is development path dependent or political a reinterpretation of mineral dependent development in botswana abstract poor management of earnings from valuable natural resources results in a syndrome known as dutch disease characterised by real exchange rate appreciation high labour costs and structural imbalances in economic development often a product of rentier politics dutch disease undermines long term economic performance in resource dependent economies resulting in a resource curse the conventional wisdom argues that institutions and state development at the time of a resource boom lock countries into divergent developmental trajectories i argue that political coalitions lay the foundation for development of state and other institutions and that changes in coalitions drive changes in policy responses to resource booms botswana s experience illustrates the argument botswana has not entirely avoided symptoms of dutch disease but has kept them largely in check despite the fragility of state institutions when diamonds were discovered a broad and stable political coalition during the first decade

growth effects of recent structural changes in the canadian economy some empirical evidence a structural change marked by deindustrialization servicization in most western economics and the nature and extent of its influence on economic growth continues to be a major topic of interst the paper rests heavily the presumption of the deindustrilization serviciation hypothesis and focusses on the growth implications of such structural changes using canadian data the paper first explores a casual relationship between goods and service sectors by running granger causality tests it then tests an econometric model to quantify the growth effects of changes in both shares and growth rates of the industrial and the manufacturing sectors the findings based on empirical testing of the model over the period 1961 89 suggest that recent structural changes in canada hava had significant negative implications

international transfers the relative price of non traded goods and the current account this paper considers the role of the relative price of non traded goods and the current account in the adjustment of a small open economy to the receipt of an international transfer the paper shows that the economy s macroeconomic adjustment to the transfer depends upon the relative capital intensities of the traded and non traded sectors of the economy as well as on the duration of the transfer the paper provides a new interpretation of france s current account surplus in the 1870s that accompanied the payment of reparations to germany following the franco prussian war and of germany s trade deficit in the 1920s that accompanied reparations payments associated with the first world war

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

boom bust cycle asymmetrical fiscal response and the dutch disease this paper investigates the changes in expenditure policy in oil exporting countries during boom bust in commodity price cycles and their implications for real exchange rate movements to do so we introduce a dutch disease model with downward rigidities in government spending to revenue shocks this model leads to a decoupling between real exchange rate and commodity export price movement during busts we test our model s theoretical predictions and underlying assumptions using panel data for 32 oil exporting countries over the period 1992 to 2009 results are threefold first we find that changes in current spending have a stronger impact on real exchange rate compared to capital spending second we find that current spending is downwardly sticky but increases in boom time and conversely for capital spending third we find limited evidence that fiscal rules have helped reduce the degree of responsiveness of current spending during booms in contrast we find evidence that fiscal rules are associated with a significant reduction in capital expenditure during busts while responsiveness to booms is more muted this raises concerns on potential adverse consequences of this asymmetry on economic performance in oil exporting countries

tourism welfare and de industrialization in a small open economy this paper investigates the effects of an expansion of tourism on welfare output and factor prices in the host country using a general equilibrium international trade model in the absence of taxes foreign ownership and distortions an increase in foreign visitors will increase welfare only if the price of nontradables increases factor mobility and foreign ownership tend to reduce the gains from tourism while commodity taxes tend to increase them conditions under which an increase in tourism can lead to deindustrialization are also discussed copyright 1991 by the london school of economics and political science

immigrant specificity and the relationship between trade and immigration theory and evidence studies routinely document that immigrant employment concentrates in non traded goods sectors and that many immigrants have low inter sectoral mobility we consider these observed characteristics of immigrant employment with regard to the question of how immigration affects a nation s pattern of production and trade we model an economy producing three goods one is non traded domestic labor and capital are domestically mobile but internationally immobile allowing that some new immigrants will become specific to the non traded goods sector the model indicates that the effects of immigration on output and trade depend importantly on the sectoral pattern of employment of both new and existing immigrants empirical investigation in a panel data set of oecd countries supports the model s prediction that immigration raises the output of non traded goods consistent with the model we also find that immigration and trade are complements given its empirical support the model s implications for immigration policy are then discussed

agricultural productivity and structural transformation evidence from brazil we study the eects of the adoption of new agricultural technologies on structural transfor mation to guide empirical work we present a simple model where the eect of agricultural productivity on industrial development depends on the factor bias of technical change we test the predictions of the model by studying the introduction of genetically engineered soybean seeds in brazil which had heterogeneous eects on agricultural productivity across areas with dierent soil and weather characteristics we nd that technical change in soy production was strongly labor saving and lead to industrial growth as predicted by the model

dutch disease effect of oil rents on agriculture value added in middle east and north african mena countries abstract this paper investigates the effect of oil rents on agriculture value added in oil producing middle east and north african mena countries annual data from 1970 to 2011 panel cointegration tests by pedroni 1999 long ran panel causality tests by canning and pedroni 2008 and two step system gmm by blundell and bond 1998 are used in this study we find a negative relationship between oil rents and agriculture value added in the long run with a rather slow rate of short run adjustment of agriculture value added back to equilibrium after a boom in oil rents these results indicate that an oil sector boom is associated with a contraction in the agriculture sectors of the countries in the panel in the long run this is probably attributable to a resource movement effect from other economic sectors to the booming oil sector in these countries this serves as evidence of a dutch disease effect of an oil sector boom on agriculture in the mena countries in this study

structural adjustment and the construction sector abstract this paper adds a construction sector to a dynamic dependent economy model equipped with consumer tradeables and non tradeables sectors the model is used to study the response of the production structure relative prices and the trade balance to a favorable terms of trade shock under the benchmark assumptions of perfect intersectoral factor mobility a perfect international capital market and no adjustment costs for realistic relative capital intensities the model predicts a boom in the construction and consumer non tradeables sectors a contraction of the tradeables sector and no relative price changes the implications of relaxing those benchmark assumptions are discussed separately

strong equilibrium in cost sharing connection games abstract we study network games in which each player wishes to connect his source and sink and the cost of each edge is shared among its users either equally in fair connection games fcg s or arbitrarily in general connection games gcg s we study the existence and quality of strong equilibria se strategy profiles from which no coalition can improve the cost of each of its members in these settings we show that se always exist in the following games 1 single source and sink fcg s and gcg s 2 single source multiple sinks fcg s and gcg s on series parallel graphs 3 multi source and sink fcg s on extension parallel graphs as for the quality of the se in any fcg with n players the cost of any se is bounded by h n i e the harmonic sum contrasted with the n price of anarchy for any gcg any se is optimal

absorbing a windfall of foreign exchange dutch disease dynamics abstract the permanent income rule is seldom the optimal response to a windfall of foreign exchange such as that from a resource discovery absorptive capacity constraints require domestic investment and investment in structures requires non traded inputs the supply of which is constrained by the initial capital stock this particularly when combined with intra sectoral capital immobility delays adjustment and creates short run dutch disease symptoms as the real exchange rate sharply appreciates and overshoots its long run value optimal revenue management requires investing in the domestic non traded goods sector and a slow build up of consumption accumulation of foreign assets adjusts to accommodate the time paths of domestic consumption and investment

hearts and spades paradigms of household economics abstract this paper explains why the feminist critique of inequalities within the family poses a serious challenge to conventional economic theories of the household but it also discusses those aspects of both neoclassical and marxian theory that are useful to an analysis of conflict within the family arguing that the bargaining power models being developed by some neoclassical theorist are complementary to marxist influenced structural accounts

the effects of mongolia s booming mining industry on its agricultural sector a test for dutch disease dutch disease occurs when currency strengthening associated with a booming sector of an economy crowds out a lagging trade dependent sector in this study a keynesian style model is specified to deduce hypotheses about how increased foreign direct investment fdi aimed at mongolia s mining sector affects its agricultural sector a key finding is that while econometric results suggest the increased fdi strengthened mongolia s currency its adverse effect on mongolia s trade sensitive agricultural sector is not sufficiently strong to cause the sector to decline although dutch disease was not detected the posited mechanism clearly is important specifically when currency strengthening is ignored the reduced form elasticity of agricultural value added with respect to fdi is 2 7 times larger than when currency strengthening is taken into account 0 103 vs 0 038 also fdi induced currency strengthening causes the keynesian multiplier y g to drop from 2 40 to 2 00 and the fdi multiplier y fdi to drop from 3 05 to 1 89

the price of stability for undirected broadcast network design with fair cost allocation is constant abstract we consider broadcast network design games in undirected networks in which every player is a node wishing to receive communication from a distinguished source node s and the cost of each communication link is equally shared among the downstream receivers according to the shapley value we prove that the price of stability of such games is constant thus closing a long standing open problem raised in anshelevich et al 2008 our result is obtained by means of homogenization a new technique that in any intermediate state locally diverging from a given optimal solution t is able to restore local similarity by exploiting cost differences between nearby players in t

resource curse or not a question of appropriability this thesis presents three self contained essays focusing on empirical questions in growth and development economics each article addresses specific questions on why countries perform differently in particular i analyse the effect of democracy on economic development the relationship between natural resources and growth and the efficiency of foreign development assistance in the first essay democracy consolidation and growth i analyse the effect of democracy on economic growth in this context i argue that an important aspect to consider is how consolidated political systems are put simply i find that it is not only a question of how democratic countries are but also how long they have been democratic in other words economic performance tends to improve with the duration of uninterrupted democracy the performance of autocracies on the other hand tends to deteriorate over time however for newly established political systems there seems to be a cost of being democratic this implies that democracies only bear their fruit after some time the analysis has important policy implications to overcome initial straits international assistance focused on democratic consolidation may be important and a very good investment in fostering long run development the second essay resource curse or not a question of appropriability together with anne boschini and jesper roine is concerned with the relation between natural resources and economic development for most laymen as well as for most economists it would seem reasonable that countries richly endowed in natural resources also benefit from this wealth however a large literature has found a systematic negative effect of natural resource abundance on economic growth we suggest that this so called resource curse is not determined by resource endowments alone but rather by the interaction between the type of resources a country possesses and the quality of institutions in the country this combination of factors determines what we call the appropriability of a resource the concept of appropriability captures the likelihood of natural resources leading to rentseeking corruption or conflicts which in turn will harm economic development our results suggest that if institutions are good enough the curse may be turned into a blessing this may explain why some countries such as norway and botswana tend to benefit from their resources while others such as angola and sierra leone do not the third and final essay of this thesis foreign sectoral aid fungibility growth and poverty reduction is a contribution to the aid efficiency literature which is concerned with the question of whether aid helps or hinders economic development foreign development assistance is often targeted on specific public expenditure sectors if this aid is not used in the sector for which it was granted e g health education it is said to be fungible and donors may end up financing something completely different from what they intended e g military expenditures the major concern about sectoral fungibility is that the alternative use of aid may be less productive or less socially useful however measuring fungibility is not sufficient to determine whether foreign sectoral aid fungibility is actually harmful what is important is how the funds treated as fungible are used the essay starts by obtaining estimates of fungibility for 57 countries the results suggest that sectoral aid is indeed largely treated as fungible by recipient countries next to assess the economic and health effects of fungibility these estimates are incorporated into an empirical model of aid and growth as well as into a model of aid and infant mortality altogether i find no evidence of more fungible sectoral aid leading to worse performance

macroeconomic policy in an oil exporting economy with foreign exchange controls the sudden and sharp increases in oil prices during the past decade and the discovery and extraction of oil in the north sea have recently contributed to a renewal of interest in the macroeconomic problems of oil exporting countries in general and those of industrialized and semi industrialized oilexporting countries such as the uk and mexico in particular the economic implications of the north sea oil revenues for the british economy have been hotly debated by forsyth and kay 1980 1981 worswick 1980 barker 1981 corden 1981 and byatt et al 1982 the effects of oil and gas revenues on the economies of canada mexico the netherlands norway and the uk have also been the subject of analysis and discussion in barker and brailovsky 1981 despite their important contribution these studies fall short of formulating a comprehensive theoretical framework for the study of macroeconomic policy in oil exporting countries in general the resurgence of interest in the macroeconomics of oil exporting economies and the lack of a satisfactory theoretical framework emphasize the need for the explicit introduction of an oil sector into macroeconomic models of the open economy the more recent studies by buiter and purvis 1983 eastwood and venables 1982 corden and neary 1982 and neary and purvis 1982 have gone some way towards meeting this need but they are better suited to the study of macroeconomic policy in developed oil exporting countries such as the united kingdom where highly developed financial markets already exist 1 without exception all these studies assume that the economy under consideration operates with a floating exchange rate and that the private capital is internationally mobile they also invariably ignore the short term and the long term financial repercussions of changes in oil income that operate via the government budget constraint and the asset position of the private sector these assumptions are however inappropriate for most oil exporting countries in the middle east africa and latin america the purpose of this paper is to examine the short run and long run macroeconomic consequences of an increase in oil revenues in an oil exporting country characterized by strict foreign exchange controls on private capital flows we attempt to do this in the context of a keynesian underemployment model of the type analysed for example by turnovsky and kaspura 1974 branson 1976 and argy and salop 1979 but with domestic prices set according to a mark up rule along the lines advocated for example by fetherston and godley 1978 1981 unlike argy and salop but in line with other recent contributions to the macroeconomic theory of open economies the present paper explicitly allows for the existence of the government budget constraint and analyses the macroeconomic effects of changes in oil revenues both in the short run when

the effects of oil price shocks on the iranian economy abstract the iranian economy is highly vulnerable to oil price fluctuations this paper analyzes the dynamic relationship between oil price shocks and major macroeconomic variables in iran by applying a var approach the study points out the asymmetric effects of oil price shocks for instance positive as well as negative oil price shocks significantly increase inflation we find a strong positive relationship between positive oil price changes and industrial output growth unexpectedly we can only identify a marginal impact of oil price fluctuations on real government expenditures furthermore we observe the dutch disease syndrome through significant real effective exchange rate appreciation

business cycles in an oil economy abstract the recent oil price fall has created concern among policy makers regarding the consequences of terms of trade shocks for resource rich countries this concern is not a minor one the world s commodity exporters combined are responsible for 15 20 of global value added we develop and estimate a two country new keynesian model in order to quantify the importance of oil price shocks for norway a large prototype petroleum exporter domestic supply chains link mainland non oil norway to the off shore oil industry while fiscal authorities accumulate income in a sovereign wealth fund oil prices and the international business cycle are jointly determined abroad these features allow us to disentangle the structural sources of oil price fluctuations and how they affect mainland norway the estimated model provides three key results first oil price movements represent an important source of macroeconomic volatility in mainland norway second while no two shocks cause the same dynamics conventional trade channels make an economically less significant difference for the transmission of global shocks to the oil exporter than to oil importers third the domestic oil industry s supply chain is an important transmission mechanism for oil price movements while the prevailing fiscal regime provides substantial protection against external shocks

optimal dutch disease growth models of the dutch disease such as those of krugman 1987 matsuyama 1992 sachs and warner 1995 and gylfason et al 1999 explain why resource abundance may reduce growth however the literature also raises a new question if the use of resource wealth hurts productivity growth how should such wealth be optimally managed this question forms the topic of the present paper in which we extend the growth literature on the dutch disease from a positive to a normative setting we show that the assumptions in the previous literature imply that the optimal share of national wealth consumed in each period needs to be adjusted down however some dutch disease is always optimal thus lower growth in resource abundant countries may not be a problem in itself but may be part of an optimal growth path the optimal spending path of the resource wealth may be increasing or decreasing over time and we discuss why this is the case

natural resource booms and inequality theory and evidence we develop a theory in the context of a two sector growth model in which learning by doing drives growth to explain the time path of income inequality following natural resource booms in resource rich countries under the condition of a relatively unskilled labor intensive non traded sector inequality falls immediately after a boom and then increases steadily over time until the initial impact of the boom disappears using data for 90 countries between 1965 and 1999 we find evidence in support of the theory especially for oil and mineral booms we also find that uncertainty about future commodity prices increases long run inequality

policy adjustments to the oil boom and their evaluation the dutch disease in indonesia abstract this paper analyzes the effects of two policy adjustments namely exchange rate devaluation and the accumulation of budget surpluses to the oil export boom in indonesia by using a simple simulation model our results indicate that exchange rate adjustment had a significant impact on expansion of tradable sectors especially the manufacturing sector by reversing the real exchange rate while officially maintaining the balanced budget principle the government exercised delicate operations whereby the budget surpluses were covertly accumulated as government deposits such operations were executed as a necessary demand management policy to ensure that the effect of devaluation was persistent these policy adjustments were consistent from a macroeconomic management point of view and have contributed to avoiding the dutch disease that indonesia otherwise might have suffered because of its oil bonanza

strong equilibrium in congestion games abstract 6 introduced the class of congestion games and proved that they always possess a nash equilibrium in pure strategies here we obtain conditions for the existence of a strong equilibrium in this class of games as well as for the equivalence of nash and strong equilibria we also give conditions for uniqueness and for pareto optimality of the nash equilibrium except for a natural monotonicity assumption on the utilities the conditions are expressed only in terms of the underlying congestion game form it turns out that avoiding a certain type of bad configuration in the strategy spaces is essential to positive results journal of economic literature classification numbers c71 c72 d62

the nexus between oil price and russia s real exchange rate better paths via unconditional vs conditional analysis abstract instead of analyzing the causality between two time series unconditional analysis as it is usually done the present study deals with the nexus between oil price and russia s real exchange rate conditioning upon potential control variables at well specified horizons and on a frequency by frequency basis this research accounts also for the possible transient linkages and signal discontinuities a major finding of this paper is deeply suggestive of a sharp causality running from oil price to real exchange rate in lower frequencies this implies that russia should better tackle with turbulence triggered by oil price and continue to reduce its energy dependency via drastic and proactive measures the economic and fiscal initiatives of putin administration may help to cope with sudden shocks to lessen the great oil dependence and to build confidence needed for economic recovery while our research does not say much about the routes through which oil price may affect differently real exchange rate it clearly indicates the presence of short term relationship conditional to gdp government expenditures terms of trade and productivity differential the conditional analysis and signal detection appear as meaningful exercises to find new insights into the focal issue

dutch disease government policy and import demand in nigeria the effects of sectoral changes and government policies on import demand in nigeria are examined in the context of the oil shocks of the 1970s and 1980s a two equation model is estimated to determine real import demand and the real exchange rate the results show that import demand increased significantly in response to the boom induced squeeze on the agricultural sector furthermore by inducing and sustaining real exchange rate overvaluation expansionary government policies contributed to higher import demand even after the collapse in oil prices

persistent trade effects of large exchange rate shocks this paper presents a theoretical basis for the argument that large exchange rate shocks such as the 1980s dollar cycle may have persistent effects on trade flows and the equilibrium exchange rate itself we begin with a partial equilibrium model in which large exchange rate fluctuations lead to entry or exit decisions that are not reversed when the currency returns to its previous level then we develop a simple model of the feedback from hysteresis in trade to the exchange rate itself here we see that a large capital inflow which leads to an initial appreciation can result in a persistent reduction in the exchange rate consistent with trade balance

optimal cost sharing for capacitated facility location games abstract we consider cost sharing for a class of facility location games where the strategy space of each player consists of the bases of a player specific matroid defined on the set of resources we assume that resources have nondecreasing load dependent costs and player specific delays our model includes the important special case of capacitated facility location problems where players have to jointly pay for opened facilities the goal is to design cost sharing protocols so as to minimize the resulting price of anarchy and price of stability we investigate two classes of protocols basic protocols guarantee the existence of at least one pure nash equilibrium and separable protocols additionally require that the resulting cost shares only depend on the set of players on a resource we find optimal basic and separable protocols that guarantee the price of stability price of anarchy to grow logarithmically linearly in the number of players these results extend our previous results cf von falkenhausen harks 2013 where optimal basic and separable protocols were given for the case of symmetric matroid games without delays we finally study the complexity of computing optimal cost shares we derive several hardness results showing that optimal cost shares cannot be approximated in polynomial time within a logarithmic factor in the number of players unless p np for a restricted class of problems that include the above hard instances we devise an approximation algorithm matching the logarithmic bound

why do some oil producing countries succeed in democracy while others fail summary empirical studies examining the effect of oil on democracy have shown contradictory results this paper offers an explanation in measuring the number of years between the beginning of oil production and the attainment of political independence in oil producing countries we found that the greater the number of years the higher the level of democracy ceteris paribus the types of resources exploited in the colonial period were shown to have influenced institutions nature and the formation of elite which acts to prevent subsequent political reforms this pattern is mitigated in countries that started producing oil far away from their independence

the dutch disease a disease after all many third world oil producers are encountering serious problems in building up a diversified export base while west european oil and gas producers netherlands united kingdom are suffering a decline in their traded goods manufacturing sector induced by real wage pressures it is becoming increasingly clear that high but temporary oil revenues may be somewhat ora mixed blessing the quip of the economist notwithstanding the mechanism behind this unbalance is clear enough part of the oil revenues is spent on non traded goods which leads to a real appreciation i e a rise in the relative price of non traded goods in terms of traded goods this in turn draws resources out of the non oil traded sector into the non traded goods producing sector corden and neary 1982 van wijnbergen 1980 one may say that this is an efficient response to the increase in income from oil production the united kingdom mexico egypt simply should move into oil derived industries and non traded goods and forget about their manufacturing sector until oil reserves are exhausted however many developing countries are hesitant to take this advice after all the post world war ii success stories in economic development involve without exception countries that promoted their traded goods sector aggressively moreover it is a well established stylised fact that technological progress is faster in the traded non sheltered sectors of an economy than in the non traded sector balassa 1964 is an early reference considering the hypothesis that technological progress rather than taking place exogenously with the passage of time is a function of accumulated experience the concern of countries like egypt mexico or indonesia is much easier to understand since solow 1957 and denison 1962 it is known that capital accumulation explain only a small part of economic growth if most of economic growth is caused by learning by doing induced technologica

super cycles of commodity prices since the mid nineteenth century summary decomposition of real commodity prices suggests four super cycles during 1865 2010 ranging between 30 and 40 years with amplitudes 20 40 higher or lower than the long run trend non oil price super cycles follow world gdp indicating they are essentially demand determined causality runs in the opposite direction for oil prices the mean of each super cycle of non oil commodities is generally lower than for the previous cycle supporting the prebisch singer hypothesis tropical agriculture experienced the strongest and steepest long term downward trend through the twentieth century followed by non tropical agriculture and metals while real oil prices experienced a long term upward trend interrupted temporarily during the twentieth century

a note on the electricity growth nexus in lao pdr abstract this paper investigates the relationship between electricity consumption and economic growth in laos by applying the ardl bounds testing approach to cointegration and granger causality tests our results confirm the existence of a long run relationship between electricity consumption and economic growth in addition we found unidirectional causality running from economic growth to electricity consumption in the long run supporting the conservation hypothesis

budget rules and resource booms and busts a dynamic stochastic general equilibrium analysis this paper develops a dynamic stochastic general equilibrium model to analyze and derive simple budget rules in the face of volatile public revenue from natural resources in a low income country like niger the simulation results suggest three policy lessons or rules of thumb when a resource price change is positive and temporary the best strategy is to save the revenue windfall in a sovereign fund and use the interest income from the fund to raise citizens consumptionover time this strategy is preferred to investing in public capital domestically even when private investment benefits from an enhanced public capital stock domestic investment raises the prices of domestic goods leaving less money for government to transfer to households public investment is not 100 percent effective in raising output in the presence of a negative temporary resource price change however the best strategy is to cut public investment this strategy dominates other methods such as trimming government transfers to households which reduces consumption directly or borrowing which incurs an interest premium as debt rises in the presence of persistent positive and negative shocks the best strategy is a mix of public investment and saving abroad in a balanced regime that provides a natural insurance against both types of price shocks the combination of interest income from the sovereign fund transfers tohouseholds and output growth brought about by public investment provides the best protective mechanism to smooth consumption over time in response to changing resource prices

an empirical dependent economy model for pakistan abstract pakistan s recent macroeconomic experience has been characterized by rapid growth relatively low inflation and the absence of severe balance of payments crises in spite of very large fiscal deficits this paper addresses the possible role that external inflows in the form of workers remittances and concessional lending may have played in generating these outcomes by conducting counterfactual simulations using an empirically estimated dependent economy macroeconomic model

commodity prices and growth an empirical investigation whereas empirical evidence on the effect of higher commodity prices on the long run growth of commodity exporters is ambiguous time series analyses using vector autoregressive var models have found that commodity booms raise income in the short run in this paper we adopt panel error correction methodology to analyze global data for 1963 to 2008 to disentangle the short and long run effects of international commodity prices on output per capita our results show that commodity booms have unconditional positive short term effects on output but non agricultural booms in countries with poor governance have adverse long term effects which dominate the short run gains our findings have important implications for non agricultural commodity exporters with poor governance especially in light of the recent wave of resource discoveries in low income countries

genuine savings and sustainability genuine savings gs has emerged as the leading economic indicator of sustainable economic development at the country level it derives from the literatures on weak sustainability wealth accounting and national income accounting we discuss the theoretical underpinnings of gs focusing on the relationship between changes in a nation s extended capital stock and the future path of consumption the indicator has entered widespread use propelled by the world bank s publications despite its varying performance as a predictor for future consumption notwithstanding the extensive body of literature reviewed promising future research avenues are identified

commodity price volatility with endogenous natural resources abstract natural resource reserves are exogenous in models of small commodity exporters changes in the stock of reserves play no role in the macroeconomy including in business cycle volatility trade dynamics or exchange rate volatility we consider richer supply dynamics and model exploration and depletion we show that an endogenous supply of reserves is important for capturing the stylised facts associated with commodity price shocks including a commodity currency the crowding out of non commodity activity dutch disease and a volatile business cycle we also consider how exploration and depletion affect the ranking of optimal monetary and taxation policies when natural resource reserves are held fixed monetary policy is an efficient tool for stabilising the effects of commodity price shocks however when exploration and depletion are accounted for using interest rates to stabilise the effects of commodity price changes becomes inefficient using taxes on the resource sector specifically an ad valorem royalty remains efficient

external disturbances domestic policy responses and debt accumulation in nigeria abstract this paper provides a case study of the link between external shocks domestic policy responses and external debt accumulation in nigeria the indonesian experience during 1970 1989 is provided as a contrast for policy comparison a significant part of the increase in external debt in the two countries corresponds to financing of capital flight after 1981 current account deficits assumed greater importance in the accumulation of external debt the growth in external debt was caused in part by adverse external conditions the results of this study show that the nigerian debt crisis was exacerbated by inappropriate policy responses indonesia avoided a crisis by applying prudent real exchange rate management and fiscal restraint

industrial policy and exchange rate scepticism the aim of the present paper is to put in historical perspective the development thinking on the relationship between industrial and exchange rate policies the first section focuses on the thought of the so called pioneers of development economics specifically their preference for protectionism and their belated recognition that an exchange rate policy could act as a substitute to it in the second one we analyze the exchange rate skepticism that arises out of the theories that identify a foreign constraint to growth in addition to the one revealed by the pioneers the third section briefly complements the previous discussion with reference to macroeconomic formulations that allow for short run contractionary effects of a devaluation reinforcing the skepticism in question in the fourth section we discuss the revival of development thinking in the 1980s and its discussion about east asian trajectories a literature that placed great emphasis on industrial policy finally in the fifth section we discuss the new historical facts and the new development macroeconomics models that are putting an end to exchange rate skepticism

south african manufacturing industries catching up or falling behind this article argues that intra industry trade with developed countries is an important source of technology transfer south africa has an industrial structure that is suited to such trade but high costs and weak social capacity to assimilate new technology therefore reintegration into the world economy is likely to reinforce dependence on resource intensive industries in the short run this need not adversely affect economic growth but unless the quality and quantity of education and training are improved the prospects for rebuilding the technological capacity and catch up with oecd countries are bleak

efficient graph topologies in network routing games abstract a topology is efficient for network games if for any game over it every nash equilibrium is socially optimal it is well known that many topologies are not efficient for network games we characterize efficient topologies in network games with a finite set of players each wishing to transmit an atomic unit of unsplittable flow we distinguish between two classes of atomic network routing games in network congestion games a player s cost is the sum of the costs of the edges it traverses while in bottleneck routing games it is its maximum edge cost in both classes the social cost is the maximum cost among the players costs we show that for symmetric network congestion games the efficient topologies are extension parallel networks while for symmetric bottleneck routing games the efficient topologies are series parallel networks in the asymmetric case the efficient topologies include only trees with parallel edges

harnessing windfall revenues optimal policies for resource rich developing economies a windfall of natural resource revenue or foreign aid faces government with choices of how to manage public debt investment and the distribution of funds for consumption particularly if the windfall is both anticipated and temporary we show that the permanent income hypothesis prescription of an ever lasting increase in consumption financed by borrowing ahead of the windfall and then accumulating a sovereign wealth fund swf is not optimal for capital scarce developing economies such countries should accumulate public and private capital to accelerate their development and only if the windfall is large relative to initial foreign debt is it optimal to build a swf the optimal time profile of consumption is biased towards the near future as compared to the permanent income hypothesis outcomes depend on instruments available to government we study cases where the government can make lump sum transfers to consumers where such transfers are impossible so optimal policy involves cutting distortionary taxation in order to raise investment and wages and where ricardian consumers can borrow against future revenues in which case the policy response to possible over consumption is a high level of investment in infrastructure

the narrow moving band the dutch disease and the competitive consequences of mrs thatcher notes on trade in the presence of dynamic scale economies abstract this paper presents a model of trade in which comparative advantage instead of being determined by underlying attributes of countries evolves over time through learning by doing in this model arbitrary patterns of specialization once established tend to become entrenched over time the model sheds light on three widely held views that do not make sense in more conventional models first is the view that temporary protection of selected sectors can permanently alter the pattern of comparative advantage in the protecting country s favor second is the view that seemingly favorable developments such as the discovery of exportable natural resources may lead to a permanent loss of other sectors and reduce welfare in the long run third is the possibility that a temporary overvaluation of a currency due to tight money can lead to a permanent loss of competitiveness in some sectors

aid the real exchange rate and why policy matters the cases of morocco and tunisia abstractevery form of foreign exchange inflow including aid can potentially cause real exchange rate appreciation with adverse consequences for the production of tradables dutch disease whether it does so depends on the policy response to the inflow this paper investigates the issue for morocco and tunisia over 1980 2009 we find that aid led to a real appreciation in morocco but had no effect on tunisia s real exchange rate this confirms the importance of the macroeconomic framework in which aid is provided and the key role for infrastructure and other supply side improvements in determining the final real economy impact of aid and other inflows

booming sector and de industrialisation in a small open economy this paper presents a theoretical analysis of the dutch disease the phenomenon whereby a boom in one traded goods sector squeezes porfitability in other traded goods sectors both by directly bi

the varieties of resource experience natural resource export structures and the political economy of economic growth many oil mineral and plantation crop based economies experienced a substantial deceleration in growth following the commodity boom and bust of the 1970s and early 1980s this article illustrates how countries dependent on point source natural resources those extracted from a narrow geographic or economic base such as oil and minerals and plantation crops are predisposed to heightened economic and social divisions and weakened institutional capacity this in turn impedes their ability to respond effectively to shocks which previous studies have shown to be essential for sustaining rising levels of prosperity analysis of data on classifications of export structure controlling for a wide array of other potential determinants of governance shows that point source and coffee and cocoa exporting countries do relatively poorly across an array of governance indicators these governance effects are not associated simply with being a natural resource exporter countries with natural resource exports that are diffuse relying primarily on livestock and agricultural produce from small family farms do not show the same strong effects and have had more robust growth recoveries

endogenous growth with a limited fossil fuel extraction capacity campbell 1980 and following authors have discussed a limited resource extraction capacity as an augmentation of the well known hotelling model we integrate a limited extraction capacity and related investments in the endogenous growth model of tsur and zemel 2005 to study its effect on economic development the capacity constraint gives rise to three effects on the one hand higher energy costs and the reallocation of production towards capacity investments decrease production available for consumption research and or capital investments energy costs and reallocation effect on the other hand research investments may increase which boosts available production research effect depending on the capital endowment and the strength of the effects long run consumption may be boosted or depressed in particular the capacity constraint may render everlasting consumption growth non optimal in a resource rich economy furthermore we find that capacity investments may be postponed to later points in time if the capital endowment is high

economic environment and agricultural development the importance of macroeconomic policy abstract this article explores the ways in which the macroeconomic balance of the economy and related policies impinge on agriculture in developing countries and considers implications for the design of policies it argues that the extent of macroeconomic balance and the quality of the policies influencing that balance to a large extent define the scope for effective agricultural policies the avoidance of severe balance of payments deficits and rapid inflation are seen as a necessary condition for the promotion of agricultural growth they also have an important influence on the nature and range of agricultural policy options available to governments

the effect of skilled emigration on real exchange rates through the wage channel abstract building on an analytical model we provide cross country empirical evidence that net skilled emigration appreciates bilateral real exchange rates through the wage channel in source countries chains of causality in the presence of the law of one price run through the spending effect and the resource allocation effect analogous to the remittance based dutch disease effect a pricing to market model allows pass through for both traded and nontraded prices when the law of one price is violated the skilled emigration elasticity of real exchange rate is estimated to be in the range of between 0 6 and 0 8 with internal prices playing a dominant role alternative model specifications show robust outcomes

boom goes the price giant resource discoveries and real exchange rate appreciation we estimate the effect of giant oil and gas discoveries on bilateral real exchange rates the size and plausibly exogenous timing of such discoveries make them ideal for identifying the effects of an anticipated resource boom on prices we find that a giant discovery with the value of a country s gdp increases the real exchange rate by 14 within 10 years following the discovery the appreciation is nearly exclusively driven by an appreciation of the prices of non tradable goods we show that these empirical results are qualitatively and quantitatively in line with a calibrated model with forward looking behaviour and dutch disease dynamics

post disaster aid and development of the manufacturing sector lessons from a natural experiment in china abstract we adopt a disaggregate approach to study the link between aid and dutch disease dynamics using a natural experiment in china specifically we examine whether post disaster aid provided to a subsample of chinese counties devastated by an earthquake in 2008 affects the sectoral composition of local economies using different methods we consistently find that counties receiving more aid even nearby counties not directly damaged by the earthquake tend to suffer from a contraction of the manufacturing sector innovative features of the paper include its regional perspective its identification strategy resting on a special provision in chinese policy pairwise aid and its focus on dutch disease effects in the context of post disaster aid

the effects of a natural gas boom on employment and income in colorado texas and wyoming improvements in technology have made it profitable to tap unconventional gas reservoirs in relatively impermeable shale and sandstone deposits which are spread throughout the u s mostly in rural areas proponents of gas drilling point to the activity s local economic benefits yet no empirical studies have systematically documented the magnitude or distribution of economic gains i estimate these gains for counties in colorado texas and wyoming three states where natural gas production expanded substantially since the late 1990s i find that a large increase in the value of gas production caused modest increases in employment wage and salary income and median household income the results suggest that each million dollars in gas production created 2 35 jobs in the county of production which led to an annualized increase in employment that was 1 5 of the pre boom level for the average gas boom county comparisons show that ex ante estimates of the number of jobs created by developing the fayetteville and marcellus shale gas formations may have been too large

gender differences the role of endogenous preferences and collective action for the last twenty five years our society has scrutinized relationships between women and men to an unprecedented degree in this discussion at once a positive description of behavior and a normative evaluation of family life neoclassical economics has contributed important insights concerning the connection between the labor market and the family however the neoclassical inquiry has proceeded in remarkable isolation from interdisciplinary and popular debates which have focused on the issue of power relations between men and women a stance which ultimately restricts the explanatory scope of the analysis the invisibility of power is particularly characteristic of the trade metaphor for marriage gary becker 1981 myself 1987 nancy folbre 1986 the exclusive focus on trade reduces social power to mere purchasing power which is exercised over technical resources or consumption goods not people the transaction cost analysis of the family robert pollak 1985 and paula england and george farkas 1986 has a richer conception of power relations between family members who are locked in bilateral monopolies but here power seems to be little more than a phenomenon endemic to longterm personal relationships in this paper i advance two different propositions concerning the mechanisms and consequences of power between men and women and use them to consider some concrete questions about the household first the mechanisms of power include collective action a point argued in other contexts by douglass north 1981 amartya sen 1977 albert hirschman 1985 samuel bowles and herbert gintis 1986 and heidi hartmann 1976 second the consequences of power include the social construction of gender a discriminatory economic system produces men and women whose socially differentiated capacities for performing and enjoying various types of work are much more distinct than their innate endowments in other words preferences and productive abilities are endogenous in this paper i borrow from the work of hirschman sen gintis 1972 and many feminist authors such as alison jaggar 1983 to explore the endogeneity of preferences i use two questions to motivate consideration of these claims the first concerns the informal marriage contract why has men s participation in household labor and childcare been so slow to change as women s market income has increased time budget studies generally show that men s household labor is not very responsive to women s market labor at most men took on about two more hours of household responsibilities per week in the 1970 s when women s wage labor increased dramatically ellen fried and susan settergren 1986 c russell hill and frank stafford 1980 hartmann 1981 the second question concerns the formal marriage contract why are there so many retdiscussants gary s becker university of chicago paula england university of texas dallas

oil and women a re examination abstract in a seminal article ross 2008 reports a negative correlation between oil production and women s representation in the labour force and politics across countries this article re examines these relationships exploiting variations in oil endowments to address endogeneity concerns we confirm that oil production causes decline in women s representation additionally we show that consistent with dutch disease effects oil production decreases women s employment in the traded sector however it also leads to an increase in women s employment in the nontraded sector we explore some social consequences of oil production and show that it results in women marrying earlier and having more children

avoiding the resource curse indigenous communities and canada s oil sands summary concerns about a resource curse in canada have been raised in response to rapid growth in the petroleum sector in northern alberta in previous research there has been little consideration of how symptoms of the resource curse are experienced and managed at a regional scale and by indigenous communities an analysis of effects and responses is offered using a natural financial human and social capitals framework without consideration of how to manage the symptoms of the resource curse oil and gas activity is likely to further disadvantage indigenous populations already living on the margins of canadian society

do large capital inflows hinder competitiveness the dutch disease in ethiopia this article investigates whether large inflows of foreign aid and remittances have had a damaging impact on the ethiopian real exchange rate rer we improve the current empirical literature by i compiling a unique quarterly dataset to provide a larger sample size and enable the modelling of important intra year dynamics which should lead to better model specifications ii providing a new empirical approach unobserved components uc to test the dutch disease hypothesis and iii using several cointegration approaches to further test the robustness of our conclusions our results suggest that there are two main long run determinants of the rer in ethiopia trade openness is found to be correlated with rer depreciations while a positive shock to the terms of trade tends to appreciate the rer foreign aid is not found to have a statistically significant impact while there is only weak evidence that remittances are associated with rer appreciations the lack of empirical support for the dutc

dutch disease and the mitigation effect of migration evidence from canadian provinces this article evaluates whether immigration can mitigate the dutch disease effects associated with booms in natural resource sectors we derive predicted changes in the size of the non tradable sector from a small general equilibrium model a la obstfeld rogoff using data for canadian provinces we find evidence that aggregate immigration mitigates the increase in the size of the non tradable sector in booming regions the mitigation effect is due mostly to interprovincial migration and temporary foreign workers there is no evidence of such an effect for permanent international immigration interprovincial migration also results in a spreading effect of dutch disease from booming to non booming provinces

marriage and divorce informational constraints and private contracting the relationship between divorce rates in the united states and laws regulating divorce are analyzed using data from a special current population survey undertaken in 1979 with particular reference to the adoption by many states of no fault divorce laws the author utilizes a contract theoretic framework to examine the impact of both legal and informational constraints on several aspects of the marriage relationship 1 the probability of divorce 2 compensation at divorce i e the terms of the divorce settlement 3 the probability of entering marriage and 4 incentives for investment in marriage specific capital two different models are developed the first assumes that ex post information about the value of each spouses opportunites at divorce is symmetric and that since divorce would only occur if the joint benefits outweigh the joint costs the law has no effect on the divorce rate the second model asserts that the existence of asymmetric information results in a fixed wage marriage contract and that divorce would be higher in states that allow unilateral divorce the evidence supports the first of these hypotheses excerpt

sustainable development in pacific micro economies abstract this paper argues that the central economic problem for a number of very small pacific island economies is the preservation and enhancement of their status as rentier societies and the relatively high living standards vis a vis other developing countries which go with the status the thrust of most development planning in the region with its focus on sustainable expansion of productive activity is misdirected in these small countries it is not productive activity but rent entitlements which must be sustained and reproduced over time aid philately and migrant remittances are not merely supplements to local incomes they are the foundations of the modern economy insofar as conventional development projects crowd out aid and remittance entitlements their impact is immiserizing criticism is offered of a recent argument for returning to sustainable subsistence economies

international redistribution of income summary how do international policies on aid trade and factor movements affect the international distribution of income we calculate the impact by world decile of the actual level of aid flows and the effect on income of merchandise trade restrictions by high income countries we find that aid s distributional impact is equality enhancing extremely small in terms of changes in inequality measures but of some importance for the lowest decile of the distribution we also find that some of this impact is counteracted by lost potential income in the lower deciles from merchandise trade barriers imposed by high income countries

mechanism and network design with private negative externalities a revenue maximizing monopolist is selling a single indivisible good to buyers who face a loss if any of its rival buyers obtain it the rivalry is modeled through a network an arc between a pair of buyers indicates that a buyer considers another buyer its rival and the magnitude of the loss is the private information of each buyer this loss exposure due to competitive considerations can be viewed as a negative externality first using a myersonian approach we derive the monopolist s optimal mechanism for any given network second we show that revenues depend on the network structure thus in applications where it is possible the monopolist might consider designing not only the mechanism but also the network if not fully at least partially third we provide and fully describe the solution to the monopolist s market design problem that is the joint network and mechanism design problem specifically despite the nonmonotone impact of additional competition on the monopolist s revenues we deter

resource boom wages and unemployment theory and evidence from the norwegian petroleum experience the effects of norwegian petroleum activities on nominal wages and the rate of unemployment are analyzed in this paper the theoretical model is based on standard theory of segmented labor markets increased nominal wages in the petroleum sector will unambiguously increase the wage level and the rate of unemployment increased petroleum employment will under realistic assumptions also raise the wage level the effect on the rate of unemployment in this case is ambiguous the empirical model is embedded in reduced forms of the theoretical model and the estimated parameters are consistent with the theoretical results

macro policy responses to natural resource windfalls and the crash in commodity prices policy prescriptions for managing natural resource windfalls are based on the permanent income hypothesis none of the windfall is invested at home and saving in an intergenerational swf is dictated by smoothing consumption across different generations furthermore with dutch disease effects the optimal response is to intertemporally smooth the real exchange rate smooth public and private consumption and limit sharp fluctuations in the intersectoral allocation of production factors we show that these prescriptions need to be modified for the following reasons first to cope with volatile commodity prices precautionary buffers should be put in a stabilisation fund second with imperfect access to capital markets the windfall must be used to curb capital scarcity invest domestically and bring consumption forward third with real wage rigidity consumption must also be brought forward to mitigate transient unemployment fourth the real exchange rate has to temporarily appreciate to signal the need to invest in the domestic economy to gradually improve the ability to absorb the extra spending from the windfall fifth with finite lives the timing of handing back the windfall to the private sector matters and consumption and the real exchange rate will be volatile finally with nominal wage rigidity we show that a taylor rule is a better short run response to a crash in commodity prices than a nominal exchange rate peg

natural disasters and labor markets abstract while it is clear that natural disasters have serious welfare consequences for affected populations less is known about how local labor markets in low income countries adjust to such large shocks combining data from the indonesia family life survey the desinventar database the u s geological survey and district level employment indicators this paper explores how a large earthquake in indonesia affected labor market outcomes in particular the evolution of wages across sectors i find that the earthquake had a positive effect on wage growth for workers who were employed in the agricultural sector at baseline i propose two mechanisms for this result a higher growth rate of the price of rice and a downward shift in the supply of workers in the agricultural sector i show that evidence mainly supports the latter labor shifted out of the agricultural sector into the construction sector raising the marginal product of labor in agriculture

funds from non renewable energy resources policy lessons from alaska and alberta abstract we document the use of energy natural resource funds in alaska and alberta and analyze theirs characteristics for further implementation in resource rich countries such funds allow dealing theoretically with intergenerational equity issues corruption and more general institutional problems the performance of both funds is very different depending on the management and composition choices but some policy lessons can be drawn from these two examples importantly the role of a public dividend policy is highlighted as a way to bypass corrupted institutions and to enhance quality of life for poorest people we also emphasize the need to deal with inflation to make the fund sustainable

short period macroeconomic aspects of foreign aid by concentrating on the supply side the existing literature on foreign aid e g the two gap or the dutch disease model neglected the role that foreign aid might also play in influencing the level of domestic demand this paper redresses the balance it analyses the role of foreign aid in the short period by incorporating problems of both effective demand and supply side constraints the analysis shows how and why aid can be useful or wasteful especially in the context of economic liberalisation this may for example imply that an increase in foreign aid has to be combined with an appropriate expansionary domestic demand policy in order to stimulate domestic employment and output 1996 academic press limited

oil windfalls and export diversification in oil producing countries evidence from oil booms abstract this paper examines the factors behind export diversification in oil countries specifically we investigate the impact of oil booms on export diversification through an empirical framework the paper finds that economy s export structure before the oil boom determines whether oil windfalls might affect the diversification process thus an oil boom negatively affects export diversification only if countries initially exhibit low levels of diversification in countries with a high level of diversification before the boom an oil boom has no impact on diversification these results are based on a large sample of 134 countries and are robust to various sensitivity analyses they are corroborated with data from the manufacturing sector which show that oil booms only reduce diversification in countries with a small manufacturing sector prior to the boom

natural resources democracy and corruption we study how natural resources can feed corruption and how this effect depends on the quality of the democratic institutions our game theoretic model predicts that resource rents lead to an increase in corruption if the quality of the democratic institutions is relatively poor but not otherwise we use panel data covering the period 1980 to 2004 and 124 countries to test this theoretical prediction our estimates confirm that the relationship between resource rents and corruption depends on the quality of the democratic institutions our main results hold when we control for the effects of income time varying common shocks regional fixed effects and various additional covariates they are also robust across different samples and to the use of various alternative measures of natural resources democracy and corruption

commodity currencies and the real exchange rate abstract this paper shows that a change in the terms of trade of a commodity exporting country could cause the relative price of nontraded goods to rise or fall depending on the strength of income and substitution effects