public goods in networks this paper considers incentives to provide goods that are non excludable along social or geographic links we find first that networks can lead to specialization in public good provision in every social network there is an equilibrium where some individuals contribute and others free ride in many networks this extreme is the only outcome second specialization can benefit society as a whole this outcome arises when contributors are linked collectively to many agents finally a new link increases access to public goods but reduces individual incentives to contribute hence overall welfare can be higher when there are holes in a network

a study on the persistence of farrell s efficiency measure under a dynamic framework abstract this article introduces a sequence of four systematic methods to examine the extent to which the economic efficiency of taiwan s commercial banks persists and to uncover the potential dynamic link between bank performance and various financial indicators quasi fixed inputs are explicitly incorporated in the dea model to account for possible adjustment costs regulation or indivisibilities among the four methods the dynamic panel data model and the markov model appear to be exploited for the first time in the area of the dea approach evidence is found that bank efficiency exhibits moderate persistence over the sample period implying that the given sample banks fail to adjust their production techniques in a timely manner regulatory authorities and bank managers are suggested to be aware of the level of undesirable non performing loans due to their close relationship with bank performance

state capacity and long run economic performance we present new evidence about the long run relationship between state capacity the fiscal and administrative power of states and economic performance our database is novel and spans 11 european countries and 4 centuries from the old regime to world war i we argue that national governments undertook two political transformations over this period fiscal centralization and limited government we find a significant direct relationship between fiscal centralization and economic growth furthermore we find that an increase in the state s capacity to extract greater tax revenues was one mechanism through which both political transformations improved economic performance our analysis shows systematic evidence that state capacity is an important determinant of long run economic growth

moving to opportunity in boston early results of a randomized mobility experiment this paper examines the short run impacts of a change in residential neighborhood on the well being of low income families using evidence from a program in which eligibility for a housing voucher was determined by random lottery we examine the experiences of households at the boston site of moving to opportunity mto a demonstration program in five cities families in high poverty public housing projects applied to mto and were assigned by lottery to one of three groups experimental offered mobility counseling and a section 8 subsidy valid only in a census tract with a poverty rate of less than 10 percent section 8 comparison offered a geographically unrestricted section 8 subsidy or control offered no new assistance but continued to be eligible for public housing our quantitative analyses of program impacts uses data on 540 families from a baseline survey at program enrollment a follow up survey administered l to 3 5 years after random assignment and state administrative data on earnings and welfare receipt 48 percent of the experimental group and 62 percent of the section 8 comparison group moved through the mto program one to three years after program entry families in both treatment groups were more likely to be residing in neighborhoods with low poverty rates and high education levels than were families in the control group however while members of the experimental group were much more likely to be residing in suburban communities than were those in the section 8 group the lower program take up rate among the experimental group resulted in more families remaining in the most distressed communities households in both treatment groups experienced improvements in multiple measures of well being relative to the control group including increased safety improved health among household heads and fewer behavior problems among boys experimental group children were also less likely to be a victim of a personal crime to be injured or to experience an asthma attack there are no significant impacts of either mto treatment on the employment earnings or welfare receipt of household heads in the first three years after random assignment

politics and economics in weak and strong states abstract while much research in political economy points out the benefits of limited government political scientists have long emphasized the problems created in many less developed nations by weak states which lack the power to tax and regulate the economy and to withstand the political and social challenges from non state actors i construct a model in which the state apparatus is controlled by a self interested ruler who tries to divert resources for his own consumption but who can also invest in socially productive public goods both weak and strong states create distortions when the state is excessively strong the ruler imposes such high taxes that economic activity is stifled when the state is excessively weak the ruler anticipates that he will not be able to extract rents in the future and underinvests in public goods i show that the same conclusion applies in the analysis of both the economic power of the state i e its ability to raise taxes and its political power i e its ability to remain entrenched from the citizens i also discuss how under certain circumstances a different type of equilibrium which i refer to as consensually strong state equilibrium can emerge whereby the state is politically weak but is allowed to impose high taxes as long as a sufficient fraction of the proceeds are invested in public goods the consensually strong state might best correspond to the state in oecd countries where taxes are high despite significant control by the society over the government

the origins of state capacity property rights taxation and politics economists generally assume that the state has sufficient institutional capacity to support markets and levy taxes this paper develops a framework where policy choices in market regulation and taxation are constrained by past investments in legal and fiscal capacity it studies the economic and political determinants of such investments demonstrating that legal and fiscal capacity are typically complements the results show that among other things common interest public goods such as fighting external wars as well as political stability and inclusive political institutions are conducive to building state capacity some correlations in cross country data are consistent with the theory

peer effects and social networks in education this paper studies whether structural properties of friendship networks affect individual outcomes in education we first develop a model that shows that at the nash equilibrium the outcome of each individual embedded in a network is proportional to her katz bonacich centrality measure this measure takes into account both direct and indirect friends of each individual but puts less weight to her distant friends we then bring the model to the data by using a very detailed dataset of adolescent friendship networks we show that after controlling for observable individual characteristics and unobservable network specific factors the individual s position in a network as measured by her katz bonacich centrality is a key determinant of her level of activity a standard deviation increase in the katz bonacich centrality increases the pupil school performance by more than 7 percent of one standard deviation

budget spillovers and fiscal policy interdependence evidence from the states abstract this paper formalizes and tests the notion that states expenditures depend on the spending of similarly situated states we find that even after allowing for fixed state effects year effects and common random shocks among neighbors a state government s level of per capita expenditure is positively and significantly affected by the expenditure levels of its neighbors ceteris paribus a one dollar increase in a state s neighbors expenditures increases its own expenditure by over 70 cents

citizen versus consumer challenges in the uk green power market abstract this paper investigates the potential advantages and disadvantages of green power products as opposed to the traditional fossil fuel levy which was the uk s chosen tax regime as a means of developing renewable energy in the uk willingness to pay for electricity generated from renewables is investigated results indicate that willingness to pay varies with social status and income however results demonstrate that there is a significant minority in full support of some sort of fiscal initiative electricity generated from renewables is a concept supported by the majority however given the stated willingness to pay it is unlikely that any new renewable capacity will result from green tariff schemes in the near term it is concluded that the green citizen must continue to co exist with the green power purchaser if the uk is to make any significant improvement in the contribution of renewable energy to electricity demand the authors would like to acknowledge the support of irene lorenzoni and jane powell of the centre for social and economic research on the global environment university of east anglia leicester energy efficiency advice centre and leicester energy agency

bureaucratic structure and bureaucratic performance in less developed countries abstract we argue that several easily identifiable structural features constitute the key ingredients of effective state bureaucracies and should help to predict ratings of bureaucratic performance competitive salaries internal promotion and career stability and meritocratic recruitment we collect a new dataset on these features for bureaucracies of 35 less developed countries controlling for country income level of education and ethnolinguistic diversity we find that our measure of meritocratic recruitment is a statistically significant determinant of ratings supplied by two of three country risk agencies the importance of competitive salaries and internal promotion and career stability could not be clearly established

public goods institutions human capital and growth evidence from german history what are the origins and consequences of the state as a provider of public goods we study public goods provision established through new laws in german cities during the 1500s cities that adopted the laws subsequently began to differentially produce and attract human capital and to grow faster legal change occurred where ideological competition introduced by the protestant reformation interacted with local politics we study plagues that shifted local politics in a narrow period as sources of exogenous variation in public goods institutions and find support for a causal interpretation of the relationship between legal change human capital and growth

the origins of violence in rwanda this paper shows that the intensity of violence in rwanda s recent past can be traced back to the initial establishment of its precolonial state villages that were brought under centralized rule one century earlier experience a doubling of violence during the state organized 1994 genocide instrumental variable estimates exploiting differences in proximity to nyanza an early capital suggest these effects are causal in other periods when the state faced rebel attacks with longer state presence violence is lower using data from several sources including a lab in the field experiment across an abandoned historical boundary i show that the effect of the historical state is primarily sustained by culturally transmitted norms of obedience the persistent effect of the precolonial state interacts with government policy where the state developed earlier there is more violence when the rwandan government mobilized for mass killing and less violence when the government pursued peace

how the electoral college influences campaigns and policy the probability of being florida this paper analyzes how us presidential candidates should allocate resources across states to maximize the probability of winning the election by developing and estimating a probabilistic voting model of political competition under the electoral college system actual campaigns act in close agreement with the model there is a 0 9 correlation between equilibrium and actual presidential campaign visits across states both in 2000 and 2004 the paper shows how presidential candidate attention is affected by the states number of electoral votes forecasted state election outcomes and forecast uncertainty it also analyzes the effects of a direct national popular vote for president

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

the monopoly of violence evidence from colombia many states in latin america africa and asia lack the monopoly of violence even though this was identified by max weber as the foundation of the state and thus the capacity to govern effectively in this paper we develop a new perspective on the establishment of the monopoly of violence we build a model to explain the incentive of central states to eliminate nonstate armed actors paramilitaries in a democracy the model is premised on the idea that paramilitaries may choose to and can influence elections since paramilitaries have preferences over policies this reduces the incentives of the politicians they favor to eliminate them we then investigate these ideas using data from colombia between 1991 and 2006 we first present regression and case study evidence supporting our postulate that paramilitary groups can have significant effects on elections for the legislature and the executive next we show that the evidence is also broadly consistent with the implication of the model that paramilitaries tend to persist to the extent that they deliver votes to candidates for the executive whose preferences are close to theirs and that this effect is larger in areas where the presidential candidate would have otherwise not done as well finally we use roll call votes to illustrate a possible quid pro quo between the executive and paramilitaries in colombia language en

trafficking networks and the mexican drug war abstract drug trade related violence has escalated dramatically in mexico since 2007 and recent years have also witnessed large scale efforts to combat trafficking spearheaded by mexico s conservative pan party this study examines the direct and spillover effects of mexican policy toward the drug trade regression discontinuity estimates show that drug related violence increases substantially after close elections of pan mayors empirical evidence suggests that the violence reflects rival traffickers attempts to usurp territories after crackdowns have weakened incumbent criminals moreover the study uses a network model of trafficking routes to show that pan victories divert drug traffic increasing violence along alternative drug routes jel d72 d85 k42 o17 z13

state capacity and military conflict powerful centralized states controlling a large share of national income only begin to appear in europe after 1500 we build a model that explains their emergence in response to the increasing importance of money for military success when fiscal resources are not crucial for winning wars the threat of external conflict stifles state building as finance becomes critical internally cohesive states invest in state capacity while divided states rationally drop out of the competition causing divergence we emphasize the role of the military revolution a sequence of technological innovations that transformed armed conflict using data from 374 battles we investigate empirically both the importance of money for military success and patterns of state building in early modern europe the evidence is consistent with the predictions of our model

misaligned incentives and the scale of incarceration in the united states abstract the incarceration rate has increased substantially in the united states between the 1980s and the 2000s in this paper i explore an institutional explanation for this growth the fact that costs of incarceration are not fully internalized typically prison is paid for at the state level but county employees such as judges prosecutors or probation officers determine time spent in custody i exploit a natural experiment that shifted the cost burden of juvenile incarceration from state to counties keeping overall costs and responsibilities unchanged this resulted in a stark drop in incarceration and no increase in arrests suggesting an over use of prison when costs are not internalized the large magnitude of the change suggests that misaligned incentives in criminal justice may be a significant contributor to the current levels of incarceration in the united states

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

good bad and ugly colonial activities do they matter for economic development levels of development vary widely within countries in the americas we argue that part of this variation has its roots in the colonial era when colonizers engaged in different economic activities in different regions of a country we present evidence consistent with the view that bad activities those that depended heavily on labor exploitation led to lower economic development today than good activities those that did not rely on labor exploitation our results also suggest that differences in political representation but not in income inequality or human capital could be the intermediating factor between colonial activities and current development

the cost of segregation in social networks abstract this paper investigates the welfare effect of income redistribution in the private provision of public goods on networks we first show that the welfare effect of income redistribution is determined by bonacich centrality then we develop an index based on the network structure of interactions which roughly speaking measures the welfare effect of income redistribution confined to a component of contributors the proposed index vanishes when applied to large components of contributors that display special segregated interactions which suggests an asymptotic neutrality of redistributive policies

on the private provision of public goods on networks abstract this paper analyzes the private provision of public goods where consumers interact within a fixed network structure and may benefit only from their direct neighbors provisions we present a proof of the existence and uniqueness of a nash equilibrium for general networks and best reply functions in addition we investigate the neutrality result of warr 38 and bergstrom blume and varian 6 whereby consumers are able to undo the impact of income redistribution as well as public provision financed by lump sum taxes to this effect we show that the neutrality result has a limited scope of application beyond a special network architecture in the neighborhood of the set of contributors

emergence and persistence of inefficient states we present a theory of the emergence and persistence of inefficient states based on patronage politics the society consists of rich and poor the rich are initially in power but expect to transition to democracy which will choose redistributive policies taxation requires the employment of bureaucrats by choosing an inefficient state structure the rich may be able to use patronage and capture democratic politics so reducing the amount of redistribution in democracy moreover the inefficient state creates its own constituency and tends to persist over time intuitively an inefficient state structure creates more rents for bureaucrats than would an efficient one when the poor come to power in democracy they will reform the structure of the state to make it more efficient so that higher taxes can be collected at lower cost and with lower rents for bureaucrats anticipating this when the society starts out with an inefficient organization of the state bureaucrats support the rich who set lower taxes but also provide rents to bureaucrats we obtain that the rich bureaucrats coalition may also expand the size of bureaucracy excessively so as to generate enough political support the model shows that an equilibrium with an inefficient state is more likely to arise when there is greater income inequality when bureaucratic rents take intermediate values and when individuals are sufficiently forward looking jel p16 h11 h26 h41