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RESEARCH PAPER ABSTRACTS
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This paper studies the barriers to
the diffusion of development across countries over the very long-run. We find
that genetic distance, a measure associated with the amount of time elapsed
since two populations' last common ancestors, bears a statistically and
economically significant correlation with pairwise income differences, even
when controlling for various measures of geographical isolation, and other
cultural, climatic and historical difference measures. These results hold not
only for contemporary income differences, but also for income differences
measured since 1500 and for income differences within
- Presented at INSEAD (November 2005),
London Business School (November 2005), UC San Diego (November 2005), UC
Berkeley (November 2005), Northwestern University (December 2005), University
of British Columbia (March 2006), Princeton University Political Institutions
and Economic Policy Conference (May 2006), NBER Political Economy Program
meeting (May 2006), International Monetary Fund (October 2006), UCLA (November
2006),
UCLA (December 2006), UC Santa Barbara (December 2006), Penn State University
(March 2007), World Bank (March 2007), New York University (March 2007)
A
Using
- Presented at
Death and Development
Analyzing a variety of
cross-national and sub-national data sources, we show that high adult mortality
reduces economic growth by shortening time horizons. Higher adult mortality is
associated with increased levels of risky behavior, higher fertility and lower
investment in physical and human capital. Furthermore, the feedback effect from
economic prosperity to better healthcare implies that mortality could be the
source of a poverty-trap. In our regressions, adult mortality explains almost
all of
- Presented at Stanford University (October 2004, May 2005), the Massachusetts Institute of Technology (January 2005) and the International Monetary Fund (May 2005).
Small States,
Big Pork
Using data on authorizations from the 2005 Highway Bill, we show that the
legislative allocation of pork barrel spending by
Do Democratic Transitions Produce Bad Economic Outcomes?
In one word: no. (A short paper prepared for the 2005 American Economic Review Papers and Proceedings)
- Presented at the American
Economic Association annual meetings in
Trade, Growth and the Size of Countries
Normally, economists take the size of countries as an exogenous variable which does not need to be explained. Nevertheless, the borders of countries and therefore their size change, partially in response to economic factors such as the pattern of international trade. Conversely, the size of countries influences their economic performance and their preferences for international economic policies - for instance smaller countries have a greater stake in maintaining free trade. In this paper we review the theory and the evidence concerning a growing body of research that has considered both the impact of market size on growth and the endogenous determination of country size. We show that our understanding of economic performance and of the history of international economic integration can be greatly improved by bringing the issue of country size at the forefront of the analysis of growth.
- Prepared for the Handbook of
Economic Growth, Philippe Aghion and Steve Durlauf, eds.,
This paper presents a framework to understand
and measure the effects of political borders on economic growth and per capita
income levels. We present a model that provides a theoretical foundation to
estimate empirically the effects of political borders on growth. In our model,
political integration between two countries results in a positive market size
effect and a negative effect through reduced openness vis-à-vis the rest of the
world. We estimate the growth effects that would result from the hypothetical
removal of national borders between pairs of adjacent countries. We also
identify zones of mutually beneficial political integration, and discuss the
applicability of our framework to European political integration.
- Presented at the American Economic Association annual meetings in
Trade Liberalization and Growth: New Evidence
This paper revisits the empirical evidence on the relationship between economic integration and economic growth. Firstly, we present an updated dataset of openness indicators and trade liberalization dates for a wide cross-section of countries in the 1990s. Secondly, we extend the Sachs and Warner (1995) study of the relationship between trade openness and economic growth to the 1990s, discussing recent criticisms of their measurement and estimation framework. Our results suggest that the cross-sectional findings of Sachs and Warner are sensitive to the period under consideration. In particular, an updated version of their dichotomous trade policy openness indicator does not enter significantly in growth regressions for the 1990s. Thirdly, and most importantly, we present new evidence on the time paths of economic growth, physical capital investment and openness around episodes of trade policy liberalization. In sharp contrast to our cross-sectional results, we find that liberalization has, on average, robust positive effects on growth, openness and investment rates within-countries.
- Presented at
This paper establishes empirically the existence of structural convergence: country pairs that converge in terms of per capita income also tend to converge in terms of their sectoral similarity, measured by the bilateral correlation of their sectoral labor shares. This is a robust feature of the data at various levels of sectoral disaggregation and data coverage. We shed light on some explanations for structural similarity, chiefly trade related determinants. Convergence in factor endowments accounts for approximately 1/3 of the extent of structural convergence. We argue that the existence of structural convergence has important implications for our understanding of business cycles transmission, of long-run development patterns and of the dynamics of specialization.
- Presented at the International
Seminar On Macroeconomics,
This paper investigates the impact of democracy on the steady-state level of human capital. To obtain an empirically testable specification, we employ a human capital-augmented Solow model, and derive the time path of human capital. We also present a model relating the extent of democracy to the rate of human capital accumulation. The model stresses a trade-off between the redistributive aspect of human capital accumulation, which suggests a favorable impact of democracy, and deviations from the ''golden rule'' of accumulation, which suggests a negative impact. We estimate the structural model using cross-country data on a variety of human capital measures. The model receives considerable support from the data. We show, in particular, that the effect of democracy on the steady-state level of human capital depends on the rate of savings on physical capital (positively) and on the rate of population growth (negatively), as predicted by the theory. The overall impact of democracy, once evaluated at the means of these variables, is positive and statistically significant.
- Presented at the conference on
Democracy, Participation and Economic Development,
Trade Liberalization and Intersectoral Labor Movements
This paper examines the impact of trade liberalization episodes on movements of labor across sectors. The aim is to assess empirically whether increased trade openness leads to increased structural change and, if so, to what extent. Results for a set of 25 liberalization episodes suggest weakly negative effects of liberalization on the extent of intersectoral labor shifts at the economy-wide 1-digit level of disaggregation. We do uncover increased sectoral change after liberalization at the 3-digit level within manufacturing, although the estimated effects are statistically weak and small in magnitude. The effects of liberalization on labor shifts differ across individual countries, in a way related to the scope and depth of reforms.
- Presented at the
We provide new measures of ethnic, linguistic and religious fractionalization for about 190 countries. These measures are more comprehensive than those previously used in the economics literature and we compare our new variables with those previously used. We also revisit the question of the effects of ethnic, linguistic and religious heterogeneity on the quality of institutions and growth. We partly confirm and partly modify previous results. The patterns of cross-correlations between potential explanatory variables and their different degree of endogeneity makes it hard to make unqualified statements about competing explanations for economic growth and the quality of government. Our new data, which features the underlying group structure of ethnicities, religions and languages, also allows the computation of alternative measures of heterogeneity, and we turn to measures of polarization as an alternative to the commonly used index of fractionalization.
This paper studies the evolution of sectoral concentration in relation to the level of per capita income. We show that various measures of sectoral concentration follow a U-shaped pattern across a wide variety of data sources: countries first diversify, in the sense that economic activity is spread more equally across sectors, but there exists, relatively late in the development process, a point at which they start specializing again. We discuss this finding in light of existing theories of trade and growth, which generally predict a monotonic relationship between income and diversification. (JEL F43, F15, O40)
- Presented at the University of Lausanne, Trinity College (Dublin), ECARES (Brussels), ICRIER (New Delhi), CERGE (Prague), the University of Chicago, the University of Manchester, the 21st NBER Summer Institute (Cambridge, MA), the University of Maryland, Boston College, the IMF, Yale University (April 2001).
Measuring the Dynamic Gains From Trade.
This paper investigates the linkages between trade policy and economic growth in a panel of 57 countries, between 1970 and 1989. We develop a new measure of trade policy openness, based on the effective policy component of trade shares. This is used in a simultaneous equations system aimed at identifying the effect of trade policy on several determinants of growth. The results of this paper suggest a strong positive impact of trade policy openness on economic growth, with the accelerated accumulation of physical capital accounting for more than one half of this total effect; smaller effects operate through enhanced technological transmissions and improvements in the quality of macroeconomic policy. This decomposition is robust with respect to alternative specifications and time periods. We also successfully test whether the model exhaustively captures the effects of trade policy on growth.
- Presented at the World Bank International Economics seminar (August 1996).
This paper introduces a new methodology to examine the empirical relationship between democracy and economic growth. Democratic institutions are assumed to affect growth through a series of channels, in accordance with a procedural view of democracy. We specify and estimate a full system of equations determining growth and the channel variables. Results suggest that democracy fosters growth by improving the accumulation of human capital and, less robustly, by lowering income inequality. On the other hand, democracy hinders growth by reducing the rate of physical capital accumulation and, less robustly, by raising the ratio of government consumption to GDP. Once all of these indirect effects are accounted for, the overall effect of democracy on economic growth is moderately negative. We interpret our results as indicating that democratic institutions are responsive to the demands of the poor by expanding access to education and lowering income inequality, but do so at the expense of physical capital accumulation.
- Presented at the World Bank's
Policy Research Department (August 1996) and at
Economic Integration and Political Disintegration.
Trade liberalization and political separatism go hand in hand. In a world of trade restrictions, large countries enjoy economic benefits, because political boundaries determine the size of the market. In a world of free trade and global markets even relatively small cultural, linguistic or ethnic groups can benefit from forming small and homogeneous political jurisdictions that peacefully trade and are economically integrated with others. This paper provides a formal model of the relationship between openness and the equilibrium number and size of countries, and successfully tests two implications of the model. The first one is that the economic benefits of country size depend on and are mediated by the degree of openness to trade. The second is that the history of Nation-State creations and secessions is influenced by the trade regime.
- Presented at
This paper examines the process of
European political integration. We start with a simple political economy model
of monetary policy, illustrating a general principle: economic integration
requires setting up European institutions endowed with the authority to enact
Europe-wide policies. However, when countries can take advantage of scale
effects thanks to economic integration, the need for large countries is
reduced. Thus, for many policies, increased economic integration reduces the
need for political integration in
- Presented at the
Carnegie-Rochester Conference on Public Policy (November 1998), at UC Berkeley
(February 1999) and at
Openness, Country Size and Government.
This paper shows that smaller countries have a larger share of public consumption in GDP, and are also more open to trade. These empirical observations are consistent with recent theoretical models explaining country formation and break up, and may account for the observed positive empirical relationship between trade openness and government size.
This paper examines the position of
Trade, Competition and Market Size
This paper studies the effects of trade liberalization on economic growth by focusing on the interaction between market size and market structure, holding the pattern of specialization and the level of technology fixed. We develop a dynamic, open economy, general equilibrium model which explicitly endogenizes market structure. The number of firms is determined both by a fixed cost of entry and by the extent of the market. A move toward free trade expands market size, so that more firms find it profitable to incur the entry cost. The theory and its extensions are confronted to cross-country and within-country evidence. Empirical findings support the predictions of the model concerning the role of market size and investment as channels linking trade openness and economic growth. Evidence on the entry of new firms and on changes in the sectoral composition of output also provides justification for focusing on the procompetitive effects of liberalization.
- Presented at the University of Chicago, Stanford University, the World Bank, New York University, Columbia University, the Federal Reserve Board, the Federal Reserve Bank of Boston, the University of California at Irvine, Stockholm University (January-February 1998) and the Delhi School of Economics (July 1998).