is democracy good for the environment quasi experimental evidence from regime transitions this paper tests the hypothesis that democratisation is conducive to less environmental depletion due to human activity using interrupted time series design for a panel of 47 transition countries and two indexes of pollution co 2 emissions and pm10 concentrations i find that democracies and dictatorships have two different targets of environmental quality with those of democracies higher than those of dictatorships income inequality may as well alter this targets but with opposite effects in the two different regimes

violence during democratization and the quality of democratic institutions abstract this paper investigates the impact of violent civil conflicts during the process of democratization on the institutional quality of the emerging democracies we propose a theory of endogenous regime transition in which violent conflict can arise in equilibrium peaceful transitions lead to a social contract that provides all groups with political representation and leads to better protection of civil liberties than violent transitions empirical evidence from the third wave of democratization based on a difference in difference methodology supports the theoretical predictions the findings suggest that compared to peaceful transitions violent conflicts during the democratic transition have persistent negative effects on the institutional quality of the emerging democracies

gender bias and the availability of business loans abstract social structure values and gender socialization have undoubtedly disadvantaged women in the process of preparing for a career in business and there is a widely held view that women are subject to discrimination by financial institutions however the evidence to verify this belief has largely been from studies where women have claimed that they were subject to discrimination in the loan situation without either supporting evidence or control data from a sample of male loan applicants two experiments were carried out using a goldberg type procedure to test the belief that women are unfairly discriminated against when seeking a loan to establish a business venture carefully constructed scenarios of an application for loan finance to purchase a commercial enterprise were mailed to loan officers of major trading bank branches the scenarios were identical in all respects except for the sex and education level of applicants loan officers were asked whether or not they would approve loan finance for the proposed business purchase and to indicate factors that contributed to their decisions significant differences in response to female and male applicants were observed in both experiments in experiment i university education both sexes were equally likely to obtain a loan but education was considered a more important factor for the female applicant than for the male in experiment ii high school education the female applicant was less likely to obtain a loan than the male applicant the results support the widely held perception that women can experience gender discrimination when seeking start up capital such discriminatory behavior by loan officers may not be and probably is not intentional rather the pervasiveness of the social construction of differential gender roles in western culture is such that it is more likely that discrimination is unconscious and consequently more difficult to change

democracy volatility and economic development growth stability is an important objective because development requires sustained increases in income because volatility is costly for the poor and because volatility deters growth we study the determinants of average growth and its volatility as a two equation system and find that higher levels of democracy and diversification lower volatility whereas volatility itself reduces growth muslim countries instrument for democracy and measures of diversification identify volatility in contrast to the lack of consensus on the democracy growth relationship the democracy stability link is robust rather than focus on growth this paper forges an alternative link between democracy and development through the volatility channel

the resource curse revisited governance and natural resources the paper analyzes the impact of natural resource abundance on selected governance indicators we use a panel data set with observations on a large number of countries over an extended period of time and employ an instrumental variable technique to account for endogeneity the results show that exports of natural resources have above all led to an increase in corruption this result is robust to both different model specifications and an alternative indicator for natural resource abundance for other governance indicators such as law and order and bureaucratic quality we either find no results or results that lack robustness

education and propaganda tradeoffs to public education provision in nondemocracies abstract nondemocratic regimes face a tradeoff when investing in public education education promotes human capital acquisition expanding the tax base yet it also enhances political sophistication and participation at a cost to nondemocratic regimes to relax this tradeoff a regime can disseminate propaganda through its education system i show that even bayesian citizens can be influenced by propaganda by deterring political opposition propaganda can induce nondemocracies to invest in education when they otherwise would not improving social welfare when propaganda is too strong however it can generate a backlash using cross country and survey data i find evidence consistent with the predictions

the illusion of fiscal illusion unsticking the flypaper effect recognizing that it is difficult to prove a negative this paper marshals evidence in support of the hypothesis that the widely documented flypaper effect of federal grants to state and local governments is purely a statistical artifact a review of previous studies and a monte carlo investigation suggest that the use of an inappropriate functional form may generate an illusory flypaper effect a local expenditure equation is then estimated in alternative specifications with ten years of state level data empirical results confirm the sensitivity of the flypaper effect to specification and tests of fit unambiguously favor one functional form that specification yields no statistical evidence of a flypaper effect

the dual illusion of grants in aid on central and local expenditures a reply in this journal chu chu h y 2003 public choice 114 349 359 offered corrections for inconsistencies in the logan model of dual fiscal illusion logan r r 1986 journal of political economy 94 1304 1318 this paper shows that logan 1986 introduced two prevailing models of fiscal illusion and chose to follow one of them for generalization chu has not corrected any inconsistencies he has instead offered a generalization of the other type of illusion this paper demonstrates that the chu generalization suffers from multiple irrational and unachievable results which is why logan 1986 chose the original version in the first place

income and democracy evidence from nonlinear estimations we test the relation between income and democracy during the postwar period we employ panel estimation methods that explicitly allow for the fact that the primary measures of democracy are censored with substantial mass at the boundaries we find that the statistically significant positive income democracy relationship is robust to the inclusion of country fixed effects

proxies in the new political economy caveat emptor i introduction today proxies for cultural political and institutional variables abound in econometric studies and strong policy recommendations are based on results obtained with them unlike the traditional data of economists they are neither market generated nor the fruit of large official or semi official statistical projects the main providers are ideological or public interest organizations such as transparency international and freedom house supplemented by scholars corporations and miscellaneous organizations the diverse and perhaps suspect origins of these data are reasons to use them cautiously yet even the prudent robert barro 1999 takes freedom house s ratings of international political and civil liberty on faith in his recent study of the determinants of democracy the trust standard what i shall call the correlation test is a common way to assess multiple proxies for an intangible variable which also breeds complacency because it often is used as a substitute for direct appraisal of them alberto alesina and beatrice weder 1999 p 10 use it in a study of corruption s relation to foreign aid claiming that these relatively high correlations among proxies for corruption provide some confidence in the measures of corruption since most of them were compiled by different institutions using very different methodologies the same spirit infuses what i shall call the mutual corroboration test for regression results it is considered probative that different proxies for the same intangible variable produce similar or at least mutually compatible regression estimates the correlation and corroboration tests also appear in a recent world bank study kaufman et al 2000 p 11 utilizing measures of the quality of governance the authors write that if the data were not informative we would not expect to see the strong agreement across sources about the quality of governance particularly striking is the broad consensus that emerges among many diverse raters they acknowledge the conceptual differences among the literally hundreds of measures used in their study all qualitative but omit none from their composite indicators finally a pioneer in the new data gerald scully 1992 constructs eight economic freedom indexes plus an average of them to be the economic freedom variable in one of his projects he cites high rank correlations among them approvingly these tests use mutual resemblance or consistency as substitutes for directly assessing the suitability of proxies for a particular project one by one evaluation is to be sure a laborious and inconvenient task but ease and convenience are not tests of the validity of evaluation procedures correlation among the proxies or results obtained with them must not be confused with aptness of the proxies or results the correlation and corroboration tests assume for instance that only measurement error differentiates proxies from one another yet political institutional variables normally are defined differently from one another good governance is already a subjective judgment broad consensus allows differences of opinion identical policy conclusions cannot follow from regressions based on measures having different meanings so the quotation from alesina and weder is an indictment of their study not a defense of it the main purpose of this article is to show that the trust standard and the correlation and corroboration tests are pseudo criteria for judging the quality of proxies and results based on them because they are capable of supporting fallacious statistical estimates these tests i show endorse statistical nonsense in an interesting familiar case the nonsense is attributable in part to the inapposite use of proxy regressors in estimations of a simple and well known model specifically bivariate regressions often cited in support of the strict free market school of thought

the effect of democracy and press freedom on corruption an empirical test this paper tests the effect of democracy and press freedom on corruption the empirical investigation carried out in this paper suggests that democracy and press freedom can have significant impact on corruption

the dual illusion of grants in aid on central and local expenditures the purpose of this paper is to clarify some misspecificationsthat prevail in the dual illusion hypothesis which is animportant influential theory in fiscal illusion studies avoter s behavior can hence be self fulfilling and the dual illusion will not contradict each other our findings alsosupport what the dual illusion hypothesis expects that aidraises the demand for recipient government output and reducesthe demand for grantor government output the intergovernmentgrants therefore do appear to be a common source of fiscalillusion

the interaction effect of economic freedom and democracy on corruption a panel cross country analysis abstract this paper examines the effects of economic freedom democracy and its interaction term on controlling corruption interactive results indicate that economic freedom and democracy significantly combat corruption economic freedom reduces corruption in any political environment democracy increases corruption when economic liberalization is low

reevaluating the modernization hypothesis we revisit and critically reevaluate the widely accepted modernization hypothesis which claims that per capita income causes the creation and the consolidation of democracy existing studies find support for this hypothesis because they fail to control for the presence of omitted variables controlling for these factors either by including country fixed effects in a linear model or by including parameterized random effects in a nonlinear double hazard model removes the correlation between income and the likelihood of transitions to and from democratic regimes in addition the estimated fixed effects from the linear model are related to historical factors that affect both the level of income per capita and the likelihood of democracy in a country this evidence is consistent with the idea that events during critical historical junctures can lead to divergent political economic development paths some leading to prosperity and democracy others to relative poverty and non democracy

why small states offer important answers to large questions small states are conspicuously absent from mainstream comparative political science there are a variety of reasons that underpin their marginal position in the established cannon including their tiny populations the fact that they are not considered real states their supposedly insignificant role in international politics and the absence of data in this article we argue that the discipline is much poorer for not seriously utilizing small states as case studies for larger questions to illustrate this we consider what the case study literature on politics in small states can offer to debates about democratization and decentralization and we highlight that the inclusion of small states in various ways augments or challenges the existing literature in these fields on this basis we argue that far from being marginal or insignificant the intellectual payoffs to the discipline of studying small states are potentially enormous mainly because they have been overlooked for so long

fiscal illusion and the grantor government in canada recent work on the u s concludes that one or more illusions are responsible for the empirically observed flypaper effect using annual canadian data for the period 1962 84 we test the single illusion and dual illusion specifications currently in the literature while the empirical results support the dual illusion specification it is not the unambiguous choice over single illusion specifications as previously found further the nature of the grant system in canada raises questions about whether illusions or real factors produce the empirical results

income and democracy evidence from system gmm estimates abstract does higher income cause democracy accounting for the dynamic nature and high persistence of income and democracy we find a statistically significant positive relation between income and democracy for a postwar period sample of up to 150 countries our results are robust across different measures of democracy and instrumentation strategies

religion and female educational attainment the paper reviews the literature on the education gender and religion nexuses and identifies plausible hypotheses that religion adversely affects female education the link between major religions and female educational attainment is examined using the barro lee data set for a sample of 97 countries the estimates include control variables for colonial heritage urbanization labor force participation and young adult mortality the estimates show powerful negative links between female educational attainment and the proportion of ethnoreligions hindu and muslim adherents in a country with similar results for the gender gap the paper offers some interpretative thoughts and research agendas

credit constraints and growth gains from governance this paper contributes to the governance literature by analyzing the specific mechanisms through which governance affects economic growth the credit channel specifically it investigates the grow

making loan decisions in banks straight from the gut when a business owner approaches a bank for a loan for their business they might hope that a well established bureaucratic procedure would ensure that their application was processed with stipulated rules and impersonal criteria they might expect that two bank officials evaluating the same proposal for a loan would reach the same decision however research shows that both quantifiable data and gut feelings are used in the decision in this research analysis of interviews with senior managers and both individual and focus group interviews with bank loan officers reveals that there are no set criteria or stipulated rules the interviews demonstrate how and why nonquantifiable data is used and why different bank officials can reach different conclusions on the same loan proposal while these bank loan officers do not appear to be discriminatory against female business owners the lending criteria and process allows significant room for discrimination it appears questionable whether bank lending is seen as an ethical and fair process

workers of the world unite franchise extensions and the threat of revolution in europe 1820 1938 abstract we test the hypothesis that the extension of the voting franchise in europe was related to the threat of revolution we contend that international diffusion of regime contention and information about revolutionary events happening in neighboring countries generate the necessary variation in the perceived threat of revolution using two samples of european countries covering the period from 1820 to 1938 we find robust evidence which is consistent with the threat of revolution hypothesis we also find some evidence that war triggered suffrage reform

clientelism contagious voting and governance this paper explains inferior quality of governance in less affluent countries in terms of a patron client relationship between political parties and a large section of voters the client voters resort to strategic voting which is shown to be contagious leading to suboptimal effort choice by the incumbent government and a higher probability for the incumbent to remain in power the possibility of competition between the incumbent and the opposition in terms of expenditure on political propaganda actually helps the incumbent and reinforces these results

some evidence on the effect of the separation of spending and taxing decisions it is often argued that separation of public spending and taxing decisions engenders in the voter overoptimistic hopes that someone else will bear the cost of public services thereby inducing an increase in the size of government but are perceived tax prices systematically and persistently reduced by separation although in stock markets all agents expectations may be unbiased they may or may not be unbiased in political markets this paper analyzes the separation created in federal states when the central government finances local expenditures evidence from a dynamic decisive voter model is presented that indicates that the separation introduced by federal grants to canadian provinces did in fact reduce the perceived tax price of provincial public services and raise provincial expenditures the results suggest also that the effect of separation diminished over time

gender disparity in angel financing this study uses unique hand collected data from a televised entrepreneurial pitch competition to examine gender differences in obtaining angel financing results indicate that while the yield rates between male and female teams do not differ a gender disparity in the amount of angel funding does in fact exist female teams receive less capital and provide more equity relative to their male counterparts even when controlling for typical determinants of investment such as industry and prior company success further we find that female teams receive investments with lower valuations than their male counterparts largely because they initially offer higher equity stakes for less capital thus this suggests that limitations to angel financing of female entrepreneurial ventures may be partly self imposed

structural differences in economic growth an endogenous clustering approach this article addresses heterogeneity in determinants of economic growth in a data driven way instead of defining groups of countries with different growth characteristics a priori based on for example geographical location we use a finite mixture panel model and endogenous clustering to examine cross country differences and similarities in the effects of growth determinants applying this approach to an annual unbalanced panel of 59 countries in asia latin and middle america and africa for the period 1971 2000 we can identify two groups of countries in terms of distinct growth structures the structural differences between the country groups mainly stem from different effects of investment openness measures and government share in the economy furthermore the detected segmentation of countries does not match with conventional classifications in the literature

the influence of political distortions on economic performance alberto alesina is the nathaniel ropes professor of political economy and chairman of the department of economics at harvard university in this interview he discusses with brian snowdon his views on several important contemporary issues including politics and the business cycle budget deficits currency unions the european union the size of nations economic growth inequality democracy foreign aid ethnic fractionalisation and the welfare state in the us and europe

a new data set measuring income inequality this article presents a new data set on inequality in the distribution of income the authors explain the criteria they applied in selecting data on gini coefficients and on individual quintile groups income shares comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage although differences in the definition of the underlying data might still affect inter temporal and international comparability based on this new data set the authors do not find a systematic link between growth and changes in aggregate inequality they do find a strong positive relationship between growth and reduction of poverty

political regimes and economic growth arguments that relate regimes to growth focus on property rights pressures for immediate consumption and the autonomy of dictators while everyone seems to agree that secure property rights foster growth it is controversial whether democracies or dictatorships better secure these rights the main mechanism by which democracy is thought to hinder growth is pressure for immediate consumption which reduces investment only states that are institutionally insulated from such pressures can resist them and democratic states are not the main argument against dictatorships is that authoritarian rulers have no interest in maximizing total output these views are summarized in turn

inequality and democracy why inequality harms consolidation but does not affect democratization under what conditions do democracies emerge and consolidate recent theories suggest that inequality is among the leading determinants of both democratization and consolidation by contrast this article argues that inequality harms consolidation but has no net effect on democratization the author shows that the existing theories that link inequality to democratization suffer from serious limitations 1 they are useful only for understanding transitions from below and thus do not apply to many other transitions that is those from above 2 even for democratization from below their predictions are unlikely to hold since inequality actually has two opposite effects and 3 they ignore collective action problems which reduces their explanatory power however these objections do not affect the relationship between inequality and consolidation in particular while inequality has two opposite effects on the probability of transition to democracy it unambiguously increases the probability of transition away from democracy this article conducts the most comprehensive empirical test to date of the relationship between inequality and democracy it finds no support for the main democratization theories contrary to what they predict estimation suggests neither a monotonic negative nor an inverted u shaped relationship yet inequality increases the probability of backsliding from democracy to dictatorship

comparing the information acquisition strategies of venture capital and commercial lenders a computer based experiment abstract owners and financial planners in new ventures prefer using internal sources of capital as much as possible because they are uncertain about how to obtain external financing and how the involvement of others will impact their ventures because undercapitalization and financial problems are at the center of nearly all business failures it would appear useful for owners and financial planners to reduce the uncertainty surrounding external financing obtaining information about one source of this uncertainty a lack of understanding of the decision processes followed by venture capitalists is the focus of research in this paper and a growing body of literature to further this line of study we investigate the differences in decision behavior of venture capitalists using bankers as a benchmark for comparison in cases in which debt and debt related financing are sought to the extent that venture capitalists have unique decision processes owners and financial planners might improve their ability to obtain financing through knowledge of the unique features of venture capitalists decision processes in addition venture capitalists might improve their decision effectiveness if made aware of systemic biases in their decision procedures using a computer software package to trace information acquisition processes we found that venture capitalists acquired less information and followed a pattern of acquisition that was deeper within categories of information than bankers in addition venture capitalists showed a stronger preference for strategic data and less interest in historical financial data both groups minimized the use of financial forecasts and followed decision processes persistently across different types of companies start up and well established the implications of this study for practice are two fold first if the owners or financial planners of a new or relatively new venture are seeking financing from external sources they should package the business plan and request in a manner that is consistent with the source of financing for example requests from venture capitalists should highlight strategic information such as descriptions of the product or process patentability prospects product market and management team less emphasis should be placed on financial information particularly financial projections in contrast requests for financing by banks should highlight historical financial information such differences between venture and bank financing may lead individuals who are seeking financing to conclude that because historical financial information is of primary importance to bankers bank financing should be sought after the business has developed a positive financial history and trend this would confirm intuition and research findings that venture financing is the primary source of external financing in the early stages of a new venture second bankers and venture capitalists like all decision makers who have developed a degree of expertise in a particular specialty should attempt to gain some insight into their decision processes the goal of obtaining this information would be to provide feedback on processes such as information acquisition which tend to become automatic over time with this knowledge bankers and venture capitalists could examine any biases in their behavior with the ultimate goal of improving performance this paper also has important implications for researchers in particular we have demonstrated that computer based approaches for studying decision behavior offer promise for interesting explorations into important issues such as how venture capitalists make decisions the computer minimizes researcher intrusion in the decision task and permits the collection of process data from samples large enough to permit statistical analyses in addition the subjects determine the length of the task and the direction of the search much as they would in practice which increases the external validity of the research method

a dynamic theory of the transition to democracy abstract a model of the transition to democracy is presented within a dynamic general equilibrium framework we demonstrate that democratic transitions occur endogenously in the course of economic growth or with economic contraction being fundamentally driven by the economic position of the middle class democratic transitions can occur rapidly or slowly because the autocrat faces an informational asymmetry regarding the effect of his policies on the political economic environment the model shows that the primary factors affecting the speed of democratic transitions are inequality the planning horizon of the autocrat the autocrat s perceived legitimacy and the rate of economic growth

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

natural resources and economic growth a meta analysis summary an important question in development studies is how natural resources richness affects long term economic growth no consensus answer however has yet emerged with approximately 40 of empirical papers finding a negative effect 40 finding no effect and 20 finding a positive effect does the literature taken together imply the existence of the so called natural resource curse in a quantitative survey of 605 estimates reported in 43 studies we find that overall support for the resource curse hypothesis is weak when potential publication bias and method heterogeneity are taken into account our results also suggest that four aspects of study design are especially effective in explaining the differences in results across studies 1 controlling for institutional quality 2 controlling for the level of investment activity 3 distinguishing between different types of natural resources and 4 differentiating between resource dependence and abundance

climate instability urbanisation and international migration abstractthis paper focuses on climate induced migration we construct a simple theoretical model where in a first step climate shocks accelerate the transition from the traditional to the modern sector leading rural workers to move to urban centres within national borders while in a second step downward pressures on wages due to the greater labour supply in cities push people to engage in international migration to test this hypothesis we exploit a rich panel dataset displaying a representative picture of bilateral migration flows and climatic data across 222 countries for the period 1960 2000 findings suggest that in the next few years the climate induced growth rate of migrant stocks might be in a range between 8 6 per cent and 12 8 per cent especially from developing countries where the level of rural employment is more likely to be affected by climatic shocks

oil price shocks income and democracy he effect of natural resource wealth and income on political institutions is a central issue at the intersection of economics and political sciences we contribute to this research by examining the effect of international oil price fluctuations on democratic institutions over the 1960 2007 period we also exploit the very persistent response of aggregate income to oil prices to study the effect of persistent oil price driven income shocks on democracy our results indicate that countries with greater net oil exports over gdp see improvements in democratic institutions following upturns in international oil prices for example positive oil price shocks lead to improvements in the polity democracy score as well as the subscores for executive constraints executive recruitment and political competition and a higher probability of a democratic transition we estimate that an oil price driven 1 percentage point increase in per capita gdp growth increases the polity democracy score by around 0 2 percentage points on impact and by around 2 percentage points in the long run the effect on the probability of a democratic transition is around 0 4 percentage points our work relates to the literature on the link between political institutions and natural resource wealth and income an influential early contribution is lipset 1959 who documents that high income countries tend to be more democratic he argues that this positive correlation arises because higher per capita income is a symptom of the modernization of society and that modernization also increases citizens demand for political participation the positive association between income and democracy has also been emphasized by huntington 1991 who holds that higher per capita income was one of the key factors behind the

long lasting effects of socialist education abstract political regimes influence the content of education and criteria used to select and evaluate students we study the impact of a socialist education on the likelihood of obtaining a college degree and on several labor market outcomes by exploiting the reorganization of the school system in east germany after reunification our identification strategy uses cutoff birth dates for school enrollment that lead to variation in the length of exposure to the socialist education system within the same birth cohort an additional year of socialist education decreases the probability of obtaining a college degree and affects longer term labor market outcomes for men

property rights and competing for the affections of demos the impact of the 1867 reform act on stock prices the 1867 reform act in britain extended the electoral franchise to the skilled but propertyless urban working classes using stock market data and exploiting the fact that foreign and domestic equities traded simultaneously on the london market this paper finds that investors in british firms reacted negatively to the passage of this act we suggest that this finding is consistent with investors foreseeing future alterations of property rights arising from the pressure that the large newly enfranchised group would bring to bear on government policy we also suggest that our findings appear to be more consistent with the tory political competition explanation for the act rather than the whig threat of revolution explanation

likelihood based estimation of dynamic panels with predetermined regressors this article discusses the likelihood based estimation of panel data models with individual specific effects and both lagged dependent variable regressors and additional predetermined explanatory variables the resulting new estimator labeled as subsystem limited information maximum likelihood ssliml is asymptotically equivalent to standard panel generalized method of moment as n for fixed t but tends to present smaller biases in finite samples as illustrated in simulation experiments simulation results also indicate that the estimator is preferred to other alternatives available in the literature in terms of finite sample performance finally to provide an empirical illustration i revisit the evidence on the relationship between income and democracy in a panel of countries using the proposed estimator

tinpots totalitarians and democrats an empirical investigation of the effects of economic growth on civil liberties and political rights ronald wintrobe 1990 1998 has recently provided atheoretical foundation for estimating equations that attemptto explain the dependence of civil liberties and politicalrights in non democratic regimes on the history of economicgrowth this theory suggests that data from different kinds ofnon democratic countries should not be pooled without allowingcoefficients to vary with regime type it also placesinteresting restrictions on the signs of the coefficients ofeconomic growth in equations explaining freedom in the typesof regimes wintrobe identifies in this paper we employ theserestrictions to test wintrobe s theory some additionalhypotheses about the difference between democratic andnon democratic regimes and about the role of education notconsidered by wintrobe are also investigated the results indicate clearly that the relationship between thedegree of freedom as measured by the sum of the gastilindexes of civil liberties and political rights andeconomic growth varies significantly across all types ofregimes totalitarians that attempt to maximize power areclearly different than tinpots that just attempt to maintainpower in this respect and non democratic regimes differ fromdemocracies other aspects of the theory are partiallyconfirmed in particular in totalitarian regimes positivegrowth reduces freedom and negative growth increases it insome specifications the theory predicts the opposite patternfor tinpots and we do find that negative growth reducesfreedom in tinpot regimes however positive growth in tinpotsalso appears to reduce freedom in some cases which is not inaccord with the theory secondary schooling has a positive effect on freedom as inprevious empirical work a result that is shown here to holdeven when each type of regime is considered separately butthe effect of primary schooling is different in tinpot andtotalitarian regimes but not in democracies primaryschooling is associated with reduced freedom

entrepreneurship and advancing national level economic efficiency we explore the channels under which entrepreneurship fosters productivity by disentangling its impact on national level economic efficiency and find that more entrepreneurship in aggregate is not always good for economic growth and most importantly identifying the form and activity of entrepreneurship is critical for policy makers to better manage changes in their economies our national level results also suggest that the new product entrepreneurship and to a lesser extent improvement driven opportunity entrepreneurship both significantly contribute to the improvement of national level efficiency however both measures would benefit from further development and it seems a higher coincidence of both is more likely to advance a nation s economic efficiency

funding new business ventures are decision makers biased against women entrepreneurs abstract women have been leaving large corporations in increasing numbers in recent years to start their own businesses however they have not been succeeding at the same rate as their male counterparts one potential barrier to a successful new venture is access to startup capital anecdotal evidence suggests that women starting their own businesses may have more difficulty obtaining financial support than men in a loan decision simulation this study systematically tested the allegations of female entrepreneurs that bank loan officers are more likely to grant loans to make a counteroffer and to make larger counteroffers to male entrepreneurs compared to female entrepreneurs under identical circumstances loan officers usually make funding decisions on the basis of information gathered from an interview and a business plan while venture capitalists often screen proposals on the basis of a business plan alone a second purpose of this study was to determine whether the mode of presentation business plan versus business plan with interview increased the male or female entrepreneur s probability of successfully obtaining a loan a third purpose of this study was to examine the effects of the decision maker s previous experience on funding decisions the recommendations of experienced loan officers versus inexperienced undergraduate students were compared in order to determine how experience and accountability influence loan decisions the study consisted of a 2 2 2 research design with three independent variables loan officers and undergraduate students either read a business plan or read a business plan and watched a videotape of an interview between a loan officer and a male or female entrepreneur who was seeking a loan to start a business participants then indicated the likelihood that they would recommend approval of the loan make a counteroffer of a smaller amount and the magnitude of the counteroffer there was no evidence that sex stereotypes influenced business funding decisions with respect to the amount of counteroffer a significant three way interaction was obtained between entrepreneurial gender presentation format and participant status loan officers made larger counteroffers to the female compared to the male when they read the business plan and watched the interview students made larger counteroffers to the male compared to the female when they read the business plan and observed the interview loan officers were significantly more cautious and conservative than students in their funding decisions failure to support allegations of bias against women entrepreneurs is discussed in terms of possible unrealistic expectations regarding the ease of obtaining startup capital further research is needed to examine this explanation one implication of these findings is that female entrepreneurs should seek opportunities to meet with loan officers to present their business proposals in the interview the female has the opportunity to address questions of motivation and competence on the other hand bankers may make more impartial decisions when relying on information in the business plan alone where financial considerations would have greater weight finally the results suggest that studies using students as proxies for bank loan officers have very limited generalizability

the impact of international trade on democracy a long run perspective the likely endogeneity between democracy and trade is addressed with an instrumental variables strategy in this article about whether international trade fosters democracy the authors use a measure of natural openness to obtain estimates of the causal impact of openness on democratization in three separate samples spanning the last 130 years a positive impact of openness on democracy is apparent in the data over the long run the post world war ii results suggest that with a rise in trade with other countries equal to a one standard deviation increase countries such as indonesia russia and venezuela could eventually become as democratic as the u s great britain or france there is some variation in the impact of openness by region that may be because trade seems to have a positive impact only when the capital to labor ratio is sufficiently high this is consistent with the idea that openness promotes democracy when it strengthens the economic fortunes of the middle class

resource windfalls political regimes and political stability abstract we study theoretically and empirically whether natural resource windfalls affect political regimes we show that windfalls have no effect on democracies while they have heterogeneous political consequences in autocracies in deeply entrenched autocracies the effect of windfalls is virtually nil while in moderately entrenched autocracies windfalls significantly exacerbate the autocratic nature of the political system to frame the empirical work we present a simple model in which political incumbents choose the degree of political contestability and potential challengers decide whether to try to unseat the incumbents the model uncovers a mechanism for the asymmetric impact of resource windfalls on democracies and autocracies as well as the the differential impact within autocracies

determinants of democracy a panel study of over 100 countries from 1960 to 1995 finds that improvements in the standard of living predict increase in democracy as measured by a subjective indicator of electoral rights the propensity for democracy rises with per capita gdp primary schooling and a smaller gap between male and female primary attainment for a given standard of living democaracy tends to fall with urbnization and with a greater reliance on natrual resources democracy has little relation to country size but rises with the middle class share of income the apparently strong relation of democracy to colonial heritage mostly disappears when the economic variables are held constant similarly the allowance for these economic variables weakens the interplay between democracy and religious affiliation however negative effects from muslim and non religious affiliations remain intact

the impact of economic development on democracy any account of the social and economic conditions of democracy must come to terms with the central finding of the cross national statistical research a sturdy though not perfect association between economic development and democracy to tackle these questions of causation we adopted a strategy of analytic induction based on comparative historical research our program of comparative historical research confirmed the conclusion of the cross national statistical analyses of the correlates of political democracy the level of economic development is causally related to the development of political democracy however the underlying reason for the connection in our view is that capitalist development transforms the class structure enlarging the working and middle classes and facilitating their self organization thus making it more difficult for elites to exclude them politically simultaneously development weakens the landed upper class democracy s most consistent opponent

trade democracy and the gravity equation abstract does democracy affect trade there are several channels by which democracy may affect trade with differing implications first democratization in the exporting country can improve product quality and reduce trade costs increasing bilateral trade second democratization in the importing country may increase trade barriers and thus reduce imports in this paper i analyze the effect of democracy on trade by augmenting the gravity equation with democracy using a rich panel data set and controlling for the endogeneity of democracy i find empirical evidence consistent with the hypothesis that democracy fosters trade this finding is robust to various econometric methods and to the use of disaggregated specifications

fiscal illusion and the grantor government empirical studies indicate that unconditional intergovernmental grants have a flypaper effect several authors have modeled recipient government spending under fiscal illusion to explain this phenomenon in short grants reduce the perceived marginal cost of recipient government output this paper develops a more general model of illusion that incorporates the grantor government thereby eliminating inconsistencies encountered in previous models the more general model implies that grant finance increases the perceived marginal cost of grantor government output thus grant induced illusion should have two effects an increase in recipient output and a decrease in grantor output the empirical work supports this hypothesis

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

does microfinance reduce income inequality this study addresses the question whether participation of the poor in microfinance contributes to reducing a country s level of income inequality using data from 70 developing countries we show that higher levels of microfinance participation are indeed associated with a reduction of the income gap between rich and poor people we also show however that the effects of microfinance on reducing income inequality are relatively small the results of this study add to the discussion on the impact of microfinance on poverty by showing that although access to microfinance does seem to improve the relative income position of the poor this improvement is modest which is probably because the use of microfinance is generally small as compared to the size of the economy of the countries in our sample microfinance should therefore not be seen as a panacea for bringing down income inequality in a significant way

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

the art of the possible power sharing and post civil war democracy this article focuses on the role that power sharing arrangements play in making it possible for some countries to make the transition to democracy successfully after civil war the authors hypothesize that the adoption of multiple forms of power sharing measures constructed to end particularly difficult civil wars facilitate the emergence of a minimalist form of democracy following some intrastate conflicts by helping to assuage warring groups security concerns the authors use a bivariate probit model to account for the possibility that the decisions by wartime rivals to engage in power sharing and whether to adopt democracy or not are interrelated employing panel data for all civils wars concluded between 1945 and the end of 2006 they find support for their hypothesis

world welfare is rising estimation using nonparametric bounds on welfare measures abstract i take a new approach to measuring world inequality and welfare over time by constructing robust bounds for these series instead of imposing parametric assumptions to compute point estimates i derive sharp bounds on the atkinson inequality index that are valid for any underlying distribution of income conditional on given fractile shares and gini coefficients while the bounds are too wide to reject the hypothesis that world inequality may have risen i show that world welfare rose unambiguously between 1970 and 2006 this conclusion is valid for alternative methods of dealing with countries and years with missing surveys alternative survey harmonization procedures alternative gdp series or if the inequality surveys used systematically underreport the income of the very rich or suffer from nonresponse bias

how to get the snowball rolling and extend the franchise voting on the great reform act of 1832 this paper suggests a new approach to analyzing the causes of franchise extension based on a new dataset it provides a detailed econometric study of the great reform act of 1832 in the united kingdom the analysis yields four main results first modernization theory receives limited support second the reform enjoyed some measure of popular support third the threat of revolution had an asymmetric impact on the voting behavior of the pro reform whigs and the anti reform tories while the threat might have convinced reluctant reformers among the whig politicians and among their patrons to support the bill it seems to have hardened the resistance to reform among the tories fourth ideology played a critical role nevertheless it also appears that self interest and political expedience explained the votes of many members of parliament

more oil less democracy evidence from worldwide crude oil discoveries this article exploits variations in the timing and size of oil discoveries to identify the impact of oil wealth on democracy i find that discovering 100 billion barrels of oil approximately the initial endowment of iraq pushes a country s democracy level almost 20 percentage points below trend after three decades the estimated effect is larger for oilfields with higher quality oil and lower exploration and extraction costs however the estimates become less precise when oil abundance is measured by oil discovery per capita suggesting politicians may care about the level instead of the per capita value of oil wealth

liberalizing autocracies in the gulf region reform strategies in the face of a cultural economic syndrome from an international comparative perspective the stability of autocratic regimes in the countries of the gulf region is striking this paper presents historical cultural as well as economic explanations and proposes that the interaction of both factors constitutes a cultural economic syndrome accounting for the persistence of authoritarianism macro quantitative analyses demonstrate the significant influence of this syndrome which operates through a mechanism of mutual reinforcement and substitution departing from this diagnosis potential remedies are discussed political and economic reform measures pursued in the 1990s are explored and the gulf monarchies are classified according to four ideal typical combinations of reform strategies

on the number and size of nations this paper studies the equilibrium determination of the number of countries in different political regimes and in different economic environments with more or less economic integration we focus on the trade off between the benefits of large jurisdictions and the costs of heterogeneity of large and diverse populations our model implies that i democratization leads to secessions ii in equilibrium one generally observes an inefficiently large number of countries iii the equilibrium number of countries is increasing in the amount of economic integration

revisiting the modernization hypothesis longevity and democracy summary modernization theory claims that changes in economic fundamentals like e g income per capita and education levels affect the political structure of a country in a causal way as an important marker of development life expectancy can also be conjectured to have a direct effect on political structures in this paper we estimate the impact of improvements in life expectancy on democracy for the purpose of identification we use data from the international epidemiological transition to construct an instrument for life expectancy we find a statistically and economically significant positive causal effect of improvements in life expectancy on democracy

revolt on the nile economic shocks religion and political power using centuries of nile flood data i document that during deviant nile floods egypt s highest ranking religious authority was less likely to be replaced and relative allocations to religious structures increased these findings are consistent with historical evidence that nile shocks increased this authority s political influence by raising the probability he could coordinate a revolt i find that the available data provide support for this interpretation and weigh against some of the most plausible alternatives for example i show that while nile shocks increased historical references to social unrest deviant floods did not increase a proxy for popular religiosity together the results suggest an increase in the political power of religious leaders during periods of economic downturn publication abstract

international comparisons of rural urban educational attainment data and determinants we study cross country differences in rural and urban educational attainment by using a data set comprising 56 countries we focus on the determinants of rural urban educational inequality which is measured by the ratio of rural to urban average years of schooling within each country we find that riskier human capital investment less credit availability a colonial heritage a legal system of french origin and landlockedness of nations are all associated with relatively lower rural educational levels and greater rural urban educational inequality conversely larger formal labor markets better infrastructure and a legal system of british origin are associated with relatively higher rural educational levels and lower rural urban educational inequality we also identify an interaction effect between economic development level and some of these factors in particular we find that as development level increases the negative positive relationship between french british legal systems and rural urban educational inequality is reversed and becomes positive negative

income and democracy existing studies establish a strong cross country correlation between income and democracy but do not control for factors that simultaneously affect both variables we show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and vari ous measures of democracy we present instrumental variables estimates that also show no causal effect of income on democracy the cross country corre lation between income and democracy reflects a positive correlation between changes in income and democracy over the past 500 years this pattern is con sistent with the idea that societies embarked on divergent political economic development paths at certain critical junctures jel d7 e 1

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

democracy rent seeking public spending and growth abstract does democratization imply faster growth less corruption and less inefficiency past studies yield ambiguous results on the effects of democracy on economic performance and growth we develop a simple two sector endogenous growth model that shows both very young and mature democracies grow faster than countries in mid stages of democratization producing a u effect this effect results from the pattern of rent seeking as it diverts from the provision of public goods rent seekers act as monopolistic competitors initially more democracy increases their number raising aggregate rents however rents per rent seeker fall with the number of rent seekers due to this crowding effect and the increased competition among rent seekers aggregate rents fall in mature democracies thus rents show an inverted u effect in relation to democracy we find fairly robust supportive evidence for the latter