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the side of caution and to be comparable with previous work, we present both the OLS cross sectional results along with the system estimates.

# **4. Estimation and Results**

The empirical strategy is to introduce the trade variable of interest first to a set of core conditioning variables, and then to progressively add new variables, many now standard in the literature, to examine both robustness and suggestive channels of influence. The basic conditioning set includes initial income of the period and a policybased index of openness provided by Sachs and Warner (1995a). Although the literature has been highly critical of virtually all such measures of openness (Pritchett 1996, Rodrik and Rodriguez 2000), to ensure consistency with the natural resource literature of Sachs and Warner, we use their measure. Nevertheless it is worth pointing out that Wacziarg (2001) shows that the estimated effects of the trade-to-GDP ratio are virtually identical when the ratio is instrumented by the Sach-Warner index as when it is instrumented by other policy indicators such as average tariffs and the non-tariff barrier coverage ratio.

The second conditioning set adds the average ratio of investment/GDP and log of years of schooling of the adult population, which is the preferred measure of the stock of human capital (e.g., Barro 2001). Next, we add growth in the terms of trade as a possible channel through which natural resources variables may affect growth. As a measure of macro stability of particular importance to the trade sector we then include the standard deviation of the real effective exchange rate (REER) over the period, calculated from monthly data. As numerous authors (see for example, Serv6n 1998) suggest, macroeconomic volatility reduces investment and thus growth. However, other studies show that macroeconomic factors that are likely to be associated with REER volatility, such as episodes of high inflation, are related to both the level of investment and the rate of productivity growth (e.g., Fischer 1993; Bruno and Easterly 1997). This may also prove a channel through which our trade variables work. Time dummies are included in all the regressions that rely on panel data.

9
will also aid households.13

# **References**

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- Beath, Andrew, Fotini, Christia, & Enikolopov, Ruben. 2012. Winning Hearts and Minds through Development? Evidence from a Field Experiment in Afghanistan. _Policy Research Working Paper 6129, World Bank: Washington, DC_ .

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> 13Wakhan Livestock Depredation Insurance Program is one such pilot intervention in the relatively low-conflict Badakhshan province.

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framework of demand and supply curves in political markets can encompass and consolidate inisghts from a vast body of knowledge, honing in on the fundamental determinant of government success or failure in addressing public good problems. That fundamental determinant is: the preferences among citizens about public goods, about the role of the state and of government policy, and beliefs about how others are behaving in the public sector. This points to a path for future research and policy experimentation to understand where preferences and beliefs come from, and how citizens find common ground to address shared problems.

# **References** :

Acemoglu, Daron, and Matthew O. Jackson. 2015. “History, Expectations, and Leadership in the Evolution of Social Norms.” Review of Economic Studies 82 (1): 1–34.

Acemoglu, D. and Robinson, J.A., 2012. _Why Nations Fail: The Origins of Power_ , _Prosperity, and Poverty._ New York: Crown Publishing Group Acemoglu, D., Johnson, S. and J. Robinson, 2006, “Institutions as a Fundamental Cause of Long-Run Growth,” in _Handbook of Economic Growth,_ Aghion, P. and S. Durlauf, eds., Amsterdam: NorthHolland Acemoglu, D. and Robinson, J.A., 2006. De facto political power and institutional persistence. _The American economic review_ , _96_ (2), pp.325-330.

Acemoglu, D. and Robinson, J.A., 2000. Why did the West extend the franchise? Democracy, inequality, and growth in historical perspective. _The Quarterly Journal of Economics_ , _115_ (4), pp.11671199.

Acemoglu, Daron, 2003. “Why not a political Coase theorem? Social conflict, commitment, and politics.” Journal of Comparative Economics, 31: 620-652 Akerlof, G.A. and Kranton, R.E., 2000. Economics and identity. _The Quarterly Journal of Economics_ , _115_ (3), pp.715-753.

Alesina, Alberto, Silvia Ardagna and Francesco Trebbi, 2006. “Who adjusts and when? On the political economy of reforms.” NBER Working Paper 12049, February 2006 Alesina, Alberto, and Paola Giuliano. 2015. “Culture and Institutions.” _Journal of Economic Literature_ 53 (4):898–944.

Alesina, A. and Fuchs-Schündeln, N., 2007. Good-bye Lenin (or not?): The effect of communism on people's preferences. _The American Economic Review_ , _97_ (4), pp.1507-1528.

Alesina, A. and Glaeser, E.L., 2004. _Fighting poverty in the US and Europe: A world of difference_ . Oxford University Press.

Anand, Rahul, David Coady, Adil Mohommad, Vimal Thakoor, and James P. Walsh. 2013. “The Fiscal and Welfare Impacts of Reforming Fuel Subsidies in India.” IMF Working Paper 13/128. International Monetary Fund, Washington, DC.

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**Figure 4. Inequality in account ownership remains high in Turkey**

<!-- Start of picture text --> 90%<br>80%<br>70%<br>60%<br>50%<br>40%<br>30%<br>20%<br>10%<br>0%<br>Men Women Richest 60% Poorest 40% People 15‐ People 25<br>24 and older<br>Percent of adults with account<br><!-- End of picture text --> _Source_ : Global Findex database. The height of the bars shows the percentage of adults with an account at a financial institution or through a mobile money provider.

# Who Remains Unbanked in Europe and Central Asia?

Globally, about 1.7 billion adults remain unbanked. Account ownership is almost universal in high‐ income economies; nearly all unbanked adults live in the developing world. Nearly half of them live in populous developing countries such as Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan.

In 2017 there were 116 million unbanked adults in ECA. The majority live in Romania, the Russian Federation, Turkey, Uzbekistan, and Ukraine.

These people share various characteristics. First, women represent 58 percent of all unbanked adults in ECA. In some economies, such as Armenia, Kosovo, and Turkey, their share is even higher.

Second, poor people account for a disproportionate share of the unbanked in ECA (figure 5). Half of all unbanked adults are from the poorest 40 percent of households in the region. In Romania, for instance, nearly 60 percent of the unbanked are from the poorest 40 percent of households. Seventy‐one percent of the richest 60 percent of adults in Romania have an account, while only 38 percent of the bottom 40 percent do. Such income gaps in account ownership are prevalent in ECA countries, with a handful of exceptions, including Croatia, the Kyrgyz Republic, Turkmenistan, and Russia, in all of which the gap is less than 10 percentage points.

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# **3.3.3 Promoting Renewable Energy Resources**

While Morocco is one of largest energy importers in MENA, it is endowed with huge potential in renewable energy. It has abundant wind and solar resources. Wind energy potential is high in vast parts in the northern and southern regions, with the annual average wind speed exceeding 9 m/s at 40 meters elevation. Solar energy potential is also remarkable. It is estimated that the country experiences 3,000 hours per year of annual sunshine equivalent to 5.3 kWh/m2/day. Total installed renewable energy capacity (excluding hydropower) is estimated at approximately 787MW at the end of year 2015.

Energy costs have been high, reducing Morocco’s export competitiveness. As a proportion of exports, they rose from 25 percent in 2002 to more than 55 percent in 2012. The government’s efforts to control energy costs have resulted in a significant reduction of these costs to a record low of 25 percent as a proportion of exports in 2016 (see Figure 3.3). Yet, the costs remain high, close to 30 percent as a proportion of exports, dampening Morocco’s capacity to compete on international markets. Studies have shown that promoting these renewable energy resources could provide significant growth and job opportunities (Debbard, 2006 and Dii, 2013). According to a report by Dii (2013), the wind, photovoltaic and concentrated solar thermal power industrial sectors could represent up to 5 percent of GDP in 2030 if the country is investing enough – in partnership with international companies with demonstrated expertise in the renewable energy sector – in the production of electricity from renewable sources.

**Figure 3.3 Morocco: Evolution of energy costs, 2002‐2017**

<!-- Start of picture text --> (Percent of total exports)<br>60<br>55<br>50<br>45<br>40<br>35<br>30<br>25<br>20<br>2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017<br><!-- End of picture text --> _Source_ : Bank Al‐Maghrib and Ministry of Economy and Finance.

In its search to reduce its dependence on energy imports, Morocco developed an energy strategy which aims to support the country’s transition to renewable energy and energy efficiency. Morocco has embedded its energy policy into a dynamic process of adjustment to the evolution of the international environment and diversification of energy sources to bring 43
included to capture the impact of the changes in the terms of external finance (or the combined impact of the balance sheet and lending channel effects) on economic activity (see Box 2). It should be noted that the variable SPR understates the actual magnitude of this effect since the average lending rate would not entirely capture the increase in cost to the typical bank borrower, as fewer borrowers qualifv for this rate during tight money episodes.

The VARs are estimated using monthly data from 1992:01 to 1998:12, including 12 lags of the relevant quantitative variables.<sup>2 8</sup> The estimated VAR coefficients are not in themselves very interesting and thus are not reported here. Instead, the impulse response functions and the variance decompositions are reported. In order to assess the overall quantitative impact of a monetary tightening and the credit channel effects on production of SMIs relative to LMFs, Figures 16 and 17 plot the impulse response functions of **ySME** and yL with respect to innovations in the interest rate and the spread residuals over a horizon of 36 months (Appendix 2 reports the overall results of this exercise). Standard errors are calculated by the Monte Carlo method, with 1000 repetitions and standard error bands (of ± 2 standard deviations) are also included.<sup>29</sup>

- 28 All data are obtained from the Central Bank, Department of Statistics, and JP Morgan. In terms of lag selection, a sequence of (likelihood ratio) exclusions tests favored 12 lags against 10 and 8 lags.

> 29 The Monte Carlo standard errors are computed as follows. At each repetition, a random sample from the asymptotic distribution of the VAR coefficients is drawn. The asymptotic distribution of the VAR coefficients is given in Hamilton (1994). From these simulated coefficients, the impulse response functions are computed. After repeating this process 1000 times, the 95% confidence interval, by the percentile method, is constructed. The standard errors reported are the standard deviations of the simulated impulse responses across 1000 replications.

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better aligning individual preferences and behavior by altering perceived norms. One potential reason for a gap between what Moroccans say they value with respect to the household division of labor and what they believe others value _currently_ is that the division of labor in other households is hard to observe. Providing information about how household behavior has shifted in recent years could lead respondents to update their expectations about how much men will contribute in the future and how social norms around their contributions will evolve.

To test this possibility, the survey included an experiment testing whether providing information about changes in men’s contributions to household labor would induce changes in respondents’ expectations about future perceived norms. After answering the questions about their personal attitudes and current perceived norms, respondents were randomly sorted with equal probability into one of three treatment groups.<sup>12</sup> Group 1 read information about how the COVID-19 pandemic increased the time Moroccan men spend on household labor. Group 2 read information about how the COVID-19 pandemic increased the time many Moroccans spend on household labor. Group 3 did not read any information. Full text of the information treatments is available in the Appendix.

I hypothesized that providing information about the impact of COVID-19 on men’s behavior would increase Moroccans’ perceptions that norms five years from now will be more egalitarian and that these effects would be larger among men than among women.<sup>13</sup> 12. Simple randomization was applied using Qualtrics’ built-in randomization. Appendix table 6 shows results of a balance test confirming that there were no significant differences in the standard covariates, personal attitudes scores, or current perceived norms scores across treatment groups.

13. See pre-registered hypotheses H4(a) and H4(b). The logic for the hypothesized gender difference was that men are relatively less likely to encounter discussions of gender equality in everyday life (as suggested by Bursztyn, González, and Yanagizawa-Drott (2020)). We would expect the treatment effects to be larger among men as encountering information should address a knowledge gap that they are likely to exhibit more than women do. For women, the information may not seem particularly revealing, or to the extent that it is, they may be more pessimistic than men (who have an interest in taking a positive view of their own sex) that a post-COVID increase in household contributions by men is likely to translate into sustained change. In addition, the information may be more likely to strike women as an incomplete picture of reality, given that time spent by women on household labor also increased during the pandemic, a fact of which women are more likely to be aware.

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effect. The intuition is that increasing access to an otherwise slow and corrupt judiciary does not fundamentally affect economic outcomes (Chemin 2020).

In this section we review the evidence on the ingredients of each of the four postulated areas (independence, access, efficiency, and quality). We also attempt to address the question of whether partial reform brings judicial effectiveness or whether there must be an all-out effort to transform the judiciary, especially given that the latter is plausible only during periods of extraordinary politics as described in the previous section.

Two caveats are in order here. When studying “judicial reform”, the various studies surveyed here refer to positive reforms that improve the effectiveness of the justice system. There are no studies that we could identify on reforms that weaken the justice system. It is instructive to understand whether such reform also happens under similar conditions. For instance, at the time of writing this literature survey there is debate about the weakening of the judiciary in Israel, following on similar reforms in countries like Hungary and Poland. These dynamics potentially fit into the bigger picture of judicial reform. Second, by construction the studies we survey analyze reforms that have taken place. There is limited literature on reforms that were attempted but ultimately were not adopted by parliament or the judiciary. Such failed reforms again provide useful information but are not easily available.

# **2a. Independence**

Judicial independence allows judges to make impartial decisions in accordance with law and evidence only, shielding them from inappropriate outside influence, whether from other branches of government, the public, or business leaders (van Dijk and Vos 2019). According to Alexander Hamilton, “nothing can contribute so much to [the judiciary’s] firmness and independence as permanency in office” (Federalist Papers, no. 78).

Judicial independence has obvious value for securing property rights when the government is itself a litigant, as in the takings of property by the state (La Porta et al 2004). Besides seeking to influence judges, politicians may also wish to pursue policies and pass laws that benefit 11
pansion of international bandwidth and a similar drop in mobile broadband price. In Tunisia, the arrival of a submarine cable in 2014 (Didon) was associated with a percentage drop in the price of mobile broadband.

Telecom sector research and industrial organization theories suggest two main channels through which SMCs can affect Internet access prices in the short run. First, the deployment of SMCs can result in cost savings on international connectivity for telecom operators through (i) economies of scale brought by increased international Internet bandwidth; (ii) a drop in data (re)routing cost supported by greater connectedness enabled by new SMCs; and (iii) a drop in network maintenance cost due to stronger resilience induced by the duplication of SMCs routes. Depending on the intensity of competition along the local broadband (BB) value chain, part of these cost savings can be passed onto end-users in terms of reduced price. Second, deploying SMCs can reduce barriers to entry into broadband markets, especially when the new infrastructure is shared under an open and non-discriminatory basis among retail broadband operators. In both cases, regulation can enhance these effects. These effects pertain to the short term, i.e., assuming no change in the availability and quality of connectivity for end-users. In the long run, changes in availability and quality of connectivity stemming from investment in middle and last-mile infrastructure may exert upward pressure on price.

In this paper, we assembled a dataset on SMCs to investigate their impact on price and the role of competition and regulation, controlling for several confounding factors, including the availability and quality of connectivity and market size. In particular, we sought to assess the impact of SMCs on price; how it evolves; regional heterogeneity; the biggest drivers of the impact, especially the relative influence of cost savings versus competition; and how this depends on the regulatory environment.

Our dataset covers more than 150 countries across all regions over 12 years (2008-2020) and includes detailed information on the capacity of SMCs, measured by the amount of international Internet bandwidth. We complement this information with data on the price of the typical fixed and mobile broadband Internet package, as well as market concentration indexes and 50 indicators measuring various aspects of ICT regulation. We employ a two-way fixed effects estimator, an instrumental variables estimator, as well as a staggered difference-in-differences estimation strategy.

Our estimates lend support to the hypothesis that SMCs deployment results in a drop in the price of Internet access: doubling the international bandwidth leads to up to a 14% drop in fixed BB price, and up to 21 % drop in the mobile BB price. The impact on fixed broadband 3