Publications by Type: Miscellaneous

2004
Risse, Mathias. 2004. “What We Owe to the Global Poor”. Abstract

In September 2000, the U.N. General Assembly committed governments to eradicating extreme poverty. Endorsing several specific development goals, this historical document was called the Millennium Declaration, and has since become a reference point for development efforts across the globe.

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Intestinal helminths – including hookworm, roundworm, whipworm, and schistosomiasis – infect more than one–quarter of the world's population. Studies in which medical treatment is randomized at the individual level potentially doubly underestimate the benefits of treatment, missing externality benefits to the comparison group from reduced disease transmission, and therefore also underestimating benefits for the treatment group. We evaluate a Kenyan project in which school–based mass treatment with deworming drugs was randomly phased into schools, rather than to individuals, allowing estimation of overall program effects. The program reduced school absenteeism in treatment schools by one–quarter, and was cheaper than alternative ways of boosting school participation. Deworming substantially improved health and school participation among untreated children in both treatment schools and neighboring schools, and these externalities are large enough to justify fully subsidizing treatment. Yet we do not find evidence that deworming improved academic test scores.

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2003
Moravcsik, Andrew, and Milada Anna Vachudova. 2003. “National Interests, State Power, and EU Enlargement”. Abstract

Some fifteen years after the collapse of communism, the uniting of Western and Eastern Europe through a substantial enlargement of the EU is perhaps the most important single policy instrument available to further a more stable and prosperous continent. As many as eight post–communist states are poised to conclude negotiations with the EU for full membership by the end of 2002. In this essay we seek to outline in the very broadest strokes the most important structural forces of national interest and influence underlying the dynamics of enlargement itself and its future consequences for EU governance. We do not claim our analysis is comprehensive, only that it seeks to capture the most significant of the underlying forces in play.

Transition economies faced the formidable task of creating financial markets to ensure that enterprises gained access to external sources of funds under circumstances that were unfavorable for such markets to take off. The two major obstacles for financial market development we identify in this paper are highly incomplete law and the absence of reliable company specific information. We argue that in light of these obstacles standard law enforcement practices, including deterrence and reactive law enforcement by courts, and ex ante screening and proactive law enforcement by regulators are not effective. To jumpstart financial markets under these circumstances, other avenues have to be explored. We suggest that China, but not Russia, has been quite successful in seeking such alternatives. We identify the decentralized process of selecting companies for listing on major stock exchanges as a means for collecting company specific information that cannot be easily standardized and would therefore remain unexplored in a system that relied only on financial reporting and disclosure. While state agents involved in the selection process may have incentives to select lemons rather than viable firms for listing, we argue that the competition among different regions and ministries instilled by the so–called quota system has mitigated these dangers. By contrast, Russia?s reliance on a standard Western disclosure system with law enforcement by a combination of courts and regulators not paid off so far. On the contrary, uncertainties about the effectiveness of law enforcement and absence of reliable information have restrained financial market development. Evidence on lower co–movement of stock in China than in Russia lends support to our theoretical analysis.

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The process of globalization has been made possible by a series of technological, institutional, and policy changes over the course of the last several decades. As the introduction to this project suggests, governments have often made conscious policy adjustments in the face of innovations perceived as advantageous by competitors, new ideas of policy success, and sometimes as the result of explicit or implicit political pressures from powerful governments or international institutions.

A very important part of this process involves government choices to alter the international legal structure in which economic transactions take place. The most salient accomplishments in the development of an international legal structure to further economic liberalization has clearly been in the trade of goods and services, where the World Trade Organization commands a focal presence. In the monetary and exchange rate area, a growing number of governments have committed themselves through Article VIII of the International Monetary Fund?s Articles of Agreement to keep their current accounts free from restrictions, assuring traders and lenders that hard currencies will be made available to pay for imports and service international debts.

Interestingly, there has been very little multilateral development of the legal rules surrounding international investment, and in particular foreign direct investment (FDI). Nevertheless, such investment has grown substantially over the past several decades. According to the United Nations, total foreign direct investment inflows peaked at about 1,450 billion in 2000, before falling back to $735.1 billion in 2001. The growth in global FDI has far outstripped both world GDP and world trade growth. But direct investments are highly skewed geographically: developed countries account for over 93 per cent of outflows and 68 percent of inflows, and these shares have not changed too drastically over the past decade.

The primary legal innovation in the area of foreign direct investment in the post–world war two period has been the proliferation of bilateral agreements that seek to make explicit the contractual arrangements under which a firm invests in a local jurisdiction. Bilateral investment Treaties (BITs) are defined as an agreement establishing the terms and conditions for private investment by nationals and companies of one country in the jurisdiction of another. They are negotiated between governments precisely to create a legal environment to encourage foreign direct investment, typically in those jurisdictions that find it difficult to credibly commit to treat foreign capital in ways that are perceived by investors as transparent, fair, and predictable. These agreements are a way to tie the hands of the host country by agreeing to a wide range of pro–investor terms. By surrendering part of its legal sovereignty – notably the right to use its own courts to adjudicate any disagreements that may arise from a contract to invest – developing countries hope to convince foreign firms that their investments will be safe and sound.

As such, BITs should be understood as a part of the broader neo–liberal project to encourage the free flow of goods, services, capital, and ideas across national borders. They typically include provisions requiring investing nationals of the BIT partner to be treated as well as national firms or as well as the most favored foreign firms (MFN treatment); establish limits on expropriations of investments and require compensation when it occurs; and guarantee investors? right to transfer funds into and out of the country using a market rate of exchange. Sometimes these agreements also explicitly prohibit "performance requirements" on the part of foreign investors, though such clauses are more typically found in US rather than European agreements. Thus, we view these agreements as consistent with the market–oriented trend the editors of this volume have identified.

This article seeks to explain why BITs have proliferated over time. The popularity of BITs is puzzling when contrasted with the collective resistance developing countries have shown toward pro–investment principles under customary international law. Our central contention is that bilateral investment treaties intensify the inter–state competition for foreign investment. Because signing a BIT gives a state an advantage in this competition we expect the probability of acceptance of a BIT by a state to increase when rival states sign such a treaty. The model we have in mind is squarely consistent with the competitive models laid out in the introductory chapter to this project.

The article is organized as follows. The first section describes the BITs terrain in some detail: the history, rationale, and spread of these bilateral arrangements over time. The second section presents a model of competition for investment that could lead to the pattern of treaty diffusion we observe. In this model, one country exogenously "breaks ranks" and agrees to investors terms in order to enjoy the benefits of investment inflows. While competitors may not have preferred to do so, BITs effectively create a negative externality by presenting the prospect of diverting capital to hosts who agree to BITs. One obvious way to mitigate this outcome is to enter into a BIT as well. We entertain the possibility of more sociological explanations which may be plausible in explaining some investment treaties witnessed in more recent years.

The third section reviews the evidence of competitive diffusion. Competitive pressures for BIT proliferation are consistent with the data, but even some of the non–diffusion influences on the pattern of BITs suggest the broader reputational story we develop is apt. While socialization influences appears to be present in recent years, the most important explanations for the growing web of bilateral arrangements are those that postulate rational responses to the globalization of capital.

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Part of a report on El Salvador's economic strategy.

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One of the most important developments over the past three decades has been the spread of liberal economic ideas and policies throughout the world. These policies have affected the lives of millions of people, yet our most sophisticated political economy models do not both temporally and spatially. We hypothesize that this clustering might be due to processes of policy diffusion. We think of diffusion as adequately capture influences on these policy choices. Evidence suggests that the adoption of liberal economic practices is highly clustered resulting from one of two broad sets of forces: one in which mounting adoptions of a policy alter the benefits of adopting for others and another in which adoptions provide policy relevant information about the benefits of adopting. We develop arguments within these broad classes of mechanisms, construct appropriate measures of the relevant concepts, and test their effects on liberalization and restriction of the current account, the capital account, and the exchange rate regime. Our findings suggest that domestic models of foreign economic policy making are insufficient. The evidence shows that policy transitions are influenced by international economic competition as well as the policies of a country's sociocultural peers. We interpret the latter influence as a form of channeled learning reflecting governments' search for appropriate models for economic policy.

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Rodrik, Dani. 2003. “Growth Strategies”. Abstract

This is an attempt to derive broad, strategic lessons from the diverse experience with economic growth in last fifty years. The paper revolves around two key arguments. One is that neoclassical economic analysis is a lot more flexible than its practitioners in the policy domain have generally given it credit. In particular, first–order economic principles–protection of property rights, market–based competition, appropriate incentives, sound money, and so on–do not map into unique policy packages. Reformers have substantial room for creatively packaging these principles into institutional designs that are sensitive to local opportunities and constraints. Successful countries are those that have used this room wisely. The second argument is that igniting economic growth and sustaining it are somewhat different enterprises. The former generally requires a limited range of (often unconventional) reforms that need not overly tax the institutional capacity of the economy. The latter challenge is in many ways harder, as it requires constructing over the longer term a sound institutional underpinning to endow the economy with resilience to shocks and maintain productive dynamism. Ignoring the distinction between these two tasks leaves reformers saddled with impossibly ambitious, undifferentiated, and impractical policy agendas.

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At the end of World War II, the United States found itself in a situation of unprecedented power. The economy of the former hegemonic state, Britain, was decimated by the war. So were the economies of the rest of Western Europe, including Britain?s foremost European economic challenger, Germany. While the Soviet Union presented a growing military threat, in economic terms U.S. power was unchallenged, leaving the United States in a position of hegemony.

Washington responded to this new position by adopting policies of multilateralism. Drawing lessons from the economic catastrophes of the interwar years, leaders in the United States determined that the only way to safeguard U.S. interests was to remain deeply engaged with the rest of the world, rather than turning inwards as after World War I. A major mechanism Washington used to implement this policy of engagement was the creation of multilateral organizations, including the United Nations, the Bretton Woods institutions, NATO, and others.

As the new millennium gets underway, the United States finds itself unexpectedly in a position of unipolarity, with no serious military challengers and economic challengers all facing serious problems of their own. A student of international relations who somehow missed the decades of the 1980s and 1990s would be startled at this turn of events. In the late 1970s and early 1980s, the discussion centered around how declining U.S. power might translate into instability in the international system. The assumption that the United States would continue its relative decline was challenged by some, but widespread.

Anyone comparing U.S. policy in 2003 to that in, say, 1948, would be struck by the contrast. In both periods American power was immense, creating a situation of hegemony or unipolarity. Yet U.S. policy in 2003 did not reflect the ultilateralism of the late 1940s and early 1950s. Rather than creating and strengthening multilateral institutions, the United States turned to unilateral policies, denigrated the entire notion of multilateralism as a principle, and refused to participate in numerous new multilateral ventures such as the International Criminal Court.

This paper begins with the observation of this paradox and builds on it to analyze the future of multilateral organizations. I begin by examining the concept of multilateralism, both in theory and in history. I then turn to an analysis of multilateralism, asking why the United States turned to multilateralism after World War II and evaluating its payoffs. The final section applies the insights developed in the rest of the paper to the future of multilateral organizations. It concludes that the current policy of "ad hoc multilateralism," or turning to multilateral organizations opportunistically, fundamentally misunderstands the nature and motivation for multilateralism. Such a policy is therefore likely to fail, leaving the United States with a stark choice between expensive unilateralism and needing to rebuild its reputation as a reliable participant in multilateral endeavors.

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Robinson, James A. 2003. “The Political Economy of Clientelism”.
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This paper draws on the legislative history of U.S. bankruptcy law to challenge the influential view that a country's legal origin and mechanism shape investor protection and ultimately financial development and economic growth. Even though the United States has an English legal origin, uses common law, and copied its first federal bankruptcy law from English law, the current U.S. bankruptcy regimes is diametrically opposite to that of the U.K. We show that the American experience can only be understood in the perspective of politics. During the formative 19th century legislative activity was strongly related to general economic conditions: every major reform attempts came in severe economic downturns. Legislative proposals only led to adoption of laws when there was a conservative lock on Congress and the Presidency. Moreover, an in–depth analysis of voting behavior during two critical episodes shows that congressional voting on bankruptcy was strongly influenced by general ideological positions, i.e., how legislators vote on other issues. In fact, even though we show that banking, but not commercial, interests influence outcomes, ideology is a much more important factor explaining voting behavior. We argue that political origins and ideological divides are grossly overlooked in our understanding of the determinants of financial (and legal) development. The ideologically charged congressional debate over bankruptcy reform at the turn of the twenty–first century echoes our historical analysis.

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Robinson, James A. 2003. “Politician-Proof Policy?”. Abstract

In this paper I discuss the nature of the political constraints that the World Bank faces in delivering basic services to the poor. The main problem arises because the Bank has to work through domestic governments which have political aims different from helping the poor. The conceptual approach attractive to economists and central to the WDR2004 is the notion of politician proofing . Given that political incentives derail good policies, how can those policies be politician–proofed? I argue that evidence and theory suggests that such an approach is ultimately futile, basically because we simply do not understand the relevant political incentives. I discuss alternative policy strategies and conclude that what is required is a much more fundamental assessment of what type of political equilibria deliver services to the poor. As I illustrate with the case of Botswana, once the political equilibrium is right, everything goes right and politician proofing in redundant.

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U.S. presidents can choose the form of international agreements that they negotiate. Using the constitution?s Article II procedure to gain ratification of a formal treaty is a costly and time–consuming endeavor, so presidents frequently turn to executive agreements that do not require approval by 2/3 of the Senate. Given this alternative, why do presidents ever choose the Article II procedure? This paper argues that treaties serve as a costly signal of intent to comply with the terms of international agreements. The choice between treaties and executive agreements is therefore a strategic executive decision that takes into account the anticipated reactions of other states. A signaling model predicts that high–benefit agreements should take the form of treaties. The predictions of purely domestic models of a positive relationship between the reliability of a government and the probability that an agreement is a treaty should not hold. These propositions are tested on a large dataset of U.S. international agreements between 1980 and 1999.

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Remittances are emerging as an important source of external development finance. They have been growing in both absolute volume, as well as relative to other sources of external finance. Perhaps even more important, they are the most stable source of external finance and are providing crucial social insurance in many countries afflicted by economic and political crises. But, as with all substantial external resource flows, the effects of remittances are complex.

The paper examines this growing external resource flows to developing countries. It first highlights the severe limitations in data, a sharp contrast to other sources of external finance. It then analyzes (based on this limited data), the key trends in remittance flows. The paper then examines the many complex economic and political effects of remittances. It highlights that while the effects of remittances are greatest on transient poverty, the long–term effects on structural poverty are less clear, principally because the consequences for economic development in general are not well understood. The paper then suggests some policy options to enhance these flows and maximize the benefits. Finally it concludes with some suggestions for future work.

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Masuch, Klaus, Huw Pill, Sergio Nicoletti-Altimari, and Massimo Rostagno. 2003. “The Role of Monetary Analysis in Monetary Policy Making”. Abstract

In this paper, the conceptual and empirical bases for the role of monetary aggregates in monetary policy making are reviewed. It is argued that money can act as a useful information variable in a world in which a number of indicators are imperfectly observed. In this context, the paper discusses the role of a reference value (or benchmark) for money growth in episodes of heightened financial uncertainty. A reference value for money growth can also act as an anchor for expectations and policy decisions to prevent divergent dynamics, such as the spiraling of the economy into a liquidity trap, which can occur under simple interest rate rules for policy conduct. The paper concludes that using information included in monetary aggregates in monetary policy decisions can provide an important safeguard against major policy mistakes in the presence of model uncertainty.

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In this article, we examine the shifting policies of sending country states toward communities living abroad, demonstrate the ways in which these are redefining the relationship between the state and its territorial boundaries, and highlight how these reconfigure conventional understandings of sovereignty, citizenship and membership. We begin by delineating the different types of policies that sending states are adapting in order to break down categories like "global nations policies" and to identify similarities and differences between states. We then suggest some possible explanations both for the convergence we see on the "repertoire" of policies that states employ and divergence we see in how far states are willing to go to ensure that migrants remain enduring long distance membership. We draw on material from several countries, but look most closely at Brazil, Mexico, the Dominican Republic, and Haiti.

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2002

In seeking to understand the root causes of the events of 9/11 many accounts have turned to Samuel P. Huntington's provocative and controversial thesis of a "clash of civilizations", arousing strong debate. Evidence from the 1995–2001 waves of the World Values Study provide survey evidence allowing us, for the first time, to sift the truth in this debate by comparing attitudes and values in 75 societies around the globe, including many Islamic and Western states.

The results confirm the first claim in Huntington's thesis: culture does matter, and indeed matters a lot, so that religious legacies leave their distinct imprint on contemporary values. But Huntington is essentially mistaken in assuming that the core clash between the West and Islamic worlds concerns democracy, as the evidence suggests striking similarities in the political values held in these societies. It remains true that Islamic nations differ from the West on issues of religious leadership, but this is not a simple dichotomous clash, as many countries around the globe display similar attitudes to Islam. Moreover the original thesis fails to identify the primary cultural fault line between the West and Islam, concerning the social issues of gender equality and sexual liberalization. The values separating Islam and the West revolve far more centrally around Eros than Demos.



Kennedy School of Government Working Paper Series, Working Paper Number:RWP02-015 Submitted: 04/22/2002

The full text of this paper can be downloaded through HOLLIS if you have a valid Harvard ID

This article examines one facet – arms control — of a larger puzzle in US–China relations over the last decade, namely why are we seeing an increasing degree of politico–military friction in Sino–US relations as China becomes more, not less, integrated into global institutions? On the one hand China?s arms control performance on most issues improved over the 1990s, with participation rates increasing in various institutions, agreements and regimes, and with accession to a small number of commitments that could actually constrain China?s relative power to some degree. On the other, despite these trends Sino–US differences over arms control have remain acute and a source of friction in the relationship. What is going on? This article begins with a description of the changes in Chinese arms control behavior over the last decade or so and offers a range of possible explanations for these. It then examines the areas of disagreement and friction in the US–China relationship on arms control. In particular it focuses on the apparent differences in the preferences of US and Chinese decision–makers on arms control policy. Finally it offers a list of three major explanations for these differences.

Moravcsik, Andrew. 2002. “Europe Without Illusions”. Abstract

Future historians may someday look back on the 1990s as the decade when Europeans began to view the European Union without illusions. Although the core of European integration has always been pragmatic, functional cooperation of a largely economic nature — trade liberalization, regulatory harmonization, financial openness — the project was assisted by the existence of a "permissive consensus" of favorable public opinion, which permitted centrist political parties to satisfy the economic demands of powerful producer groups while justifying their actions with arguments about the role of the EU in promoting regional democracy and peace. As a result, European political elites only rarely criticized the EU. In recent years more open skepticism has been voiced. The first part of this essay evaluates the views of five leading European statesmen and thinkers, found in their Spaak lectures at Harvard University, on this issue: Ralf Dahrendorf, Uffe Ellemann–Jensen, Roy Jenkins, George Papandreou and Renato Ruggiero. The second part evaluates the most serious of recent criticisms of the EU, namely that it is democratically illegitimate. Concern about the EU's 'democratic deficit' is in fact misplaced. Judged against the practices of existing advanced industrial democracies, rather than an ideal plebiscitary or parliamentary democracy, the EU is legitimate. Its institutions are tightly constrained by constitutional checks and balances: narrow mandates, fiscal limits, super–majoritarian and concurrent voting requirements and separation of powers. The EU's appearance of exceptional insulation reflects the subset of functions it performs — central banking, constitutional adjudication, civil prosecution, economic diplomacy and technical administration. These are matters of low electoral salience commonly delegated in national systems, for normatively justifiable reasons. On balance, the EU redresses rather than creates biases in political representation, deliberation and output.

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