commodity price shocks and civil conflict evidence from colombia how do income shocks aect armed con ict theory suggests two op posite eects if labor is used to appropriate resources violently higher wages may lower con ict by reducing labor supplied to appropriation this is the opportunity cost eect alternatively a rise in contestable income may increase violence by raising gains from appropriation this is the rapacity eect our paper exploits exogenous price shocks in inter national commodity markets and a rich dataset on civil war in colombia to assess how dierent income shocks aect con ict we examine changes in the price of agricultural goods which are labor intensive and natural resources which are capital intensive we focus on coee and oil the two largest exports we nd that a sharp fall in coee prices in the 1990s increased violence dierentially in regions growing more coee by lower ing wages and the opportunity cost of joining armed groups in contrast a rise in oil prices increased violence dierentially in the oil region by in creasing municipal revenue siphoned through rapacity this pattern holds in several other agricultural and natural resource sectors providing robust evidence that price shocks aect con ict in opposite directions depending on the factor intensity of the commodity

institutions factor prices and taxation virtues of strong states many of the most pernicious economic institutions and policies create entry barriers or manipulate factor prices to transfer resources from entrepreneurs and workers to groups that hold political power these inefficiencies partly result from the fact that direct and efficient fiscal instruments that can be used for taxation and redistribution of resources are absent one might then conclude that increasing state capacity and expanding the set of available fiscal instruments should improve the allocation of resources by preventing the use of these inefficient indirect methods of redistribution this reasoning ignores the effect of greater state capacity and the change in the set of available fiscal instruments on the political equilibrium however because the availability of more efficient means of taxation increases the potential benefits of controlling state power it also intensifies costly political conflict aimed at capturing the control of the state this indirect effect counteracts the benefits from more efficient taxation and may dominate the direct benefits the paper establishes the possibility that the allocation of resources may deteriorate substantially in response to an autonomous increase in state capacity and the set of fiscal instruments it also argues that in the british case which is a key historical example that points to the central role of increased state capacity in economic development this change was not autonomous instead it was an equilibrium response to changes in political institutions that placed better checks on the exercise of power by the executive this reasoning suggests that the study of the effect of fiscal capacity and the evaluation of policies aimed at increasing state capacity in less developed economies should be done in the context of dynamic models of political economy in which fiscal capacity and political constraints are jointly determined this abstract was borrowed from another version of this item

a multiplier decomposition method to analyze poverty alleviation abstract the objective of this paper is to present a multiplier decomposition method focusing on poverty alleviation the decomposition captures the various mechanisms and linkages through which a production sector s output contributes to poverty alleviation within a socioeconomic system represented by a social accounting matrix sam it is shown that a multiplier can be broken down into two multiplicative effects the distributional and interdependency effects the decomposition method is applied to the case of indonesia a key policy implication is that the human capital of the poor needs to be enhanced if they are not to be sealed off from the industrialization process

macro shocks and costly political action in non democracies this paper presents a theory of political instability in autocracies where the disenfranchised express their political preferences for a leadership replacement through costly political action we focus on the business regulatory environment as an arena for autocratic rent creation as a source of information asymmetry between the autocrat and the disenfranchised and as a potential political grievance for the disenfranchised within this context we revisit the role of macro shocks as a catalyst for political instability and propose a novel informational channel through which macro shocks may trigger costly political action when the autocrat chooses to create rents through regulation that deteriorates the mean macroeconomic outcome we then provide an empirical investigation of our theoretical hypotheses employing fixed effects panel regressions and an instrumental variable strategy over a sample of non democratic countries consistent with our theoretical hypotheses we demonstrate that adverse economic shocks increase the probability of mass protest episodes but that the magnitude of the effect depends on the extent to which business regulation is market distorting

rain and the democratic window of opportunity according to the economic approach to political transitions negative transitory economic shocks can give rise to a window of opportunity for democratic change we examine this hypothesis using yearly rainfall variation over the 1980 2004 period in 41 sub saharan african countries we find that a 25 drop in rainfall increases the probability of a transition to democracy during the following two years by around 3 percentage points a 5 fall in income due to low rainfall raises the probability of democratization by around 7 percentage points we also find that rainfall does not affect transitions from democracy to autocracy

nonfarm diversification poverty economic mobility and income inequality a case study in village india this paper assembles data at the all india level and for the village of palanpur uttar pradesh to document the growing importance and influence of the non farm sector in the rural economy between the early 1980s and late 2000s the suggestion from the combined national sample survey and palanpur data is of a slow process of non farm diversification whose distributional incidence on the margin is increasingly pro poor the village level analysis documents that the non farm sector is not only increasing incomes and reducing poverty but appears as well to be breaking down long standing barriers to mobility among the poorest segments of rural society efforts by the government of india to accelerate the process of diversification could thus yield significant returns in terms of declining poverty and increased income mobility the evidence from palanpur also shows however that at the village level a significant increase in income inequality has accompanied diversification away from the farm a growing literature argues that such a rise in inequality could affect the fabric of village society the way in which village institutions function and evolve and the scope for collective action at the village level failure to keep such inequalities in check could thus undermine the pro poor impacts from the process of structural transformation currently underway in rural india

farm productivity and rural poverty in india armed with new data we return to an old question from the pages of this journal to what extent do india s rural poor share in agricultural growth combining data from 24 household sample surveys spanning 35 years with other sources we estimate a model of the joint determination of consumption poverty measures agricultural wages and food prices we find that higher farm productivity brought both absolute and relative gains to poor rural households a large share of the gains was via wages and prices though these effects took time the benefits to the poor were not confined to those near the poverty line

information aggregation through costly political action information about various policy alternatives is dispersed among the individual members of a society prior to a vote over the alternatives some people take costly political action to signal their private information to voters by informing voting decisions political action has potential to decrease the likelihood that voters cast mistaken votes perhaps surprisingly preelection communication may be counterproductive the dispersed information is partially aggregated by the vote and political action may contribute noise to the voting process in some cases the voting mechanism is more likely to implement the full information voting outcome in the absence of preelection political action copyright 1994 by american economic association

modeling agricultural growth multipliers agriculture s potential as an engine of third world growth depends in large part on the size of the production and consumption linkages it stimulates in rural regions current estimates of agricultural growth multipliers within rural regions vary widely not only because economic structures differ across regions but also because the array of fixed price models most commonly used embody widely differing basic assumptions among fixed price models the semi input output formulation projects the most plausible multipliers but even they overstate the magnitude of growth multipliers by 10 to 25 according to the price endogenous model developed here

china s uneven progress against poverty while the incidence of extreme poverty in china fell dramatically over 1980 2001 progress was uneven over time and across provinces rural areas accounted for the bulk of the gains to the poor though migration to urban areas helped the pattern of growth mattered rural economic growth was far more important to national poverty reduction than urban economic growth agriculture played a far more important role than the secondary or tertiary sources of gross domestic product gdp rising inequality within the rural sector greatly slowed poverty reduction provinces starting with relatively high inequality saw slower progress against poverty due both to lower growth and a lower growth elasticity of poverty reduction taxation of farmers and inflation hurt the poor external trade had little short term impact

a theory of political transitions we develop a theory of political transitions inspired by the experiences of western europe and latin america nondemocratic societies are controlled by a rich elite the initially disenfranchised poor can contest power by threatening revolution especially when the opportunity cost is low for example during recessions the threat of revolution may force the elite to democratize democracy may not consolidate because it is redistributive and so gives the elite an incentive to mount a coup highly unequal societies are less likely to consolidate democracy and may end up oscillating between regimes and suffer substantial fiscal volatility

information manipulation coordination and regime change this article presents a model of information manipulation and political regime change there is a regime that can be overthrown but only if enough citizens participate in an uprising citizens are imperfectly informed about the regime s ability to resist an uprising and the regime can engage in propaganda that taken at face value makes the regime seem stronger than it truly is this coordination game with endogenous information manipulation has a unique equilibrium and the article gives a complete analytic characterization of the equilibrium s comparative statics holding fixed the number of signals available to citizens if the per unit signal precision is sufficiently high then the regime is harder to overthrow in contrast if the number of signals increases so that both total signal precision and the regime s costs of manipulation rise together then the regime is easier to overthrow unless there are strong economies of scale in information control

an analysis of seasonality in monthly per person tourist spending in turkish inbound tourism from a market segmentation perspective abstract this study analyses seasonal variations in monthly per person tourist spending in turkish inbound tourism from a market segmentation perspective in this study a seasonal unit root test and recently developed decomposition techniques tramo seats x 12 arima are used it is found that there is a stochastic and strong seasonality in per person tourist spending data the findings interestingly show that the seasonal pattern in per person tourist spending is considerably different from the seasonal pattern in tourist arrivals the results have implications for decision makers in tourism both at micro and macro levels in terms of effective resource allocation and market segmentation

on the form of transfers to special interests an important question in political economy concerns the form of transfers to special interests the chicago view is that political competition leads politicians to make such transfers efficiently the virginia position is that lack of information on the part of voters leads politicians to favor inefficient sneaky methods of redistribution this paper analyzes the form of transfers in a model of political competition in which politicians have incentives to make transfers to special interests it shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians inefficient methods of redistribution may be employed

growth still is good for the poor incomes in the poorest two quintiles on average increase at the same rate as overall average incomes this is because in a global dataset spanning 118 countries over the past four decades changes in the share of income of the poorest quintiles are generally small and uncorrelated with changes in average income the variation in changes in quintile shares is also small relative to the variation in growth in average incomes implying that the latter accounts for most of the variation in income growth in the poorest quintiles these findings hold across most regions and time periods and when conditioning on a variety of country level factors that may matter for growth and inequality changes this evidence confirms the central importance of economic growth for poverty reduction and illustrates the difficulty of identifying specific macroeconomic policies that are significantly associated with the relative growth rates of those in the poorest quintiles

the influence of low fare airlines on vacation choices of students results of a stated portfolio choice experiment this paper reports the results of a portfolio model of vacation choices of students the portfolio model concerns the combined choice of destination type transport mode duration accommodation and travel party for vacations in addition to usual transport modes such as airline train bus and car a distinction was made between low fare airlines as these may be especially appealing to students and regular airlines stated choice data were used to estimate the model the attributes of the transport modes were systematically varied in the experiment while respondents were faced with free options for the other choice facets estimation results indicated that the developed model of portfolio choice performs satisfactory in substantive terms it seems that transport mode predominantly influences the portfolio choices the attributes that are significant tend to amplify the specific role of transport modes in general and low fare airlines in particular

length of stay for low cost tourism abstract awareness of tourists length of stay and the factors which determine that is an essential element for good planning and management at tourist destinations this article analyses to what extent the personal characteristics of the low cost tourist those of the trip and stay and those of the destination itself are significant in determining the duration of a trip to this end an econometric duration model is estimated the results obtained show that the effect of time restrictions seem to be relevant for explaining the observed differences in length of stay as well as the effects of the tourist s spending capacity prices and the differences between urban and sun and sand destinations furthermore the model also allows us to analyse changes in the likelihood of the stay being ended at a specific point in time hazard associated with changes in the explanatory variables and to obtain predicted survival times for different groups of tourists

the influence of distance and prices on the choice of tourist destinations the moderating role of motivations abstract the literature of tourist destination choice pays great attention to the direct impact of the attributes of distance to the destination and prices of the destination but does not reach any consensus around them regarding their inhibitory or attraction effect alternatively our study proposes that the effects of distance and prices are moderated by tourist motivations at the moment of choosing a destination which leads us to make hypotheses to explain this decision through the interaction between destination attributes and the personal motivations of the individual tourists the methodology applied estimates random coefficient logit models which control possible correlations between different destinations and consider tourist heterogeneity the empirical application carried out in spain on a sample of 2127 individuals shows that the dissuasive influence of distance and prices on the selection of destinations is moderated by motivations in the sense that the motivations have a direct increasing the dissuasive effect or inverse reducing the dissuasive effect moderating effect on the influences of distance and prices

incumbent performance and electoral control in the pure theory of electoral competition citizens compare the platforms of the candidates and vote for the one whose platform is preferred candidate strategies are identified with promises about future performance in office models of this sort have been developed in both static mckelvey 1975 and dynamic kramer 1977 i settings and all appear to have the property that if the set of alternatives is large enough in some sense equilibrium platforms rarely exist but these models have another feature that is quite as disturbing as their instability in the static setting discussed by mckelvey little attention is paid to the possibility that once in office the politician s preferences may diverge from those of his constituents and that he may therefore choose policies at variance from his platform instead it is simply assumed that promises will be kept whether or not such behavior is congruent with the interest of the officeholder it is sometimes argued that an enforcement mechanism may exist to discipline politicians for failing to keep promises but without a specification of the mechanism it is not obvious that it would be in the interests of the

the role of routines in the vacation decision making process of dutch vacationers abstract for most dutch vacationers going on holiday has become a normal thing in their lives this study attempts to find what that means for the way they decide on their vacation if routinization occurs how does it relate to factors such as the extensiveness of the decision making process the search for internal and external information and the type of destination selected this paper presents the results of a qualitative study among 32 dutch households which is part of a larger research project on the routinization of vacation choice behavior of dutch vacationers it appears that the vacation decision making processes of the interviewed households are much less extensive and far more routinized than described in the rational choice models a limited or routine choice process entails a greater emphasis on an internal search for information furthermore the results indicate that a domestic vacation in most cases required a less extensive decision making process compared to a vacation abroad the results however appear to be not always consistent due to the fact that the extensiveness of the vacation choice process is influenced by several interacting factors factors related to both the type of vacationer and type of vacation play an important role policy makers and marketers can use these results in their communication and provision of services to the dutch tourist

managing tourism in the galapagos islands through price incentives a choice experiment approach abstract this study analyzes nature based tourism in ecuador s galapagos national park which faces great risks of invasive species due to visitor contacts the analysis uses visitors preference data to evaluate the potential impacts of various pricing strategies on revenues data come from choice experiment surveys conducted in 2009 regarding four characteristics of a tour to the galapagos length of stay depth of experience in the islands ecosystem level of protective measures taken against invasive species and price we found that the typical tourist would be willing to pay 2 5 times more for a tour with high level of protection against invasive species than for a tour with the current level of protection and otherwise similar characteristics the mean marginal willingness to pay for a tour with an in depth natural experience is 1 8 times more than for a similar tour providing only an overview of the galapagos ecosystem further we determined that differences in elasticity of demand between long and short tours suggest that a pricing strategy may be used to encourage tourists to take longer tours without affecting total revenue such a pricing strategy would decrease the number of unique island visitor contacts per year thereby reducing the threat to the islands unique ecosystem

a latent class approach to tourists length of stay abstract in this paper a conditional demand function is estimated for the length of stay at a tourist destination the microeconomic model specifies the demand for the length of stay conditional on the remaining holiday characteristics that the tourist has chosen the destination type of accommodation etc the empirical model uses a latent class truncated poisson regression which acknowledges the existence of groups or segments of demand with different preferences in the case under study a distinction is made between two segments with a preference for either a longer or shorter holiday the statistical model also resolves a problem of multimodality acknowledged in previous analyses to be one of the main characteristics of this variable

the effects of location and sectoral components of economic growth on poverty evidence from indonesia abstract in this paper we investigate the relationship between economic growth and poverty reduction by differentiating growth and poverty into their sectoral composition and urban rural location using data from indonesia we find that rural services growth reduces poverty in all sectors and locations however urban services growth has the largest effect on poverty in most sectors finally we also find that rural agriculture growth strongly reduces poverty in rural areas the largest contributor to poverty in indonesia this implies that while agriculture growth in rural areas still plays a major role in reducing poverty policies that enable strong growth in the services sector in both urban and rural areas would expedite poverty reduction

why has economic growth been more pro poor in some states of india than others abstract we use 20 household surveys for india s 15 major states spanning 1960 1994 to study how the sectoral composition of economic growth and initial conditions interact to influence how much growth reduced consumption poverty the elasticities of measured poverty to farm yields and development spending did not differ significantly across states but the elasticities of poverty to urban and rural non farm output varied appreciably and the differences were quantitatively important to the overall rate of poverty reduction states with higher elasticities did not experience higher rates of non farm growth the non farm growth process was more pro poor in states with initially higher literacy higher farm productivity higher rural living standards relative to urban areas lower landlessness and lower infant mortality

collective action with uncertain payoffs coordination public signals and punishment dilemmas how can one analyze collective action in protests or revolutions when individuals are uncertain about the relative payoffs of the status quo and revolution we model a calculus of protest of individuals who must either submit to the status quo or support revolt based only on personal information about their payoffs in deciding whether to revolt the citizen must infer both the benefit of successful revolution and the likely actions of other citizens we characterize conditions under which payoff uncertainty overturns conventional wisdom a when a citizen is too willing to revolt he reduces the incentives of others to revolt b less accurate information about the value of revolution can make revolt more likely c public signals from other citizens can reduce the likelihood of revolt d harsher punishment can increase the incidence of punishment and e the incidence of protest can be positively correlated with that of repression

estimating the relative benefits of agricultural growth on the distribution of expenditures does the sectoral composition of aggregate economic growth affect poverty we ask whether agricultural growth in developing countries increases the expenditures of poorer households more than growth in other sectors while some reduced form analyses have tackled this question using either country level time series data regional panel data for one country or cross sectional country data this paper is unusual in using panel data for many countries we improve on much of the existing literature by devising an instrumental variables strategy to correct for the endogeneity of sectoral gdp growth involving averaging over sectoral income growth rates for neighboring countries our principal finding from our instrumental variable estimator is that the estimated elasticities associated with growth in agricultural income are significantly greater than for non agricultural income for all but the extreme top and bottom deciles in the middle range of the income distribution the effect of a given gdp growth due to agriculture is 3 4 times larger than if it was due to non agricultural activities having established that on average growth in gdp originating in agriculture is more beneficial for poorer deciles we finally explore whether this is a pattern which holds across different groupings of countries a second important finding is that there is heterogeneity across some groupings most particularly we find that it is the poorest people in the poorest countries for whom agricultural income growth is the most beneficial

information cascades and revolutionary regime transitions we combine acemoglu and robinson s model of the economic origins of democracy with lohmann s model of political mass protest this allows us to analyse the economic causes of political regime change based on the microfoundations of revolution we are able to derive conditions under which democracy arises peacefully when it occurs only after a revolution and when oligarchy persists we model these possibilities in a world of asymmetric information where information cascades are possible and where these cascades may involve errors in the sense that they make everyone worse off

why have some indian states done better than others at reducing rural poverty the unevenness of the rise in rural living standards in the various states of india since the 1950s allowed the authors to study the causes of poverty they modeled the evolution of average consumption and various poverty measures using pooled state level data for 1957 91 they found that poverty was reduced by higher agricultural yields above trend growth in nonfarm output and lower inflation rates but these factors only partly explain relative success and failure in reducing poverty initial conditions also mattered states that started the period with better infrastructure and human resources with more intense irrigation greater literacy and lower infant mortality rates had significantly greater long term rates of consumption growth and poverty reduction by and large the same variables that promoted growth in average consumption also helped reduce poverty the effects on poverty measures were partly redistributive in nature after controlling for inflation the authors found that some of the factors that helped reduce absolute poverty also improved distribution and none of the factors that reduced absolute poverty had adverse impacts on distribution in other words there was no sign of tradeoffs between growth and pro poor distribution

the composition of growth matters for poverty alleviation this paper contributes to explain the cross country heterogeneity of the poverty response to changes in economic growth it does so by focusing on the structure of output growth the paper presents a two sector theoretical model that clarifies the mechanism through which the sectoral composition of growth and associated labor intensity can affect workers wages and thus poverty alleviation then it presents cross country empirical evidence that analyzes first the differential poverty reducing impact of sectoral growth at various levels of disaggregation and the role of unskilled labor intensity in such differential impact the paper finds evidence that not only the size of economic growth but also its composition matters for poverty alleviation with the largest contributions from labor intensive sectors such as agriculture construction and manufacturing the results are robust to the influence of outliers alternative explanations and various poverty measures

micro economic determinants of tourist expenditure a quantile regression approach abstract we assess the effect of the main determinants of tourist expenditure by applying both linear and quantile regression models to individual micro data collected by a survey addressed to non resident tourists who spent their holidays in sardinia during the period april october 2012 we find that in addition to income and foreign nationality tourist expenditure is crucially driven by trip related party size stay length accommodation sea and sun typology and transport modality and psychographic characteristics repeated visits and holiday motivations moreover our results indicate that the effects vary with respect to the expenditure component and the level of spending thus confirming the high complexity of the tourism product higher positive effects were found for heavy spenders in the case of foreign nationality previous visits and notoriety motivated holidays while party size and the number of visited sites contribute to reducing the level of expenditure for light spending tourists

global income inequality this paper presents a non technical summary of the current state of debate on the measurement and implications of global inequality inequality between citizens of the world it discusses the relationship between globalization and global inequality it shows why global inequality matters and proposes a scheme for global redistribution

the determinants of individual unemployment durations in an era of high unemployment this paper presents the results of an econometric analysis of the conditional probability of leaving unemployment for two male inflow cohorts entering unemployment at very different points in time 1978 and 1987 the effect of income while unemployed is found to be much weaker for the i987 cohort an elasticity of o i compared with 0 4 and is only found to be significant for teenagers and in the first three months of a spell demand constraints measured by the local unemployment rate are found to have a stronger negative effect on the exit probability for the i987 cohort than in 1978 the i 980s witnessed continual high levels of unemployment in britain and the movement of unemployment up the economic and political agenda unemployment results in major output and income losses and is the cause of much misery to those involved the nation is poorer because of it for both reasons it is therefore important to understand the process that generates a given level of unemployment this process can be considered in terms of two key probabilities the probability of an individual entering unemployment and the probability of an unemployed individual leaving unemployment to take up a job or for other reasons these probabilities will vary with the characteristics of the individual concerned and over time changes in the aggregate unemployment rate can under certain assumptions be decomposed into changes in the inflow rate into unemployment and changes in the steady

the length of stay in the demand for tourism abstract one of the main characteristics of current tourism is the reduction in the length of stay at a destination nevertheless this variable has received little attention in literature this paper examines the microeconomic determinants of the length of stay at one of the mediterranean s leading sun and sand destinations the estimation of a conditional demand function model highlights the explanatory power of the tourist s sociodemographic profile and of holiday characteristics as well as the sensitivity of the length of stay to price changes

the evolving role of agriculture in poverty reduction an empirical perspective abstract the role of agriculture in development remains much debated this paper takes an empirical perspective and focuses on poverty as opposed to growth alone the contribution of a sector to poverty reduction is shown to depend on its own growth performance its indirect impact on growth in other sectors the extent to which poor people participate in the sector and the size of the sector in the overall economy bringing together these different effects using cross country econometric evidence indicates that agriculture is significantly more effective in reducing poverty among the poorest of the poor as reflected in the 1 day squared poverty gap it is also up to 3 2 times better at reducing 1 day headcount poverty in low income and resource rich countries including those in sub saharan africa at least when societies are not fundamentally unequal however when it comes to the better off poor reflected in the 2 day measure non agriculture has the edge these results are driven by the much larger participation of poorer households in growth from agriculture and the lower poverty reducing effect of non agriculture in the presence of extractive industries

vacation length choice a dynamic mixed multinomial logit model abstract this paper uses panel data to develop and estimate a dynamic model of choice of the length of stay of a vacation controlling for unobserved heterogeneity and state dependency length of stay options vary from short 1 3 nights medium 4 9 nights to long vacations 10 nights or more and the decision not to go on vacation in a particular year independent variables include family lifecycle stage income month and lags of the dependent variable results indicate that long holidays are most strongly affected by trips made previously in the same year than medium and short vacations in contrast there is an increased need for a vacation when any medium or long trips were not yet made in the current year month specific variables confirm that respondents have preferences for making leisure trips during the main holidays and warm seasons the observed differences given the various lifecycle stages reflect imposed constraints given age and or household composition that are typical of each particular group

beyond agriculture versus non agriculture decomposing sectoral growth poverty linkages in five african countries summary africa s development debate is often cast as agriculture versus non agriculture with agriculture s proponents arguing that agricultural growth is more effective at reducing poverty this dual economy perspective overlooks the heterogeneity within and synergies between these two broad sectors recent studies decompose agriculture into subsectors and find that agricultural growth led by smallholder farmers is even more effective at reducing poverty than larger scale estate farms in contrast few studies estimate subsectoral growth poverty linkages for non agriculture yet we strongly expect for example that growth led by informal traders or foreign owned mining companies will have quite different implications for poverty reduction different perspectives on what constitutes non agriculture might therefore explain divergent views on its relative importance for poverty reduction to address this gap in our understanding we estimate sectoral poverty growth elasticities using economy wide models for five african countries while our estimated elasticities are higher for agriculture than for non agriculture as a whole the extent to which this is true varies considerably across nonagricultural subsectors and across countries we find that the poverty growth elasticities for trade and transport services and manufacturing especially agro processing are often close to and sometimes exceed agriculture s this means that growth led by these nonagricultural subsectors might be as effective as agriculture at reaching the poor this confirms the need for a more nuanced treatment of non agriculture in africa s policy debate and may explain conflicting perspectives on agriculture s role vis a vis non agriculture

a simple model of inefficient institutions this paper develops a simple model of economic and political institutions that lead to poor aggregate economic performance in the model economy groups with political power the elite choose policies to increase their income and to directly or indirectly transfer resources from the rest of society to themselves the resulting equilibrium is generally inefficient because of three distinct mechanisms 1 revenue extraction 2 factor price manipulation and 3 political consolidation in particular the elite may pursue inefficient policies to extract revenue from other groups they may do so to reduce the demand for factors coming from other groups in the economy thus indirectly benefiting from changes in factor prices finally they may try to impoverish other groups competing for political power the elite s preferences over inefficient policies translate into inefficient economic institutions the notable exception to this general picture emerges when long term investments are important thus creating a commitment holdup problem whereby equilibrium taxes and regulations are worse than the elite would like them to be from an ex ante point of view in this case economic institutions that provide additional security of property rights to other groups can be useful