what drives deregulation economics and politics of the relaxation of bank branching restrictions this paper investigates private interest public interest and political institutional theories of regulatory change to analyze state level deregulation of bank branching restrictions using a hazard model we find that interest group factors related to the relative strength of potential winners large banks and small bank dependent firms and losers small banks and the rival insurance firms can explain the timing of branching deregulation across states during the last quarter century the same factors also explain congressional voting on interstate branching deregulation while we find some support for each theory the private interest approach provides the most compelling overall explanation of our results

why voluntary export restraints are voluntary the paper presents an analysis of the effect upon an oligopolistic equilibrium of introducing a voluntary export restraint ver upon an importing firm a ver set at the free trade level of imports is shown to raise the profits of all firms within the industry the result follows as the imposition of a ver upon a free trade nash price competition forces the domestic firm to become an industry price leader the ver raises industry prices by facilitating collusion and lowers consumer welfare pourquoi les restrictions volontaires d 1 exportation sont volontaires ce memoire presente une analyse des effets de l introduction de restrictions volontaires a l exportation rve sur une entreprise qui importe dans un monde en equilibre oligopolistique on montre que l introduction de rve approximant le niveau des importations en regime de libre echange devrait augmenter les profits de toutes les entreprises dans l industrie cela decoule du fait que l imposition de rve sur un univers de concurrence par les prix a la nash en regime de libre echange force l entreprise domestique a devenir le leader en prix l introduction de rve augmente le niveau des prix de l industrie en facilitant la collusion et de ce fait reduit le niveau de bien etre des consomrnateurs

betting on hitler the value of political connections in nazi germany this paper examines the value of connections between german industry and the nazi movement in early 1933 drawing on previously unused contemporary sources about management and supervisory board composition and stock returns we find that one out of seven firms and a large proportion of the biggest companies had substantive links with the national socialist german workers party firms supporting the nazi movement experienced unusually high returns outperforming unconnected ones by 5 to 8 between january and march 1933 these results are not driven by sectoral composition and are robust to alternative estimators and definitions of affiliation

an ordinal ranking of economic institutions abstractwe provide the first ranking of countries economic institutions using an ordinal methodology using the five areas of the fraser institute s economic freedom of the world efw index we find that final rankings of a country s institutions are sensitive to the importance ordering of area 1 size of government when areas 2 5 are in the most important position we find that there is no significant difference between the efw rankings and our rankings when area 1 is placed in the most important position however a number of european countries with large welfare states but good governance do poorly

policy intervention in debt renegotiation evidence from the home affordable modification program we evaluate the effects of the 2009 home affordable modification program hamp that provided intermediaries with sizable financial incentives to renegotiate mortgages hamp increased intensity of renegotiations and prevented a substantial number of foreclosures but reached just one third of its targeted indebted households this shortfall was in large part due to low renegotiation intensity of a few large intermediaries and was driven by intermediary specific factors exploiting regional variation in the intensity of program implementation by intermediaries suggests that the program was associated with a lower rate of foreclosures consumer debt delinquencies house price declines and an increase in durable spending

voluntary export restraints and expectations an analysis of export quotas in oligopolistic markets the frequency of export quotas imposed as voluntary export restraints has been increasing this tends to create the expectation that similar export quotas will be imposed in the future even if free trade is allowed now the author analyzes the effect of such an expectation he demonstrates that if a quota is expected to be imposed on foreign exporting firms it intensifies the exporting firms competition in the prequota period this offsets the protection which the export quota as a voluntary export restraint will provide for domestic import competing firms in the future quota period copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

freedom and international migration economic and political freedoms are regressed on a bilateral cross section of international migrant stocks using ordinary least squares and tobit techniques a positive relationship between these variables is found economic freedom is statistically significant even when controlling for income per capita and political freedom in addition the impact of these freedoms on migration flows into oecd countries between 2001 and 2006 using fixed effects estimations is analyzed the panel data analysis mostly corroborates the cross sectional analysis the notable exception is that political freedom appears to have had a negative impact on migration flows during this period

resistance to reform status quo bias in the presence of individual specific uncertainty comment why do governments so often fail to adopt policies which economists consider to be efficiency enhancing our answer to this question relies on uncertainty regarding the distribution of gains and losses from reform we show that there is a bias towards the status quo and hence against efficiency enhancing reforms whenever some of the individual gainers and losers from reform cannot be identified beforehand there are reforms which once adopted will receive adequate political support but would have failed to carry the day ex ante the argument does not rely on risk aversion irrationality or hysteresis due to sunk costs jel d72 f13 why do governments so often fail to adopt policies that economists consider to be efficiency enhancing this is one of the fundamental questions of political economy the answer usually relies on what may be

gains and losses of sugar program policy options high domestic sugar prices supported by u s sugar policy have induced a significant substitution of corn sweeteners for sugar recognizing the close relationship between sugar and corn sweeteners this study applies a general equilibrium approach to evaluate the distributional effects of three different policy options i e quota tariff and deficiency payment on sugar related interest groups the results show that the current quota policy intended ostensibly to protect domestic sugar producers have hurt foreign exporters it will harm domestic sugar producers if the trend continues additionally the quota program is the most expensive of the options considered

economic freedom and the stability of stock prices a cross country analysis abstract this paper investigates the link between economic freedom and the price stability of individual securities in a unique setting using a sample of 327 american depositary receipts adrs we find an inverse relation between the economic freedom of a adrs home country and the price volatility of the adr this negative correlation is driven primarily by certain components of economic freedom such as property right protection the soundness of the money and the level of free trade in the home country further we find evidence that less regulation and less government control of markets in the home country leads to more stable adr prices

does immigration impact institutions the economics literature generally finds a positive but small gain in income to native born populations from immigrants and potentially large gains in world incomes but immigrants can also impact a recipient nation s institutions a growing empirical literature supports the importance of strong private property rights a rule of law and an environment of economic freedom for promoting long run prosperity but little is known about how immigration impacts these institutions this paper empirically examines how immigration impacts a nation s policies and institutions we find no evidence of negative and some evidence of positive impacts in institutional quality as a result of immigration

trade liberalization corruption and software piracy as multinational firms explore new and promising national markets two of the most crucial elements in the strategic decision regarding market entry are the level of corruption and existing trade barriers one form of corruption that is crucially important to firms is the theft of intellectual property in particular software piracy has become a hotly debated topic due to the deep costs and vast levels of piracy around the world the purpose of this paper is to assess how laissez faire trade policies and corruption affect national software piracy rates using invisible hand theory as well as literature from the fields of international strategy and ethics formal research hypotheses are posited and tested results suggest that corruption mediates the relationship between economic freedom and software piracy implications for multinational managers and researchers are also addressed

market oriented institutions and policies and economic growth a critical survey this paper surveys recent evidence suggesting that market oriented institutions and policies are strongly related to economic growth focusing on studies using the economic freedom ef indicator of the fraser institute this index is critically discussed also various serious shortcomings of empirical studies using this index are identified nevertheless there are strong indications that liberalization i e an increase in the ef index stimulates economic growth this paper also reviews studies on the determinants of ef political liberalization is often found to enhance economic liberalization whereas there is less evidence for causality running in the other direction

further evidence on the relationship between economic freedom and economic growth often it is maintained that economic freedom may further high levels of economic growth using various measures of economic freedom constructed by scully and slottje the robustness of this relationship is examined both direct and indirect effects of lack of liberties are analysed our main conclusion is that the link between economic freedom and economic growth depends upon the measure used for some indicators of economic freedom there appears a robust direct relationship while for others there is no such relationship investment is not related to our indicators for economic freedom

the grecian horse does immigration lead to the deterioration of american institutions concerns about the institutional impact of immigration particularly in the united states are not new we can trace them back to benjamin franklin thomas jefferson and alexander hamilton more recently in response to a literature that questions the desirability of current immigration restrictions borjas j econ lit 53 961 974 2015 speculates that immigrants coming from countries with poor institutions could reduce substantially the institutional quality in the united states to a point where it could negate all economic gains associated with immigration in terms of gdp and income using the economic freedom of north america index since 1980 we find no evidence to corroborate borjas s concerns however we find mixed evidence that immigration increases minimum wages and union density

people s opium religion and economic attitudes since max weber there has been an active debate on the impact of religion on people s economic attitudes much of the existing evidence however is based on cross country studies in which this impact is confounded by differences in other institutional factors we use the worldvalues surveys to id entify the relationship between intensity of religious beliefs and economic attitudes controlling for country fixed effects we study several economic attitudes towardcooperation the government working women legal rules thriftiness andthe market economy we also distinguish across religious denominations differentiating on whether a religion is dominant in a country we find that on average religious beliefs are associated with good economic attitudes where good is defined as conducive to higher per capita income andgrowth yet religious people tendto be more racist andless favorable with respect to working women these effects differ across religious denominations overall we find that christian religions are more positively associatedwith attitudes conducive to economic growth r 2003 elsevier science b v all rights reserved jel classification a1 e0 n4 z1

why are stabilizations delayed when a stabilization has significant distributional implications e g tax increases to eliminate a large budget deficit socioeconomic groups may attempt to shift the burden of stabilization onto other groups the process leading to stabilization becomes a war of attrition each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden the authors solve for the expected time of stabilization in a model of rational delay and relate it to several political and economic variables they motivate this approach and its results by comparison to historical and current episodes copyright 1991 by american economic association

human capital and growth abstract this paper describes a growth model with the property that human capital accumulation can account for all observed growth the model is shown to be consistent with evidence on individual productivities as measured by census earnings data the central hypothesis is that we learn more when we interact with more productive people

towards an equilibrium level of market reform how politics affects the dynamics of policy change in this article we examine the dynamics of economic reforms that are implemented by incumbent policy makers interested in maintaining their political power we use a sample of 86 countries over a time period going from 1980 to 2001 and find that the achievement of an equilibrium level of market liberalization is highly costly our results are robust to endogenity and model specification

financial development and economic growth convergence or divergence abstract this study tests for convergence in financial development and economic growth by incorporating the interaction between the real and financial sectors into an otherwise traditional test for convergence the results show strong evidence for conditional convergence middle and high income countries conditionally converge to parallel growth paths not only in per capita gdp but also in financial development the mutually reinforcing relationship between financial development and economic growth is stronger in the early stage of economic development and this relationship diminishes as sustained economic growth gets under way as such low income countries with a relatively well developed financial sector are more likely to catch up to their middle and high income counterparts and those with a relatively under developed financial sector are more likely to be trapped in poverty this finding explains the observed great divergence between poor and rich countries another finding is that while human capital is more important to growth in the early stage of economic development economic freedom becomes more important in the later stage

fraud recovery and the quality of country governance abstract using supervisory data from u s financial institutions on fraud related losses in foreign markets we find that losses in countries with poor governance have lower recovery rates our results are robust to accounting for potential endogeneity and reverse causality concerns among numerous robustness checks the association is driven by intuitive governance dimensions such as control of corruption rule of law regulatory quality and government effectiveness in addition country governance plays a particularly important role in fraud recovery for firms with poor risk management quality overall this paper presents unique and novel evidence tying country governance quality to firm level risk realizations

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

economic freedom culture and growth how do economic freedom and culture impact economic growth this paper argues that culture as measured by the world values surveys and economic institutions associated with economic freedom are both independently important for economic prosperity but the strength of their impact can be better understood only when both are included in the growth regression our results indicate that economic freedom is more important than culture for growth outcomes suggesting substitutability between the two we posit that culture is important for growth when economic freedom is absent diminishing in significance once economic freedom is established

institutions investment and growth new cross country and panel data evidence this paper outlines the alternative channels through which institutions affect growth and studies the empirical relationship between institutions investment and growth the empirical results indicate that i free market institutions have a positive effect on growth ii economic freedom affects growth through both a direct effect on total factor productivity and an indirect effect on investment iii political and civil liberties may stimulate investment iv an important interaction exists between freedom and human capital investment v milton friedman s conjectures on the relation between political and economic freedom are correct vi promoting economic freedom is an effective policy toward facilitating growth and other types of freedom jel o17 o40 p51

trust social capital and economic development many argue that elements of a society s norms culture or social capital are central to understanding its development however these notions have been difficult to capture in economic models here we explore ap ossible role for trustworthiness as corresponding to social capital individuals are trustworthy when they perform in accordance with promises even if this does not maximize their payoffs the usual focus on incentive structures in motivating behaviour plays no role here instead we emphasize more deep seated modes of behaviour and consider trustworthy agents being socialized to act as they do to model this socialization we borrow from a process of preference evolution pioneered by bisin and verdier 2001 the model developed endogenously accounts for social capital and explores its role in the process of economic development it captures in a simple formal way the interaction between social capital and the economy s productive processes the results obtained caution against rapid reform and provide an explanation for why late developing countries may not easily be able to transplant the modes of production that have proved useful in the west

economic freedom government policy and the trade off between equity and economic growth this study investigates the role that economicfreedom plays in economic growth and in the distribution in marketincome the role of government policy in advancingeconomic progress and in promoting income equality and the effectthat the rate of economic progress has on thedistribution of market income structural and reduced formmodels are estimated that reveal that economic freedompromotes both economic growth and equity and that there is apositive but relatively small trade off between growth andincome inequality

producer consumer trade offs in export cartels the wheat cartel case since the formation of the organization of petroleum exporting countries opec several models of cartel competitive fringe markets for an exhaustible resource have been developed derivations of nash cournot equilibrium price paths under such a regime and insightful behavioral descriptions of limit pricing by monopolists facing potential competition have enriched the literature concerning this market structure salant and gilbert and goldman in addition the gains to producers from cartelization in the oil copper and bauxite industries have been derived empirically pindyck largely in reaction to opec numerous discussions have focused on an important but different commodity than those mentioned above several proposals supported by many producers and consumers have been put forth to form a cartel in wheat among the major exporters the united states canada australia and argentina 1 if such a cartel were organized which group or groups have the most to gain the above studies on exhaustible resources do not distinguish between producer and consumer effects in the exporting countries largely because domestic demand for this type of good is small relative to the total amount exported in oil for example there is little need to distinguish between a producer export cartel which maximizes producer returns and a government cartel which maximizes the welfare of all groups since the solutions would be very similar however this is not necessarily the case for other commodities where domestic demand is an important component of market structure e g in wheat the domestic demand is large relative to total wheat exports 2 the purpose of this paper is to consider a market in which the commodity in question has a relatively large domestic demand component and to demonstrate that a sharp distinction has to be made between a producer export cartel and a government export cartel this paper shows abstracting from implementation issues raised by caves pindyck and mccalla and schmitz that producers actually may lose from a government cartel the conditions under which this can happen are derived theoretically the model is then applied to the world wheat economy and interestingly the empirical results suggest that there is a strong possibility that producers would in fact lose from a government wheat cartel if there are decreasing returns in production unless compensated by a tax on consumers this result raises several important policy issues

regulation and distrust in a cross section of countries government regulation is strongly negatively correlated with social capital we document this correlation and present a model explaining it in the model distrust creates public demand for regulation while regulation in turn discourages social capital accumulation leading to multiple equilibria a key implication of the model is that individuals in low trust countries want more government intervention even though the government is corrupt we test this and other implications of the model using country and individual level data on social capital and beliefs about government s role as well as on changes in beliefs and in trust during the transition from socialism

understanding economic policy reform one of the eventual consequences of the global debt crisis was a wave of market oriented economic reforms this paper discusses the state of our knowledge on the political economy of this process why were inefficient and often unsustainable policies maintained for so long why are so many governments reforming now after decades of adherence to policies of an opposite kind have the reformers internalized the correct lessons from the east asian experience finally are there any helpful rules for reformers to follow in guiding their policies through complicated political terrain

trust in large organizations several authors suggest that trust is an important determinant of cooperation between strangers in a society and therefore of performance of social institutions we argue that trust should be particularly important for the performance of large organizations in a cross section of countries evidence on government performance participation in civic and professional societies importance of large firms and the performance of social institutions more generally supports this hypothesis moreover trust is lower in countries with dominant hierarchical religions which may have deterred networks of cooperation trust hold up remarkably well on a cross section of countries this abstract was borrowed from another version of this item

the impact of economic freedom on the black white income gap abstract using state level data from 1980 2010 we examine whether economic freedom as measured by the economic freedom of north america index has had any impact in increasing or decreasing the ratio of median income for black households to the median income of white households to our knowledge there has been no research on racial income disparities and the role that economic freedom might have in alleviating or exacerbating the problem we find evidence that economic freedom is associated with an increase in the racial income gap

real effects of workers financial distress evidence from teacher spillovers abstract this paper studies the effects of financial distress on workers productivity using detailed data from the public school system in texas we show that the student passing rate in the median sized grade decreases by 1 2 percentage points following a declaration of bankruptcy by one teacher in the grade the effect of financial distress increases with the complexity of the task overall our results suggest a potential feedback effect of worker financial distress on local economic conditions and thus contribute to the understanding of the propagation and potential amplification of shocks through a local economy

institutions and the resource curse countries rich in natural resources constitute both growth losers and growth winners we claim that the main reason for these diverging experiences is differences in the quality of institutions more natural resources push aggregate income down when institutions are grabber friendly while more resources raise income when institutions are producer friendly we test this theory building on sachs and warner s influential works on the resource curse our main hypothesis that institutions are decisive for the resource curse is confirmed our results contrast the claims of sachs and warner that institutions do not play a role

voluntary export restraints as protection policy the u s beef case there are several well known implications of international trade theory which are relevant to our study with a tariff an importing country s welfare can improve only if the excess supply curve is upward sloping under the large country assumption bhagwati has shown that a quota used by an importer can be equivalent to a tariff and mintz has contrasted features of tariffs quotas and vers empirical work has focused largely on the effects of tariffs and equivalent quotas generally exporting countries lose from such trade barriers in contrast we find that exporting countries gain and importing countries lose with a ver we also contrast the gains and losses of vers in the case of frozen boneless beef to an optimal tariff and optimal export tax the theoretical implications of vers for beef exporters were first recognized by freebairn and gruen

stability vs flexibility the effect of regulatory institutions on opportunity type how entrepreneurial opportunities are formed and exploited depends upon the institutional environment in which they are embedded the varying amounts of risk and uncertainty across and within heterogeneous institutional environments have important implications for the types of opportunity developed while the international business and entrepreneurship literatures consider the effect of environmental risk and uncertainty on firms risk and uncertainty are often treated as interchangeable or synonymous and rarely are both considered to be present together to address this we develop a new theoretical model based on institutional economics describing how institutional arrangements promoting stability thus supporting an entrepreneur s ability to assess risk will lead to more imitative opportunities while institutions promoting flexibility thus supporting an entrepreneur s ability to respond to uncertainty by iterating will foster more innovative opportunities we test this framework using cross national data across 40 countries from the gem survey finding that institutional arrangements that promote stability do lead to more imitation while institutions that promote flexibility foster more innovation by treating risk and uncertainty as distinct constructs our study makes theoretical contributions to research on institutional environments and opportunity types with implications for future research on subsidiary initiatives the evolution of mnes and born global firms

contractual arrangements and enforcement in transition agriculture theory and evidence from china abstract this paper empirically investigates the relationship between contractual arrangements and their enforcement in chinese agriculture based on an analysis of a survey of 100 agribusiness firms engaged in contract farming in zhejiang province of china we find that private contract enforcement mechanisms play an important role in influencing smallholders decisions to breach or fulfill contracts contract arrangements such as floor pricing or requiring smallholders to make specific investments facilitate self enforcement and significantly improve the smallholder s contract fulfillment rate this is particularly important in chinese agriculture since the business environment is characterized by an absence of effective public enforcement institutions

coordination commitment and enforcement the case of the merchant guild we interpret historical evidence in light of a repeated game model to conclude that merchant guilds emerged during the late medieval period to allow rulers of trade centers to commit to the security of alien merchants the merchant guild developed the theoretically required attributes secured merchants property rights and evolved in response to crises to extend the range of its effectiveness contributing to the expansion of trade during the late medieval period we elaborate on the relations between our theory and the monopoly theory of merchant guilds and contrast it with repeated game theories that provide no role for formal organization

how robust is the relationship between economic freedom and economic growth using various indicators for economic freedom it is shown that increases in economic freedom are robustly related to economic growth this conclusion holds even if the impact of outlying observations is taken into account the level of economic freedom is not related to growth

tax rights in transition economies a tragedy of the commons abstract this paper develops the concept of tax rights to analyze the impact of fiscal institutions on economic development in transition economies a government s tax rights are poorly defined when it and other governments and agencies can unilaterally levy taxes on the same tax base existing evidence suggests that chinese local governments have gained more clearly defined tax rights than their russian counterparts using the big push model of industrialization murphy k shleifer a vishny r 1989 industrialization and the big push journal of political economy 95 1003 1026 within a common property resource framework we show that this difference in tax rights helps explain why china has been significantly more successful than russia

forced sales and house prices the market for housing differs in several important ways from the textbook model of a liquid asset market with exogenous fundamentals this implies that the price at which a house is sold can be influenced not only by general supply and demand conditions but also by idiosyncratic factors including the urgency of the sale and the effects of the ownership transfer on the physical quality of the house first houses are productive only when people are living in them owning an empty house is equivalent to throwing away the dividend on a financial asset second houses are fragile assets that need maintenance and are vulnerable to van dalism unoccupied houses are particularly vulnerable and expensive to protect third short term rental contracts involve high transactions costs resulting from the moving costs of renters and the need of homeowners to protect their property against damage fourth houses are expensive indivisible and heterogeneous assets each house has certain unique characteristics which are likely to appeal to certain poten tial buyers and not to others so selling a house requires matching it with an appro priate buyer because of the high costs of intermediation in housing this task is normally undertaken by a real estate broker rather than a dealer fifth most home owners must finance their purchases using mortgages collateralized debt contracts that transfer home ownership to the mortgage lender through a foreclosure process if the homeowner defaults the expansion of mortgage credit in the early 2000s and the recent decline in house prices have led to an unprecedented increase in foreclosures since 2006 foreclosures transfer houses to financial institutions which must maintain and pro tect them until they can be sold foreclosed houses are likely to sell at low prices both because they may have been physically damaged during the foreclosure pro cess and because financial institutions have an incentive to sell them quickly in a liquid market an asset can be sold rapidly with a minimal impact on its price but

freedom and growth do constitutions matter this paper uses an augmented solow model with cross section data to measure the effect on per capita income of a the entrenchment of various rights in a country s constitution and b the level of economic freedom in a country broadly construed the results suggest that entrenchment per se of any single right seldom has a significant general economic effect while the effect of economic freedom is significant and substantial the paper then considers whether such evidence could support the proposition that constitutions do not matter while it concludes otherwise it does caution against incurring excessive negotiation costs to obtain entrenchment of a comprehensive wish list of rights

political power economic freedom and congress effects on bank performance abstract this paper studies the linkages between bank performance connections to powerful politicians and the degree of economic freedom in a bank s home state we find that bank performance is positively related to state economic freedom we also reconfirm the finding of gropper et al 2013 that bank performance is improved by political connections however the positive effect of political connections appears to be significantly reduced when there is a higher degree of economic freedom in the state indicating that political connections may matter less to banks when there is more economic freedom economic freedom in a state can have a beneficial effect on state economic growth and hence may outweigh any political connection benefits however the declines in state economic freedom in recent years could make political connections potentially more valuable to banks

endogenous economic freedom and the wealth of nations evidence from a panel of countries 1996 2011 indexes of economic freedom measure the degree to which the policies and institutions of countries are supportive of economic freedom the authors find a considerable scope for improvement in index of economic freedom created by heritage foundation since not all components of index have equal effect on economic well being contrary to heritage methodology the authors tackle the aggregation bias and highlight that each index component contributes differently to the level of economic freedom and subsequently to the level of income per capita the level of fiscal freedom and monetary freedom exert the strongest influence on the overall index of economic freedom authors present the new endogenous cross country ranking of 135 countries from instrumental variable two stage least squares iv 2sls empirical specification which removes the inconsistencies arising from the arbitrary assumption of the equivalent effect of each component on the overall index and hence the level of real income per capita

economic freedom and migration flows between u s states a modified gravity model is estimated using a cross section of data drawn from the u s census bureau survey of 2000 in order to analyze the impact of economic freedom on gross migration flows among the lower 48 states spatial econometric methods are utilized in order to capture spatial effects not detected by distance in addition the economic freedom of north america index is decomposed to determine the individual impact of various policies results show that states with higher relative economic freedom experience greater migration inflow through its direct impact on income and employment growth in aggregate the findings indicate that individuals migrate toward states with relatively higher government consumption expenditures relatively lower tax burdens and states with more freedom with respect to labor decisions in the form of less restrictive minimum wages less concentration of unions and less dependence on public employment

does better nutrition raise farm productivity household level data from sierra leone are used to test whether higher caloric intake enhances family farm labor productivity this is the notion behind the efficiency wages hypothesis which has found only weak empirical support a farm production function is estimated accounting for the simultaneity in input and calorie choice instruments include prices household demographic characteristics and farm assets the latter two sets of instruments are later dropped to explore the robustness of the results to different specifications of exogeneity the exercise shows a highly significant effect of caloric intake on labor productivity providing solid support for the nutrition productivity hypothesis the marginal effect on productivity falls drastically as calorie consumption rises but remains positive at moderately high levels of intake one result is a fall in the effective price of food a decline that is larger for households that consumer fewer calories

impact of the 2014 suspension agreement on sugar between the united states and mexico in december 2014 the u s and mexico agreed to a suspension agreement that set a 22 25 cwt import price floor on u s sugar imports from mexico a partial equilibrium trade model was developed to estimate the economic impact the agreement would have had if it had been in effect from 2008 to 2014 in years when the price floor would have been binding on average u s producers would have gained 138 million and mexican producers would have lost 218 million however total mexican welfare would have actually increased by 11 5 million furthermore the average price floor that would have maximized total mexican welfare over that period is 22 76 cwt also under certain supply and demand elasticity conditions the average price floor that would have maximized joint u s and mexican producer welfare over that period is 21 91 cwt the latter two estimates are both close to the actual price floor agreed to in the 2014 suspension agreement

influence of trade policies on price integration in the world beef market abstract the article develops three hypotheses about how policy interventions in major trading nations influence price integration in the world beef market simple correlation coefficients tests for significant differences between coefficients and granger causality tests are used to test the hypotheses first segmentation between prices in foot and mouth disease fmd free and fmd endemic countries is found but it is much less than previously assumed second european community policies that closed the e c import market have isolated prices in the e c from other markets these policies also led to greater integration among prices in fmd free and fmd endemic market segments by forcing exporters from both segments to compete directly in new import markets third the u s a is found to be the price leader in world beef markets due not only to market size but also to u s policies that allow transmission of price information from the u s market to the world market but not vice versa

player and referee roles held jointly the effect of state ownership on china s regulatory enforcement against fraud this article examines the impact of the prevailing state ownership in the chinese stock market on corporate governance and the financial regulatory system respectively as the internal and external monitoring mechanisms to deter corporate fraud and protect investors in line with the literature that state ownership exaggerates the agency problem we find that the retained state ownership in privatised firms increases the incidence of regulatory enforcements against fraud for the state owned enterprises soes however larger state ownership is associated with a lower incidence of enforcement actions this is attributed to the mutual political affiliation of the fraudulent soes and the regulatory commission a new regulation solutions for listed firm checks promulgated in march 2001 has mitigated this effect by empowering the regulatory commission to increase the severity of regulatory conditions our evidence confirms the improvement in the regulatory environment and investor protection in the chinese stock market brought about by the regulatory reform and development

a theory of privatisation public enterprises around the world have proved to be highly inefficient primarily because they pursue strategies such as excess employment that satisfy the political objectives of politicians who control them privatization of public enterprises can raise the cost to politicians of influencing them since subsidies to private firms necessary to force them to remain inefficient are politically harder to sustain than wasted profits of the state firms in this way privatization leads to efficient restructuring of firms moreover privatization is more effective when combined with a tight monetary policy and when the new owners of firms are profit maximizing investors rather than their employees or even managers copyright 1996 by royal economic society

firms corporate social responsibility behavior an integration of institutional and profit maximization approaches understanding firms behavior across countries a key concern in the international business literature requires the joint consideration of both institutional influences and firms profit maximization goals in the corporate social responsibility csr area however researchers have utilized theories that take into account only one or the other institutional theory which explains csr as legitimacy seeking activities in line with national level institutions or economic based approaches that consider csr effects only in terms of firm profitability while an institutional argument implies convergence in csr behavior among firms in similar institutional contexts profit maximization logic treats csr as a firm specific behavior we integrate these perspectives by demonstrating the moderating effects of firms economic motivations for seeking legitimacy on the relationship between institutional environment and csr responsiveness we argue that variations in firms economic visibility and economic vulnerability can bring about differences in their need for societal goodwill and in turn their legitimacy seeking findings on a database of apparel firms employee related csr across 23 countries support this overall argument the integration of such fundamentally different theoretical perspectives allows us to contribute new theoretical insights to international business on the influence of national institutions on firms behavior

economic reform and dynamic political constraints in this paper we examine the impact of political constraints on economic reform plans with special reference to the transition from centrally planned to market economies we analyse the problem of an agenda setting reform minded government facing a bureaucracy or industrial sector for which allocative efficiency requires redundancies and an increase in work intensity the government also tries to minimize the rents conceded to its heterogeneous workforce we examine two types of political constraints unanimity rule and majority rule both in a one period and a two period horizon the main results are the following first of all we show how adverse selection and time consistency may generate the widely observed feature of gradualism as an ingredient of an optimal reform second under a majority rule it is shown to be possible for the government to obtain a majority vote for a reform scheme that intertemporally hurts majority interests indeed the government can improve rent extraction through the strategic use of the threat of future proposals the group which expects to be in the minority tomorrow may accept concessions while its votes can be used to extract rents from another group these results suggest that in a dynamic context democratic constraints should not be overestimated as an obstacle against efficiency enhancing economic reforms the results of this paper may throw some light on the political economy of current reforms in eastern europe governments and political decision makers in general always face political constraints when elaborating reform proposals they know that the need to overcome potential opposition from various groups of the population constrains proposals for change political constraints vary depending on the specific institutional structure of society and are clearly different under a military dictatorship than under a parliamentary democracy the role of political constraints seems particularly important in eastern europe today where new democratic governments face the huge task of achieving the transition to a market economy while the introduction of democracy may have removed some important obstacles to economic change namely the veto power of a powerful nomenclatura under communist one party rule fears are expressed that it could potentially jeopardize economic reforms which may during the transition period hurt a majority of the population what can economic theory tell us about optimal economic reform under political constraints this paper starts addressing this ambitious question by looking at structural reform focusing on a restructuring of economic sectors which requires massive redundancies and a significant rise in labour productivity our model illustrates the case of planning

determinants of non life insurance expenditure in developed and developing countries an empirical investigation the determinants of non life insurance expenditure in a panel data set covering 36 developed countries and 31 developing countries for the period 2000 2011 are analysed results of our instrumental variable analysis indicate that economic freedom income bank development urbanization culture and law systems are the key drivers of the non life insurance expenditure across countries however their impacts differ significantly between the groups of developed and developing countries suggesting that the heterogeneity among countries in terms of the level of development plays an important role the global financial crisis is also found to influence the direction of those effects especially in developed countries the article yields useful policy and economic implications for governments and multinational non life insurance companies with regard to the development of the non life insurance sector an important engine for economic growth and prosperity

consequences of constitutions the paper presents empirical findings regarding the economic policy consequences of constitutional arrangements in three different dimensions first the data are consistent with several theoretical predictions about the consequences of electoral rules and forms of government for fiscal policy and rent extraction even when non random constitution selection is taken into account second empirical tests of the predictions from a new comprehensive model of parliamentary democracy show that proportional elections raise government spending through their indirect consequences for party structures and types of government rather than through their direct effects on policymaking incentives third new empirical results suggest that constitutional arrangements may have important consequences for structural policies that promote long run economic performance hinting at a missing link in the causal chain from history to current economic performance all these empirical findings appear statistically robust and the estimated effects are large enough to be of genuine economic interest jel d72 e60 h00 o11

economic backwardness in political perspective government policies and institutions shape economic incentives and via this channel have a first order impact on economic development why then do many societies adopt policies that discourage investment and maintain institutions that cause economic backwardness perhaps politically powerful groups elites are not in favor of economic growth but why it would appear that economic growth would provide more resources for these groups to take over or tax increasing their economic returns so why don t powerful groups always support economic development in this paper we develop a theory of inefficient government policies and institutions all else equal politically powerful groups would welcome superior institutions and technologies but in practice all else is not equal because superior institutions and technologies may reduce their political power and make it more likely that they will be replaced at the center of our theory is therefore the idea that changes in institutions or the introduction of new technologies often create turbulence eroding the political advantages and future economic rents of incumbent elites alternatively new technologies may enrich competing groups increasing their threat to incumbents these considerations make politically powerful groups fear losing power and oppose economic and political change even when such change will benefit society as a whole to understand the mechanism at work and its potential applications consider a concrete example industrialization in the nineteenth century bairoch 1982 estimates that between 1830 and 1913 world manufacturing output increased by a factor of 5 see table 1 panel a nevertheless this process was highly uneven across regions and countries bairoch also calculates that over the same period manufacturing output in developed countries europe and north america increasedbyafactorofover10 whereasitdeclinedinthe third world among developed countries there were

politics and productivity i introduction economic studies of long run performance are focusing increasingly on political legal financial and social factors development is no longer regarded as a gradual inevitable transformation from self sufficiency to specialization and participation in the division of labor instead progress follows the creation and evolution of institutions that support social and commercial relationships the new institutional economics explains that growth requires that the potential hazards of trade shirking opportunism risk and so on be controlled by institutions like secure property rights reliable procedures for resolving disputes and means of enforcing contracts in the absence of close social ties these institutions reduce information costs encourage capital formation and capital mobility allow risks to be priced and shared and otherwise facilitate cooperation north and thomas 1973 north 1990 drobak and nye 1997 levine 1997 in particular political authorities must make credible commitments not to expropriate private resources once investments have been made 1 despite widespread agreement that institutions matter there is no consensus on how they should be incorporated into the analysis even the best empirical studies of productivity and growth treat institutional characteristics in an eclectic way barro s 1991 influential article for example uses the numbers of assassinations and revolutions per capita as proxies for political instability finding these measures negatively correlated with growth and investment scully 1988 regresses growth rates on dummy variables derived from gastil s 1982 ordinal rankings of political and economic liberty king and levine 1993a 1993b 1993c derive various measures of the quality of financial intermediaries and show that these measures are good predictors of growth this article presents a different approach to analyzing the relationship between institutions and aggregate economic performance following the modem productivity literature see for example fried et al 1993 we model economic performance with a stochastic production frontier frontier analysis is a form of benchmarking it analyzes a group of branches firms nations or other units by identifying best practices and evaluating each member s performance relative to the best practice frontier the results produce not only qualitative rankings of the group members but also numerical efficiency scores that can be used to assess the effects of various policies and characteristics for this reason frontier analysis is well suited for studying the effects of legal and political institutions on the economic performance of nations to capture institutional factors we use two comprehensive indexes of legal regulatory and political conditions working with a broad sample of countries from 1975 to 1990 we incorporate a widely used measure of economic freedom along with a new measure of policy stability to represent a country s institutional environment the new institutional economics suggests that countries with high levels of economic freedom protection of private property rights respect for the rule of law an unhampered price system and so on and policy stability commitment not to change the rules of the game ex post will be closer to the best practice frontier in our model economic freedom and policy stability affect economic performance by enhancing technical efficiency in other words these institutions do not alter the state of technology but they allow producers to squeeze more out of current technology for instance countries with more stable policies attract more foreign investment than countries with less stable policies ceteris paribus this leads to increased competition among producers which in turn brings efficiency gains similarly countries with lower taxes milder regulatory burdens lower inflation fewer restrictions on foreign ownership and so on are likely to produce output more efficiently than countries with policies that restrict production inhibit capital formation and reduce competition

national competitive advantage and the roles of economic and political freedom evidence from hong kong the equivocal interrelationships between economic performance and the institu tions of respectively economic and political freedom are examined using data from firms op erating in hong kong an economy where both an erstwhile paramount international business reputation for competitiveness and the institutional basis on which it was predicated have come into question in recent years it is hypothesized that i both economic and political freedom declines will be associated with a proxy for future economic performance competitiveness decline but that ii the correlation of economic freedom declines with competitiveness de cline will be mediated by political freedom declines hierarchical regression analyses tend to support these hypotheses although results vary by firm origin

regional institutions ownership transformation and migration of industrial leadership in china the case of the chinese synthetic dye industry 1978 2008 scholars have emphasized the gradual ownership transformation of enterprises as a key driver of the chinese economy s unprecedented growth however little work has been done on the issue of whether this transformation process takes place evenly across the various regions in china this article describes the important role of regional institutions in shaping the ownership based competitiveness of local enterprises and the migration of industries across regions in the case of the chinese synthetic dye industry the passing of leadership from state owned enterprises soes to collectively owned enterprises coes and then to private enterprises pes was accompanied by a concurrent leadership migration from one region to another the article contends that this simultaneous occurrence was not accidental four institutional constraints the degree of central supervision the local labor arrangements the local social welfare provision and the degree of ambiguity in property rights retarded the rise of new ownership forms in the previously dominant regions this gave other regions the opening to take over leadership positions by providing a more favorable institutional context for new ownership forms these findings are likely to apply to all of the chinese manufacturing industries that existed prior to 1978 and that subsequently did not experience significant technological changes and were not highly protected by the government

corporate lobbying political connections and the bailout of banks abstract political involvement has long been shown to be a profitable investment for firms that seek favorable regulatory conditions or support in times of economic distress but how important are different types of political involvement for the timing and magnitude of political support to answer this question we take a comprehensive look at the lobbying expenditures and political connections of banks that were recipients of government support under the 2008 troubled asset relief program tarp we find that politically engaged firms were not only more likely to receive tarp funds but they also received a greater amount of tarp support and received the support earlier than firms that were not politically involved

the spontaneous evolution of commercial law jeremy bentham contended that property and state made law are born and must die together before the state s law there was no property take away the law all property ceases 4 309 most economists have taken this argument to heart clearly some system of defining and then protecting and enforcing property rights property law and rules of exchange contract law is needed for a market system to develop but does the state have to develop and enforce property and contract law one purpose of the following presentation is to demonstrate that the commercial sector is completely capable of establishing and enforcing its own laws a second purpose is to illustrate that modern commercial law is in fact largely made by the merchant community despite governmental efforts to take over provision of such law commerce is an evolving process of interaction and reciprocity which is simultaneously facilitated by and leads to an evolving system of commercial law carl menger 17 proposed that the origin formulation and the ultimate process of all social institutions including law is essentially the same as the spontaneous order adam smith 20 described for markets markets guided by smith s invisible hand coordinate interactions and so does customary law 6 7 these systems develop because perhaps through a process of trial and error it is found that the actions they are intended to coordinate are performed more effectively under one institutional arrangement or process than under another the more effective institutions and practices replace the less effective in the case of customary commercial law traditions and practice evolve to produce the observed spontaneous order as hayek explained however while smith s and menger s insights are firmly established in economics the study of jurisprudence has been almost completely unaffected by their arguments 9 101 one reason of course is that the invisible hand explanation for the emergence of market order is highly plausible because there is an obvious mechanism the mechanics of individual but interrelated market prices which provides the necessary coordination we call the price system the mechanism of evolution for a legal order is much less obvious thus the legal positivist view which holds that law is the product of deliberate design has a strong following among economists another major purpose of this discussion of commercial law therefore is to demonstrate that the rules of property and contract necessary for a market economy which most economists and legal scholars feel must be imposed have evolved without the

economic freedom and growth decomposing the effects most studies of the relation between economic freedom andgrowth of gdp have found a positive relation one problem inthis area is the choice of economic freedom measure a singlemeasure does not reflect the complex economic environment anda highly aggregated index makes it difficult to draw policyconclusions in this paper we investigate what specific typesof economic freedom measures that are important for growth the robustness of the results is carefully analysed since thepotential problem with multicollinearity is one of thenegative effects of decomposing an index the results showthat economic freedom does matter for growth this does notmean that increasing economic freedom defined in generalterms is good for economic growth since some of thecategories in the index are insignificant and some of thesignificant variables have negative effects

institutions freedom and technical efficiency the impact of institutions on economic performance is currently the subject of much research in this study we use panel data to estimate a stochastic production frontier and the sources of inefficiency for a broad set of countries a maximum likelihood procedure is used to estimate the parameters for the stochastic production frontier and the determinants of inefficiency simultaneously our results show that institutions that promote greater economic freedom in turn promote efficiency

presidential address institutions and culture how and why does distant political and economic history shape the functioning of current institutions this paper argues that individual values and convictions about the scope of application of norms of good conduct provide the missing link evidence from a variety of sources points to two main findings first individual values consistent with generalized as opposed to limited morality are widespread in societies that were ruled by non despotic political institutions in the distant past second well functioning institutions are often observed in countries or regions where individual values are consistent with generalized morality and under different identifying assumptions this suggests a causal effect from values to institutional outcomes the paper ends with a discussion of the implications for future research jel a10 d7 e00

how integrated are world beef markets the case of australian and u s beef markets abstract the objective of the paper is to examine market integration between australian and u s beef prices at the farmgate level if these two prices are found to be integrated then it can be alleged that australian beef prices can be used as a world price in empirical analyses and or as a reference price to measure the level of support accorded the u s beef sector co integration analysis and a time varying parameter estimation procedure based on the kalman filter model are applied the paper distinguishes between steer and cow beef segments and it uses monthly data over the 1972 1 to 1993 2 period the results indicate that australian and u s beef prices are co integrated albeit not fully and that the degree of convergence between the various price pairs has not substantially increased over time the results also suggest that australian prices can not unequivocally be adopted as a world price in empirical analyses