Research Library

2012
Frankel, Jeffrey, and George Saravelos. 2012. “Can Leading Indicators Assess Country Vulnerability? Evidence from the 2008–2009 Global Financial Crisis.” Journal of International Economics. Journal of International Economics. Publisher's Version Abstract

We investigate whether leading indicators can help explain the cross-country incidence of the 2008–2009 financial crisis. Rather than looking for indicators with specific relevance to the recent crisis, the selection of variables is driven by an extensive review of more than eighty papers from the previous literature on early warning indicators. Our motivation is to address suspicions that indicators found to be useful predictors in one round of crises are typically not useful to predict the next round. The review suggests that central bank reserves and past movements in the real exchange rate were the two leading indicators that had proven the most useful in explaining crisis incidence across different countries and episodes in the past. For the 2008–2009 crisis, we use six different variables to measure crisis incidence: drops in GDP and industrial production, currency depreciation, stock market performance, reserve losses, and participation in an IMF program. We find that the level of reserves in 2007 appears as a consistent and statistically significant leading indicator of who got hit by the 2008–2009 crisis, in line with the conclusions of the pre-2008 literature. In addition to reserves, recent real appreciation is a statistically significant predictor of devaluation and of a measure of exchange market pressure during the current crisis. We define the period of the global financial shock as running from late 2008 to early 2009, which probably explains why we find stronger results than earlier papers such as Obstfeld et al. (2009, 2010) and Rose and Spiegel (2009a,b, 2010, 2011) which use annual data.

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Domínguez, Jorge I. 2012. “Conclusion: The Choices of Voters during the 2006 Presidential Election in Mexico.” The Johns Hopkins University Press. Publisher's Version Abstract

In 2006, Felipe Calderón narrowly defeated Andrés Manuel López Obrador in Mexico’s hotly contested presidential election. Mexico’s 2006 presidential race demonstrated the importance of contested elections in democratic consolidation. Consolidating Mexico’s Democracy is at once a close examination of this historic election and an original contribution to the comparative study of elections throughout the world.

The contributors to this volume—preeminent scholars from the fields of political science and government—make use of extensive research data to analyze the larger issues and voter practices at play in this election. With their exclusive use of panel surveys—where individuals are interviewed repeatedly to ascertain whether they have changed their voter preference during an election campaign—the contributors gather rich evidence that uniquely informs their assessment of the impact of the presidential campaign and the voting views of Mexican citizens.

The contributors find that, regardless of the deep polarization between the presidential candidates, the voters expressed balanced and nuanced political views, focusing on the perceived competence of the candidates. The essays here suggest the 2006 election, which was only the second fully free and competitive presidential election allowed by the Mexican government, edged the country closer to the pattern of public opinion and voting behavior that is familiar in well-established democracies in North America and Western Europe.

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This article studies the effect of domestic observers deployed to reduce irregularities in voter registration in a new democracy, and in particular, the response of political parties’ agents to these observers. Because political parties operate over large areas and party agents may relocate away from observed registration centers, observers may displace rather than deter irregularities. We design and implement a large-scale two-level randomized field experiment in Ghana in 2008 taking into account these spillovers and find evidence for substantial irregularities: the registration increase is smaller in constituencies with observers; within these constituencies with observers, the increase is about one-sixth smaller on average in electoral areas with observers than in those without; but some of the deterred registrations appear to be displaced to nearby electoral areas. The finding of positive spillovers has implications for the measurement of electoral irregularities or analysis of data collected by observers.

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We consider the effect of legislative primaries on the electoral performance of political parties in a new democracy. While existing literature suggests that primaries may either hurt a party by selecting extremist candidates or improve performance by selecting high valence candidates or improving a party’s image, these mechanisms may not apply where clientelism is prevalent. A theory of primaries built on a logic of clientelism with intra-party conflict instead suggests different effects of legislative primaries for ruling and opposition parties, as well as spillover effects for presidential elections. Using matching with an original dataset on Ghana, we find evidence of a primary bonus for the opposition party and a primary penalty for the ruling party in the legislative election, while legislative primaries improve performance in the presidential election in some constituencies for both parties.

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This paper was published on November, 26, 2012, in the American Journal of Political Science: http://files.wcfia.harvard.edu/node/8225

 

 

Fruehwirth, Manfred, and Leopold Sögner. 2012. “Does the Sun Shine Really Shine on the Financial Markets?”. Abstract

After a series of papers has provided—partially ambiguous—results on the impact of weather variables on stock (index) returns, this article studies the impact of weather on a wide variety of financial market instruments, namely "risk-free" interest rates, the US corporate bond market, stock returns, stock index returns and the VIX volatility index. First, we construct a model that combines asset pricing and results from psychology to show how weather variables can affect asset prices in different market segments via mood. Second, in our empirical analysis we use several weather variables from the National Climatic Data Center (NCDC) and control variables motivated by economic theory. Applying various econometric techniques and using different market segments (motivated by differences in the risk level and institutional differences) allows to give a more detailed picture on the impact of weather on financial market prices. We demonstrate that on none of the market segments analyzed the weather has any significant impact.

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The 1930s American Dust Bowl was an environmental catastrophe that greatly eroded sections of the Plains. The Dust Bowl is estimated to have immediately, substantially, and persistently reduced agricultural land values and revenues in more-eroded counties relative to less-eroded counties. During the Depression and through at least the 1950s, there was limited relative adjustment of farmland away from activities that became relatively less productive in more-eroded areas. Agricultural adjustments recovered less than 25 percent of the initial difference in agricultural costs for more-eroded counties. The economy adjusted predominantly through large relative population declines in more-eroded counties, both during the 1930s and through the 1950s.

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The long-awaited joint communication by the Commission and the High Representative for Foreign Affairs and Security Policy “Developing a European Union Policy towards the Arctic Region: Progress since 2008 and next steps” was issued in July 2012, four years after the groundbreaking Commission communication on the EU and the Arctic region.

The 2008 communication was a difficult effort to identify the EU’s potential role in the Arctic, building on a checkered variety of policies and actions. The declared aim was “to lead to a structured and coordinated approach to Arctic matters, as the first layer of an Arctic policy” for the EU, thus “opening new cooperation perspectives with the Arctic states, helping all of us to increase stability and to establish the right balance between the priority goal of preserving the Arctic environment and the need for sustainable use of resources.” That aim has yet to be achieved, as the language of 2012 reveals: “Taking a comprehensive approach to Arctic issues, this new Joint Communication underlines the need for a coherent, targeted EU approach towards the Arctic, building on the EU’s strengths, promoting responsible development while engaging more extensively in dialogue and cooperation with all Arctic stakeholders.”

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Adele Airoldi is a Fellow of the Center who was in residence at Harvard in 1994-1995.


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Jasanoff, Sheila. 2012. “Genealogies of STS.” Social Studies of Science. Social Studies of Science. Publisher's Version Abstract

Human societies fashion themselves through rites of memory, gilding and illuminating some pages of the past while consigning others to forgetfulness. Official memories reinforce dominant cultural narratives, asserting continuities where skeptics might see breaks or ruptures, contradictions or untruths; indeed, revolutions, scientific or otherwise, can be thought of as violent breaks with comfortable connections between past and present. To see the power of such story-telling, consider for example the myth of the durability of the US Constitution, a myth that proclaims the unchanging identity of that founding document through a secession, a civil war, and numerous democratizing amendments that totally transformed the look of the nation’s voting polity. To this day, that myth legitimates styles of constitutional analysis that challenge, under the rubric of strict constructionism, attempts to treat the Constitution as a source of living and evolving principles. Or, at the opposite pole of the Earth, take Australia’s ritualistic annual observance of Anzac Day. That remarkable celebration connects the forging of the nation’s identity to Gallipoli: to a dawn landing on faraway shores almost a century ago, in a war of others’ making, to a failed military enterprise that ended in an inglorious evacuation, following a bloody, months-long stalemate.

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Chandra, Amitabh, and Katherine Baicker. 2012. “The Health Care Jobs Fallacy.” New England Journal of Medicine. New England Journal of Medicine. Publisher's Version Abstract

The United States is in the throes of the most serious recession in post-war history. Despite improving employment numbers, the official unemployment rate still exceeded 8% in March 2012. Amidst this malaise, the health care sector is one of the few areas of steady growth. It may seem natural to think that if the health care sector is one of the bright spots in the economy,public policies should aim to foster continued growth in health care employment. Indeed, hospitals and other health care organizations point to the size of their payrolls as evidence that they play an important role in economic recovery, a role that must not be endangered by reforms that seek to reduce spending on health care. Politicians on both sides of the aisle are quick to emphasize the “job-creating” or “job-killing” aspects of reforms. But this focus on health care jobs is misguided. The goal of improving health and economic well-being does not go hand in hand with rising employment in health care. It is tempting to think that rising health care employment is a boon, but if the same outcomes can be achieved with lower employment and fewer resources, that leaves extra money to devote to other important public and private priorities such as education, infrastructure, food, shelter, and retirement savings.

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When praised at all, imperialism is most often commended for the peace it bestowed. By demobilizing armies, deposing marauding princes and subduing war-like states, European powers fashioned a half-century of political order. The question nonetheless arises: Should they be lauded for that? In this chapter, I view Africa’s history through the lens of comparative history and argue that the imperial peace may have retarded Africa’s development.

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Bates, Robert H. 2012. “Income and Democracy: Lipset’s Law Inverted.” Oxford Centre for the Analysis of Resource Rich Economies. Oxford Centre for the Analysis of Resource Rich Economies. Publisher's Version Abstract

We revisit Lipset’s law, which posits a positive and significant relationship between income and democracy. Using dynamic and heterogeneous panel data estimation techniques, we find a significant and negative relationship between income and democracy: higher/lower incomes per capita hinder/trigger democratization. We thus challenge the recent empirical literature that found no such significant relationship. We attribute this result to the nature of the tax base, and exploit additional sources of heterogeneity. Decomposing overall income per capita into its resource and non-resource components, we find that the coefficient on the latter is positive and significant while that on the former is significant but negative.

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Interview on 02/06/2012 with Shinju Fujihira, Associate Director, Program on U.S.-Japan Relations in the Asahi Shimbun.

120206_asahi_shininterview.pdf

Alt, James, David Dreyer Lassen, and Joachim Wehner. 2012. “Moral Hazard in an Economic Union: Politics, Economics, and Fiscal Gimmickry in Europe”. Abstract

This paper examines empirically how transparency of the budget process affects fiscal rules and incentives for fiscal gimmickry or creative accounting in the European Union. Using stock-flow adjustment data for EU countries from 1990–2007, we show that pressure from a deficit limit rule as in the Stability and Growth Pact creates incentives for fiscal gimmicks, as does political pressure from the electoral cycle and economic pressure from negative shocks in the business cycle. However, we show that where institutional transparency is higher, these incentives are damped and largely disappear. We infer that fiscal rules do not work well when institutional transparency is low.

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Bates, Robert H. 2012. “The New Institutionalism and Africa.” The Journal of African Politics. The Journal of African Politics. Publisher's Version Abstract

After briefly reviewing the new institutionalism, this article uses the history of political reform in Africa to test its key tenet: that power, if properly organized, is a productive resource. It does so by exploring the relationship between changes in political institutions and changes in economic performance, both at the macro- and the micro-level. The evidence indicates that political reform (Granger) causes increases in GDP per capita in the African subset of global data. And, at the micro-level, it demonstrates that changes in national political institutions in Africa strongly relate to changes in total factor productivity in agriculture.

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A glance at a newspaper or the wait staff in a restaurant, at high-technology hubs such as Silicon Valley, on the streets of cities like Berlin or Barcelona, or at the students in our classes makes it clear how many immigrants now live in North America and Western Europe, and how important they are to our cultural, economic, and social lives. A glance at the landscape of governance, however, does not give a clear or consistent image of immigrants’ presence. In 2007, only twelve Representatives in the 435-member United States Congress were immigrants, as were only two each of the 50 governors and 100 senators. Immigrants cast only 6.3 percent of the vote in the American presidential election of 2008, despite being almost 13 percent of the total adult population (Garbaye and Mollenkopf forthcoming 2012). As of 2009, 11 deputies in the 622-seat German Bundestag were foreign-born (Alonso and Claro da Fonseca 2009). As of 2007, no French citizen of Mahgrébin origin had sat in the 555-member National Assembly.

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Good, Byron J. 2012. “Phenomenology, Psychoanalysis, and Subjectivity in Java.” Ethos, Journal of the Society of Psychological Anthropology. Ethos, Journal of the Society of Psychological Anthropology. Publisher's Version Abstract

This essay outlines the evolution of my personal thinking about phenomenology and subjectivity. In previous work, I drew heavily on cultural phenomenology for studying illness, subjective experience, and medical knowledge across cultures. Here I describe why I have become increasingly dissatisfied with this framework for understanding subjectivity and the subject and suggest alternatives I consider important for psychological anthropology. I focus in particular on questions of how to investigate that which is largely unspeakable and unspoken in everyday speech but at times erupts into awareness as complex specters haunting the present. I provide a case from my ongoing research in Java of a young man who suffered an acute psychosis, drawing implications for a theory of subjectivity and methods for psychological anthropology. I point briefly to the relation of madness and memories of political violence as sites for investigating subjectivity, suggesting the importance of a “hauntology” for psychological anthropology. Finally, I address questions about whether a method that addresses hidden aspects of psychological experience requires a stance in which ethnographers “know better than” those with whom they are interacting.

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Carter, Brett, and Robert H. Bates. 2012. “Public Policy, Price Shocks, and Civil War in Developing Countries”. Abstract

Those who study the role of agriculture in the political economy of development focus on government policy choices on the one hand and the impact of price shocks on the other. We argue that the two should be studied together. We nd that civil unrest (Granger) causes government policies, pushing governments in poor and medium income countries to shift relative prices in favor of urban consumers. We also nd that while civil wars are related to food price shocks, when government policy choices are taken into account, the relationship disappears. We thus learn two things: Policies that placate urban consumers may in ict economic costs on governments, but they confer political benets. And when estimating the relationship between price shocks and political stability, equations that omit the policy response of governments are misspecied.

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Co-author Brett L. Carter is a PhD candidate in the Department of Government at Harvard University.

Africa is largely agrarian and the performance of agriculture shapes the performance of its economies. It has long been argued that economic development in Africa is strongly conditioned by politics. Recent changes in Africa’s political systems enables us to test this argument and, by extension, broader claims about the impact of political institutions on economic development. Building on a recent analysis of total factor productivity growth in African agriculture, we find that the introduction of competitive presidential elections in the last decades of the 20th Century appears to have altered political incentives, resulting in policy reforms that have enhanced the performance of farmers.

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Singhal, Monica, Katherine Baicker, and Jeffrey Clemens. 2012. “The Rise of the States: U.S. Fiscal Decentralization in the Postwar Period.” Journal of Public Economics. Journal of Public Economics. Publisher's Version Abstract

One of the most dramatic changes in the fiscal federalism landscape during the postwar period has been the rapid growth in state budgets, which almost tripled as a share of GDP and doubled as a share of government spending between 1952 and 2006. We argue that the greater role of states cannot be easily explained by changes in Tiebout forces of fiscal competition, such as mobility and voting patterns, and are not accounted for by demographic or income trends. Rather, we demonstrate that much of the growth in state budgets has been driven by changes in intergovernmental interactions. Restricted federal grants to states have increased, and federal policy and legal constraints have also mandated or heavily incentivized state own-source spending, particularly in the areas of education, health and public welfare. These outside pressures moderate the forces of fiscal competition and must be taken into account when assessing the implications of observed revenue and spending patterns.

rise_of_the_states.pdf

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