economic roots of political conflict the case of sri lanka the escalation of political conflicts in many developing countries and their impact on economic development have been topical issues in recent development literature the overwhelming emphasis on ethnic conflicts in the literature has however precluded analysts from looking at political conflicts beyond their ethnic dimension in the wider context of the development process in particular because of the preoccupation with ethnic roots as the prime source of these conflicts reverse causation running from economic policy to political conflict has been virtually ignored in the debate the purpose of this paper is to fill this gap through an in depth case study of the twin political conflict in sri lanka the tamil separatist war in the north and the sinhala youth uprising in the south with emphasis on its economic roots the findings suggest that fundamental contradictions in the national development policy in the restrictive trade regime of sri lanka were at the heart of the country s twin political conflict

institutional selection in international relations state anarchy as order by the end of the medieval era three new competing institutions attempted to capture gains from trade and reduce feudal particularism sovereign territorial states cityleagues and city states by the middle of the seventeenth century city leagues and city states had declined markedly territorial states survived as the dominant form because they were able to reduce free riding lower transaction costs and credibly commit their constituents the selection process took place along three dimensions first sovereign territorial states proved competitively superior in the economic realm second states increasingly recognized only other sovereign territorial states as legitimate actors in the international system third other actors defected to or copied the institutional makeup of sovereign territorial organization the emergence of discrete territorial units in which only sovereign authorities represented their citizens as the predominant type of organization in international affairs created a new solution to the problem of markets and hierarchies

ingredients of famine analysis availability and entitlements famines often take place in situations of moderate to good food availability without any significant decline of food supply per head the paper presents an alternative approach to famines which does not concentrate on availability but on people s ability to command food through legal means available in the society including the use of production possibilities trade opportunities entitlements vis a vis the state etc the approach is explained focusing on exchange entitlement mappings fluctuations in which can lead to big shifts in the intergroup distribution of food command the approach is then applied to the bengal famine of 1943 the ethiopian famine in wollo in 1973 and the bangladesh famine in 1974 and some general conclusions are drawn about the nature and classes of famines

implications of ethnic diversity ethnically differentiated societies are often regarded as dysfunctional with poor economic performance and a high risk of violent civil conflict the author distinguishes between dominance in which one group constitutes a majority and fractionalization in which there are many small groups in terms of overall economic performance the research shows that both theoretically and empirically fractionalization is normally unproblematic in democracies although it can be damaging in dictatorships in terms of the risk of civil war the author shows that both theoretically and empirically fractionalization actually makes societies safer while dominance increases the risk of conflict a policy implication is that fractionalized societies are viable and secession should be discouraged

the political economy of state failure rapid decolonization created many arbitrary countries in contrast to those states which had emerged through a quasi darwinian process of selection some of these new countries had structural characteristics which gravely impeded the provision of public goods their lack of a unifying sense of shared identity made cooperation difficult and their tiny economic size left them unable to reap scale economies two public goods security and accountability are particularly important for development and so where they could not be provided states failed the cause of a problem is not necessarily a guide to its solution darwinian struggle among failing states is not something to be encouraged solutions lie partly in a phase of international provision of the key public goods partly in enhanced regional pooling of sovereignty and partly in institutional innovation to make the domestic provision of public goods less demanding of the state copyright 2009 oxford university press

truth trust and market transactions what do we know john humphrey and hubert schmitz have recently made an important contribution to the literature on trust and economic transactions between firms unfortunately the evidence that high levels of societal trust contribute significantly to economic growth is far less reliable than they suggest we need more research but research informed by greater conceptual clarity about trust and the institutional arrangements that contribute to trust the framework presented here for conceptualising the various sources of trust should help guide empirical research

predicting exchange rate crises mexico revisited abstract this paper predicts ex ante probabilities of currency crises and sizes of expected devaluations month by month for mexico between 1980 and 1986 the forces contributing to speculative attacks on the mexican peso include domestic fiscal and monetary shocks external credit shocks and relative price shocks reducing domestic credit growth increasing the uncertainty surrounding this growth and reducing the size and perhaps increasing the frequency of currency realignments might have greatly reduced the amount of currency speculation against the peso between 1980 and 1986 anticipated external credit supply shocks played a relatively minor role during mexico s balance of payments crises

wars foodcost and countervailing policies a panel data approach abstract withholding food or providing it during a conflict is vital for peace missions and challenges for building sustainable peace the purpose of this paper is to introduce a new perspective in considering the impact of wars on relative wages in the food sector we define the foodcost as the share of wages paid to the food sector versus total manufacturing wages we try to estimate the effect of two types of wars namely civil and international wars on the foodcost and explore the policies that are likely to reduce that cost we use panel data for 41 countries from 1960 to 1999 to answer these questions the empirical results show that civil wars positively affect the foodcost while international wars apparently do not the policy implication of this analysis is that in the event of a civil war policy makers lack the resources to exert control on a rising foodcost a rise in the foodcost could be translated into higher food prices or lower purchasing power over food either of which may have devastating impacts on social and economic well being in the event of an international war as opposed to a civil war governments have a greater capacity to prioritize and mobilize resources therefore the impact of an international war on the foodcost is positive but weak the foreign aid remains an effective countervailing tool for reducing the increase in the foodcost

on the dynamics of ethnic fractionalization does fractionalization change over short periods of time if so are there any substantial implications for economic performance to answer such questions we construct a new panel data set with measures of ethnic linguistic and religious fractionalization for 26 former communist countries covering the period from 1989 to 2002 our fractionalization measures show that transition economies became more ethnically homogeneous over such a short period of time although the same did not happen for linguistic and religious diversity in line with the most recent literature there seems to be no effect of exogenous diversity on macroeconomic performance that is on per capita gdp growth however we find that dynamic endogenous ethnic diversity is negatively related to growth although this is still not the case for linguistic and religious diversity these findings are robust to different specifications polarization measures and instrument sets as well as to a composite index of ethnic linguistic religious fractionalization

fractionalization and the size of government i study the effect of voters with a group based social conscience voters care more about the well being of those belonging to their own group than the rest of the population within a model of political tax determination both fractionalization and group antagonism reduce the support for redistribution whereas within group inequality increases support for redistribution inequality between groups has the opposite effect these results hold even if a poor group forms a majority using a panel constructed from us micro data i find support for the hypothesis that within race inequality increases redistribution while between race inequality decreases redistribution

a theory of racial diversity segregation and productivity abstract empirical evidence illustrates that diversity generates both economic costs and benefits this paper develops a theoretical model that accounts for the positive and deleterious effects of heterogeneity first an expanded solow growth model demonstrates that the direct effects of diversity can be positive or negative and depend upon the size of fixed parameter values second diversity also influences individuals location decisions segregation variation of diversity across regions always reduces national output per worker so if diversity induces integration it indirectly augments productivity as well finally political policies aimed at reducing interaction costs across groups may actually reduce aggregate output per worker by encouraging segregation

likelihood versus timing of speculative attacks a case study of mexico abstract this paper estimates a survival model to identify the role of macroeconomic fundamentals on the likelihood and the timing of a currency crisis for mexico during 1982 1994 foreign reserve losses expansionary output expansionary monetary and fiscal policies an increase in inflation differentials and an appreciation of the real exchange rate appear to have contributed to the speculative pressures on the other hand the decline in foreign reserves and the increase in the share of short term foreign currency indexed debt seem to be the main factors which determined the timing of speculative attacks

agriculture as a funding source of isis a gis and remote sensing analysis agriculture is an important source of income for the islamic state in syria and iraq isis which currently rules over large parts of the breadbaskets of the two countries it has received limited attention compared to other sources of isis revenues such as oil looting ransom foreign donations and various forms of taxation we estimate winter crops production of wheat and barley in isis controlled areas in both syria and iraq for the years 2014 2015 and irrigated summer crops production cotton in northeast syria we show that remote sensing can give a credible estimation of agricultural production in the absence of statistics with evidence from modis aqua and terra satellites as well as landsat imagery we find that agricultural production in isis controlled syrian and iraqi zones has been sustained in 2014 and 2015 despite the detrimental impact of conflict after a drought in 2014 production was able to capitalize on improved rainfalls in 2015 first indications show that the winter grain harvest of 2016 in iraqi territories of isis was significantly above pre conflict mean and below pre conflict mean in its syrian territories we also show how water flows along the euphrates have impacted production we estimate the revenue that isis can derive from wheat and barley production and the likely magnitude of an exportable surplus agricultural production gives the group a degree of resilience although its economy is not sustainable in the longer run and could be affected by military collapse taxation of recurrent income streams such as agriculture will become more important for isis as its extractive sources of revenues show signs of dwindling beside non grain food imports agricultural production is crucial for its political legitimacy by ensuring food provision to the broader population food security considerations would require a high priority in any post isis reconstruction effort and would need to include the rehabilitation of supply chains for agricultural inputs such as quality seeds and fertilizers

environmental performance in socially fragmented countries social fragmentation is often associated with reduced co operative behaviour which undermines public goods provision such as environmental protection the few studies linking social fragmentation and environmental performance have been confined to using ethnic fractionalisation as the only measure of social heterogeneity in this paper we contribute to the literature in a twofold manner first we bring into the analysis alternative measures of social fragmentation i e religious fractionalisation ethnic religious polarisation that have received considerable attention in development economics in recent years second this is the first study to our knowledge that makes use of a large panel dataset of several environmental indicators to explore links between ethnic religious diversity and the environment we find that all indices of social fragmentation are negatively linked to measures of environmental quality although for some of them the size of the effect is larger in the case of polarisation

the african food crisis and the role of food aid abstract although not always as visible as the ethiopian famine there has been a food crisis in africa for at least 25 years characterized by a steady decline in per capita food production this has largely been caused by insufficient foreign exchange earnings aggravated by low world food prices and other global developments over which sub saharan africa has had no control there is an urgent need for an increase in regular food and non food aid contrary to common belief such aid can be used to stimulate local agricultural production this article outlines seven major measures which could be applied to food aid to ensure that this happens

cities and cultures we investigate whether cultural diversity across us cities measured as the variety of native languages spoken by city residents is associated with any effect on their productivity diversity of cultures may imply diversity of production skills of abilities and of occupations that enhances the productive performance of a city on the other hand transaction costs and frictions across groups may hurt productivity similarly diversity in available goods and services can increase utility but distaste for or hostility to different cultural groups may decrease it using census data from 1970 to 1990 we find that wages and employment density of us born workers were systematically higher ceteris paribus in cities with richer linguistic diversity these positive correlations reveal a net positive effect of diversity on productivity that survives robustness checks and instrumental variable estimation this effect is found to be stronger for highly educated workers and for white workers we also show that better assimilated non native speakers i e those who speak english well and have been in the us for more than five years are most beneficial to the productivity of us born workers

speculative currency attacks and balance of payments crises abstract this paper reviews the recent theoretical literature on collapsing exchange rate regimes using a combination of technique intuition and realworld observation we discuss the literature s main insights point out some unresolved questions and offer suggestions for future research the survey should be of interest to both specialists and non specialists in the field of international macroeconomics

economic incentives and international trade this paper studies the importance of incentives as a determinant of international trade flows we argue that barter countertrade and foreign direct investment can be seen as efficient institutions that mitigate contractual hazards which arise in technology trade marketing and imperfect capital markets paying an import with export goods rather than cash barter helps to overcome incentive problems that arise in debt repayment of highly indebted countries payment in export goods removes the anonymity of the medium of exchange and thus allows to create a collateral for the creditor furthermore tying an import with an export countertrade helps to solve the incentive problems related to the technology transfer to developing countries the export flow serves as a hostage that deters cheating on the quality of the imported technology good the predictions of the two models are consistent with the pattern of trade of actual barter and countertrade contracts

does foreign direct investment affect wage inequality an empirical investigation we use a panel of more than 100 countries for the period 1980 2002 to analyse the relationship between inward foreign direct investment fdi and wage inequality we particularly check whether this relationship is nonlinear in line with a theoretical discussion we find that the effect of fdi differs according to the level of development we depict two different patterns one for oecd developed and one for non oecd developing countries results suggest the presence of a nonlinear effect in developing countries wage inequality increases with fdi inward stock with such effect diminishing with further increases in fdi for developed countries wage inequality decreases with fdi inward stock and there is no robust evidence to show that this effect is nonlinear

common pool resources and contextual factors evolution of a fishermen s cooperative in calcutta abstract the cpr school has successfully rebutted hardin s pessimistic tragedy of the commons model however in recent years critics have focussed on the inward orientation and lack of contextual analysis characterising the writings of the cpr school oakerson a model for the analysis of common property problems working paper r86 13 workshop in political theory and policy analysis indiana university 1986 and ostrom governing the commons cambridge cambridge university press 1990 have detailed the list of variables that have to be studied to understand the mechanics of collective action however these factors are internal to the community recent critics point out that the actions of individual agents are also influenced by the alternatives embedded outside the system these variables are collectively labelled contextual factors in our paper we have analysed the case of a fishermen s cooperative in the calcutta metropolitan district to show how the historic and economic context shapes targets of resource users and affects the feasibility of alternative courses to achieve the target by determining opportunity and transaction costs of actions this indicates the importance of contextual factors in explaining the formation and evolution of the resource regime

limits to institutional reforms the essay draws on the theory of macro economic policy as it has evolved to discuss implicit policy determinism in the new economics of institutions the extension of rational choice methods to new levels of analysis such as micropolitics macropolitics political macroeconomics and microfoundations of cooperation has apparently reduced the policy choice set and diminished the role of experts all outcomes reflect constrained maximization by rational agents the essay argues however that scarcity of knowledge leads to incomplete and variable policy models and that competition among policy models creates a role for experts in social change

on the form of transfers to special interests an important question in political economy concerns the form of transfers to special interests the chicago view is that political competition leads politicians to make such transfers efficiently the virginia position is that lack of information on the part of voters leads politicians to favor inefficient sneaky methods of redistribution this paper analyzes the form of transfers in a model of political competition in which politicians have incentives to make transfers to special interests it shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians inefficient methods of redistribution may be employed

understanding variations in local conflict evidence and implications from indonesia recent studies of large scale headline conflicts have excluded consideration of local conflict in large part due to the absence of representative data at low levels of geographic specification this paper is a first attempt to correct for that by assessing the incidence impacts and patterns of local conflict in indonesia we employ a combination of qualitative fieldwork with an exploratory statistical analysis of the 2003 village potential statistics collected by the bureau of statistics potensi desa podes which maps conflict across all of indonesia s villages neighborhoods violent conflict can be observed throughout the archipelago the qualitative analysis shows that local conflicts vary in form and impacts across districts and that local factors are key the quantitative analysis which excludes high conflict areas of indonesia confirms the importance of economic factors with positive correlations between violent conflict and poverty inequality and variables measuring economic development clustering of ethnic groups and ill defined property rights were also positively associated with violence

racial diversity and macroeconomic productivity across us states and cities sparber c racial diversity and macroeconomic productivity across us states and cities regional studies racial diversity in the usa continues to rise past analyses have argued that diversity can have both positive and negative consequences the overall macroeconomic effects of diversity within the usa require further examination this paper exploits variation across us regions from 1980 to 2000 to determine whether racial heterogeneity creates gains or losses for states and cities fixed effects analysis indicates that diversity enhances the productivity of cities evidence at the state level is more ambiguous as significant results only appear in random effects specifications sparber c la diversite ethnique et la productivite macroeconomique a travers les etats et les grandes villes aux e u regional studies aux etats unis la diversite ethnique est toujours a la hausse des etudes anterieures ont cherche a affirmer que les consequences de la diversite ethnique peuvent s averer a la fois positives

the economic institution of international barter starting with the international debt crisis in the 1980s international barter increased substantially more recently barter has emerged in russia and south east asia this paper examines how barter can help highly indebted countries to finance imports if they cannot use standard credit arrangements we argue that payment in goods is easier to enforce than payment in money however debtors may pay with inferior quality products we rank goods with respect to these incentive properties and derive the economic institution of commodity money which explains the trade pattern in barter our theoretical predictions are consistent with data on barter contracts

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

immigration and firms integration in international production networks abstract this paper uses panel data on cross border migration and transaction level trade for swiss municipalities to identify the effect of migration networks on specific margins of the integration of firms in global value chains we find that the stability of an international supplier buyer relationship is strongly associated with a priori knowledge about the supplier s origin as measured by the migrant network with the same country of origin present in the buyer s immediate environment here a municipality not only do firms engage in more stable input trading relationships and intensify relationships in terms of input trading volume but they reduce the total number of suppliers in a given country in response to an increase of immigration from there these results are in line with a theoretical framework where firms sourcing strategies are subject to incomplete information firms diversify their foreign supplier network in order to be less susceptible to potential bad shocks once informational barriers are lifted firms contract fewer suppliers but purchase a larger volume from each of them

trade law and product complexity abstract how does the quality of national institutions that enforce the rule of law influence international trade anderson and marcouiller argue that bad institutions located in the importer s country deter international trade because they enable economic predators to steal and extort rents at the importer s border we complement this research and show how good institutions located in the exporter s country enhance international trade in particular trade in complex products whose characteristics are difficult to fully specify in a contract we argue that both exporter and importer institutions affect international as well as domestic transaction costs in complex and simple product markets international transaction costs are a part of the costs of trade domestic transaction costs affect complex and simple products differently thereby changing a country s comparative advantage in producing such goods we find ample empirical evidence for these predictions countries that have good institutions tend to

does political competition lessen ethnic discrimination evidence from sri lanka abstract the impact of political competition on ethnic discrimination remains largely unexplored to address this gap this paper explores the relationship between the level of political competition and the probability of receiving government transfers among ethnic minorities in sri lanka in the run up to the national elections of 2000 the paper shows that making politicians dependent on the votes of members of ethnic groups other their own can encourage moderation in discriminatory practices towards ethnic minorities specifically we find that political competition positively influenced the distribution of government food stamps among sri lankan tamils who otherwise are less likely to receive food stamps relative to the sinhalese majority the negative impact of political competition on discrimination is higher when minorities form part of swing constituencies than when they form part of the base support for political parties lessons learnt here suggest that having built in incentives in the design of the electoral process for intergroup bargaining and cooperation in countries with ethnically heterogeneous societies can be an effective restraint on ethnic discrimination this is consistent with other research that considers political institutions to be a key lever for making ethnically divided societies more inclusive

heterogeneity and collective management evidence from common forests in himachal pradesh india summary this paper conducts a statistical investigation into the impact of differences in economic benefits wealth and social classes within the community on collective management of forests there are two key results first social parochialism is not a pre requisite for collective management of forests moderate levels of social diversity are associated with low collective management but at high levels of social diversity collective management is high second moderate wealth heterogeneity is beneficial however at high levels and in the presence of benefit heterogeneity it decreases collective management similarly benefit heterogeneity reduces collective management if wealth heterogeneity also exists these results run counter to the dominant understanding of heterogeneity but may be seen as alternate explanations under a specific socioeconomic context

predator or prey parasitic enterprises in economic development abstract in many developing and transition economies mafia like activities are rampant extortion and other forms of predation lower profitability in private businesses and distort investment incentives incorporated in a model of industrialization bimodal club convergence may result economies may get stuck in a predators club characterized by a vicious cycle of poverty and predation societies with a low flow of new entrepreneurs are especially vulnerable to predation and never get out of this club poor societies with a high flow of new entrepreneurs however may grow out of the trap and join the rich producers club

behind the market stage where real societies exist part i the role of public and private order institutions this two part article is an attempt to clarify the social conditions upon which the viability and efficiency of the market system rest it strives to show that the embeddedness thesis that is an explanation based upon the existence of long run personal ties involving the use of reputation mechanisms among transactors cannot fully elucidate the question as to how the problem of trust is solved in market societies as explained in part i there are difficulties of both theoretical and empirical historical kinds and these explain why the market order needs to be sustained by private and public order institutions in part ii the role of generalised morality in backing or supplementing such institutions is discussed in the light of game theory and particular emphasis is put on the ability of moral norms to sustain honest behaviour by generating the right kind of preferences and establishing trust the vexed problem of the dynamics of norm emergence and erosion is then addressed with a view to showing

international trade and institutional change medieval venice s response to globalization international trade can have profound effects on domestic institutions we examine this proposition in the context of medieval venice circa 800 1600 early on the growth of long distance trade enriched a broad group of merchants who used their newfound economic muscle to push for constraints on the executive that is for the end of a de facto hereditary doge in 1032 and the establishment of a parliament in 1172 the merchants also pushed for remarkably modern innovations in contracting institutions that facilitated longdistance trade for example the colleganza however starting in 1297 a small group of particularly wealthy merchants blocked political and economic competition they made parliamentary participation hereditary and erected barriers to participation in the most lucrative aspects of long distance trade over the next two centuries this led to a fundamental societal shift away from political openness economic competition and social mobility and toward political closure extreme inequality and social stratification we document this oligarchization using a unique database on the names of 8 178 parliamentarians and their families use of the colleganza in the periods immediately before and after 1297 we then link these families to 6 959 marriages during 1400 1599 to document the use of marriage alliances to monopolize the galley trade monopolization led to the rise of extreme inequality with those who were powerful before 1297 emerging as the undisputed winners jel codes d02 f10 n43

the emergence of property rights enforcement in early trade a behavioral model without reputational effects abstract the present article focuses on the conditions that allow governments to increase property rights protection because they expect enough income from such action we develop a behavioral explanation according to which the answer lies in the growth in the importance size and wealth of merchant guilds in the medieval era in western europe as well as a somewhat surprising effect of volatile price structures we add to prior research by showing that even uncoordinated embargo pressures among multiple guilds could get medieval rulers to offer high levels of property rights protection

social divisions and institutions assessing institutional parameter variation this paper investigates the hypothesis that the association between property rights institutions and income is weaker in countries with high social divisions it argues that social divisions should have a negative effect on perceived institutional inclusiveness which in turn should depress institutional payoffs absent a property rights indicator that captures the perceived inclusiveness of institutions social divisions should then weaken the observed association between property rights institutions and income the empirical results support this hypothesis and highlight the importance of evaluating whether the institutions measure used captures the institutional framework applying to the population at large

flight capital as a portfolio choice the authors examine flight capital in the context of portfolio choice they estimate the stock of flight capital held abroad and compare it with the stock of real nonfinancial capital held within each country for 51 countries they construct estimates as of 1990 of private domestic capital and flight capital which combined add up to domestic wealth there are large regional differences in the proportion of private wealth that is held abroad ranging from 3 percent in south asia to 39 percent in africa they explain differences in portfolio choice in terms of the capital to labor ratio indebtedness exchange rate distortions and risk ratings all proxies for differences in the risk adjusted rate of return on capital they then apply the results to four policy questions in which private portfolio choices are potentially important the effect of the east asian crisis on domestic capital outflows spillovers the effect of hipc debt relief on capital repatriation and why africa has so much of its private wealth outside the continent their conclusions 1 the four most severely affected east asian countries will eventually lose about 250 billion in domestic wealth as a result of the deterioration in risk between march 1997 and september 1998 2 they found some support for a spillover model 3 the effect of the hipc debt relief initiative on capital repatriation will vary massively between hipc eligible countries 4 africa has by far the lowest capital per worker which makes massive capital flight from africa all the more distinctive three variables explain capital flight in africa exchange rate overvaluation adverse investor risk ratings and high indebtedness

ethnic diversity public spending and individual support for the welfare state a review of the empirical literature we review the empirical literature that studies the effect of ethnic diversity on public spending and on individual support for the welfare state the survey puts a particular focus on the fast growing literature that uses experiments to study the effects of ethnic diversity many of these studies have appeared since the pioneering survey by alesina and la ferrara and have not been covered by a survey before

racial diversity and aggregate productivity in u s industries 1980 2000 author affiliation chad sparber department of economics colgate university 13 oak drive hamilton ny 13346 usa csparber mail colgate edu acknowledgment i would like to acknowledge the guidance and advice from the faculty and graduate students of the university of california davis i especially thank giovanni peri hilary w hoynes alan m taylor florence bouvet and ahmed s rahman three anonymous referees rukmani gounder margriet caswell and the attendees of the western economics association international conference in san francisco provided helpful comments and suggestions as did takao kato robert w turner and faculty members of colgate university and san diego state university a fellowship from the university of california office of the president provided support for this research 1 introductionthe united states grew increasingly diverse between 1980 and 2000 as whites declined from 83 to 73 of the labor force many states are reconsidering their affirmative action policies while the federal government reevaluates immigration and citizenship statutes unfortunately we do not yet fully understand the aggregate effects of diversity international empirical analyses often argue that racial or ethnic heterogeneity hinders macroeconomic growth and development by fostering conflict corruption political instability and competitive rent seeking many top u s business executives reject these views however and claim that individuals from varied backgrounds bring unique approaches to problem solving and complement each other in production several academic analyses echo these sentiments this paper adds to the debate on the costs and benefits of diversity by building upon the traditional economic growth and development framework to measure racial diversity s net effect on productivity within sectors of the united states my methodology advances the existing literature by addressing two limitations of prior studies first although cross country evidence for the costs of diversity is clear the united states may be especially effective in managing diversity this paper determines whether the u s experience differs from international accounts second typical international growth analyses measure aggregate outcomes for countries but fail to address differences in marginal effects that could exist across sectors of the economy i depart from this strategy by analyzing industrial performance across u s states to begin i measure racial diversity by using decennial census data from the integrated public use microdata series ipums 1 to construct fractionalization indices for state industry cells between 1980 and 2000 i then employ two stage weighted least squares regressions with fixed effects to estimate diversity s industry specific influence on average wages paid to workers a proxy for labor productivity in the absence of observed output per worker measures unqualified statements regarding the costs and merits of diversity are unwarranted as racial heterogeneity increases productivity within most but not all u s industries these results are robust to methodologies controlling for individual level heterogeneity state specific trends industry specific trends and supply factors prior academic research anecdotes from political events and the sector specific coefficients in this paper provide intuition about the industrial characteristics that determine whether diversity leads to economic gains or losses i use the u s department of labor s o net consortium data2 to show that industries heavily reliant upon creative decision making problem solving and customer service benefit from diversity in contrast sectors characterized by high levels of group work or teamwork experience losses which suggests that heterogeneity encumbers common action the results therefore reconcile competing literatures by recognizing both the costs and the benefits of diversity

financial policy and speculative runs with a crawling peg argentina 1979 1981 abstract in this paper we present a model of a balance of payments crisis and examine the argentine experiment with a crawling peg between december 1978 and february 1981 the approach taken allows us to examine the evolution of a crisis when a collapse is not perfectly foreseen and yields plausible estimates of one month ahead probabilities of a collapse of the crawling peg the results suggest that the viability of an exchange rate regime depends on the consistency of exchange rate policy with domestic credit policy if the two are not consistent confidence in exchange rate policy is undermined

cross racial envy and underinvestment in south african partnerships trust games are employed to investigate the effect of heterogeneity in income and 5 race on cooperation in south africa the amount of socio economic information available to the subjects about their counterparts is varied no significant behavioural differences are observed when no such information is provided however when the information is available it significantly affects individual trust behaviour the low income subjects from both racial groups invest significantly less 10 in partnerships with the high income subjects of the other racial group than in any other partnership we attribute this behaviour to cross racial envy which on aggregate may lead to substantial efficiency losses

when collective ignorance is bliss theory and experiment on voting for learning abstract when do groups and societies choose to be uninformed we study a committee that needs to vote on a reform which will give every member a private state dependent payoff the committee can vote to learn the state at no cost we show that the committee votes not to learn the state whenever independent voters are more divided than partisans this implies that groups with conflicting preferences tend to seek less information a laboratory experiment shows that committees are substantially more likely to vote against acquiring information when the theory predicts them to do so we also observe deviations from theory that are largely explained by cognitive limitations at the same time subjects with more experience or with greater strategic competence are more likely to vote in line with the theory providing evidence for external validity of the model

investment in the absence of property rights the role of incumbency advantages in many situations the individuals who can generate some output must enter a contest for appropriating this output this paper analyses the investment incentives of such agents and the role of incumbency advantages in the contest depending on the advantages an increase in the productivity of the investment can decrease or increase the amount of investment the results are applied to autocrats investment behavior and job specific investment in organizations

the dynamics of business ethics and economic activity the authors model the agency relationship between managers and investors through socialization ethical managers develop internalized norms that prevent them from acting opportunistically unethical managers lack these norms higher ethical standards on the part of managers increase economic activity in the short run however increased economic activity increases opportunities to profit from unethical behavior eroding ethical standards over the long run when this rate of erosion is high cycling of ethics and economic activity emerges otherwise ethics and economic activity converge to a stable long run limiting value

collapsing exchange rate regimes some linear examples abstract we construct a pair of linear examples to study the collapse time of a fixed exchange rate regime the first example is a perfect foresight continuous time model which allows calculation of the exact collapse time and the tracking of reserves the second example is a discrete time stochastic model which yields an endogenous probability distribution over the collapse time and produces a forward discount of the exchange rate

benefit sharing among local resource users the role of property rights skewed distributions of benefits from natural resources can fuel social exclusion and conflict threatening sustainability this paper analyzes how user group property rights to harvest forest products affect the distribution of benefits from those products within user groups we argue that groups with recognized harvesting rights share benefits more equally among group members than groups without such rights we test this argument with data from 350 forest user groups in 14 developing countries our results suggest that securing harvesting rights for local user groups can contribute to more equal benefit sharing especially in ethnically homogenous groups

fractionalization polarization and economic growth identifying the transmission channels in this article we examine empirically both the direct and indirect links between ethnic fragmentation and economic growth we find that both ethnic fractionalization and polarization are negatively associated with growth if considered in isolation an effect that is though primarily attributed to their link to other growth related activities i e investment conflict control of corruption fertility we study the corresponding transmission channels and calculate their relative importance in explaining a development curse based on ethnic diversity for both measures of ethnic fragmentation we find the corruption channel to be the most important one

how ethnic diversity affects economic growth summary this paper investigates the empirical relationship between ethnic diversity polarization and economic growth ethnicity is assumed to affect economic growth through a number of possible transmission channels that are generally included in cross country growth regressions this paper provides an extensive empirical analysis shedding light on the various sources through which ethnic diversity and polarization affects economic growth indirectly it advances and empirically establishes the hypothesis that ethnic diversity has a strong direct negative impact on economic growth whereas ethnic polarization has non negligible indirect economic effects through the specified channel variables

food aid domestic policy and food security contrasting experiences from south asia and sub saharan africa abstract food aid both for short term emergency relief and as program food aid that helps address medium term food deficits is often a major component of food security strategies in developing countries this study reviews the experience with food aid of four major recipients of food aid india bangladesh ethiopia and zambia regarding food production trade markets consumption and safety nets as well as the policy responses to food emergencies the widely varying experiences of the study countries suggest that food aid that supports building of production and market enhancing infrastructure is timed to avoid adverse price effects on producers and is targeted to food insecure households can play a positive role in enhancing food security however food aid is not the only or in many cases the most efficient means of addressing food insecurity in many cases private markets can more effectively address shortfalls in food availability and cash transfers may be a viable alternative to food transfers in kind

fractionalization and long run economic growth webs and direction of association between the economic and the social south africa as a time series case study recent cross sectional growth studies have found that ethnolinguistic fractionalization is an important explanatory variable of long run growth performance in the present article we follow the ca