two stage budgeting and exact aggregation this paper presents an econometric model of demand for energy based on two stage budgeting the model provides own price and cross price elasticities of demand for energy and nonenergy commodities for the united states these elasticities are estimated separately for households classified by family size age of head region race and urban versus rural residence price elasticities are presented conditional on total energy expenditure and total expenditure on all commodities the model combines individual cross section data with aggregate time series data and is based on exact aggregation over individual demand functions

the origins of ethnolinguistic diversity this study explores the determinants of ethnolinguistic diversity within as well as across countries shedding light on its geographic origins the empirical analysis conducted across countries virtual countries and pairs of contiguous regions establishes that geographic variability captured by variation in regional land quality and elevation is a fundamental determinant of contemporary linguistic diversity the findings are consistent with the proposed hypothesis that differences in land endowments gave rise to location specific human capital leading to the formation of localized ethnicities jel j15 j24 z13

statehood democracy and preindustrial development this paper proposes a growth model linking state history to economic development it considers three state systems non statehood authoritarian statehood and democratic statehood these differ in the way a public good is provided which in turn determines growth rates under certain assumptions democratic states grow faster than authoritarian ones which in turn grow faster than non states all societies start with non statehood and transition into authoritarian statehood at some point but the timing is random when later given the opportunity only those societies that transitioned relatively recently to authoritarian statehood transition to democracy when they do they begin to grow faster eventually overtaking older and still authoritarian states this generates an inversely u shaped cross sectional relationship between development and state history consistent with modern cross country data

estimating the economic impact of political party competition in the 1992 british election quences of government partisanship major problem facing researchers who study the consequences of government partisanship is that it is difficult to ascertain the potential economic impact of governments which because of election defeats never existed consider for instance a labour government in britain in 1992 a conservative government in 1997 or a dole administration in the united states none of these governments actually took office and for obvious reasons this impedes analysis of what effects they would have had on their respective national economies here i present a methodology designed to estimate the economic impact that an election losing party would have caused had it achieved office i focus in particular on the 1992 british polity and demonstrate that campaign period prices of london based publicly traded securities can be used to estimate what was expected to have happened in the british economy conditional on a 1992 labour victory the estimates show that a labour government in 1992 was expected by british investors to have ushered in significantly higher interest rates and depressed stock markets compared to those witnessed under the victorious conservative party these results imply that the labour conservative disparity in 1992 was substantial and that relative to the conservative party labour was truly left wing prices of market traded securities ostensibly nonpolitical variables can convey a great deal about political parties electoral competition and the consequences of government partisanship suppose for example that prices in london stock markets were unusually volatile during the 1992 british election campaign and that they jumped dramatically following polling day and the conservative victory according to the analytical ap

sensitivity analyses of anomalies in developed stock markets abstract the literature on anomalies in developed stock markets produces no consensus on specification this study uses extreme bound analysis eba to evaluate the robustness of 15 stock return anomalies given data covering 16 developed markets from may 1984 to march 1999 two factors are sturdy according to the extreme decision rule in the panel design d p and momentum under a less stringent eba criterion long run lagged returns country risk and the january effect are also robust time series eba for individual markets produces one robust result according to relaxed decision rules across a majority of cases long run government bond yields

agriculture diffusion and development ripple effects of the neolithic revolution are the effects of the neolithic revolution still impacting on incomes across the world today i find strong support for this proposition using new country specific estimates of the timing of the agricultural transition and provide evidence that the differences are due to how technological diffusion is accounted for a correction for world migrations since 1500 significantly improves the fit transition year also helps to explain income in 1500 itself and an alternative measure of pre modern development state history has similar ability to predict income in 1500 and 1997

post 1500 population flows and the long run determinants of economic growth and inequality we construct a matrix showing the share of the year 2000 population in every country that is descended from people in different source countries in the year 1500 using this matrix we analyze how post 1500 migration has influenced the level of gdp per capita and within country income inequality in the world today indicators of early development such as early state history and the timing of transition to agriculture have much better predictive power for current gdp when one looks at the ancestors of the people who currently live in a country than when one considers the history on that country s territory without adjusting for migration measures of the ethnic or linguistic heterogeneity of a country s current population do not predict income inequality as well as measures of the ethnic or linguistic heterogeneity of the current population s ancestors an even better predictor of current inequality in a country is the variance of early development history of the country s inhabitants with ethnic groups originating in regions having longer histories of agriculture and organized states tending to be at the upper end of a country s income distribution however high within country variance of early development also predicts higher income per capita holding constant the average level of early development

the political economy of resource driven growth abstract in recent decades resource poor countries have out performed resource abundant ones a stylised facts model of competitive industrialisation describes the long run development of a resource poor country with a political state that is developmental only minor change is required to adapt the model to trace the development trajectory of a resource abundant country with a similar political state however most resource abundant countries engender a political state that is factional or predatory and distorts the economy in the pursuit of rents a staple trap model describes the development trajectory under these conditions the model predicts a growth collapse from which recovery is protracted especially for small economies that lack a niche trade link with a large economy

the transmission of democracy from the village to the nation state we provide evidence that a history of democracy at the local level is associated with contemporary democracy at the national level auxiliary estimates show that a tradition of local democracy is also associated with attitudes that favor democracy with better quality institutions and higher level of economic development

measuring country event risk compensation on brics international portfolio management the brics nations brazil russia india and china have a strong relative economic growth pattern in the world among economic powers the allure of globalization has made the analysis and assessment of national critical component of international portfolio management in recent years we construct the model from comparing the relative sd of stock return whereby higher sds are generally associated with more risk this relative sd forms a principle component in the change of the weights on the international portfolio choice the result shows that event jump risk not only makes the investor s allocation more conservative overall but also it can be compensated on brics event risk

democracy political risks and stock market performance this study examines the impacts of democracy and political risk on stock market using annualized panel data for 49 emerging markets for 2000 2012 we find evidence that democracy and political risk do have impact on stock market returns and the relationship between democracy and political risk is parabolic i e there is a threshold level of democracy after which political risk begins to decline also our results suggest that decreases in political risk lead to higher returns

europe s tired poor huddled masses self selection and economic outcomes in the age of mass migration during the age of mass migration 1850 1913 one of the largest migration episodes in history the united states maintained a nearly open border allowing the study of migrant decisions unhindered by entry restrictions we estimate the return to migration while accounting for migrant selection by comparing norway to us migrants with their brothers who stayed in norway in the late nineteenth century we also compare fathers of migrants and nonmigrants by wealth and occupation we find that the return to migration was relatively low 70 percent and that migrants from urban areas were negatively selected from the sending population keep ancient lands your storied pomp cries she with silent lips give me your tired your poor your huddled masses yearning to breathe free the wretched refuse of your teeming shore send these the homeless tempest tost to me i lift my lamp beside the golden door emma lazarus 1883

resource curse or not a question of appropriability this thesis presents three self contained essays focusing on empirical questions in growth and development economics each article addresses specific questions on why countries perform differently in particular i analyse the effect of democracy on economic development the relationship between natural resources and growth and the efficiency of foreign development assistance in the first essay democracy consolidation and growth i analyse the effect of democracy on economic growth in this context i argue that an important aspect to consider is how consolidated political systems are put simply i find that it is not only a question of how democratic countries are but also how long they have been democratic in other words economic performance tends to improve with the duration of uninterrupted democracy the performance of autocracies on the other hand tends to deteriorate over time however for newly established political systems there seems to be a cost of being democratic this implies that democracies only bear their fruit after some time the analysis has important policy implications to overcome initial straits international assistance focused on democratic consolidation may be important and a very good investment in fostering long run development the second essay resource curse or not a question of appropriability together with anne boschini and jesper roine is concerned with the relation between natural resources and economic development for most laymen as well as for most economists it would seem reasonable that countries richly endowed in natural resources also benefit from this wealth however a large literature has found a systematic negative effect of natural resource abundance on economic growth we suggest that this so called resource curse is not determined by resource endowments alone but rather by the interaction between the type of resources a country possesses and the quality of institutions in the country this combination of factors determines what we call the appropriability of a resource the concept of appropriability captures the likelihood of natural resources leading to rentseeking corruption or conflicts which in turn will harm economic development our results suggest that if institutions are good enough the curse may be turned into a blessing this may explain why some countries such as norway and botswana tend to benefit from their resources while others such as angola and sierra leone do not the third and final essay of this thesis foreign sectoral aid fungibility growth and poverty reduction is a contribution to the aid efficiency literature which is concerned with the question of whether aid helps or hinders economic development foreign development assistance is often targeted on specific public expenditure sectors if this aid is not used in the sector for which it was granted e g health education it is said to be fungible and donors may end up financing something completely different from what they intended e g military expenditures the major concern about sectoral fungibility is that the alternative use of aid may be less productive or less socially useful however measuring fungibility is not sufficient to determine whether foreign sectoral aid fungibility is actually harmful what is important is how the funds treated as fungible are used the essay starts by obtaining estimates of fungibility for 57 countries the results suggest that sectoral aid is indeed largely treated as fungible by recipient countries next to assess the economic and health effects of fungibility these estimates are incorporated into an empirical model of aid and growth as well as into a model of aid and infant mortality altogether i find no evidence of more fungible sectoral aid leading to worse performance

democracy and economic growth a historical perspective recent studies appear to show that democracy has no robust association with economic growth yet all such work assumes that the causal effect of democracy can be measured by a country s regime status in a particular year t which is correlated with its growth performance in a subsequent period t 1 the authors argue that democracy must be understood as a stock rather than a level measure that is a country s growth performance is affected by the number of years it has been democratic in addition to the degree of democracy experienced during that period in this fashion democracy is reconceptualized as a historical rather than a contemporary variable with the assumption that long run historical patterns may help scholars to understand present trends the authors speculate that these secular historical infiuences operate through four causal pathways each of which may be understood as a type of capital physical capital human capital social capital and political capital this argument is tested in a cross country analysis and is shown to be robust in a wide variety of specifications and formats

long run cultural divergence evidence from the neolithic revolution this paper investigates the long run influence of the neolithic revolution on contemporary cultural norms as reflected in the dimension of collectivism individualism we present a theory of agricultural origins of cultural divergence where we claim that the advent of farming in a core region was characterized by collectivist values and eventually triggered the out migration of individualistic farmers towards more and more peripheral areas this migration pattern caused the initial cultural divergence which remained persistent over generations using detailed data on the date of adoption of neolithic agriculture among western regions and countries the empirical findings show that the regions which adopted agriculture early also value obedience more and feel less in control of their lives the findings add to the literature by suggesting the possibility of extremely long lasting norms and beliefs influencing today s socioeconomic outcomes

the rise of europe atlantic trade institutional change and economic growth the rise of western europe after 1500 is due largely to growth in countries with access to the atlantic ocean and with substantial trade with the new world africa and asia via the atlantic this trade and the associatedcolonialism affected europe not only directly but also indirectly by inducing institutional change where initial political institutions those established before 1500 placed significant checks on the monarchy the growth of atlantic trade strengthened merchant groups by constraining the power of the monarchy and helped merchants obtain changes in institutions to protect property rights these changes were central to subsequent economic growth

the slave trade and the origins of mistrust in africa in a recent study nunn 2008 examines the long term impacts of africa s slave trade he finds that the slave trade which occurred over a period of more than 400 years had a significant negative effect on long term economic development although the article arguably identifies a negative causal relationship between the slave trade and income today the analysis is unable to establish the exact causal mechanisms underlying this reduced form relationship in this article we examine one of the channels through which the slave trade may affect economic development today combining contemporary individual level survey data with historical data on slave shipments by ethnic group we ask whether the slave trade caused a culture of mistrust to develop within africa initially slaves were captured primarily through state organized raids and warfare but as the trade progressed the environment of ubiquitous insecurity caused individuals to turn on others including friends and family members and to kidnap trick and sell each other into slavery sigismund wilhelm koelle 1854 p e h hair 1965 charles piot 1996 we hypothesize that in this environment a culture of mistrust may have evolved which may persist to this day we show that current differences in trust levels within africa can be traced back to the transatlantic and indian ocean slave trades combining contemporary individual level survey data with historical data on slave shipments by ethnic group we find that individuals whose ancestors were heavily raided during the slave trade are less trusting today evidence from a variety of identification strategies suggests that the relationship is causal examining causal mechanisms we show that most of the impact of the slave trade is through factors that are internal to the individual such as cultural norms beliefs and values jel j15 n57 z13

occupational choice and the spirit of capitalism the british industrial revolution triggered a socioeconomic transformation whereby the landowning aristocracy was replaced by industrial capitalists rising from the middle classes as the economically dominant group we propose a theory of preference formation under financial market imperfections that can account for this pattern parents shape their children s preferences in response to economic incentives middle class families in occupations requiring effort skill and experience develop patience and a work ethic whereas upper class families relying on rental income cultivate a refined taste for leisure these class specific attitudes which are rooted in the nature of preindustrial professions become key determinants of success once industrialization transforms the economic landscape i introduction the industrial revolution was more than capital accumulation and growth it also set off a social and political transformation that redefined hierarchies in society and reshaped the distribution of income and wealth before the onset of industrialization in eighteenth century britain wealth and political power were associated with the possession of land over the course of the nineteenth century a new class of entrepreneurs and businessmen emerged as the economic elite for the most part the members of this class rose from humble beginnings and had their social origins in the urban middle classes the landed elite was left behind and eventually lost its political and economic predominance many observers of the time linked this reversal in economic fortunes to differences in values attitudes and ultimately preferences across social classes there are countless examples both in scholarly and in fictional writing of portrayals of members of the landowning class as averse to work unwilling to save ill disposed tocommercialactivity andunabletoconsidermoneyassomething

which dimensions of culture matter for long run growth we present empirical evidence that among a variety of cultural dimensions the individualism collectivism dimension based on hofstede s 2001 data is the most important and robustly significant effect of culture on long run growth other dimensions that have a significant effect albeit less robust are generally strongly correlated with individualism and convey similar information we found no significant or robust effect on growth from cultural dimensions that are independent from the individualism collectivism cleavage

political risk in emerging and developed markets using analyst estimates of political risk we show that political risk represents a more important determinant of stock returns in emerging than developed markets average returns in emerging markets experiencing decreased political risk exceed those of emerging markets experiencing increased political risk by approximately 11 per quarter in contrast the difference is only 2 5 per quarter for developed markets further the difference between the impact of political risk in emerging and developed markets is statistically significant we also document a global convergence in political risk over the last 10 years political risk has decreased in emerging markets and increased in developed markets if this trend continues the differential impact of political risk in emerging vs developed markets may narrow

historical legacies a model linking africa s past to its current underdevelopment abstract recent studies have found evidence linking africa s current under development to colonial rule and the slave trade given that these events ended long ago why do they continue to matter today i develop a model exhibiting path dependence which provides one explanation for why these past events may have lasting impacts the model has multiple equilibria one equilibrium with secure property rights and a high level of production and others with insecure property rights and low levels of production i show that external extraction when severe enough causes a society initially in the high production equilibrium to move to a low production equilibrium because of the stability of low production equilibria the society remains trapped in this suboptimal equilibrium even after the period of external extraction ends the model provides one explanation why africa s past events continue to matter today

individualism and stock price crash risk employing a sample of 26 473 firms across 42 countries from 1990 to 2013 we find that firms located in countries with higher individualism have higher stock price crash risk furthermore individualism can be transmitted by foreign investors from overseas markets to influence local firms crash risk and can exacerbate the impact of firm risk taking and earnings management on crash risk moreover the positive relation between individualism and crash risk is amplified during the global financial crisis and attenuated by enhanced country level financial information transparency and the adoption of international financial reporting standards

optimal adders for environmental damage by public utilities abstract social costing refers to the consideration of environmental damages and other external costs and benefits in resource planning or dispatch decisions by electric utilities typically utility regulators must take existing regulations promulgated by other levels of government as parametric so social costing represents a second layer of regulatory review with regard to many issues the consideration of external costs at the level of utility regulation will have efficiency implications that are not obvious for example the practice is particularly contentious when it is believed that industry emissions of a pollutant are overcontrolled in that they are subject to an emission limitation more stringent than what would be considered economically efficient within a simple but fairly general normative model this paper presents some simple analytics for the consideration of social costs in utility decision making assuming the objective of the regulator is to maximize social welfare the efficient policy depends on the institutional characteristics of preexisting regulation the role of deviations from marginal cost pricing in electricity pricing and the possibility of customer bypass of the utility grid are explicitly modeled

resource intensity institutions and development summary we examine the relationship between resource abundance and several indicators of human welfare consistent with the existing literature on the relationship between resource abundance and economic growth we find that given an initial income level resource intensive countries tend to suffer lower levels of human development while we find only weak support for a direct link between resources and welfare there is an indirect link that operates through institutional quality there are also significant differences in the effects that resources have on different measures of institutional quality these results imply that the resource curse is a more encompassing phenomenon than previously considered and that key differences exist between the effects of different resource types on various aspects of governance and human welfare 2005 elsevier ltd all rights reserved

tradable allowances in a restructuring electric industry abstract the so 2 tradable allowance program has been introduced into an electric industry undergoing dramatic changes entry of nonutilities into the industry and the emergence of stranded costs are two major changes that are shown to have an impact on the market for allowances and the industry s incentives to switch to cleaner fuels the degree of impact depends on the extent to which consumers bypass traditional utilities and buy from entrants and on public utility commission policies regarding the recovery of stranded costs in turn the amount of stranded costs depends on fuel switching the results follow from simulations of a two utility model that illustrate the qualitative effects of changing policies

history institutions and economic performance the legacy of colonial land tenure systems in india we analyze the colonial land revenue institutions set up by the british in india and show that differences in historical property rights institutions lead to sustained differences in economic outcomes areas in which proprietary rights in land were historically given to landlords have significantly lower agricultural investments and productivity in the post independence period than areas in which these rights were given to the cultivators these areas also have significantly lower investments in health and education these differences are not driven by omitted variables or endogeneity problems they probably arise because differences in historical institutions lead to very different policy choices

selection on observed and unobserved variables assessing the effectiveness of catholic schools in this paper we measure the effect of catholic high school attendance on educational attainment and test scores because we do not have a good instrumental variable for catholic school attendance we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables we also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of catholic school attendance to selection bias we use our methods to estimate the effect of attending a catholic high school on a variety of outcomes our main conclusion is that catholic high schools substantially increase the probability of graduating from high school and more tentatively attending college we find little evidence of an effect on test scores

colonialism and modern income islands as natural experiments abstract using a new database of islands throughout the atlantic pacific and indian oceans we find a robust positive relationship between the number of years spent as a european colony and current gdp per capita we argue that the nature of discovery and colonization of islands provides random variation in the length and type of colonial experience we instrument for length of colonization using variation in prevailing wind patterns we argue that wind speed and direction had a significant effect on historical colonial rule but do not have a direct effect on gdp today the data also suggest that years as a colony after 1700 are more beneficial than earlier years we also find a discernable pecking order among the colonial powers with years under u s british french and dutch rule having more beneficial effects than spanish or portuguese rule our finding of a strong connection between modern income and years of colonization is conditional on being colonized at all since each of the islands in our da

economic growth and individualism the role of informal institutions abstract this paper shows that the degree of ancestral individualism is positively related to annual earnings across second generation us immigrants this provides evidence in favor of gorodnichenko and roland s 2011b hypothesis that the individualistic dimension of culture is important for long term economic growth

privatization political risk and stock market development in emerging economies this paper investigates whether privatization in emerging economies has a significant indirect effect on local stock market development through the resolution of political risk we argue that a sustained privatization program represents a major political test that gradually resolves uncertainty over political commitment to a market oriented policy as well as to regulatory and private property rights we present evidence suggesting that progress in privatization is indeed correlated with improvements in perceived political risk our analysis further shows that changes in political risk in general tend to have a strong effect on local stock market development and excess returns in emerging economies we conclude that the resolution of political risk resulting from successful privatization has been an important source for the rapid growth of stock markets in emerging economies

how deep are the roots of economic development the empirical literature on economic growth and development has moved from the study of proximate determinants to the analysis of ever deeper more fundamental factors rooted in long term history a growing body of new empirical work focuses on the measurement and estimation of the effects of historical variables on contemporary income by explicitly taking into account the ancestral composition of current populations the evidence suggests that economic development is affected by traits that have been transmitted across generations over the very long run this article surveys this new literature and provides a framework to discuss different channels through which intergenerationally transmitted characteristics may impact economic development biologically via genetic or epigenetic transmission and culturally via behavioral or symbolic transmission an important issue is whether historically transmitted traits have affected development through their direct impact on productivity or have operated indirectly as barriers to the diffusion of productivityenhancing innovations across populations jel j11 o33 o47 z13

on the origins of gender roles women and the plough the study examines the historical origins of existing cross cultural differences in beliefs and values regarding the appropriate role of women in society we test the hypothesis that traditional agricultural practices influenced the historical gender division of labor and the evolution of gender norms we find that consistent with existing hypotheses the descendants of societies that traditionally practiced plough agriculture today have less equal gender norms measured using reported gender role attitudes and female participation in the workplace politics and entrepreneurial activities our results hold looking across countries across districts within countries and across ethnicities within districts to test for the importance of cultural persistence we examine the children of immigrants living in europe and the united states we find that even among these individuals all born and raised in the same country those with a heritage of traditional plough use exhibit less equal beliefs about gender roles today jel codes d03 j16 n30 copyright 2013 oxford university press

factor endowments inequality and paths of development among new world economies whereas traditional explanations of differences in long run paths of development across the americas generally point to the significance of differences in national heritage or religion we highlight the relevance of stark contrasts in the degree of inequality in wealth human capital and political power in accounting for how fundamental economic institutions evolved over time we argue moreover that the roots of these disparities in the extent of inequality lay in differences in the initial factor endowments dating back to the era of european colonization we document through comparative studies of suffrage public land and schooling policies systematic patterns by which societies in the americas that began with more extreme inequality or heterogeneity in the population were more likely to develop institutional structures that greatly advantaged members of elite classes and disadvantaging the bulk of the population by providing them with more political influence and access to economic opportunities the clear implication is that institutions should not be presumed to be exogenous economists need to learn more about where they come from to understand their relation to economic development our findings not only contribute to our knowledge of why extreme differences in the extent of inequality across new world economies have persisted for centuries but also to the study of processes of long run economic growth past and present

political uncertainty and asset valuation evidence from business relocations in canada abstract quebec s drive for sovereignty from canada has been the source of political uncertainty for decades in canada this paper studies empirically stock market s reaction to the announcements of business relocations from the province of quebec to other provinces within canada similar announcements about toronto are used for control empirical results show that the market s reaction to the announcements of business relocations a from quebec is positive b from toronto is negative and c to toronto is positive the difference in abnormal returns between the quebec and toronto samples is positive and significant

history lessons institutions factor endowments and paths of development in the new world the explanations offered for the contrasting records of long run growth and development among the societies of north and south america most often focus on institutions the traditional explanations for the sources of these differences in institutions typically highlight the significance of national heritage or religion we in contrast argue that a hemispheric perspective across the wide range of colonies established in the new world by the europeans suggests that although there were many influences factor endowments or initial conditions had profound and enduring effects on the long run paths of institutional and economic development followed by the respective economies

second best adjustments to externality estimates in electricity planning with competition some public utility commissions use monetary place holders to reflect externality values in the financial evaluation of utility investments this approach can be justified as a second best policy tool if existing environmental regulation can be taken as given this paper addresses two possible unintended consequences of this policy the effect on the price marginal cost gap and the potential substitution towards unregulated generation we compute a second best adder to correct for externalities in electricity planning in three regional case studies using a normative model of economic efficiency such adders are found to differ from externality estimates by 10 20 percent or more

irrigation and autocracy irrigated agriculture makes societies more likely to be ruled by authoritarian regimes ancient societies have long been thought to follow this pattern we empirically show that irrigation affects political regimes even in the present to avoid endogeneity we use geographical and climatic variation to identify irrigation dependent societies we find that countries whose agriculture depended on irrigation are about six points less democratic on the 21 point polity2 scale than countries where agriculture has been rainfed we find qualitatively similar results across regions within countries we argue that the effect has historical origins irrigation allowed landed elites in arid areas to monopolize water and arable land this made elites more powerful and better able to oppose democratization consistent with this conjecture we show that irrigation dependence predicts land inequality both at the country level and in premodern societies surveyed by ethnographers

statistical properties of country risk ratings under oil price volatility evidence from selected oil exporting countries abstract this paper focuses on the application of panel models for identification and analysis of influence of oil price volatility on statistical properties of country risk ratings which stem from uncertainty of macroeconomic fluctuations firstly two statistical properties of country risk ratings volatility clustering and asymmetrical revision were identified in a theoretical framework based on cruces 2006 secondly considering the oil price volatility numerical experiments were conducted based on extended models to test and verify specific properties of country risk ratings in selected oil exporting countries empirical results suggest that properties of country risk remain comparatively steady despite oil price volatility it is also found that the oil price volatility can obviously exaggerate the country risk volatility as it happened during 2007 2009 country clustering based on the properties of country risk ratings shows that the selected countries maintain a significant clustering tendency these features are of great importance for estimating risk exposure of international trade and investments in oil export during extreme situations

the varieties of resource experience natural resource export structures and the political economy of economic growth many oil mineral and plantation crop based economies experienced a substantial deceleration in growth following the commodity boom and bust of the 1970s and early 1980s this article illustrates how countries dependent on point source natural resources those extracted from a narrow geographic or economic base such as oil and minerals and plantation crops are predisposed to heightened economic and social divisions and weakened institutional capacity this in turn impedes their ability to respond effectively to shocks which previous studies have shown to be essential for sustaining rising levels of prosperity analysis of data on classifications of export structure controlling for a wide array of other potential determinants of governance shows that point source and coffee and cocoa exporting countries do relatively poorly across an array of governance indicators these governance effects are not associated simply with being a natural resource exporter countries with natural resource exports that are diffuse relying primarily on livestock and agricultural produce from small family farms do not show the same strong effects and have had more robust growth recoveries

culture legal origins and financial development this study proposes that countries with a cultural orientation toward individualism tend to enjoy a higher level of financial development estimates based on cross country data lend strong support to this hypothesis specifically the results indicate that existing disparity in the level of financial development is significantly correlated with variation in the extent of individualism across countries where a one standard deviation increase in individualism is associated with 0 631 standard deviations improvement in the level of financial development the results are robust to a number of considerations additional results provide some support to the notion that individualistic culture and legal origin may serve as complements rather than substitutes to each other jel o40 o50 z10

inequality does cause underdevelopment insights from a new instrument consistent with the provocative hypothesis of engerman and sokoloff 1997 2000 this paper confirms with cross country data that agricultural endowments predict inequality and inequality predicts development the use of agricultural endowments specifically the abundance of land suitable for growing wheat relative to that suitable for growing sugarcane as an instrument for inequality is this paper s approach to problems of measurement and endogeneity of inequality the paper finds inequality also affects other development outcomes institutions and schooling which the literature has emphasized as mechanisms by which higher inequality lowers per capita income it tests the inequality hypothesis for development institutional quality and schooling against other recent hypotheses in the literature while finding some evidence consistent with other development fundamentals the paper finds high inequality to independently be a large and statistically significant barrier to prosperity good quality institutions and high schooling

dynamics and stagnation in the malthusian epoch this paper examines the central hypothesis of the influential malthusian theory according to which improvements in the technological environment during the pre industrial era had generated only temporary gains in income per capita eventually leading to a larger but not significantly richer population exploiting exogenous sources of cross country variations in land productivity and the level of technological advancement the analysis demonstrates that in accordance with the theory technological superiority and higher land productivity had significant positive effects on population density but insignificant effects on the standard of living during the time period 1 1500 ce

national culture and the choice of exchange rate regime abstract based on the social analysis framework of williamson we argue that national culture especially the individualism collectivism dimension located in the social embeddedness level can guide behaviors and decisions in a country including the choice of exchange rate regime we argue that individualistic societies are more likely to choose floating regimes because their economic agents are independent overconfident and have higher levels of risk tolerance individualistic societies are also associated with better financial development fewer capital controls and more democratic institutions which are all tied to a higher probability of choosing a floating exchange rate regime we use data on 78 countries over the 1976 2014 period and we control for common determinants of exchange rate regimes we find that individualistic countries have a significantly higher probability of implementing a floating regime than a fixed regime our evidence is robust to using an instrumental variables approach an alternative estimation technique an alternative regime classification alternative proxies for culture a subsample analysis and additional controls we also find that other cultural dimensions uncertainty avoidance power distance and masculinity can influence the choice of exchange rate regime but their effect is weaker than that of individualism

monetary policy and country risk this article develops an econometric model in order to study country risk behaviour for six emerging economies argentina mexico russia thailand korea and indonesia by expanding the country beta risk model of harvey and zhou 1993 erb et al 1996a b and gangemi et al 2000 towards this end we have analysed the impact of macroeconomic variables especially monetary policy upon country risk by way of a time varying parameter approach the results indicate an unstable effect of monetary policy upon country risk in periods of crisis however this effect is stable in other periods and the favero giavazzi effect is not verified for all economies with an opposite effect being observed in many cases

shining a light on the resource curse an empirical analysis of the relationship between natural resources transparency and economic growth summary one of the most common policy prescriptions for overcoming the so called resource curse particularly for extractive industries has been to call for greater transparency and accountability from governments however despite the conceptual attraction of this policy it has never been empirically proven that resource rich countries are actually less transparent than other countries and whether this lack of transparency has had a significant negative effect on economic growth using a relatively new index of transparency that has extensive coverage both across countries and time the results suggest a strong and robust negative causal association running from point resource export revenues to transparency furthermore there is also some evidence that this lack of transparency is associated with a subsequent decrease in economic growth

resource nationalism meets the market political risk and the value of petroleum reserves this paper investigates the effect of resource nationalism on the value of petroleum crude oil and natural gas reserves we develop a framework for treating resource nationalism as political risk and utilize data on reserve transactions from john s herold and political risk ratings from international country risk guide and institutional investor for the period 2000 2006 controlling for other factors that affect reserve value we demonstrate the value destruction of political risk and estimate the political risk discount for 37 countries the paper contributes to both the international business literature and practitioner approaches to political risk analysis in demonstrating use of publicly available market data from real asset transactions to measure the cost of political risk we also show that the discount depends on market conditions the higher expected future petroleum prices are the larger is the discount at any level of political risk this insight adds a new dimension to analysis of political risk which is typically measured and examined without regard to market conditions

an empirical model of the brazilian country risk an extension of the beta country risk model this paper develops a statistical model to study the brazilian country risk using a country beta model in the spirit of harvey and zhou 1993 erb et al 1996a b and gangemi et al 2000 specifically the impact of macroeconomic variables is analysed using a time varying parameter approach an extension of the original model is applied in order to verify the parameters stability over time it is found that monetary policy had a significant and stable impact on brazil s country risk and international reserves presented a significant impact only during the fixed exchange rate period

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

financial and political risks in us direct foreign investment this paper examines the risk of us direct foreign investments over the period 1982 98 in 59 host countries the first part of the analysis builds an empirical model to explain the time series and cross country patterns of return on capital the estimation then uses the return on assets roa as a measure of the return on capital and investigates its determinants there are four main findings first the roa in a majority of countries does not simply track the worldwide roa second some cross country differences are explained by financial risks third unexplained country risk is qualitatively and quantitatively related to unobserved political risk fourth unexplained country risk is also compensated with a higher roa enhancing its credibility as a measure of political risk the unexplained country risk is thus used to calculate a new index of political risk ratings for 56 host countries that may be useful to managers investors policymakers and academics