democracy and economic growth a meta analysis despite a sizeable theoretical and empirical literature no firm conclusions have been drawn regarding the impact of political democracy on economic growth this article challenges the consensus of an inconclusive relationship through a quantitative assessment of the democracy growth literature it applies meta regression analysis to the population of 483 estimates derived from 84 studies on democracy and growth using traditional meta analysis estimators the bootstrap and fixed and random effects meta regression models it derives several robust conclusions taking all the available published evidence together it concludes that democracy does not have a direct impact on economic growth however democracy has robust significant and positive indirect effects through higher human capital lower inflation lower political instability and higher levels of economic freedom democracies may also be associated with larger governments and less free international trade there also appear to be country and region specific democracy growth effects overall democracy s net effect on the economy does not seem to be detrimental

empirical evidence on dividends as a signal of firm value the role of dividends in firm valuation continues to be a theoretical puzzle as well as an empirical obsession with economists the pioneering work by modigliani and miller mm 32 29 is the archetype of the theoretical dilemma whereas the authors proved convincingly the irrelevance of dividend policy to firm value within a perfect capital market they tempered their irrelevance proposition with what is usually referred to as the information content of dividends icd hypothesis in a more scientific sense this hypothesis should be labeled as a conjecture since it is essentially an ad hoc observation that dividends may convey information to the capital market concerning a firm s future earnings potential even though the icd hypothesis was not derived from a well specified economic model it has nevertheless been subjected to a plethora of empirical studies in general these studies have focused upon the precise influence of dividend changes upon a firm s common stock price overall the results can be described as being supportive of the notion that stock price movements are positively correlated with cash dividend changes this correlation of course is consistent with the icd hypothesis

do elites benefit from democracy and foreign aid in developing countries abstract a popular argument for the absence of any beneficial effects of foreign aid is that it is skimmed by political elites in recipient countries however studies also suggest that aid may be more effective in relatively democratic developing countries by exploring data on income quintiles derived from the world income inequality database for 88 developing countries a set of results indicate that foreign aid and democracy in conjunction are associated with a higher share of income held by the upper quintile it thus appears that foreign aid contrary to popular beliefs leads to a more skewed income distribution in democratic developing countries while the effects are negligible in autocratic countries the paper closes with a discussion of potential mechanisms generating this perverse effect

fiscal versus traditional market variables in canadian migration this paper evaluates the hypothesis that the influence of traditional market variables on migration in canada has diminished over time this is attributed to a crowding out process whereby growth of social security type programs has cushioned the effects of say unemployment and thus motivation to migrate for jobs and fiscal policies have exerted unintended effects implications are that market forces that would work naturally to induce migration from low to high income regions and thus equalize earned incomes have been short circuited and that traditional tools of manpower policy for influencing migration such as job creation skill enhancement or wages are less effective currently than they might have been in the past

asymmetric information signaling and optimal corporate financial decisions as is shown in the financial literature the assumption of perfect and costless information often leads to the conclusion that corporate financial decisions are inconsequential to the value of the firm e g stiglitz 20 and fama 6 this conclusion seems to be in direct contradiction with the observed behavior of corporations that allocate real resources to implement financial policies the gap between theory and observed behavior is bridged by introducing various frictions and market imperfections a growing number of studies examine the optiraality of financial decisions when the assumption of perfect and costless information is replaced by allowing for informational asymmetry the asymmetry is assumed to exist between corporate insiders who possess superior information about the firm s future earnings prospects and outside investors the emphasis in this literature is on the ability of financial instruments to serve as signaling devices through which the true value of the firm can be revealed to the market without moral hazard or disclosure of confidential information although the signaling process is typically considered to be costly it is advocated that firms may be better off if they employ this mechanism rather than reveal reliable but confidential information or not disclose at all

the welfare impact of land redistribution evidence from a quasi experimental initiative in malawi summary land reform may be an effective means of reducing poverty in many developing countries where policy efforts have recently embraced a decentralized market based approach to land redistribution we use household panel data combined with a quasi experimental program to assess the impact of a joint malawi world bank land program on household well being double difference and matching methods are used to address identification sources of bias results point to average positive effects on several productive outcomes of beneficiaries while no effects are found with respect to access to social services there is also evidence of heterogeneous effects by gender and inheritance systems

the aftermath of financial crises a look on human and social wellbeing summary alongside its detrimental macroeconomics impacts financial crises can have substantial negative consequences on human and social wellbeing employing a cross country dataset on more than 100 banking and or currency crises during 1981 2007 this work examines the effects of financial crises on indicators of human and social wellbeing through employing an event study analysis the findings of this analysis suggest that the aftermaths of financial crises are characterized by increases in the growth rates of suicide rates crime rates and income inequality rates relative to their pre crisis trajectories additionally declines in the growth rates of health and educational expenditures government welfare expenditures and food quality and quantity intakes are common during periods immediately following financial crises such deteriorations are observed across different countries with income levels and also for crises that are and are not accompanied by recessions on average though human and social indicators are hit harder during financial crisis events accompanied by recessions this is especially true for crises in low and middle income economies in comparison to those in high income countries as a result not only are financial crises directly responsible for more rapid increases in income inequality within countries they may also be responsible for increasing inequalities of income security health nutrition and educational outcomes between richer and poorer countries needless to say deteriorations in many of these fronts are often associated with persistent or permanent losses in human and social wellbeing and cannot be assumed to be simply and immediately reversed with an economic recovery therefore the paper calls on the need for more concerted effort on the part of the policymakers to actively protect human and social outcomes during financial crises rather than trying to address such losses in the aftermath of crises because some of these losses are simply not recoverable

screening market signalling and capital structure theory this paper develops an equilibrium model in which informational asymmetries about the qualities of products offered for sale are resolved through a mechanism which combines the signalling and costly screening approaches the model is developed in the context of a capital market setting in which bondholders produce costly information about a firm s a priori imperfectly known earnings distribution and use this information in specifying a bond valuation schedule to the firm given this schedule the firm s optimal choices of debt equity ratio and debt maturity structure subsequently signal to prospective shareholders the relevant parameters of the firm s earnings distribution our objectives in this paper are threefold first we discuss an alternative equilibrium mechanism for resolving the informational asymmetry problem in a lemons type market in which some agents are a priori better informed than others this mechanism recently proposed by thakor 19 is distinct from and yet integrates the salient features of the screening see stiglitz 17 and viscusi 21 and signalling bhattacharya 41 paradigms second we demonstrate that the equilibrium notion developed is relevant to the determination of an interior optimal capital structure for a firm in a world of imperfect information this application of our model involves firms with intertemporally distributed cashflows which vary cross sectionally and are not necessarily independent and identically distributed i i d through time we use this multiperiod setting to address our third objective which is to explain a firm s debt maturity decision essentially our argument is that when both the size and timing of a firm s future earnings are indistinguishable ex ante from other firms in the economy the firm s capital structure and debt maturity choices could simultaneously function as signals of these a priori unknown parameters of its earnings the market structure we consider is similar to that in thakor 19 there are sellers each of whom offers a variety of products with qualities dependent upon a common set of exogenous attributes unique to the seller and buyers who are unaware of these attributes buyers interested in one of the products offered

political institutions and financial development an empirical study summary this paper examines whether political institutional improvement promotes financial development using a panel dataset of 90 developed and developing countries over 1960 99 the empirical evidence reveals a positive effect of institutional improvement on financial development at least in the short run particularly for lower income countries the preliminary evidence by a before after event study indicates that a democratic transformation is typically followed by an increase in financial development

inequality redistribution and growth a challenge to the conventional political economy approach abstract this paper reconsiders the conventional political economy view that 1 1 more unequal societies tend to make more redistribution and 2 2 more redistribution is harmful to growth we present a number of theoretical arguments suggesting that the two previous implications are not necessarily true and that the empirically observed negative correlation between inequality and growth might just come from the fact that more unequal societies tend to redistribute less which in turn is actually detrimental to growth

signalling by direct disclosure under asymmetric information abstract in this paper an informational asymmetry exists between investors and the issuer of an initial public offering about the value of the security to avoid market failure a solution is proposed in which the issuer makes a disclosure about firm value that is verified by an investment banker the investment banker enters into a contingent contract with investors which imposes a penalty if the ex post observable cash flow indicates fraudulent disclosure a bivariate signalling model is formulated and solved and testable implications are derived from comparative statics analysis

on the performance of differently regulated financial institutions some empirical evidence abstract the paper raises two questions about the industrial economics of banking first why are financial market configurations so different across nations we discuss the theoretical arguments by following the sequence regulation structure performance section 2 second do the differences in regulation and structure matter section 3 provides empirical evidence pertaining to that question throughout the paper we refer to two polar cases of financial systems market m and bank b based systems as for banks we distinguish between specialised and universal banks universal banking is a particular institutional representation of b systems a first empirical test relating macroeconomic growth to financial variables suggests that these variables matter we then test with a set of 88 banks the effects of regulatory and structural variables on the level and variability of bank performance we conclude that universal banks achieve a better risk return trade off due to superior monitoring and information collection capacity

migration and income redistribution responsibilities this study examines whether afdc benefits determine or discourage state to state migration flows in the united states a pooled cross section time series model is developed to estimate afdc benefits in a state and recipients and whether benefits in one state affect benefits in other states a second model using data from the 1980 census and the panel study of income dynamics estimates migration of afdc recipients and the level of benefits in in migration and out migration states both models indicate that small but statistically significant amounts of migration occur which may be quite important but only in the long run movers although small in number are much more likely to move to a state with higher benefits states perceive this migration as important indicating that states should have less control and the federal government more control over income redistribution

the effect of welfare and wage levels on the location decisions of female headed households abstract this paper develops and estimates a model designed to calculate the impact of welfare benefit levels wages and tax rates on the location choices of female headed households the empirical model assumes that women simultaneously choose both where they will live and whether or not they will participate in the welfare system based on their expected income and expected hours of work for each location participation possibility these income and hours expectations depend in turn on the welfare benefits wage and tax rates facing each household in each location it is found that both regional welfare levels and wage rates have a significant effect on the location decisions of this population the probability of a typical female headed household with little outside income leaving an area with low welfare payments and low wages can be as much as 12 points higher over a 4 year period than the probability of leaving a high welfare high wage area

progressive taxes equity and human capital accumulation in an endogenous growth model with overlapping generations abstract this paper explores the trade off between efficiency and intra and intergenerational equity in an endogenous growth model of an open economy with overlapping generations and human capital accumulation we demonstrate that progressive taxes hurt long run growth and exacerbate distortions associated with intergenerational spillovers however by raising saving these taxes strengthen the net foreign asset position

the information content of dividends a signalling approach the adoption of the incentive signalling framework gives a reasonably good explanation of the corporate dividend decision the equilibrium optimal dividend decision under such a framework is presented and analyzed assuming a reward penalty managerial incentive scheme is used it is shown that the size of the declared dividend is an increasing function of expected cash flow however there exists a trend that points out that the higher the level of expected cash flow the lower the marginal effects of cash flow on dividends a similar relationship is observed with respect to changes in expected cash flows these conclusions are in harmony with real world behavior as reported by several empirical studies the effects of uncertainty and interest rates on dividends are also analyzed it is shown in agreement with observed phenomena that the higher the uncertainty the lower the dividend payout ratio

political equilibrium income distribution and growth this paper analyzes the impact of income distribution on growth when investment in human capital is the source of growth and individuals vote over the degree of redistribution in the economy the model has three main features first very different patterns of income distribution are conducive to high growth at different levels of per capita income second growth is associated with an externality whereby investment in human capital by one group increases the productivity of other groups thus potentially enabling them to invest in human capital third the initial pattern of income distribution and the resulting political equilibrium are crucial in determining whether the transmission of this externality is promoted in which case growth is enhanced or prevented in which case growth is stopped using a non overlapping generations model with voting i derive several empirical implications in particular the model implies an inverted u relation between levels of inequality and levels of income in cross sections but not necessarily in time series a result that seems consistent with a number of empirical studies

the effect of the social welfare system on metropolitan migration in the us by income group gender and family structure this research paper addresses some important issues regarding out migration from and in migration to metropolitan areas in the u s particularly the effect of the social welfare system on migration decisions the primary focus is on migration by income group poor versus non poor with a secondary focus on how gender and family status relate to migration the results provide only very weak support for the hypothesis that social welfare benefits influence out migration decisions only of non poor female headed households but moderate support for the effect of such benefits on in migration decisions especially of low income and female headed households excerpt

minimum wage exports and growth abstract using an endogenous growth model in an open economy we study the impact of minimum wages on growth for an innovator country we state that a minimum wage shifts efforts from production to r d but only in an open economy thus it speeds up long run growth in proportional to exports calibrations suggest the growth surplus can be significant an empirical study on 11 oecd countries illustrates these results the impact on welfare is ambiguous because the minimum wage induces unemployment however we show that in an open economy a minimum wage associated with unemployment benefits can pareto dominate laissez faire

promise and pitfalls in the use of secondary data sets income inequality in oecd countries as a case study this paper examines the role of secondary data sets in empirical economic research taking the field of income distribution as a case study we illustrate problems faced by users of secondary statistics showing how both cross country comparisons and time series analysis can depend sensitively on the choice of data after describing the genealogy of secondary data sets on income inequality we consider the main methodological issues and discuss their implications for comparisons of income inequality across oecd countries and over time the lessons to be drawn for the construction and use of secondary data sets are summarized at the end of the paper

does inequality cause inflation the political economy of inflation taxation and government debt a democratic society in which the distribution of wealth is unequal elects political parties that are likely to represent the interests of poor people it is in the interests of the clientele of the resulting governments to attempt to levy inflation taxes in order to erode the real value of debt service and redistribute from the rich to the poor consequently inequality and high levels of nominal government debt sow the seeds for inflation some cross country evidence for this proposition is provided

aggregate investment and political instability an econometric investigation although in theory the long run effect of uncertainty on investment is ambiguous available econometric evidence widely supports a negative association between aggregate investment and political instability a shortcoming of this body of evidence is that it has failed to investigate the existence and direction of causality between these two variables this paper fills this gap by testing for such causal and negative long run relationship between political instability and investment we find there is a causal relation going from instability to investment but it is positive and particularly strong in low income countries this finding is robust to various sensitivity checks

tax reforms under market distortions in product and labour markets using a two agent model comprised of capitalists and workers this paper examines the importance of imperfect competition in product and labour markets in determining the welfare effects of tax reform the reform considered consists of eliminating the capital tax alongside a concurrent rise in the labour tax in contrast to the perfectly competitive model models with product or labour market failures each result in welfare losses for the workers in the long run in a realistic calibration to the uk economy combining these imperfections implies that this tax reform will be pareto improving in the long run however these welfare gains over longer time horizons come at the cost of short run losses which consistent with previous research result in welfare losses for workers post reform

political freedom economic freedom and income convergence do stages of economic development matter in the literature theory and empirical evidence on the nexus of political freedom economic freedom and economic growth are mixed in this paper we test the hypothesis that the effect of political freedom on promoting economic growth is realized and detectable at later stages of social and economic development using panel data for a sample of 104 countries between 1970 and 2003 we find strong support for our hypothesis while economic freedom has greater effects on income convergence in the oecd countries political freedom clearly promotes the convergence among those oecd countries

economic growth urbanization and energy consumption a provincial level analysis of china abstract as the largest developing country with fast paced economic growth china s development has been characterized by a high degree of energy consumption high level of heavy industry international trade and urbanization progress in this study we extend the current literature by incorporating urbanization energy consumption and international trade into a production function using a panel data set model over the period from 2001 to 2012 the results show that urbanization and capital are the major contributors to china s economic growth meanwhile there exists a u shaped relationship between urbanization and economic growth that heavy industry exerts a significant negative effect on economic growth using system generalized methods of moments gmm sys estimation methods and the relationship between international trade and economic growth is mixed and no consistent results support the conclusion that the international trade promotes economic growth adjusting the industry and trade structure in economic growth is the priority for the policy makers

growth distribution and politics we start by arguing that to understand growth differences across countries and time one needs to understand differences in public policies that affect the incentives for productive accumulation of capital human capital or technically useful knowledge and to understand policy differences one needs to understand how political institutions aggregate conflicting interests into public policies we then survey some recent work along these lines which argues that more inequality leads to slower growth next we illustrate some of the basic ideas of this work by help of a simple model of taxation we also present some econometric cross country evidence which is largely supportive of the basic ideas we end by suggestions for further work this abstract was borrowed from another version of this item

dividend surprises inferred from option and stock prices this paper introduces a new method to measure the unexpected component of dividend announcements while measures used previously were based on various arbitrary models of dividend expectations our suggested method compares the reaction of stock and option prices to dividend announcements our measure is compared to commonly used model based measures to a box jenkins time seriesbased measure and to a value line investor survey based measure of dividend surprises the new measure is more highly correlated with the market s reaction to the announcements than are alternative measures of dividend surprises the new measure is also shown to be insensitive to the extent to which the options used to identify unexpected dividend announcements are in or out of the money theoretical analysis of dividend policy has focused on the effect of dividends on stock prices and on optimal portfolio holdings 1 empirical tests of the theories are predicated upon their ability to identify the unexpected component of dividend announcements or dividend surprises since the market s dividend expectations are not directly observable dividend surprises have been measured so far in relation to various ad hoc models of dividend expectations such as the naive model which assumes that investors expect dividend levels to remain the same from one quarter to the next we propose to measure directly the magnitude of dividend surprises by using stock and option prices we will show that our price based method is superior to model based methods used in prior studies for example the stock market reaction to dividend announcements is more highly correlated with dividend surprises measured by our method than with dividend surprises measured by several model based methods including a method based on a box jenkins estimation and on value line s forecast of dividends additionally the suggested pricebased measure is shown to be insensitive to the choice of options used the paper is organized as follows section i examines a method suggested by cox and rubinstein 1985 and by garman 1983 for inferring dividend

welfare policies and migration of the poor in the united states an empirical note this paper has investigated the impact of geographic welfare benefit differentials upon migration in the united states unlike other related studies which typically focus upon black migration as a surrogate measure of migration of the poor the present study focuses directly upon migration of the poor per se a variety of reduced form estimates are provided the evidence strongly suggests that the net in migration of the poor is positively and significantly influenced by higher nominal afdc levels and by higher real afdc levels these findings support the welfare magnet hypothesis which alleges that relatively high welfare levels act to attract poor migrants moreover given that poor migrants are attracted non only by high nominal welfare levels but also by high real welfare levels an argument can be made for establishing geographically uniform real welfare benefit levels in the united states this uniformity presumably should act over the long run to eliminate the human resource distortions being caused by the currently prevailing welfare system

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

distribution and growth cross country evidence an endogenous growth model is presented to examine the determinants of economic growth and income distribution and their relationship three major findings from a cross country analysis of 45 countries are 1 a higher level of educational attainment of the labour force has an equalizing effect on income distribution while the larger the dispersion of schooling among the labour force the greater the income inequality 2 human capital investment as well as physical capital investment are significant factors contributing to economic growth and 3 income inequality has a negative effect on economic growth supporting the existence of a complementary relationship between equity and growth

the politics of underinvestment in agricultural research this paper develops a political economy framework that determines the factors causing underinvestment in public research expenditures governments are unable to fully compensate for unequal income distribution effects of research because of either their inability to make credible commitments or ofdeadweight costs associated with compensation

who is afraid of political instability abstract an unstable macroeconomic environment is often regarded as detrimental to economic growth among the sources contributing to such instability much of the blame has been assigned to political issues this paper empirically tests for a causal and negative long run relation between political instability and economic growth but finds no evidence of such a relationship sensitivity analysis indicates that there is a contemporaneous negative relationship but also that in the long run and ignoring institutional factors the group of african countries plays the determining role