Developer
Democracy and economic outcomes: Evidence from the superstars of modern art
Christiane Hellmanzik
European Journal of Political Economy, June 2013, Pages 58-69
Abstract:
This paper analyses the impact of the political environment on the value of artistic outcomes as measured by the price of paintings produced over the period from 1820 to 2007. The analysis is based on a unique dataset encompassing a global sample of 273 superstars of modern art born between 1800 and 1945, auction results of their paintings, and data on the political environment in the respective production countries. Controlling for a variety of economic and hedonic variables, there is a statistically significant, positive link between the level of democracy and the value of artistic output. Moreover, we find that democracy has a significant positive impact both on the density of superstar painters and the collective artistic human capital in a country.
----------------------
Modernization of agriculture and long-term growth
Dennis Tao Yang & Xiaodong Zhu
Journal of Monetary Economics, forthcoming
Abstract:
This paper develops a two-sector model that illuminates the role played by agricultural modernization in the transition from stagnation to growth. When agriculture relies on traditional technology, industrial development reduces the relative price of industrial products, but has a limited effect on per capita income because most labor has to remain in farming. Growth is not sustainable until this relative price drops below a certain threshold, thus inducing farmers to adopt modern technology that employs industry-supplied inputs. Once agricultural modernization begins, per capita income emerges from stasis and accelerates toward modern growth. Our calibrated model is largely consistent with the set of historical data we have compiled on the English economy, accounting well for the growth experience of England encompassing the Industrial Revolution.
----------------------
Political Centralization in Pre-Colonial Africa
Philip Osafo-Kwaako & James Robinson
Journal of Comparative Economics, forthcoming
Abstract:
In this paper we investigate the empirical correlates of political centralization using data from the Standard Cross-Cultural Sample. We specifically investigate the explanatory power of the standard models of Eurasian state formation which emphasize the importance of high population density, inter-state warfare and trade as factors leading to political centralization. We find that while in the whole world sample these factors are indeed positively correlated with political centralization, this is not so in the African sub-sample. Indeed, none of the variables are statistically related to political centralization. We also provide evidence that political centralization, where it took place, was indeed associated with better public goods and development outcomes. We conclude that the evidence is quite consistent with the intellectual tradition initiated in social anthropology by Evans-Pritchard and Fortes in the 1940s which denied the utility of Eurasian models in explaining patterns of political centralization in Africa.
----------------------
Chiefs: Elite Control of Civil Society and Economic Development in Sierra Leone
Daron Acemoglu, Tristan Reed & James Robinson
NBER Working Paper, January 2013
Abstract:
The lowest level of government in sub-Saharan Africa is often a cadre of chiefs who raise taxes, control the judicial system and allocate the most important scarce resource - land. Chiefs, empowered by colonial indirect rule, are often accused of using their power despotically and inhibiting rural development. Yet others view them as traditional representatives of rural people, and survey evidence suggests that they maintain widespread support. We use the colonial history of Sierra Leone to investigate the relationships between chiefs' power on economic development, peoples' attitudes and social capital. There, a chief must come from one of the ruling families recognized by British colonial authorities. Chiefs face less competition and fewer political constraints in chiefdoms with fewer ruling families. We show that places with fewer ruling families have significantly worse development outcomes today - in particular, lower rates of educational attainment, child health, and non-agricultural employment. But the institutions of chiefs' authority are also highly respected among villagers, and their chiefdoms have higher levels of "social capital," for example, greater popular participation in a variety of "civil society" organizations and forums that might be used to hold chiefs accountable. We argue that these results are difficult to reconcile with the standard principle-agent approach to politics and instead reflect the capture of civil society organizations by chiefs. Rather than acting as a vehicle for disciplining chiefs, these organizations have been structured by chiefs to control society.
----------------------
Economic growth and individualism: The role of informal institutions
Casper Worm Hansen
Economics Letters, February 2013, Pages 378-380
Abstract:
This paper shows that the degree of ancestral individualism is positively related to annual earnings across second-generation US men. This provides evidence in favor of Gorodnichenko and Roland's (2011b) hypothesis that the individualistic dimension of culture is important for long-term economic growth.
----------------------
Corruption and economic activity: Micro level evidence from rural Liberia
Gonne Beekman, Erwin Bulte & Eleonora Nillesen
European Journal of Political Economy, June 2013, Pages 70-79
Abstract:
We study how corruption affects economic activities of households in rural Liberia. A proxy of corruption of community leaders is obtained by directly monitoring the diversion of inputs associated with a development project. We measure quantities of these inputs twice; before and after the chief stored them, and interpret any ‘gaps' between these measurements as indicative of diversion by the chief (or corruption). We use this ‘gap' proxy to explain variation in economic behaviour across respondents, and find that corrupt community leaders cause reduced levels of income generating activities that are economically important: corruption leads to a 50% reduction in rice planted and to nearly equally large reductions in trade activity.
----------------------
Eiji Yamamura & Haruo Kondoh
Contemporary Economic Policy, forthcoming
Abstract:
Since the end of the 1990s, local governments in Japan have enacted Information Disclosure Ordinances, which require the disclosure of official government information. This article uses Japanese prefecture-level data for the period 1998-2004 to examine how this enactment affected the rate of government construction expenditure. The Dynamic Panel model is used to control for unobserved prefecture-specific effects and endogenous bias. The major finding is that disclosure of government information reduces the rate of government construction expenditure. This implies that information disclosure reduces losses from rent-seeking activity, which is consistent with public choice theory.
----------------------
Thomas Allison, Aaron McKenny & Jeremy Short
Journal of Business Venturing, forthcoming
Abstract:
Microlending provides a valuable alternative to traditional financing for entrepreneurs in impoverished countries. Drawing from theory on political rhetoric and the concept of warm-glow giving, we examine characteristics of entrepreneurial narratives that are related to how quickly entrepreneurs receive funding. Using a sample of 6051 narratives from entrepreneurs in developing countries, we demonstrate that narratives higher in language indicating blame and present concern lead to more rapid funding, while narratives higher in accomplishment, tenacity, and variety lead to slower funding. Our findings suggest that the presentation of investment profiles should be carefully managed to maximize funding likelihood.
----------------------
William Pyle & Laura Solanko
Public Choice, April 2013, Pages 19-41
Abstract:
Why are some business lobbies less benign in their external effects than others? In The rise and decline of nations (New Haven: Yale University Press, 1982), Mancur Olson proposed that less-encompassing groups - i.e., those whose constituents collectively represent a relatively narrow range of interests - have a greater interest in seeking the types of subsidies, tariffs, tax loopholes, and competition-limiting regulations that, while benefiting their members, impose costs on the rest of society. By drawing on a unique pair of surveys - one targeted to managers of Russian regional lobbies, and the other addressed to managers of Russian industrial enterprises - we provide what we believe to be the most direct test of this hypothesis to date. The pattern of responses is striking. Managers of both the less encompassing lobbies and the enterprises belonging to those types of organizations display stronger preferences for narrowly targeted policy interventions. Our results, that is, strongly support Olson's hypothesis.
----------------------
Regulation, Trust, and Cronyism in Middle Eastern Societies: The Simple Economics of ‘Wasta'
Andy Barnett, Bruce Yandle & George Naufal
Journal of Socio-Economics, June 2013, Pages 41-46
Abstract:
Despite being a fixture of everyday life in the Arab world, wasta, which may be thought of as special influence by members of the same group or tribe, has received little attention from social scientists. Our casual empiricism suggests that wasta is an important determinant of how economic activities are organized and resources are allocated in Middle Eastern societies, yet economists, even those who specialize in work related to the Middle East, have not addressed the issue of wasta. With this paper we provide a modest beginning to filling that void. Specifically, we use the history of wasta, Hayek's concept of extended order and Coase's work on the nature of the firm to draw inferences regarding the existence of wasta and its persistence in Arab societies.
----------------------
Risk Attitudes and Economic Well-being in Latin America
Juan Camilo Cardenas & Jeffrey Carpenter
Journal of Development Economics, forthcoming
Abstract:
A common conjecture in both the theoretical and policy literatures on development is that people remain poor because they are too impatient and risk averse to accumulate the resources needed to improve their well-being. The empirical literature, however, suggests that this conjecture is far from proven. We sample more than 3,000 participants drawn representatively from six Latin American cities and find little correlation between baseline risk aversion and well-being, measured as an index of eight outcomes. We do, however, find that measures of ambiguity aversion, loss aversion and the willingness to take advantage of a risk pooling scheme all correlate with well-being. Participants who are ambiguity averse, loss averse, and who react conservatively in the risk pooling condition all have significantly lower scores on our well-being index. These results are robust to the inclusion of a variety of important controls like human capital accumulation and access to credit.
----------------------
Cost of Government and Firm Value
Michael Firth, Stephen Gong & Liwei Shan
Journal of Corporate Finance, June 2013, Pages 136-152
Abstract:
Do high expenditures incurred in running the government benefit or hurt firms? Using Chinese data between 1999 and 2006, we find that higher administrative expenditures in provincial governments are associated with lower firm value, lower stock and financial performance, and lower labor productivity. Local governments that spend more on public administration tend to collect more fees from companies and spend less on social welfare and infrastructures. Our evidence is consistent with the "grabbing hand" hypothesis and has important policy implications.
----------------------
Stefan Voigt & Jerg Gutmann
Journal of Comparative Economics, forthcoming
Abstract:
Among economists, the view that precisely defined and reliably enforced property rights are generally conducive to economic growth has been quasi-unanimous. But recently, some authors have argued that the relationship is more complex than previously acknowledged: property rights reforms might, for example, not per se lead to increases in observed growth rates. This paper contributes to the debate by emphasizing that the mere promise of secure property rights is unlikely to have any effects unless accompanied by some commitment to enforce these rights that is perceived as credible by private actors. An independent judiciary is interpreted as a tool that permits governments to make credible commitments to abide by the law. We provide empirical evidence for a positive growth effect of constitutional property rights, once the judicial system is independent enough to guarantee their enforcement.
----------------------
Corruption and the effects of economic freedom
L. Pieroni & G. d'Agostino
European Journal of Political Economy, March 2013, Pages 54-72
Abstract:
The prediction that economic freedom is beneficial in reducing corruption has not been found to be universally robust in empirical studies. The present work reviews this relationship by using firms' data in a cross-country survey and argues that approaches using aggregated macro data have not been able to explain it appropriately. We model cross-country variations of the microfounded economic freedom-corruption relationship using multilevel models. Additionally, we analyse this relationship by disentangling the determinants for several components of economic freedom because not all areas affect corruption equally. The results show that the extent of the macro-effects on the measures of (micro)economic freedom for corruption, identified by the degree of economic development of a country, can explain why a lack of competition policies and government regulations may yield more corruption. Estimations for Africa and transition economy subsamples confirm our conjectures.
----------------------
The Transmission of Democracy: From the Village to the Nation-State
Paola Giuliano & Nathan Nunn
NBER Working Paper, January 2013
Abstract:
We provide evidence that a history of democracy at the local level is associated with contemporary democracy at the national level. Auxiliary estimates show that a tradition of local democracy is also associated with attitudes that favor democracy, with better quality institutions, and higher level of economic development.
----------------------
Soviet Banking, 1922-1987: An Analysis of Gosbank Balance Sheets
Yasushi Nakamura
Comparative Economic Studies, March 2013, Pages 167-197
Abstract:
Motivated by increased availability of monetary data, this study investigates the activity of the Soviet state bank (Gosbank). The analysis shows that the main financial source of Gosbank moved from state budget funds to household deposits in the early 1960s. After that, the expansion of bank financing was based on household deposits. This did not lead to a corresponding development of macroeconomic monetary management because of the lack of a financial market. Further research should be undertaken to quantitatively evaluate the macroeconomic efficiency of the use of bank funds.
----------------------
The Role of Press Freedom in Economic Development: A Global Perspective
Abdullah Alam & Syed Zulfiqar Ali Shah
Journal of Media Economics, Winter 2013, Pages 4-20
Abstract:
In this study, the authors explore the role of press freedom in the development of an economy, both in terms of economic growth and foreign direct investment. The relationship between press freedom, foreign direct investment, and economic growth is analyzed using a balanced panel of 115 countries. The existence of a bidirectional relationship between press freedom and economic growth is established using the generalized method of moments technique. We also find a bidirectional relationship between foreign direct investment and economic growth using the analysis. Our results are not contradicted by similar indices produced by Reporters Sans Frontières and Freedom House.
----------------------
Cultural Influences on Economic Prosperity
Jan Maridal
Journal of Socio-Economics, forthcoming
Abstract:
Following Francis Fukuyama's (2001) postulation for future research in economic development, this paper examines the cultural hypothesis regarding national economic prosperity. Culture is found to affect economic performance through two channels; cultural traits that stimulate individual motivation, and traits that develop social capital in the population. Culture is defined as a society's beliefs and value system and operationalized through the use of variables from the World Values Survey (WVS). The analysis controls for factors commonly recognized in the economic growth literature. The results are sustained through a sensitivity analysis using a variant of Extreme Bounds Analysis (EBA). Compared with previous empirical studies, this research deepens the cultural analysis, increases the number of observations, and lengthens the time period studied.
----------------------
Comparing China and India: A Factor Accumulation Perspective
Kamhon Kan & Yong Wang
Journal of Comparative Economics, forthcoming
Abstract:
The remarkable economic transformations in China and India in recent decades have been accompanied by almost equally remarkable different development patterns. For example, the empirical data during 1985-2004 show that, compared with India, China's economy has exhibited (i) considerably higher rates of physical capital formation; (ii) much higher ratios of measured physical to human capital; and (iii) a more physical-capital-friendly public policy. Motivated by these empirical observations, we study the accumulation of both physical and human capital in a one-sector growth model with a CES production function. After deriving some qualitative implications from the model, we estimate the key technological parameters of the normalized CES production function using the panel data at the provincial level for China and at the state level for India. Our estimation results suggest that our model implications match broadly with the above stylized development patterns regarding China and India.