business cycle analysis with a markov switching model this article explores the hamilton markov switching model through an analysis of the business cycles of eight developed market economies forecasting and specification tests suggest only marginal improvements over linear autoregressive models yet filtered and smoothed conditional probabilities indicate turning points in business cycles that closely correlate with turning points from traditional methods tests regarding the asymmetry of business cycles reject the null of symmetry for most countries

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

predicting recessions with interest rate spreads a multicountry regime switching analysis abstract this study uses markov switching models to evaluate the informational content of the term structure as a predictor of recessions in eight oecd countries the empirical results suggest that for all countries the term spread is sensibly modelled as a two state regime switching process moreover a simple univariate model turns out to be a filter that transforms accurately term spread changes into turning point predictions the term structure is confirmed to be a reliable recession indicator however the results of probit estimations show that on average the markov switching filter does not improve the forecasting ability of the spread

natural resources curse or blessing are natural resources a curse or a blessing the empirical evidence suggests that either outcome is possible this paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources these include that a resource bonanza induces appreciation of the real exchange rate deindustrialization and bad growth prospects and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law corruption presidential democracies and underdeveloped financial systems another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad induces corruption especially in nondemocratic countries and keeps in place bad policies finally resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets the survey also offers some welfare based fiscal rules for harnessing resource windfalls in developed and developing economies

rain and the democratic window of opportunity according to the economic approach to political transitions negative transitory economic shocks can give rise to a window of opportunity for democratic change we examine this hypothesis using yearly rainfall variation over the 1980 2004 period in 41 sub saharan african countries we find that a 25 drop in rainfall increases the probability of a transition to democracy during the following two years by around 3 percentage points a 5 fall in income due to low rainfall raises the probability of democratization by around 7 percentage points we also find that rainfall does not affect transitions from democracy to autocracy

markov switching causality and the money output relationship the causal link between monetary variables and output is one of the most studied issues in macroeconomics one puzzle from this literature is that the results of causality tests appear to be sensitive with respect to the sample period that one considers as a way of overcoming this difficulty we propose a method for analysing granger causality which is based on a vector autoregressive model with time varying parameters we model parameter time variation so as to reflect changes in granger causality and assume that these changes are stochastic and governed by an unobservable markov chain when applied to us data our methodology allows us to reconcile previous puzzling differences in the outcome of conventional tests for money output causality

the elusive curse of oil abstract our goal is to show that contrary to the claims made in several recent papers the effect of a large endowment of oil and other mineral resources on long term economic growth of countries has been on balance positive moreover the claims of a negative effect of oil and mineral wealth on the countries institutions are called into question

estimating the permanent income elasticity of government expenditures evidence on wagner s law based on oil price shocks this paper provides instrumental variable estimates of the permanent income elasticity of government expenditures it uses annual variation in the international oil price weighted with countries average oil net export gdp shares as a plausibly exogenous source of within country variation in countries permanent income the short run estimates of the permanent income elasticity are robust across alternative specifications and are below one the estimated elasticity coefficients range between 0 3 and 0 6 and have standard errors of 0 1 and 0 4 respectively point estimates of long run elasticities are somewhat larger but still smaller than unity the investment component of government spending is found to be more elastic than the consumption component whereas elasticity differences between rich and poor countries are insignificant

the index of leading indicators measurement without theory twenty five years later if the success of a specific approach to economic analysis can be measured by its longevity and continued popularity under a variety of environments then the use in business cycle forecasting of leading economic indicators as originally developed by wesley mitchell and arthur burns 1938 at the national bureau of economic research must stand near the top one might say peak of such successes this is rather remarkable in light of the criticism it has faced continually since koopmans 1947 in a review of burns and mitchell 1946 first decried the lack of any theory behind the nber business cycle methodology since its introduction the composite index of leading indicators now published monthly by the u s bureau of economic analysis bea has been widely monitored as a guide to future economic performance the use of leading indicators survived the period of advancement and demise of the structural approach to econometric forecasting and if anything has enjoyed a resurgence in recent years as more sophisticated time series techniques of measurement without theory have been developed in fact the relationship between the leading indicator approach and general time series methods of the type described by box and jenkins 1970 was formalized by sargent and sims 1977 who pointed out that forecasting with a composite index may be seen as the imposition of a specific set of restrictions on the vector autoregression containing the individual series included in the index from this standpoint it is possible to evaluate formally the index of leading indicators as a tool for prediction and such is the purpose of this paper there are two main questions to be answered

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

a theory of political transitions we develop a theory of political transitions inspired by the experiences of western europe and latin america nondemocratic societies are controlled by a rich elite the initially disenfranchised poor can contest power by threatening revolution especially when the opportunity cost is low for example during recessions the threat of revolution may force the elite to democratize democracy may not consolidate because it is redistributive and so gives the elite an incentive to mount a coup highly unequal societies are less likely to consolidate democracy and may end up oscillating between regimes and suffer substantial fiscal volatility

what do the leading indicators lead the authors find that the composite leading index cli is useful for forecasting gross national product gnp both in sample and in an out of sample real time exercise they propose a nonlinear specification in which cyclical shifts of the cli precede those in gnp however the authors find that better forecasts are provided by a simple linear relation between current gnp growth and the growth rate of the cli during the previous quarter along with an error correction term corresponding to the previous quarter s logarithmic difference between the level of the cli and the level of gnp copyright 1996 by university of chicago press

a two country model of stochastic output with changes in regime abstract this paper evaluates the transmission of business cycles between countries and presents evidence that world wide shocks dominate any transmission of business cycles i examine industrial production and look at the relationships of the united states with canada germany and the united kingdom in the process i present a specialized markov switching time series model and evaluate it relative to other more familiar stochastic models i show that for the data sets considered markov switching models have much better goodness of fit but larger forecast variance relative to arma or var models

market structure uncertainty and intrafirm diffusion the case of optical scanners in grocery stores this study uses monthly data on the adoption of optical scanners by sixty three grocery chains in thirty two large u s cities to identify the determinants of the rate of intrafirm diffusion the methodology involves a two stage approach that relates market environment characteristics to the estimated rate of intrafirm diffusion the results indicate that firms with larger market shares adopt a new innovation scanners more quickly initially but diffuse the innovation through their stores more slowly than firms with smaller market shares in addition firms that lag competitors in the initial adoption of scanners tend to diffuse the innovation more quickly copyright 1992 by mit press

innovation diversity and diffusion a self organisation model a number of features of innovation diffusion are identified appropriability diversity expectations selection learning and spillover externalities a dynamic model is formul ated to embed the diffusion question into a more general framework of disequilibrium competition the model incorporates distinct vintage structures reflecting a change in technological trajectory learning by using a nd expectations driven investment rules of thumb simulation studies reveal robust quasi logistic curves but a complicated pattern of net market share gains and losses uncertainty regarding the rationality of early or late adoption it is argued ensures that the requisite behavioral variety is present to generate these diffusion patterns copyright 1988 by royal economic society

predicting u s business cycle regimes this article examines the use of logistic classification methods for the identification and prediction of postwar u s business cycle expansion and contraction regimes as defined by the national bureau of economic research nber reference turning point dates we present a coherent theoretical framework for this task using measures of discriminatory information the analysis encompasses model selection parameter estimation and classification decision rules we examine the performance of logistic procedures in reproducing the nber regime classifications and in predicting one and three months ahead using leading indicator variables our models are shown to provide substantially more accurate business cycle regime predictions than markov switching specifications

herd behavior the penguin effect and the suppression of informational diffusion an analysis of informational externalities and payoff interdependency this article analyzes a technology adoption process in which the effect of informational spillover interacts with network externalities the interplay of informational externalities and payoff interdependency induces risk averse and clustering behavior in the technology adoption process the analysis differs from the herd behavior literature in focusing on how the herd behavior of subsequent users influences the initial adoption decision moreover herd behavior in this article stems from each agent s desire to inhibit the revelation of new information that can be used in a way detrimental to her rather than from each agent s effort to free ride on information contained in the decisions made by predecessors

fuel riots definition evidence and policy implications for a new type of energy related conflict abstract fuel riots are a distinct type of energy related conflict we provide the first fuel riots database and explore their social economic and environmental drivers the analysis demonstrates links between fuel riots and high international crude oil prices in countries characterised by weak state capacity deficient governance fuel scarcity and poor economic performance we suggest a potential causal pathway for fuel riots when international fuel prices spike net fuel importing countries bear higher costs if these countries are politically unstable and their government inefficient the likelihood of fuel riots is high wealthier countries can absorb price increases and maintain subsidies as opposed to poorer societies where fuel riots are more likely our findings demonstrate the role of state capacity and socio economic conditions in enabling conflict and will inform policy by identifying fertile ground for fuel riots i e societies likely to be affected by increases in fuel prices due to scarcity and climate action such as carbon taxes we propose that policies which better control international prices and action designed to reduce political instability in vulnerable countries are key to preventing fuel riots fuel subsidy reform must anticipate popular opposition and mitigate the impact upon vulnerable populations in order to reduce the likelihood of instability and minimise hardship

the determinants of technology adoption the case of the banking firm using data on the adoption of automatic teller machines by firms in the banking industry this study examines the relationship between the decision to adopt new technology and its determinants since banking firms differ considerably in terms of the competitive environments in which they operate focusing on this one innovation in this industry allows a stronger test of the relationship between market structure and the adoption of new technology than has been previously conducted using a failure time estimation procedure we find that larger banks and banks operating in more concentrated local banking markets register a higher conditional probability of adopting this new technology all else equal we also find that other results are consistent with the underlying model and that the bank s regulatory environment shapes its adoption decision in plausible ways

the first law of petropolitics finalversion received19 april2011 we examine empirically the relationship between crude oil prices and the ebb and ow of democratic insti tutions in order to test the hypothesis that high oil prices undermine democracy and sustain autocracy we use a variety of time series and panel data methods over a wide range of country subsamples and timeperiods nding strictly no evidence in favour of this so called first law of petropolitics friedman2006

adoption of agricultural innovations in developing countries a survey this paper reviews various studies which have provided a description and possible explanation to patterns of innovation adoption in the agricultural sector the survey points out that the tendency of many studies to consider innovation adoption in dichotomous terms adoption nonadoption may not be appropriate in many cases where the actual decisions are defined over a more continuous range more attention needs to be given to the socio cultural and institutional environment in area studies so that their interrelation with economic factors affecting adoption can be inferred the presence of several interrelated innovations is another aspect that needs to be considered more carefully in future research since a number of simultaneous decisions may be involved furthermore the possibility of regular sequential patterns in adopting components of a new technological package should be specifically addressed in future studies finally the impact of differential adoption rates on land holding distribution merits attention in future research

bayes estimates of markov trends in possibly cointegrated series stylized facts show that average growth rates of u s per capita consumption and income differ in recession and expansion periods because a linear combination of such series does not have to be a constant mean process standard cointegration analysis between the variables to examine the permanent income hypothesis may not be valid to model the changing growth rates in both series we introduce a multivariate markov trend model that accounts for different growth rates in consumption and income during expansions and recessions and across variables within both regimes the deviations from the multivariate markov trend are modeled by a vector autoregression var model bayes estimates of this model are obtained using markov chain monte carlo methods the empirical results suggest the existence of a cointegration relation between u s per capita disposable income and consumption after correction for a multivariate markov trend this result is also obtained when per capita investment is added to the var

measuring poverty in a growing world or measuring growth in a poor world the extent to which growth reduces global poverty has been disputed for 30 years although there are better data than ever before controversies are not resolved a major problem is that consumption measured from household surveys which is used to measure poverty grows less rapidly than consumption measured in national accounts in the world as a whole and in large countries particularly india china and the united states in consequence measured poverty has fallen less rapidly than appears warranted by measured growth in poor countries one plausible cause is that richer households are less likely to participate in surveys but growth in the national accounts is also upward biased and consumption in the national accounts contains large and rapidly growing items that are not consumed by the poor and not included in surveys so it is possible for consumption of the poor to grow less rapidly than national consumption without any increase in measured inequality current statistical procedures in poor

gdp growth and the composite leading index a nonlinear causality analysis for eleven countries abstract this paper examines the ability of the composite leading index of economic activity to predict future movements in gdp growth using a nonlinear granger causality test our empirical results are shown to contrast sharply with those from the conventional linear causality test

natural resource abundance and human capital accumulation summary this paper studies the link between resource abundance and human capital accumulation it reviews the commonly used indicators of resource abundance and human capital accumulation the case for a form of resource curse in human capital accumulation is not robust to reasonable changes in these indicators in fact subsoil wealth and resource rents per capita are shown to be significantly correlated with improved indicators of human capital accumulation if mineral wealth is what authors have in mind when they refer to natural resource abundance then they should choose indicators that measure this concept as accurately as possible

this is what the leading indicators lead we propose an optimal filter to transform the conference board composite leading index cli into recession probabilities in the us economy we also analyse the cli s accuracy at anticipating us output growth we compare the predictive performance of linear var extensions of smooth transition regression and switching regimes probit non parametric models and conclude that a combination of the switching regimes and non parametric forecasts is the best strategy at predicting both the nber business cycle schedule and gdp growth this confirms the usefulness of cli even in a real time analysis copyright 2002 john wiley sons ltd

model averaging in markov switching models predicting national recessions with regional data this paper introduces new weighting schemes for model averaging when one is interested in combining discrete forecasts from competing markov switching models in the empirical application we forecast u s business cycle turning points with state level employment data we find that forecasts obtained with our best combination scheme provide timely updates of u s recessions in that they outperform a notoriously difficult benchmark to beat the anxious index from the survey of professional forecasters for short term forecasts

exploring the dynamics between terrorism and anti terror spending theory and uk evidence abstract recent years have seen governments restricting civic freedoms and legislating significant increases in spending to combat terrorist activities in this paper we investigate the relationship between anti terror spending and terrorism in line with previous findings in the empirical literature on terrorist activity our game theoretic model of the interaction between a benevolent government and a terrorist organization is suggestive of a non linear relation between terrorism and counter terrorism spending using uk data our empirical markov switching implementation provides evidence in favor of this approach the empirical results also show that the probability of transiting into a state with high terror is smaller if defense spending is high

do natural resources fuel authoritarianism a reappraisal of the resource curse a large body of scholarship finds a negative relationship between natural resources and democracy extant cross country regressions however assume random effects and are run on panel datasets with relatively short time dimensions because natural resource reliance is not an exogenous variable this is not an effective strategy for uncovering causal relationships numerous sources of bias may be driving the results the most serious of which is omitted variable bias induced by unobserved country specific and time invariant heterogeneity to address these problems we develop unique historical datasets employ time series centric techniques and operationalize explicitly specified counterfactuals we test to see if there is a long run relationship between resource reliance and regime type within countries over time both on a country by country basis and across several different panels we find that increases in resource reliance are not associated with authoritarianism in fact in many specifications we generate results that suggest a resource blessing

the impact of declining oil rents on tax revenues does the shadow economy matter abstract we study the association between oil rents and tax revenues highlighting the importance of the shadow economy se as a moderating factor in this relationship declining oil rents may not lead to higher tax efforts in a state if the se is sizable using a sample of 124 countries from 1991 to 2015 our panel data regression analysis illustrates the moderating role of the se in the final effect of negative oil rent shocks on tax revenues a decline in oil rents following negative oil price shocks ceases to have any significant positive impact on tax revenues in countries with an se representing more than 35 of gross domestic product the results are robust after controlling for country and year fixed effects other determinants of tax revenues and using a dynamic model

sources of international business fluctuations country specific shocks or worldwide shocks abstract this paper identifies sources of business fluctuations in a two country open economy model with the structural var method focusing on the relative importance of worldwide shocks and country specific shocks unlike previous studies which define country specific shocks as labor supply shocks this study explicitly identifies three kinds of permanent shocks worldwide shocks domestic country specific shocks and foreign country specific shocks with identifying restrictions derived from a theoretical model the main finding is that u s country specific shocks are the most important in explaining u s and foreign output fluctuations except in the short run

asymmetric oil price shocks tax revenues and the resource curse abstract the paper proposes an asymmetric relationship between oil rents and institutions such that only positive oil windfalls adversely affect institutional quality and negative oil windfalls have no impact we test this theory empirically by studying the dynamics of institutional quality in russian regions we find that increases in tax revenues caused by exogenous positive oil price shocks do not change regional income but increase corruption and reduce regional democracy and governance quality declines in tax revenues from negative oil price shocks do not affect institutional quality but decrease regional income

the dynamics of technological change in uk retail banking services an evolutionary perspective abstract the purpose of this paper is to elaborate an evolutionary perspective on the process of structural change that has characterized the banking industry in the united kingdom uk for this purpose the evolution of retail financial services is contrasted against the backdrop of the implementation and development of information and communication technologies icts the paper delves into the sources and the effects of technological change in banking over a long term perspective 1840s 1990s to point out the significance of the opportunities and the constraints that have shaped the growth and development of this industry this is interpreted as a three stage evolutionary process driven by intertemporal coordination across several complementary domains including activities of production business organization consumption and the underlying regulatory setting it is concluded that the evolution of uk retail banking displays the characteristics of a distributed process of innovation in which developers of technologies service suppliers and customers contribute to the process of structural change of the industry

business cycles for g7 and european countries this article proposes classical business cycle turning points for the g7 and a number of european countries based on industrial production this enables the authors to examine the international nature of cyclical movements free from arbitrary assumptions about the trend in particular they show that cyclical assymetry is common with slopes during declines being generally larger in magnitude than during expansions a binary measure of association for expansion and contradiction regimes indicates a core group of european countries related to each other and apparently linked to the united states and japan through germany copyright 1997 by university of chicago press

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

constructing a new leading indicator for unemployment from a survey among german employment agencies the article investigates the predictive power of a new survey implemented by the federal employment agency fea for forecasting german unemployment in the short run every month the ceos of the fea s regional agencies are asked about their expectations of future labour market developments we generate an aggregate unemployment leading indicator that exploits serial correlation in response behaviour through identifying and adjusting temporarily unreliable predictions we use out of sample tests suitable in nested model environments to compare forecasting performance of models including the new indicator to that of purely autoregressive benchmarks for all investigated forecast horizons 1 2 3 and 6 months test results show that models enhanced by the new leading indicator significantly outperform their benchmark counterparts to compare our indicator to potential competitors we employ the model confidence set results reveal that models including the new indicator perform very well at the 10 level

measuring and predicting heterogeneous recessions this paper examines the usefulness of a more refined business cycle classification for monthly industrial production ip beyond the usual distinction between expansions and contractions univariate markov switching models show that a three regime model is more appropriate than a model with only two regimes interestingly the third regime captures severe recessions contrasting the conventional view that the additional third regime represents a recovery phase this is confirmed by means of markov switching vector autoregressive models that allow for phase shifts between the cyclical regimes of ip and the conference board s leading economic index lei the timing of the severe recession regime mostly corresponds with periods of substantial financial market distress and severe credit squeezes providing empirical evidence for the financial accelerator theory

interdependences in the intrafirm diffusion of technological innovations confronting the rational and social accounts of diffusion this article investigates the intrafirm diffusion of technological innovations and the interdependences that exist among rival firms in this process previous research has offered two potential explanations for these interdependences social accounts in which they result from institutional pressures and rational accounts in which firms are interdependent as a result of how adoption by rivals affects expectations about the profitability of the technology the article offers two contributions first we propose a competitive interaction mechanism that is consistent with the fundamentals of rational accounts of diffusion second the empirical analysis shows the dominance of the proposed rational mechanism over social accounts of innovation diffusion in the generation of interdependences in the process of intrafirm diffusion

democratisation and growth this article challenges cross sectional findings that democracy has a negligible effect on growth we employ a new dataset of political transitions during the third wave of democratisation and examine the within effect of democratisation in countries that abandoned autocracy and consolidated representative institutions the panel estimates imply that on average democratisations are associated with a 1 increase in annual per capita growth the dynamic analysis reveals that while during the transition growth is slow in the medium and long run it stabilises at a higher level this evidence favours development theories of democratic rule and friedrich hayek 1960 s idea that the merits of democracy appear in the long run leading politicians and commentators have argued that democratisation will bring prosperity and growth into pariah and economically poorly performing countries 1 others however remain sceptical pointing to the mixed and inconclusive empirical evidence the old debate dating back to plato and aristotle on which political regime is socially and economically optimal arises again this debate is not purely academic and philosophical as it has important policy implications in the last thirty years the world has experienced an unprecedented move towards democratic institutions influential policy makers and scholars urge western authorities to foster democratic movements in totalitarian countries see the economist article philosophers and kings june 19th 2003 yet the question remains will democratisation bring economic growth to assess the average growth effect of a successful democratic transition we analyse the evolution of annual real per capita gdp growth before and after incidents of permanent democratic reform in the 1960 2003 period in our analysis we exploit a newly constructed dataset of permanent democratisations during the so called third wave of democratisation and the 1990s when many former socialist countries moved towards representative rule the panel results reveal new evidence that contrast with the previous mainly cross sectional work first conditioning on time invariant country characteristics and global shocks a permanent democratisation is associated with approximately a one half to one per cent increment in annual real per capita gdp growth second a dynamic j shaped effect emerges with considerable though not this article is a major revision of an earlier paper titled aristotle was right stable democracy fosters

the informational content of surnames the evolution of intergenerational mobility and assortative mating we propose a new methodology for measuring intergenerational mobility in economic well being our method is based on the joint distribution of surnames and economic outcomes it circumvents the need for intergenerational panel data a long standing stumbling block for understanding mobility it does so by using cross sectional data alongside a calibrated structural model to recover the traditional intergenerational elasticity measures our main idea is simple if inheritance is important for economic outcomes then rare surnames should predict economic outcomes in the cross section this is because rare surnames are indicative of familial linkages if the number of rare surnames is small this approach will not work however rare surnames are abundant in the highly skewed nature of surname distributions from most western societies we develop a model that articulates this idea and shows that the more important is inheritance the more informative will be surnames this result is robust to a variety of different assumptions about fertility and mating we apply our method using the 2001 census from catalonia a large region of spain we use educational attainment as a proxy for overall economic well being a calibration exercise results in an estimate of the intergenerational correlation of educational attainment of 0 60 we also find evidence suggesting that mobility has decreased among the different generations of the 20th century a complementary analysis based on sibling correlations confirms our results and provides a robustness check on our method our model and our data allow us to examine one possible explanation for the observed decrease in mobility we find that the degree of assortative mating has increased over time overall we argue that our method has promise because it can tap the vast mines of census data that are available in a heretofore unexploited manner

effects of international food price shocks on political institutions in low income countries evidence from an international food net export price index we examine the effects of variations in the international food prices on political institutions in low income countries our empirical analysis exploits that the economic impact of changes in the international food prices differs across countries depending on whether countries are net food importers or exporters we construct an international food net export price index that captures this heterogeneity our panel fixed effects analysis yields that in low income countries within country variations in the international food net export price index are significantly negatively related to democratic institutions we further explore the mechanisms driving this relationship along the economic and the conflict dimensions

technological regimes and innovation in services the case of the italian banking industry abstract in this paper we propose a conceptual model to analyse innovations originating from the diffusion of information technologies in the banking sector we argue that technical change in this industry exhibits a revolutionary character a distinction is made between the mass automation regime focusing mainly on the mechanization of back office procedures in the 1960s and 1970s and the smart automation regime originating from the introduction of distributed data processing and network technologies and centered around the supply of electronic banking services a theoretical model is developed which emphasizes the crucial role played by demand pull variables in stimulating innovative behaviour under the smart automation regime in contrast limited importance is attributed to cumulative and learning by doing effects relating to back office automation at least for banks endowed with sufficient absorptive capacity the theoretical hypotheses are tested through an econometric analysis of the determinants of the innovative behaviour in electronic payment systems of a sample of italian commercial banks

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

rival precedence and the dynamics of technology adoption an empirical analysis this study employs information on the adoption of automatic teller machines by banking firms to examine the nature of firm reactions to rival precedence in the adoption process using a failure time estimation procedure it is found that the ado ption of this innovation by rivals increases the conditional probabil ity that a decision to adopt will be made the effect of spillovers f rom technology adoption and the interaction of market concentration a nd rival precedence are also investigated finally the study shows w ith an example how the estimation procedure may be used to test the u nderpinnings of diffusion processes copyright 1987 by the review of economic studies limited

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

a model of carbon price interactions with macroeconomic and energy dynamics abstract this paper develops a model of carbon pricing by considering two fundamental drivers of european union allowances economic activity and energy prices on the one hand economic activity is proxied by aggregated industrial production in the eu 27 as it provides the best performance in a preliminary forecasting exercise vs other indicators on the other hand brent natural gas and coal prices are selected as being the main carbon price drivers as highlighted by previous literature the interactions between the macroeconomic and energy spheres are captured in a markov switching var model with two states that is able to reproduce the boom bust business cycle hamilton 1989 first industrial production is found to impact positively negatively the carbon market during periods of economic expansion recession thereby confirming the existence of a link between the macroeconomy and the price of carbon second the brent price is confirmed to be the leader in price formation among energy markets bachmeier and griffin 2006 as it impacts other variables through the structure of the markov switching model taken together these results uncover new interactions between the recently created eu emissions market and the pre existing macroeconomic energy environment

business cycle duration dependence a parametric approach this paper reexamines duration dependence in u s business cycles using parametric hazard models positive duration dependence would indicate that expansions or contractions are more likely to end as they become older this paper provides statistically significant evidence of positive duration dependence for expansions before world war ii and contractions after world war ii the evidence is stronger than in earlier research utilizing nonparametric techniques because certain nonparametric techniques have low statistical power against the type of duration dependence found in this paper evidence is also presented suggesting that expansions became longer on average after world war ii while contractions became shorter copyright 1991 by mit press

are statistical reporting agencies getting it right data rationality and business cycle asymmetry this article provides new evidence on the rationality of early releases of industrial production ip and producer price index ppi data rather than following the usual practice of examining only first available and fully revised data we examine the entire revision history for each variable thus we are able to assess for example whether earlier releases of data are in any sense less rational than later releases and when data become rational our findings suggest that seasonally unadjusted ip and ppi become rational after approximately 3 4 months whereas seasonally adjusted versions of these series remain irrational for at least 6 12 months after initial release for all variables examined we find evidence that the remaining revision is predictable from its own past or from publicly available information in other economic and financial variables in addition we find a clear increase in the volatility of revisions during recessions suggesting that early data releases are less reliable in toughe

the resource curse exorcised evidence from a panel of countries abstract this paper evaluates the impact of major natural resource discoveries since 1950 on gdp per capita using panel fixed effects estimation and resource discoveries in countries that were not previously resource rich as a plausibly exogenous source of variation i find a positive effect on gdp per capita levels following resource exploitation that persists in the long term results vary significantly between oecd and non oecd treatment countries with effects concentrated within the non oecd group i further test gdp effects with synthetic control analysis on each individual treated country yielding results consistent with the average effects found with the fixed effects model

from education to democracy the conventional wisdom views high levels of education as a prerequisite for democracy this paper shows that existing evidence for this view is based on crosssectional correlations which disappear once we look at within country variation in other words there is no evidence that countries that increase their education are more likely to become democratic

a brief review of some problems in using national accounts data in level of output comparisons and growth studies abstract after an initial burst of enthusiasm for establishing their national accounts 30 or 40 years ago some countries have made continuous improvements while others have done little to maintain even their initial system presently most developing countries make their basic estimate of gdp from the production side and most do not have adequate surveys to permit a consistency check of their production and expenditure side estimates the base surveys for expenditures and production are typically over ten years old and the lags in basic surveys for constructing constant price estimates are frequently longer a number of countries estimate their growth from a weighted average of volume indexes and make no attempt at direct deflation many of those that do deflate their current expenditure estimates do so at a very aggregate level users of national accounts should be aware of the varying quality of the estimates across countries and hopefully continual questioning of the numbers will help to encourage improvement

an econometric characterization of business cycle dynamics with factor structure and regime switching a dynamic factor model with regime switching is proposed as an empirical characterization of business cycles the approach integrates the idea of comovements among macroeconomic variables and asymmetries of business cycle expansions and contractions the first is captured with an unobservable dynamic factor and the second by allowing the factor to switch regimes the model is estimated by maximizing its likelihood function and the empirical results indicate that the combination of these two features leads to a successful representation of the data relative to extant literature this holds for within and out of sample and for both revised and real time data copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

income and population growth do populations grow as countries become richer in this study we estimate the effects on population growth of shocks to national income that are plausibly exogenous and unlikely to be driven by technological change for a panel of over 139 countries spanning the period 1960 2007 we interact changes in international oil prices with countries average net export shares of oil in gdp controlling for country and time fixed effects we find that this measure of oil price induced income growth is positively associated with population growth the iv estimates indicate that a 1 percentage point increase in gdp per capita growth over a 10 year period increases countries population growth by around 0 1 percentage points furthermore we find that this population effect results from both a positive effect on fertility and a negative effect on infant and child mortality

the diffusion of new technology and the market for an innovation this article shows that the diffusion of a capital embodied process innovation results from a pattern of decreasing incremental benefits and adoption costs for later adoptions strategic behavior is inessential to this finding we develop a method for comparing diffusion rates for different market structures in the capital equipment market we consider cases with market power on the seller s side of the market and on the buyers side of the market a case with no market power and the welfare optimal case we find that a joint venture adopts an innovation more slowly than other market regimes to protect existing capital investments and that the adoption rate is slower than is socially optimal a monopoly supplier on the other hand adopts at a rate faster than is socially optimal this result is usually also the case when there is no market power finally we show that the monopoly supplier accelerates adoptions faster than in the case where there is no market power but retards later adoptions market power thus makes a difference in diffusion rates and on which side of the market that power lies makes a considerable difference

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

models of technology diffusion abstract the literature on new technology diffusion is vast and it spills over many conventional disciplinary boundaries this paper surveys the literature by focusing on alternative explanations of the dominant stylized fact that the usage of new technologies over time typically follows an s curve the most commonly found model which is used to account for this model is the so called epidemic model which builds on the premise that what limits the speed of usage is the lack of information available about the new technology how to use it and what it does the leading alternate model is often called the probit model which follows from the premise that different firms with different goals and abilities are likely to want to adopt the new technology at different times in this model diffusion occurs as firms of different types gradually adopt it there are actually many ways to generate an s curve and the third class of models which we examine are models of density dependence popularized by population ecologists in these models the twin forces of legitimation and competition help to establish new technologies and then ultimately limit their take up finally we look at models in which the initial choice between different variants of the new technology affect the subsequent diffusion speed of the chosen technology such models often rely on information cascades which drive herd like adoption behaviour when a particular variant is finally selected

political foundations of the resource curse in this paper we argue that the political incentives that resource endowments generate are the key to understanding whether or not they are a curse we show 1 politicians tend to over extract natural resources relative to the efficient extraction path because they discount the future too much and 2 resource booms improve the efficiency of the extraction path however 3 resource booms by raising the value of being in power and by providing politicians with more resources which they can use to influence the outcome of elections increase resource misallocation in the rest of the economy 4 the overall impact of resource booms on the economy depends critically on institutions since these determine the extent to which political incentives map into policy outcomes countries with institutions that promote accountability and state competence will tend to benefit from resource booms since these institutions ameliorate the perverse political incentives that such booms create countries without such institutions however may suffer from a resource curse

intrafirm diffusion of new technologies an empirical application research on the diffusion of new technologies has centred on the study of the interfirm rate of diffusion paying much less attention to intrafirm aspects this paper attempts to overcome this gap in the literature by analysing the factors that influence the speed with which a new technology the atm is fully adopted the data over which the hypotheses are tested belongs to the spanish savings banks market the results show that the rate of intrafirm diffusion is explained by innovation firm and market characteristics in testing our hypotheses we make use of both traditional methods and survival analysis techniques

optimal prediction of cyclical downturns abstract in the conventional way of visualizing economic time series the prediction problem does not dichotomize into predicting turning points and predicting conditional means yet the prediction of turning points has always been considered a separate issue in business cycle literature the paper first discusses these issues and then describes a model where the prediction of turning points does separate from the prediction of conditional means using the model an optimal way of predicting turning points is derived and applied to u s data the paper uses time series methodology and the theory of optimal stopping times

modelling business cycle movements in the uk economy this paper models the phases of the uk business cycle using gdp data with a time varying transition probabilities tvtp markov switching regime model and exogenous leading indicator variables single indicators in linear models are compared with the tvtp framework with logistic and exponential functions used in the latter the markov switching models capture the major recessions of the sample but the use of leading indicators through the tvtp framework can improve this regime recognition finally a forecast comparison shows that the tvtp models perform relatively well in predicting during the 1990s particularly when nominal interest rates are used to generate the regime switching probabilities

a nonparametric investigation of duration dependence in the american business cycle does the termination probability of a business expansion or contraction increase with age this question may be formally addressed by analyzing the nature of duration dependence in aggregate economic activity our null hypothesis is that there is no duration dependence which we test via intentionally nonparametric procedures we also argue that common notion of business cycle periodicity can be usefully interpreted in terms of whole cycle duration dependence we find some evidence for duration dependence in whole cycles and in prewar expansions but little evidence elsewhere

new index of coincident indicators a multivariate markov switching factor model approach abstract this paper extends the univariate markov switching unobserved component model to the multivariate markov switching factor model of coincident economic indicators an approximate ml method is developed to estimate the model the extracted markov switching factor may be interpreted as the coincident index and is comparable to the stock watson index which differs only by the markov switching component using four constituent series of the doc coincident index for the period january 1960 to june 1992 the proposed model generates recessionary and expansionary periods which are remarkably consistent with the nber chronology of the business cycles from the noisy monthly data this paper also finds that duration dependence does matter

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

the transmission mechanism in a changing world this paper aims at improving the understanding of the transmission of shocks across countries and how this transmission may have changed over time by employing a model that allows for parameter changes across regimes we show that transmission of shocks from the us to european countries may depend on the values of transition variables such as financial prices exchange rates international capital flows trade links and monetary policy instruments we also show that transmission mechanisms estimated with the proposed models have good performance in describing the 2001 downturn in some european countries as an effect of a us shock more generally the models have a good forecasting performance over short horizons

the long run effects of oil wealth on development evidence from petroleum geology we estimate the long run effects of oil wealth on development by exploiting spatial variation in sedimentary basins areas where petroleum can potentially form instrumental variables estimates indicate that oil production impedes democracy and fiscal capacity development increases corruption and raises gdp per capita without significantly harming the non resource sectors of the economy we find no evidence that oil production increases internal armed conflict coup attempts or political purges in several specifications failure to account for endogeneity leads to substantial underestimation of the adverse effects of oil suggesting that countries with higher quality political institutions and greater fiscal capacity disproportionately select into oil production