same selection of countries and variables identifies some differences that stand out the short term macroeconomic impact effects are much larger in the post war period suggesting that the propagation channels of shocks operate at a faster pace in the more recent period moreover the time profile of effects differs suggesting that modern policies may be modulating the temporal shape of the response to banking crises shocks however the broad magnitude of the adverse effect of banking crises remains comparable across these time periods

allocation of goods by lottery i introduction many goods such as hunting permits oil drilling leases cellular telephone licenses and rights to fishing berths as well as some buds such as the military draft jury duty and who is to be thrown overboard on a sinking life raft are or have been allocated by lotteries in neo classical welfare economics the random distribution of property rights does not affect allocative efficiency as long as transferability is allowed and the transactions costs are non prohibitive lottery allocations however are generally not transferable thus lottery allocations are inefficient since the goods are not ultimately allocated to the users who value them the most a number of authors such as aubert 1959 fienberg 1971 eckhoff 1989 and elster 1989 36 122 have argued that lotteries are chosen as the allocative instrument because it represents a fair or just means of allocating the goods rawls 1971 374 and eckhoff 1989 have noted that where it is impractical to divide the goods equally among those who desire them a lottery serves to satisfy both the requirement that the process be fair and that the allocation problem be resolved relatively costlessly elster 1989 113 however notes that lotteries are not the only fair allocation mechanism for example he points out that in jewish ethics the problem of allocating an indivisible good such as life saving resources is resolved by denying it to everyone even economists would probably prefer a lottery to this resolution the fairness hypothesis has a rich history in the old testament lotteries are deemed a fair way of allocating goods such as the inheritance of land numbers 33 54 lotteries are also used to allocate bads in perhaps the most famous biblical example of use of lots jonah was chosen by lot to be sacrificed to appease god who had brought a storm that threatened to wreck the ship the story goes that the lot selected jonah because he was shirking his duties elsewhere and should not have even been on the vessel jonah 1 6 1 notice that fair here is taken to mean just given this theological foundation it is not surprising that the lottery has seen frequent use in legal history as well one of the most interesting cases occurred in swedish and finnish trials in the 17th and 18th centuries in cases where a man was murdered by a mob lotteries were used to allocate punishment since the law required an eye for an eye no more and no less eckhoff says that if it was impossible to ascertain which of them had dealt the mortal blow the courts determined that one of the responsible parties be sentenced to death and that the person be selected by lottery 1989 19 a similar use of lotteries occurs in military history to deal with cases of mass desertion in roman armies every tenth man was executed decimated and the remainder pardoned in more modern times the lottery has been used in u s law 2 first of course is the use of a lottery to decide who shall sit on a jury a connection between fairness and lotteries however has also appeared in the common law in an 1842 case u s v holmes which has been discussed by fienberg 1971 eckhoff 1989 and elster 1989 a ship sank in a heavy storm and the lone surviving life raft was in grave danger of sinking the crew threw overboard fourteen male passengers in an effort to save the rest when back in port after being rescued a crewman named holmes the only crew member who had not disappeared upon arrival to port was brought to trial for the deaths of the passengers the court ruled that the non essential members of the crew should have been thrown overboard before any passengers and if that was not sufficient then passengers should have been selected by lot which is the fairest mode elster 1989 65 the fact that a human life presumably a large cost was at stake ex post did not affect the decision 3 the environmental economics literature contains a number of references to the social preferences for and benefits of lottery allocations

the influence on congress by the thrift industry abstract the investigation of the influential role of the thrift industry on congress as demonstrated by voting behavior on regulatory policy changes in the eighties is the focus of this study specifically we search for the degree to which the inadequately capitalized component of the thrift industry has captured the house of representatives we examine the influence on congress by the thrift industry using the votes by the house of representatives associated with three different legislative acts the garn st germain act the competitive equality banking act and the financial institutions reform recovery and enforcement act addressing the thrift crisis using a multi chotomous voting model we identify traditional public choice variables that could influence the probability of voting for legislation to capture the variation of the thrifts interests we consider a series of financial variables motivated by the thrift literature of failure prediction models these variables allow us to investigate the influences from the health of the congressional district s thrifts their asset composition characteristics and their reliance on regulatory forbearance

balancing environmental protection and energy production in the federal hydropower licensing process the u s federal energy regulatory commission ferc must balance environmental protection of riverine resources with the nation s growing demand for power production every time it issues a hydroelectric license this paper models the bureaucratic agency s decision making process in issuing these licenses data on nearly 500 hydro power licenses issued from 1983 to 2005 are utilized it is discovered that legislative and institutional constraints are by far the largest influences on ferc s regulatory decisions implying that if the current allocation of surface water in the united states is considered inefficient the most effective way to alter this allocation is by passing new legislation or by implementing institutional reform at ferc

interest group politics under majority rule abstract we develop a model of interest group politics in which the groups and coalitions that arise and the form of redistributive policies sought are jointly determined the model generates three key results first programs intended to reduce income inequality are more likely to involve direct payments than are programs that redistribute wealth across groups with similar incomes second nonequalizing redistribution is unlikely unless the various participants in the political process face significantly different political and economic costs of obtaining transfers third many policies that induce asymmetries among interest groups also impose significant deadweight costs stable nonequalizing redistribution will therefore tend to involve indirect and economically inefficient methods of transferring income

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

the generalized war of attrition abstract we model a war of attrition with n k firms competing for n prizes in a natural oligopoly context the k 1 lowest value firms drop out instantaneously even though each firm s value is private information to itself in a standard setting context in which every competitor suffers losses until a standard is chosen even after giving up on its own preferred alternative each firm s exit time is independent both of k and of other players actions our results explain how long it takes to form a winning coalition in politics solving the model is facilitated by the revenue equivalence theorem jel d43 d44 l13 o30

economic costs of alternative monetary policy responses to speculative currency attacks abstract the outcome of a speculative attack on the foreign exchange rate can be classified into three cases i immediate depreciation of the nominal exchange rate ii successful defense or iii failed defense this paper explores which of these outcomes yields the lowest cost in terms of output and unemployment in the short and medium run ex ante the outcome of a speculative attack is uncertain therefore the appropriate response of monetary authorities to a speculative attack depends on the cost of an immediate depreciation compared with that of the expected outcome of a currency defense our empirical analysis focuses on a sample of 73 emerging and developing countries over the 1960 2011 period our results indicate that an immediate depreciation is the policy response that is associated with a lower expected output loss and unemployment in the short run and it tends to be expansionary in the medium run a defense if successful entails insignificant costs in the short run but unlike an immediate depreciation a successful defense is not expansionary in the medium run if a defense fails large output losses and an increase in unemployment ensue at least in the short run

studying the role of political competition in the evolution of government size over long horizons here we argue for the use of cointegration and error correction analysis to combine economic factors that are nonstationary with political factors that are stationary into an empirical model of the evolution of public policy over long periods the approach is applied to disentangle the contributions of economics and politics to the evolution of public expenditure by the government of canada over 130 years political competition emerges as the primary political factor affecting government size

fiscal and monetary policies and the cost of sudden stops abstract this article investigates the effects of monetary and fiscal policies on output growth during sudden stop balance of payments crisis in emerging markets and developing countries sudden stops in capital flows and subsequent deep recessions are a frequent occurrence in these countries but there is no professional consensus and little systematic empirical evidence shedding light on the macroeconomic policy mix most likely to limit output losses during these episodes to address this issue we investigate 83 sudden stop crisis in 66 countries using a baseline empirical model to control for the various determinants of output losses during sudden stops we measure the marginal effects of policy on output losses and find strong evidence that monetary tightening rise in the discount rate or unsterilized rise in international reserves and discretionary fiscal contraction are significantly correlated with larger output losses following a sudden stop fiscal expansion is associated with smaller output losses following a sudden stop but monetary expansion has no discernable effect the macroeconomic policy mix associated with the least output loss during a sudden stop financial crisis is a discretionary fiscal expansion combined with a neutral monetary policy

explaining agricultural and agrarian policies in developing countries the paper describes and as far as possible explains variations in policies programs and institutions that influence agricultural growth agrarian relations and rural welfare across developing countries and over time it evaluates the impact of distorted policy patterns on agricultural production and rural poverty and identifies conditions under which policy reforms meant to bring about greater efficiency and equity are likely to be initiated and sustained it draws upon a broad range of literature to show how material conditions missing markets and government policies affect static welfare outcomes patterns of accumulation state formation and the establishment of political institutions it suggests ways to improve policy advice and proposes directions for future research

the political economy of farmland ownership regulations and land prices one of the most ubiquitous forms of agricultural regulation is a restriction on farmland ownership one canadian example of a farmland ownership restriction is the saskatchewan farm security act fsa passed in 1974 the purpose of this article is to explain using a political economy framework why the fsa was implemented and to estimate the effect of the fsa on saskatchewan farmland values a present value pv model is used to estimate the relationship between land values rents and the regulation the hausman endogeneity test reveals that the regulation variable is endogenous with the land price the sign of the regulation variable is negative which fits with the theory i e the more stringent the regulation the lower the land value we estimate that the regulation lowered saskatchewan farmland prices by an average of 4 to 34 us acre depending on whether ordinary least squares ols or two stage least squares tsls is employed in the estimation over the period of 1974 2001

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded