a model of the origins of basic property rights this paper studies the origins of one of the most basic of property rights namely the right of an individual or an organization to the fruits of its labour my objective is to address the questions of why when and how this property right can emerge and be made secure i develop a model of the strategic interaction between two players in the state of nature which is an environment characterized by the absence of any laws and institutions including property rights and the state my analysis explores in particular the roles of the players fightin g and productive skills on the emergence and security or otherwise of this property right

inequality and polarisation in health systems responsiveness a cross country analysis the world health report 2000 proposed three fundamental goals for health systems encompassing population health health care finance and health systems responsiveness the goals incorporate both an efficiency and equity dimension while inequalities in population health and health care finance have motivated two important strands of research inequalities in responsiveness have received less attention in health economics this paper examines inequality and polarisation in responsiveness bridging this gap in the literature and contributing towards an integrated analysis of health systems performance it uses data from the world health survey to measure and compare inequalities in responsiveness across 25 european countries in order to respect the inherently ordinal nature of the responsiveness data median based measures of inequality and polarisation are employed the results suggest that in the face of wide differences in the health systems analysed there exists large variability in inequality in responsiveness across countries

the tragedy of the commons and economic growth why does capital flow from poor to rich countries we analyze a differential game in which all interest groups have access to a common capital stock we show that the introduction of a technology that has inferior productivity but enjoys private access may ameliorate the tragedy of the commons we use this model to analyze capital flight in many poor countries property rights are not well defined since safe bank accounts in rich countries the inferior technology are available to citizens of these countries they engage in capital flight we show that the occurrence of capital flight does not imply that opening the capital account reduces growth and welfare

psychological factors and stock option exercise we investigate stock option exercise decisions by over 50 000 employees at seven corporations controlling for economic factors psychological factors influence exercise consistent with psychological models of beliefs employees exercise in response to stock price trends exercise is positively related to stock returns during the preceding month and negatively related to returns over longer horizons consistent with psychological models of values that include reference points employee exercise activity roughly doubles when the stock price exceeds the maximum price attained during the previous year

why don t poor countries catch up a cross national test of an institutional explanation early neoclassical analyses predicted that poor countries would grow faster than wealthy countries because of technological advances and diminishing returns to capital in the latter the reverse has occurred poor countries are falling back rather than catching up we suggest here that deficient institutions underlie this divergence employing various indicators of institutional quality including the rule of law the pervasiveness of corruption and the risk of expropriation and contract repudiation we show that the ability of poor countries to catch up is determined in large part by the institutional environment in which economic activity in these countries takes place jel o00 o10

inflation and welfare in a monetary economy it is in everyone s private interest to try to get someone else to hold non interest bearing cash and reserves but someone has to hold it all so these efforts must simply cancel out all of us spend several hours per year in this effort and employ thousands of talented and highly trained people to help us these person hours are simply thrown away wasted on a task that should not have to be performed at all

on the dynamics of ethnic fractionalization does fractionalization change over short periods of time if so are there any substantial implications for economic performance to answer such questions we construct a new panel data set with measures of ethnic linguistic and religious fractionalization for 26 former communist countries covering the period from 1989 to 2002 our fractionalization measures show that transition economies became more ethnically homogeneous over such a short period of time although the same did not happen for linguistic and religious diversity in line with the most recent literature there seems to be no effect of exogenous diversity on macroeconomic performance that is on per capita gdp growth however we find that dynamic endogenous ethnic diversity is negatively related to growth although this is still not the case for linguistic and religious diversity these findings are robust to different specifications polarization measures and instrument sets as well as to a composite index of ethnic linguistic religious fractionalization

the tragedy of tourism resources as the outcome of a strategic game a new analytical framework abstract game theory is rarely used to deal with the overuse and misuse of tourism resources when it happens the issue is normally explained within a non cooperative setting in which because of the free riding option a problem emerges as the socially irrational outcome of an individually rational behaviour social dilemma in some cases the assumptions upon which this explanation rests risk lacking both descriptive accuracy and predictive power since tourism is the encounter of a stable residents with a changing tourists population the paper asserts that in many cases the issue may be better investigated within a strategic game in which the players do not know an aspect of their environment that is important for their choice bayesian game building on this the paper demonstrates why an unsustainable path may emerge even when both players prefer preservation to exploitation and no free ride incentive exists then it addresses some policy issues to prevent the dreaded result that non cooperative behaviour would yield

endogenous formation of coalitions in a model of a race abstract this paper examines the endogenous formation of coalitions among symmetric firms who are racing to innovate a new product or process the probability of success depends on a coalition s research intensity which in turn depends on the r d of member firms forming joint ventures allows firms to maintain a higher research intensity and increase their probability of success we characterize the equilibrium coalition structure when the innovation is drastic as well as non drastic and examine its variation with respect to input spillovers and imperfect appropriability of benefits we also compare equilibrium and efficient coalition structures

citizens preferences and the portfolio of public goods evidence from nigeria summary developing countries have undertaken decentralization reforms to increase the efficiency of public goods provisioning by tailoring the goods to the preferences of smaller groups the reforms aim to ensure that the resulting supply of public goods matches local demands we analyze if local politicians tasked with supplying public goods in a developing country respond to citizens preferences we ask two questions first faced with demands for increased spending on a particular type of public good will politicians increase the overall spending on public goods or keep it constant while reallocating resources between different public goods second if politicians reallocate resources rather than increase overall spending which public good will receive additional funds at the expense of another good we examine these questions using sub national spending and preference data in nigerian districts our empirical strategy accounts for interdependency between spending areas as increased spending in one area can be offset by decreasing expenditures elsewhere we find that local politicians reallocate resources across education health infrastructure and agricultural support to match the preference profile of citizens across these goods but do not increase overall spending for public goods

solution of perfect foresight saddlepoint problems a simple method and applications abstract the paper proposes a method to compute adjustment dynamics that occur in infinite time horizon problems of deterministic optimal control without loss of accuracy this method is easier to implement than existing ones discussed applications are the standard neoclassical growth model and the general two sector growth model with cyclical adjustment on a two dimensional manifold

poverty voracity and growth abstract this article investigates economic performance when enforceable property rights are missing and basic needs matter for consumption it suggests a new view of the so called voracity effect according to which windfall gains in productivity induce behavior that leads to lower economic growth taking into account that the rate of intertemporal substitution in consumption depends on the level of consumption it is shown that voracious behavior is situation specific it occurs when an economy is in decline and sufficiently close to stagnation

non hbox co _2 co 2 generating energy shares in the world cross country differences and polarization the aim of this paper is to examine the spatial distribution of non hbox co 2 generating energy sources in the world for the period 1990 2009 paying special attention to the evolution of cross country disparities to this end after carrying out a classical convergence analysis a more thorough investigation of the entire distribution is presented by examining its external shape the intra distribution dynamics and the long run equilibrium distribution this analysis reveals the existence of a weak rather insignificant convergence process and that large cross country differences are likely to persist in the long run next as polarization indicators are a proper way of appraising potential conflict in international environmental negotiations we test whether or not the distribution dynamics concurs with the presence of polarization our results indicate that two poles can be clearly differentiated one with high and other with low non hbox co 2 generating energy shares in view of these findings and to ensure a fair transition to a sustainable energy system the paper calls for the development of an ambitious clean energy agenda especially in countries with low non hbox co 2 generating energy shares

incorporating policymaker costs and political competition into rent seeking games 1 introductionrent seeking in politics involves agents who lobby policymakers for potential benefits in a seminal contribution tullock 1980 modeled rent seeking as a lottery game a major weakness of tullock s game was that it lacked verisimilitude to actual rent seeking because it omitted politics the absence of politics meant that the game essentially assumed that there are no costs to the policymakers of supplying rents but as tollison 1997 and others have pointed out these costs are not zero and the politics surrounding the policy decision influence the pattern of lobbying and the rent seeking outcome in this paper we address two aspects of those politics the costs to policymakers of supplying rents and the variable intensity of political competition among a given number of rent seekers including these aspects increases the similarity of the game to actual rent seeking situations and makes clearer the incentives to rent seekers costs to supplying rents arise due to various constraints legislators must build coalitions acquire parliamentary rights maintain a positive image and service constituent interests policymakers in agencies must follow procedural rules submit to congressional oversight and budgeting pass omb reviews and so forth lower policymaker costs should increase the effectiveness of lobbying and this should attract greater lobbying efforts among rent seekers 1 increasing policymaker costs makes lobbying less effective indeed because of these costs policymakers often turn away lobbies empty handed in short policymakers have constraints that affect the policies they design and this affects lobbying expenditures dougan and snyder 1993 this paper introduces policymaker costs in monetary units such that they are comparable to the value of the rent and rent seeking expenditures political competition among rent seekers also influences the rent seeking outcome competition traditionally has been modeled by varying the number of rent seeking agents actual or potential or their relative lobbying expenditures e g posner 1975 rogerson 1982 sun and ng 1999 competition can vary however even among a given number of rent seekers and for a given profile of expenditures for example two agents may lobby a policymaker for the same unique and exclusive political good then one agent directly opposes the other and only one agent can win the good alternatively the same two agents may lobby a policymaker for two separate political goods in that case the agents oppose each other only indirectly this situation is frequent in politics as rent seeking agents compete for space on the political agenda for policymakers time and for portions of a particular government budget in this situation success by one agent does not necessarily result in failure by the other but it does lower the probability that the other agent will succeed competition is more intense in the first example even though the examples involve the same number of firms industrial organization economists have shown that a single parameter can determine incumbent firms competition in price and quantity regardless of the number of firms present 2 this paper introduces rent seeking competition analogously allowing a parameter to alter the competitiveness of the rent seeking game among a fixed number of firms we incorporate monetized policymaker costs and the political competition parameter into the success probabilities of the standard rent seeking game the resulting model is a game in which the agents simultaneous maximization of expected net returns or profits determines a nash equilibrium in their expenditures incorporating politics into the standard game makes the game more accurate because equilibrium and comparative statics depend in part on the politics of the rent seeking contest more specifically increasing political competition decreases rent seeking expenditures unless the value of the rent is sufficiently large relative to policymaker costs and dissipation rates are lower than in previous research because of policymaker costs

immigration conflict and redistribution we study how the possibility of a conflict between natives and immigrants shapes income redistribution in democracies conflict erupts when immigrants are given less than what they could obtain by resorting to confrontation that in turn can make natives vote for lower tax rates and lower public spending we show that income redistribution both vertical from the rich to the poor and horizontal from natives to migrants decreases with the level of immigration this is because the threat of conflict intensifies as the migrant population becomes bigger inequality softens the effect of immigration on tax rates but reduces horizontal redistribution despite the threat of conflict the welfare of the native population unambiguously increases with the stock of migrants

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

deprivation and social exclusion social exclusion manifests itself in the persistent relative lack of an individual s access to functionings compared with other members of society and we model it as being in a state of deprivation over time we view deprivation as having two basic determinants the lack of identification with other members of society and the aggregate alienation experienced by an agent with respect to those having fewer functioning failures using an axiomatic approach we characterize new individual and aggregate measures of deprivation and social exclusion the aggregate measures are then applied to eu data for the period 1994 2001

the feedback equilibria of a differential game of capitalism abstract the feedback equilibria of a capitalistic game described by kelvin lancaster are derived under concave utility functions with a constant degree of absolute risk aversion and standard production function it is shown that the equilibrium solution is unique if the rate of time preference and the constant degree of absolute risk aversion are sufficiently great some properties of the equilibrium solution are reported

property rights and finance which is the tighter constraint on private sector investment weak property rights or limited access to external finance from a survey of new firms in post communist countries we find that weak property rights discourage firms from reinvesting their profits even when bank loans are available where property rights are relatively strong firms reinvest their profits where they are relatively weak entrepreneurs do not want to invest from retained earnings

measuring the effects of economic diversity on growth and stability the role of economic diversity in regional stability and growth is examined contrary to conventional wisdom the empirical literature has been unable to confirm the link between diversity and economic performance traditional notions of diversity tend to be defined narrowly usually emphasizing the distribution of employment across industries these approaches are inadequate because they do not capture elements of inter industrial linkages an alternate approach to conceptualizing diversity based on a regional input output model is described and computed for the 50 states empirical results suggest that diversity within the theoretical construct of input output is associated with higher levels of stability and growth

anarchy and its breakdown anarchy defined as a system in which participants can seize and defend resources without regulation from above is not chaos but rather a spontaneous order however anarchy is fragile and may dissolve either into formless amorphy or into a more organized system such as hierarchy under anarchy each contestant balances between productive exploitation of the current resource base and fighting to acquire or defend resources anarchy is sustainable only when there are strongly diminishing returns to fighting effort the decisiveness parameter is sufficiently low and incomes exceed the viability minimum these considerations explain many features of animal and human conflict

forecasting volatility using long memory and comovements an application to option valuation under sfas 123r horizon matched historical volatility is commonly used to forecast future volatility for op tion valuation under the statement of financial accounting standards sfas 123r in this paper we empirically investigate the performance of using historical volatility to forecast long term stock return volatility in comparison with a number of alternative forecasting methods in analyzing forecasting errors and their impact on reported income due to option expensing we find that historical volatility is a poor forecast for long term volatility and that shrinkage adjustment toward comparable firm volatility only slightly improves its per formance forecasting performance can be improved substantially by incorporating both long memory and comovements with common market factors we also experiment with a simple mixed horizon realized volatility model and find its long term forecasting perfor mance to be more accurate than historical forecasts but less accurate than long memory forecasts

conflict and distribution abstract we develop a behavioral model that links the level and pattern of social conflict to the societywide distribution of individual characteristics the model can be applied to groups that differ in characteristics such as wealth ethnicity religion and political ideology we settle questions of existence and uniqueness of conflict equilibrium conflict is seen to be closely connected with the bimodality of the underlying distribution of characteristics however in general the conflict distribution relationship is nonlinear and surprisingly complex our results on conflict patterns also throw light on the phenomena of extremism and moderation journal of economic literature classification numbers d63 d72 d74

a generalized model of rent seeking behavior in this paper i present a formal analysis of rent seeking games in which the players valuations for the prize are represented as vectors the players in this game are risk neutral and may not be indifferent to who wins the contestable rent if it is someone else both tullock s original rent seeking model and the public goods rent seeking model by katz et al turn out to be special cases of this more general model

a lipsetian theory of voluntary power handover we consider an autocracy where the ruling elite control both the resource wealth and ed ucation policies education prompts economic growth and enriches the budget of the elite however education also increases the awareness of citizens capturing their reluctance to accept a dictatorship and their labor market aspirations and forces the elite to ex pand redistribution or handover the power a power handover leads to a more democratic regime where the elite retains at least partially its economic power this trade offis the backbone of our lipsetian theory of voluntary power handover this theory provides new insights on the positive relationship between economic development education and de mocratization and on the negative relationship between inequality and democratization finally we revisit the resources curse hypothesis within our setting

linking conflict to inequality and polarization in this paper we study a behavioral model of conflict that provides a basis for choosing certain indices of dispersion as indicators for conflict we show that a suitable monotone transform of the equilibrium level of conflict can be proxied by a linear function of the gini coefficient the herfindahl hirschman fractionalization index and a specific measure of polarization due to esteban and ray jel classification d74 d31

wealth varying intertemporal elasticities of substitution evidence from panel and aggregate data abstract this paper constructs and estimates a model of consumer preferences in which the intertemporal elasticity of substitution ies of consumption expenditure rises with the level of wealth the purpose of this paper is to measure the effect that systematic variation in the ies of poor and rich consumers has on the ies of aggregate consumption expenditure we find economically significant differences in the ies of poor and rich consumers in indian panel data on the consumption of individual households we also find economically significant differences in the ies measured in aggregate time series data for the u s and india

the exercise and valuation of executive stock options abstract in theory hedging restrictions faced by managers make executive stock options more difficult to value than ordinary options because they imply that exercise policies of managers depend on their preferences and endowments using data on option exercises from 40 firms this paper shows that a simple extension of the ordinary american option model which introduces random exogenous exercise and forfeiture predicts actual exercise times and payoffs just as well as an elaborate utility maximizing model that explicitly accounts for the nontransferability of options the simpler model could therefore be more useful than the preference based model for valuing executive options in practice

income polarization in european countries and europe wide 2004 2012 polarization is an interesting additional social indicator for analyzing income distribution across countries as it captures the phenomenon of clustering around extreme poles income polarization can be closely linked to social exclusion which is relevant for eu social policy because combatting social exclusion is a central element of the lisbon agenda and the europe 2020 strategy rising income polarization has been observed outside europe but within the eu polarization is relatively unexplored this paper provides theoretical insights into this relatively new dimension of income distribution and analyzes trends in income polarization in 28 eu countries and 3 non eu countries using micro data from eu silc over the period 2004 2012 income polarization is rather stable over this period in european countries and europe wide it was rising among the old eu15 countries in the sub period 2004 2008 but declining afterwards the opposite development is witnessed for new member states despite the great recession we find quite stable income polarization in europe

the institutional framework and economic development the compound growth rates of per capita output and farrell type efficiency measures for 115 market economies over the period 1960 80 were compared with measures of political civil and economic liberty it was found that the institutional framework has significant and large effects on the efficiency and growth rate of economies politically open societies which subscribe to the rule of law to private property and to the market allocation of resources grow at three times the rate and are two and one half times as efficient as societies in which these freedoms are abridged

comparing bargaining solutions in the shadow of conflict how norms against threats can have real effects abstract in many economic environments agents make costly and irreversible investments in guns that may enhance their respective threat payoffs but also shrink the utility possibilities set in such settings with variable threats and a variable utility possibilities set it becomes possible to rank different bargaining solutions in terms of efficiency we compare bargaining solutions within a class in which the influence of the threat point on the bargaining outcome varies across solutions under symmetry we find that the solution in which the threat point is least influential the equal sacrifice solution pareto dominates the other solutions since the equal sacrifice solution puts the least weight on the threat point norms against threats that can be seen in many seemingly rhetorical pronouncements in adversarial relations can mitigate some of the costs of conflict and therefore have efficiency enhancing effects journal of economic literature classification numbers c72 c78 d30 d70 d72 k42

ethnicity and conflict an empirical study this paper examines the impact of ethnic divisions on conict the empirical specication is informed by a theoretical model of conict esteban and ray 2011 in which equilibrium conict is related to just three distributional indices of diversity ethnic polarization ethnic fractionalization and a greenberg gini index constructed across ethnic groups our empirical ndings verify that these distributional measures are signicant correlates of conict the underlying theory permits us to use these results to make inferences about the relative importance of public goods in conict as well as the extent of within group cohesion in conictual activity these eects are further strengthened as we introduce country specic measures of group cohesion and the relative importance of public goods and combine them with the distributional measures exactly as specied by the theory

us and them the origin of identity and its economic implications we investigate the origins of identity and the innate proclivity to draw a distinction between insiders and outsiders we propose an evolutionary explanation we argue that identity arises because it facilitates survival in an evolutionary setting we endogenize preferences and demonstrate that the evolutionarily stable preferences fashioned by natural selection would draw a distinction between insiders and outsiders we then work out the implications of such preferences in two contemporary scenarios one entailing rent seeking behavior and the other involving public good provision our results are in conformity with empirical evidence

does stock return predictability affect eso fair value abstract executive stock options esos are modified american options that cannot be valued using standard methods with a few exceptions the literature has discussed the eso fair value by assuming unpredictable stock returns which are not supported by the available empirical evidence in this paper we obtain the fair value of american esos when stock returns are predictable and specifically driven by the trending ornstein uhlenbeck process of lo and wang 1995 we solve the executive s portfolio allocation problem for a simple buy and hold strategy when his wealth can be distributed between a risk free asset and a market portfolio this problem is jointly solved with the executive s optimal exercise policy we find that executives tend to wait longer the higher the predictability independently of the composition of executive s asset menu we have also analyzed the implications under the fas123r proposals for the eso fair value and found that even for low autocorrelations there is a meaningful mispricing when unpredictable returns are erroneously assumed

inequality lobbying and resource allocation this paper describes how wealth inequality may distort public resource allocation a government seeks to allocate limited resources to productive sectors but sectoral productivity is privately known by agents with vested interests in those sectors they lobby the government for preferential treatment the government even if it honestly seeks to maximize economic efficiency may be confounded by the possibility that both high wealth and true economic desirability create loud lobbies broadly speaking both poorer economies and unequal economies display greater public misallocation the paper warns against the conventional wisdom that this is so because such governments are more corrupt jel d72 d78 d82 016 in this paper we propose a particular channel through which wealth inequality distorts the resource allocation process our analysis rests on four premises

prosperity without conflict abstract social conflict and slow growth are features of many developing economies this paper considers the role institutions of property rights and conflict management can play in both achieving prosperity and mitigating conflict in these economies we study how introducing conflict over economic distribution into an otherwise standard model of growth can shape optimal second best taxation policy when diversionary activities cannot be taxed in this context we find that the maximization of economic efficiency may call for a reduction in growth in order to mitigate the problem of diversion even though the economy s growth is inefficiently slow in the absence of taxation this is so when institutional quality is sufficiently poor but not otherwise the paper warns against the conventional justification of growth promoting policies on efficiency grounds independently of institutions

collective action and the group size paradox according to the olson paradox larger groups may be less successful than smaller groups in furthering their interests we address the issue in a model with three distinctive features explicit intergroup interaction collective prizes with a varying mix of public and private characteristics and nonlinear lobbying costs the interplay of these features leads to new results when the cost of lobbying has the elasticity of a quadratic function or higher larger groups are more effective no matter how private the prize with smaller elasticities a threshold degree of publicness is enough to overturn the olson argument and this threshold tends to zero as the elasticity approaches the value for a quadratic function we also demonstrate that these results are true irrespective of whether we examine group sizes over the cross section in some given equilibrium or changes in the size of a given group over different equilibria

measuring social tension from income class segregation we develop an index that effectively measures the level of social tension generated by income class segregation we adopt the basic concepts of between group difference or alienation and within group similarity or identification from the income bi polarization literature but we allow for asymmetric degrees of between group antagonism in the alienation function and construct a more effective identification function using both the relative degree of within group clustering and the group size to facilitate statistical inference we derive the asymptotic distribution of the proposed measure using results from u statistics as the new measure is general enough to include existing income polarization indices as well as the gini index as special cases the asymptotic result can be readily applied to these popular indices evidence from the panel study of income dynamics data suggests that while the level of social tension shows an upward trend over the sample period of 1981 to 2005 government s taxes a

some economic determinants of time series properties of earnings abstract the earnings time series literature in accounting focuses on the statistical characteristics of the processes which generate corporate earnings in order to further our understanding of earnings behavior this study investigates the question whether inter firm differences in these statistical characteristics autocorrelations and variances of earnings changes can be explained by economic factors various relationships between economic factors and earnings behavior are derived from the economic literature and examined empirically in this study findings indicate that autocorrelations and variability of annual earnings and earnings over equity changes are systematically associated with the following factors the type of product the height of industry barriers to entry a surrogate for degree of competition the degree of capital intensity operating leverage and the firm size

on the formation of alliances in conflict and contests this paper examines the problem of the formation of alliances in conflict and more generally in contests with three players each player possesses an exogenous strategic endowment e g arms efforts rent seeking activity the outcome of contests including those between any alliances of players is governed by a contest success function csf in the three person one cake problem an alliance between two players against the third one will form if and only if the csf has an increasing returns characteristic when an alliance forms there is a tendency to be formed by the weaker players against the strongest player similar tendencies exist in other three person problems that i examine

free riding and ethnic heterogeneity abstract this paper provides a new explanation for lower levels of public good provision in heterogeneous societies compared to their homogeneous counterparts social sharing norms force rich individuals to share part of their income with their poor relatives but do not apply across different ethnic groups because there is a more extensive redistribution in more homogeneous societies the cost of contributing to the public good is lower the model predicts the level of public goods provision and welfare monotonically decreases with the number of different ethnic groups

education social cohesion and economic growth analysis of the contribution of education to growth through its role in promoting a common culture indicates that when different cultural groups separately determine the social content of their school curricula excessive polarization can result with less than optimal growth the optimal trajectory involves a gradual reciprocal convergence of school curricula towards the middle ground this may be difficult to implement in a political context in which all agents are identified with one group or another when curricula are determined by legislative bargaining centralization of schooling may result in overly rapid homogenization in some cases and perhaps surprisingly excessive polarization in others this abstract was borrowed from another version of this item

dynamic inconsistency and self control a planner doer interpretation we show that gul and pesendorfer s econometrica 69 2001 1403 representation result for preferences with temptation and self control can be reexpressed in terms of a costly intrapersonal conflict between a planner and doer as in thaler and shefrin j political econ 89 1981 392 and psychologists standard view of self control problems

cultural diversity and economic growth evidence from the us during the age of mass migration we exploit the large inflow of immigrants to the us during the 1870 1920 period to examine the effects that within county changes in the cultural composition of the us population had on output growth we construct measures of fractionalization and polarization to distinguish between the different effects of cultural diversity our main finding is that increases in cultural fractionalization significantly increased output while increases in cultural polarization significantly decreased output we address the issue of identifying the causal effects of cultural diversity by using the supply push component of immigrant inflows as an instrumental variable

forecasting currency volatility a comparison of implied volatilities and ar fi ma models we compare forecasts of the realized volatility of the pound mark and yen exchange rates against the dollar calculated from intraday rates over horizons ranging from one day to three months our forecasts are obtained from a short memory arma model a long memory arfima model a garch model and option implied volatilities we find intraday rates provide the most accurate forecasts for the one day and one week forecast horizons while implied volatilities are at least as accurate as the historical forecasts for the one month and three month horizons the superior accuracy of the historical forecasts relative to implied volatilities comes from the use of high frequency returns and not from a long memory specification we find significant incremental information in historical forecasts beyond the implied volatility information for forecast horizons up to one week

social composition social conflict and economic development this article investigates how the existence of non cooperative social groups that appropriate resources either peacefully or through contest affects economic growth when property rights are unenforceable for symmetric groups it shows that economic growth is generated only in peaceful societies for the case of asymmetric groups rebel equilibria are investigated in which a large majority behaves peacefully although challenged by an aggressive minority the article explains how conflict intensity and the rate of economic growth depend on social fractionalisation general productivity of the economy power of social elites and the ease at which resources are appropriated

proposal power and majority rule in multilateral bargaining with costly recognition this paper studies a sequential bargaining model in which agents expend efforts to be the proposer in equilibrium agents effort choices are influenced by the prize and cost effects the endogenous prize is 9

economic inequality new methods for new trends two positions dominate the debate over the recent increases in economic inequality in the united states the job skill mismatch thesis attributes rising inequality to growth in the number of high skill high wage jobs that leaves less skilled workers behind the polarization thesis in contrast argues that the service shift generates growth in the number of both high wage and low wage jobs and declines in the middle standard summary measures of distributional inequality cannot discriminate between these depictions of where job growth is occurring we propose new methods for measurement that provide both summary and detailed information about the distributional shifts in earnings and aframework for statistical inference using data from the curent population survey cps on yearly earnings from 1967 to 1987 we show that the trends in distributional inequality vary considerably by race gender and time while the evidence provides more support for the polarization argument this thesis needs refinement if it is to account for the variations in changing inequality observed here

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

employee stock option exercises an empirical analysis this paper describes the exercise behavior of over 50 000 employees who hold longterm options on employer stock at eight corporations employees typically exercise options years before expiration commonly sacrificing half of the black scholes value exercise is strongly associated with recent stock price movements the market to strike ratio proximity to vesting dates time to maturity volatility and the employee s level within the company these findings have implications for compensation planners the fasb as it develops a new accounting standard for options and financial statement users and preparers who apply and interpret the new fasb standard

the persistence of volatility and stock market fluctuations this paper examines the potential influence of changing volatility in stock market prices on the level of stock market prices it demonstrates that volatility is only weakly serially correlated implying that shocks to volatility do not persist these shocks can therefore have only a small impact on stockmarket prices since changes in volatility affect expected required rates of return for relatively short intervals these findings lead us to be skeptical of recent claims that the stock market s poor performance during the 1970 s can be explained by volatility induced increases in risk premia this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

a test of the regional growth instability frontier using state data the application of the portfolio framework to the economy predicts the existence of a convex growth instability frontier using two data sets on gross state product for the states of the united states this hypothesis is tested the tests confirm the existence of a convex frontier for economic growth and instability the shape of the frontier is estimated and growth adjusted measures of economic instability based on the frontier are computed over long periods of time economic instability is negatively correlated with a range of measures of economic diversity providing further support for the portfolio view of economic growth

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

policy divergence and voter polarization in a structural model of elections abstractone of the most widely discussed phenomena in american politics today is the perceived increasing partisan divide that splits the u s electorate a contested question is whether this diagnosis is actually true and if so what the underlying cause might be we propose a new method that simultaneously estimates voters preferences and parties positions on economic and cultural issues we apply the model to u s presidential elections between 1972 and 2008 the model recovers candidates positions from voters behavior and decomposes changes in the overall political polarization of the electorate into changes in the distribution of voters ideal positions voter radicalization and consequences of elite polarization sorting

all that glitters is not gold polarization amid poverty reduction in ghana ghana is an exceptional case in the sub saharan africa landscape together with a handful of other countries ghana offers the opportunity to analyze the distributional changes in the past two decades since four comparable household surveys are available in addition different from many other countries in the continent ghana s rapid growth translated into fast poverty reduction a closer look at the distributional changes that occurred in the same period however suggests less optimism the present paper develops an innovative methodology to analyze the distributional changes that occurred and their drivers with a high degree of accuracy and granularity looking at the results from 1991 to 2012 the paper documents how the distributional changes hollowed out the middle of the ghanaian household consumption distribution and increased the concentration of households around the highest and lowest deciles there was a clear surge in polarization indeed when looking at the drivers of polarization household characteristics educational attainment and access to basic infrastructure all tended to increase over time the size of the upper and lower tails of the consumption distribution and as a consequence the degree of polarization

social fractionalization endogenous appropriation norms and economic development we investigate how social composition affects competitive and cooperative behaviour in a linear growth model without secure property rights if a society is homogeneous or highly fractionalized it is in the self interest of people to cooperate the first best allocation is enforced through trigger strategies and growth is independent from social structure if a society is polarized i e if it consists of a small number of groups the first best solution can turn out to be unenforceable and groups will follow an exploitative strategy in this case the rate of growth is monotonously decreasing in the degree of fractionalization

a bayesian approach to modeling stock return volatility for option valuation new measures of stock return volatility are developed to increase the precision of stock option price estimates with bayesian statistical methods volatility estimates for a given stock are developed using prior information on the cross sectional patterns in return volatil ities for groups of stocks sorted on size financial leverage and trading volume call option values computed with the bayesian procedure generally improve prediction accuracy for market prices of call options relative to those computed using implied volatility standard historical volatility or even the actual ex post volatility that occurred during each option s life although the bayesian methods produce biased call price estimators they do reduce the systematic tendency of standard pricing approaches to overprice underprice options on high low volatility stocks little bias improvement is observed with respect to the time to maturity and moneyness of the call options

why not africa growth and welfare effects of secure property rights this paper presents the long run equilibrium and developmentdynamics in the neoclassical growth model and a simple modelof endogenous growth when property rights are absent theresults are compared to the outcome in a corresponding modelwith secure property rights the main findings are that thereexists a considerable gain in level and growth of consumptionfrom establishing secure property rights that economicperformance without property rights worsens with an increasingnumber of competing social groups and that the existence orabsence of property rights explains conditional convergence

cross country evidence on the link between volatility and growth this paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations in a sample of ninety two countries as well as a sample of oecd countries the authors find that countries with higher volatility have lower growth the addition of standard control variables strengthens the negative relationship the authors also find that government spending induced volatility is negatively associated with growth even after controlling for both time and country fixed effects copyright 1995 by american economic association

commodity windfalls polarization and net foreign assets panel data evidence on the voracity effect this paper examines the effects that windfalls from international commodity price booms have on net foreign assets in a panel of 145 countries during the period 1970 2007 the main finding is that windfalls from international commodity price booms lead to a significant increase in net foreign assets but only in countries that are ethnically homogeneous in highly ethnically polarized countries net foreign assets significantly decreased to explain this asymmetry the paper shows that in ethnically polarized countries commodity windfalls lead to large increases in government consumption expenditures and political corruption the paper s findings are consistent with theoretical models of the current account that have a built in voracity effect