education poverty and terrorism is there a causal connection the paper investigates whether there is a connection between poverty or low education and terrorism we review evidence on hate crimes which are closely related to terrorism the occurrence of hate crimes is largely independent of economic conditions we analyze data on support for attacks against israeli targets from public opinion polls conducted in the west bank and gaza strip support for violent attacks does not decrease among those with higher education and higher living standards the core contribution of the paper is a statistical analysis of the determinants of participation in hezbollah militant activities having a living standard above the poverty line or a secondary or higher education is positively associated with participation in hezbollah we also find that israeli jewish settlers who attacked palestinians in the west bank in the early 1980s were overwhelmingly from high paying occupations although our results are tentative and exploratory they suggest that neither poverty nor education has a direct causal impact on terrorism

the political economy of the food subsidy system in bangladesh this article examines the operation of the food subsidy system in bangladesh from 1980 to 1995 using a political economy perspective two political economy concepts rent seeking lobbies and rent seeking bureaucrats agents are found to be useful in providing a partial explanation of why this system has failed to benefit the rural poor however each of these explanations is incomplete because it fails to consider the large impact that external actors usaid and the world bank have had on the bangladesh food subsidy system one way to improve the ability of this system to reach the poor would be to increase the amount of self targeting in food subsidies by building on the food for work programme

devaluation investment and growth in ldcs abstract this paper examines the short and long run effects of devaluation in a model where following structuralist theories investment is treated as output of a composite good produced by combining domestic and imported components in fixed proportions introducing investment goods of this type alters a number of results most notably the marshall lerner condition is neither necessary nor sufficient for an expansionary outcome and under simple and plausible conditions a devaluation may worsen the payments balance

agendas strategic voting and signaling with incomplete information the literature on agendas with sincere and strategic voting represents an important contribution to our understanding of committees of institutions and of the opportunities to manipulate outcomes by the manipulation of institutions that literature though imposes an assumption that may be unrealistic in many situations namely that everyone knows the preferences of everyone else in this essay we apply bayesian equilibrium analysis to show that the properties of agendas that others derive by assuming complete information do not hold necessarily under incomplete information first a condorcet winner need not be selected even if nearly everyone on the committee most prefers it second the two step theorem that any outcome reachable in n voting stages via some amendment agenda is reachable in two stages under sophisticated voting need not hold third nonbinding votes such as straw polls can critically affect final outcomes

the politics of liberalizing zambia s maize markets abstract this paper discusses the process of agricultural liberalization in zambia the central argument is that maize markets have been more quickly and fully liberalized than maize input markets because the perceived political risks of liberalizing input markets are greater than those of liberalizing maize markets and because economic interest groups benefited from maize liberalization while similar interests benefited from continued government interventions in input markets these finding imply that in order to understand the prospects for economic liberalization in new democracies we must disaggregate both civil society and markets

arms races and negotiations two players simultaneously decide whether or not to acquire new weapons in an arms race game each player s type determines his propensity to arm types are private information and are independently drawn from a continuous distribution with probability close to one the best outcome for each player is for neither to acquire new weapons although each prefers to acquire new weapons if he thinks the opponent will there is a small probability that a player is a dominant strategy type who always prefers to acquire new weapons we find conditions under which the unique bayesian nash equilibrium involves an arms race with probability one however if the probability that a player is a dominant strategy type is sufficiently small then there is an equilibrium of the cheap talk extension of the game where the probability of an arms race is close to zero copyright 2004 wiley blackwell

why is stabilization sometimes delayed reevaluating the regime type hypothesis existing work on the politics of stabilization has failed to find compelling evidence of a regime type effect this article reformulates and reevaluates the regime type hypothesis it is argued tha

co ordination spillovers and cheap talk abstract we analyze the role of cheap talk in two player games with one sided incomplete information we identify conditions under which 1 players can fully communicate and coordinate on efficient nash equilibria of the underlying complete information game and 2 players cannot communicate so cheap talk does not alter the equilibrium set of the bayesian game we present examples that illustrate several issues that arise when there is two sided incomplete information journal of economic literature classification numbers c72 d82

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

imf conditionality threat perception and political repression a cross national analysis this article investigates the impact of international monetary fund imf conditionality on political repression conditionality refers to the conditions that borrowing countries must implement bef

good bye financial repression hello financial crash some unintended consequences of financial liberalization in latin america are analyzed in this paper intrinsic imperfectious in financial markets and the policy dilemmas they pose are reviewed first the stylized facts of southern cone experiments in financial liberization are then presented alternative ways of organlzing domestic capital markets under latin american conditions are discussed and an eclectic reform mongering program is proposed

cheap talk with two audiences these problems have in common a simple structure an informed sender says something to two interested but uninformed receivers who then take actions based on their beliefs these actions affect the sender as well as the receivers in this paper we study how costless nonverifiable claims cheap talk can affect these beliefs and hence the actions and how the incentives for truthful revelation to one receiver are affected by the presence of the other we then ask how welfare is affected by whether claims are made in public or in private as some of the above examples suggest public messages may be more credible than private messages addressed to either audience one possibility is that the presence of one audience can discipline the sender s relationship with the other we call this one sided

the political economy of privatization in developing countries abstract privatization in ldcs refers here to the sale or leasing of assets in which the state has a majority interest and the contracting out of publicly provided services privatization is in part a response to the need for fiscal austerity its pace and scope will be determined importantly by the way in which the public sector was built privatization is easier to implement than has been supposed because its austerity and equity costs are relatively small compared to those of broader structural adjustment processes in which it is commonly situated however the payoffs from privatization are relatively small too there is high opportunity cost in time and management for the complicated task of preparing public assets for sale capital market thinness characterizes ldcs and popular capitalism does not appear to be a realistic option in ldcs privatization is likely to be entangled in regional and ethnic conflicts these may be as consequential for formulating and implementing programs as are the critical coalitions that form between economic sectors such as capital and labor or importers and exporters we believe that privatization is not a linear or ineluctable process indeed many privatizations may be implemented in the absence of a commitment to market forces but where the state seeks to redefine the instruments and scope of its interventionism

religion terrorism and public goods testing the club model abstract can rational models once theological explanations are discredited explain why certain radical religious rebels are so successful in perpetrating suicide attacks the fundamental barrier to success turns out not to be recruiting suicide attackers there is a rational basis for volunteering rather the barrier is the danger of other operatives defecting a club model portraying voluntary religious organizations as efficient providers of local public goods explains how they weed out potential defectors by requiring sacrifices as signals of commitment they are thereby able to succeed in risky terrorist attacks the model has testable implications for tactic choice and damage achieved by clubs and other rebel organizations data spanning a half century on both terrorists and civil war insurgents much from middle east sources and israel palestine reveal that a missions organized by radical religious clubs that provide benign local public goods are both more lethal and are more likely to be suicide attacks than missions organized by other terrorist groups with similar aims and theologies and b suicide attacks are chosen when targets are hard i e difficult to destroy our results suggest benign tactics to counter radical religious terrorism and insurgency

seeking guidelines for poverty reduction in rural zambia abstract poverty profiles typically provide policy makers with information about the characteristics of the poor without giving guidance as to the types of programs best suited for reducing poverty a method is described in this paper for extending the typical poverty profile to analyze and quantify the constraints faced by poor smallholders in rural areas the method is applied to rural zambia where poverty is widespread and deep the extension provides timely information for the design of poverty reducing policies

explanations of the demand for labour in the united kingdom engineering sector this paper presents a set of employment functions for nine individual engineering industries using annual data for the period 1954 1987 for the united kingdom a brief review alternative theoretical specifications is undertaken a set of co integrating regressions is computed to establish the existence of a long run equilibrium relationship between employment and inter alia output and real wages based on the results of the co integration exercise full unrestricted dynamic equations are obtained and these are then reduced to a more parsimonious representation the finally preferred restricted models are then tested against a number of diagnostic statistical criteria to establish their robust and efficient properties the value of these equations for explaining past and predicting future employment and training in the engineering sector is assessed

economic liberalization via imf structural adjustment sowing the seeds of civil war previous studies that have explored the effects of economic liberalization on civil war have employed aggregate measures of openness and have failed to account for potential endogeneity bias in this research note we suggest two improvements to the study of the relationship between liberalization and civil war first emphasizing that it is processes that systematically create new economic winners and losers rather than particular levels of economic openness that have the potential to generate conflict we consider the effects of one oft used means of liberalizing economies the adoption by countries of international monetary fund imf structural adjustment programs second we use a bivariate probit model to address issues of endogeneity bias analyzing all data available for the period between 1970 and 1999 we identify an association between the adoption of imf programs and the onset of civil war this finding suggests that imf programs to promote economic openness unintentionally may be creating an environment conducive to domestic conflict

the macroeconomics of trade liberalization abstract this paper analyzes the short run macroeconomic consequences of trade liberalization in ldcs it is shown that linkages between the tradables and nontradables sectors the effect of imported inputs on the economy s productive structure and certain patterns of factor substitution can go a long way toward explaining the perverse contractionary effects frequently seen in liberalization programs

understanding the failure of imf reform the zambian case abstract political resistance to international monetary fund imf reform in developing countries has become a major obstacle to reform implementation the zambian case in which the roots of resistance to reform were present in a developmentalist model long before the arrival of the imf suggests that the current analysis of political will and resistance to interest group pressure needs to be strengthened by a more profound conceptualization of the political economic regime of countries attempting reform when examined in this larger political economic context the zambian case further makes clear the need for support for political as well as economic change during the reform process

economic stabilization conditionality and political stability imf conditionality is seldom so important that it dominates all other considerations for political stability imf stabilization programs often shift benefits from one group to another they expose elites to charges of selling the sovereignty of their countries the imposition of imf conditions particularly subsidy cuts may lead to sharp outbreaks of civil disorder nonetheless the imf provides resources that make adjustment easier and thus may lessen the chances of political instability for a country imf programs are seldom implemented fully as negotiated and the penalties for partial compliance are not great debtor countries have more flexibility in imposing austerity measures and the economic constraints are less binding than often assumed the very availability of alternatives to imf programs results in internal divisions because some favor debt repudiation and others oppose it groups now contend over solutions to the debt problems of their countries

cycles of conflict an economic model abstract we propose a model of cycles of conflict and distrust overlapping generations of agents from two groups sequentially play coordination games under incomplete information about whether the other side consists of bad types who always take bad actions good actions may be misperceived as bad and information about past actions is limited conflict spirals start as a result of misperceptions but also contain the seeds of their own dissolution bayesian agents eventually conclude that the spiral likely started by mistake and is thus uninformative of the opposing group s type the agents then experiment with a good action restarting the cycle jel d72 d74 d83 z13

do polls create momentum in political competition abstract we explore how public opinion polls affect candidates campaign spending in political competition generally polls lead to more asymmetric behavior under a majority rule there always exists an equilibrium in which the initially more popular candidate invests more in the campaign and thereby increases her lead in expectation polls create momentum when campaigning is very effective and the race is very close a second type of equilibrium may exist the trailing candidate outspends and overtakes his opponent regardless of the type of equilibrium polls have a tendency to decrease expected total campaigning expenditures by amplifying ex ante asymmetries between candidates and thus defusing competition when candidates care also for their vote share in addition to having the majority candidates incentives crucially depend on the distribution of voters candidate preferences

war and conflict in economics theories applications and recent trends we review the main economic models of war and conflict these models vary in details but their implications are qualitatively consistent highlighting key commonalities across a variety of conflict settings recent empirical literature employing both laboratory and field data in many cases confirms the basic implications of conflict theory however this literature also presents important challenges to the way economists traditionally model conflict we finish our review by suggesting ways to address these challenges

an examination of the differential patterns in the cyclical behaviour of the employment hours and wages of labour of different skills british mechanical engineering 1963 1978 this paper compares the cyclical behaviour of the employment hours and wage rates of skilled semi skilled and unskilled labour in british mechanical engineering from 1963 to 1978 figure 1 shows the variation of the employment share of skilled and non manual male labour in relation to the cyclical fluctuations during the same period where the cycle measure employed is the percentage deviation of output from its trend value a casual inspection reveals that the percentage of skilled labour in manual employment reaches peaks in the 1967 1972 and 1977 recessions while falling to lows in the 1966 1969 1970 and 1974 booms in similar fashion the percentage of non manual labour in total employment attains a peak in 1972 and 1977 and falls to a low in 1974 1975 these observations indicate that there is a differential cyclical response of the employment of different types of labour and suggest that skilled and non manual employment fluctuate relatively less the fixity and heterogeneity of labour was first highlighted by oi 1962 and becker 1962 the introduction of hiring firing and training costs which vary among different groups of workers implies that the employment behaviour of these groups will differ markedly over the course of the business cycle i e the stock of some groups of labour is relatively fixed in the short run we will be referring to this as the fixed labour hypothesis it applies especially to skilled workers because they usually embody more specific on the job training than lower skill groups during short run cyclical fluctuations we expect that the adjustment in the employment of skilled workers will be slower than that of lower skill groups and if one identifies non manual labour with relatively higher skill than manual labour the same employment behaviour will be expected for non manual labour the examination of the relative employment variation of skilled labour is useful in the discussion of the aggregate employment function for which research has led to the empirical finding of short run increasing returns to labour the explanation usually given to this is that there are short run adjustment costs which prevent the firm from adjusting the employment of skilled and non manual labour instantaneously with respect to cyclical demand shifts however excluding the work of rosen 1968 there has not been any direct empirical testing of such a hypothesis another implication of the fixed labour hypothesis concerns the short run behaviour of the hours of work of skilled labour as the most substantial

the strategy of manipulating conflict two decision makers choose hawkish or dovish actions in a con ict game with incomplete information the decision making can be manipulated by extremists who send publicly observed cheaptalk messages the power of extremists depends on the nature of the underlying con ict game if actions are strategic complements a hawkish extremist provocateur can increase the likelihood of con ict by sending messages which trigger a fear spiral of hawkish actions this reduces the welfare of both decision makers if actions are strategic substitutes a dovish extremist paci st can send messages which cause one decision maker to back down and become more dovish this reduces his welfare but bene ts the other decision maker the hawkish extremist is unable to manipulate the decision makers if actions are strategic substitutes and the paci st is equally powerless if actions are strategic complements

doubts and dogmatism in conflict behavior we consider a conflict under incomplete information where two opponents fight to impose their preferred policy before the conflict one opponent the agent trusts the information received by his principal under some conditions the principal induces hawkish attitudes in the agent the agent never doubts the optimality of his preferred policy conflicts are violent and bad decisions are sometimes made under other conditions the agent believes that his opponent may be right even when all evidence indicates that the policy preferred by the opponent is certainly suboptimal in this case the agent adopts dovish attitudes and conflicts are less violent

cheap talk can matter in bargaining this paper describes an intuitive way in which cheap talk can matter in a twostage bargaining game in which talk may be followed by serious negotiation the intuition that all buyers would claim to have low reservation prices is incorrect in our model instead if good faith participation is endogenously determined then the parties can use talk to trade off bargaining position against the probability of continued negotiation our cheap talk equilibrium features bargaining behavior that could not be equilibrium behavior in the absence of talk

endogenous timing in the presence of non monotonicities the aim of this paper is to generalize the endogenous timing game proposed by hamilton and slutsky games and economic behavior 1990 2 pp 29 46 by allowing the payoff or the marginal payoff of a player to become non monotonic with respect to the strategy of the opponent we propose a taxonomy of the subgame perfect nash equilibria based on the characteristics of the payoff functions proposed by eaton canadian journal of economics 2004 37 pp 805 29 we determine under which conditions of the initial payoff functions commitment has a social value and when the simultaneous move nash equilibrium is commitment robust and discuss its pareto efficiency

policies for promoting regional agricultural trade abstract this paper deals with the political issues of trade liberalization after giving a brief account of the potential and barriers to intraregional trade in southern africa the position in malawi zambia and zimbabwe supports the view that there is a significant potential for trade barriers to trade are due to the external trading regime internal policies and external factors notably food aid the liberalization of the internal food economy is expected to give rise to additional trade flows among the countries regional integration schemes may further contribute to trade expansion however only if they are used as a step to worldwide integration and if an effective institutional framework is secured

the politics of adjustment lessons from the imf s extended fund facility the international debt crisis has forced painful economic adjustments on the developing world in the short run it has forced governments to seek to correct payments imbalances through stabilization programs usually undertaken with conditional assistance from the international monetary fund imf the crisis has also revealed deeper weaknesses in many third world economies weaknesses demanding more basic reforms in the structure of incentives prices and investment

politics and the suboptimal provision of counterterror i present a model of interactions between voters a government and a terrorist organization the model focuses on a previously unexplored conceptualization of counterterrorism as divided into tactic specific observable and general unobservable tactics when there is divergence between voters and government preferences strategic substitution among different modes of attack by terrorists and agency problems between the voters and government create a situation in which the politically optimal counterterrorism strategy pursued by the government in response to electoral and institutional incentives is quite different from the security maximizing counterterrorism strategy in particular in response to electoral pressure the government allocates resources to observable counterterror in excess of the social optimum this problem is particularly severe when governments put great weight on rent seeking or care less about counterterror than do voters and when terrorists have a large set of tactics from which to choose voters can decrease the magnitude of the agency problem by increasing the benefits of reelection by for example slackening requirements for nonsecurity related public goods i have received valuable comments and advice from bruce bueno de mesquita randy calvert martin cripps james fearon amanda friedenberg robert powell matthew stephenson and barbara walter i thank the weidenbaum center on the economy government and public policy at washington university for financial support

how to organize crime in criminal organizations diffusing information widely throughout the organization might lead to greater internal efficiency in particular since these organizations are self sustaining through enhancing trust however this may come at the cost of leaving the organization more vulnerable to external threats such as law enforcement we consider the implications of this trade off and characterize the optimal information structure rationalizing both hierarchical structures and organization in cells then we focus on the role of the external authority characterize optimal detection strategies and discuss the implications of different forms of enforcement on the internal structure of the organization and policy finally we discuss a number of applications and extensions in this paper we study the interplay between trust within an illegal organization and its vulnerability to the authorities illegal organizations function more effectively when the people who constitute them trust each other we argue that information sharing is an important factor in building internal trust and cohesion but that can leave the organization vulnerable understanding how this trade off affects an organization s information structure and productivity can allow us to assess detection policies designed to destabilize such organizations since 9 11 the u s congress has passed a 400 billion annual budget for the war on terror new domestic institutions have been created or enhanced among many others the counterterrorism section at the u s department of justice s criminal division international intelligence cooperation has been strengthened and new protocols and controversial legal tools such as the patriot act have been developed however these new agencies and institutions face the same basic questions that have challenged the prosecutors fighting organized crime in italy south america and eastern asia as well as authorities fighting terrorism all over the world now and in the past how can we learn about the internal structure of criminal organizations how should we go about investigating a criminal organization in order to break its internal cohesion how does a criminal organization react to investigation policies we highlight the fact that simply understanding the information links within an organization gives us insight into addressing these questions the anecdotal evidence suggests that there is a wide heterogeneity across the information structures of different criminal organizations the most credited theory about the mafia developed in the early 1990 s has identified the so called cupola as the highest level of the organization supposedly consisting of agents who hold large amounts of information about the organization itself and carry out the enforcement needed for the organization to function 2 these crucial agents are shielded from the authorities since they are typically not directly involved in criminal activities this theory suggests a centralized information and enforcement structure 1 previous drafts have circulated under the titles power and organizational structure under an external threat

politics of economic liberalization in india abstract attempts at liberalizing india s import substitution model of development have had a mixed record some success in changing the policy regime highlights the role of a new technocratic leadership that has received support from both indian business groups and from external aid agencies conversely popular sectors within india including the rank and file of the ruling party the organized workers in the public sector and the numerically significant middle and lower peasantry have registered their opposition while the government remains committed to liberalizing the economy the momentum has slowed down and given the pressures of electoral politics a populist economic program has been simultaneously readopted it appears that the marriage of political and economic liberalism may not be an easy one in countries like india

rationalizability learning and equilibrium in games with strategic complementarities we study a rich class of noncooperative games that includes models of oligopoly competition macroeconomic coordination failures arms races bank runs technology adoption and diffusion r d competition pretrial bargaining coordination in teams and many others for all these games the sets of pure strategy nash equilibria correlated equilibria and rationalizable strategies have identical bounds also for a class of models of dynamic adaptive choice behavior that encompasses both best response dynamics and bayesian learning the players choices lie eventually within the same bounds these bounds are shown to vary monotonically with certain exogenous parameters we study the class of noncooperative supermodular games introduced by topkis 1979 and further analyzed by vives 1985 1989 who also pointed out the importance of these games in industrial economics supermodular games are games in which each player s strategy set is partially ordered the marginal returns to increasing one s strategy rise with increases in the competitors strategies so that the game exhibits strategic complementarity 2 and if a player s strategies are multidimensional marginal returns to any one com ponent of the player s strategy rise with increases in the other components this class turns out to encompass many of the most important economic applications of noncooperative game theory in macroeconomics diamond s 1982 search model and bryant s 1983 1984 rational expectations models can be represented as supermodular games in each of these models more activity by some members of the economy raises the returns to increased levels of activity by others in oligopoly theory some models of bertrand oligopoly with differentiated products qualify as supermodu lar games in these games when a firm s competitors raise their prices the marginal profitability of the firm s own price increase rises a similar structure is present in games of new technology adoption such as those of dybvig and spatt 1983 farrell and saloner 1986 and katz and shapiro 1986 when more users hook into a communication system or more manufacturers adopt an interface standard the marginal return to others of doing the same often rises similarly in some specifications of the bank runs model introduced by diamond and dybvig 1983 when more depositors withdraw their funds from a bank it is more worthwhile for other depositors to do the same in the warrant exercise

the cycle of violence an empirical analysis of fatalities in the palestinian israeli conflict thomas c schelling s the strategy of conflict 1960 laid the groundwork for thinking about conflicts as non zero sum games in which each side may choose to exercise or threaten violence in order to deter or incapacitate the opponent or simply to exact revenge it has been difficult however to test many of the predictions formulated by schelling and others because of the lack of data on the strategic choices of the two sides engaged in a conflict observed at a high enough frequency for statistical tests to have any power this paper uses daily frequency data to analyze the dynamics of violence during four years of the second intifada the most recent outburst of the palestinian israeli conflict

the political economy of indirect control this paper characterizes the efficient sequential equilibrium when a government uses indirect control to exert its authority we develop a dynamic principal agent model in which a principal a government delegates the prevention of a disturbance such as riots protests terrorism crime or tax evasion to an agent who has an advantage in accomplishing this task our setting is a standard dynamic principal agent model with two additional features first the principal is allowed to exert direct control by intervening with an endogenously determined intensity of force which is costly to both players second the principal suffers from limited commitment using recursive methods we derive a fully analytical characterization of the likelihood intensity and duration of intervention the first main insight from our model is that repeated and costly interventions are a feature of the efficient equilibrium this is because they serve as a punishment to induce the agent into desired behavior the second main insight is a detailed analysis of a fundamental tradeoff between the intensity and duration of intervention which is driven by the principal s inability to commit finally we derive sharp predictions regarding the impact of various factors on likelihood intensity and duration of intervention we discuss these results in the context of some historical episodes