Research Library

Desai, Mihir A. 2004. “Financial Constraints and Growth: Multinational and Local Firm Responses to Currency Crises”.Abstract

This paper studies the effects of financial constraints on firm growth by investigating if large depreciations differentially impact multinational affiliates and local firms in emerging markets. U.S. multinational affiliates increase sales, assets and investment significantly more than local firms during, and subsequent to, currency crises. The enhanced relative performance of multinationals is traced to their ability to use internal capital markets to capitalize on the competitiveness benefits of large depreciations. Investment specifications indicate that increases in leverage resulting from sharp depreciations constrain local firms from capitalizing on these investment opportunities, but do not constrain multinational affiliates. Multinational parents also infuse new capital in their affiliates after currency crises. These results indicate another role for foreign direct investment in emerging markets–multinational affiliates expand economic activity during currency crises when local firms are most constrained.

Download PDF
Froese, Paul. 2004. “Forced Secularization in Soviet Russia: Foreign Direct Investment in a World of Multiple Taxes”.Abstract

Under communism, the Russian religious landscape consisted mainly of two competitors – a severely repressed Russian Orthodox Church and a heavily promoted atheist alternative to religion called "scientific atheism". Under these circumstances, one might expect the rapid spread of religious disbelief. But the intensity of the atheist campaign originated from official mandate and not popular appeal. In turn, scientific atheism never inspired the Russian population and grew increasingly uninspired as Soviet officials created a monopoly "church" of scientific atheism in hopes of replacing persistent religious beliefs and practices. This paper is dedicated to explaining why communists could not successfully convert the masses to atheism. The findings provide evidence that systems of belief require more than simply the power of promotion and coercion to become accepted.

Download PDF

Rodrik, Dani. 2004. “From 'Hindu Growth' to Productivity Surge: The Mystery of the Indian Growth Transition”. Download PDF

Bader, Chris, and Paul Froese. 2004. “The Fundamental Importance of God's Character: Measuring Religious Effects and Differences”.Abstract

Social scientists often explain religious effects in terms of religious group affiliations. Typically, researchers identify religious groups by denomination or some broader popular categorization, such as "fundamentalist," or "evangelical." To better capture religious differences, Steensland et al. (2000) propose an intricate classification of American denominations which takes into account the theology and historical development of various American religious traditions. In response, we propose to replace the reliance on indirect denominational and other group membership as inferential measures of religiousness with a more appropriate direct measure: conceptions of God. This simple measure predicts church attendance rates, belief in biblical literalism, party identification, abortion attitudes, and sexual morality attitudes. In addition, this indicator provides a means to understand variation within religious traditions. God?s character proves the most straightforward way to describe religious differences and the most efficient way to demonstrate how religion impacts the world.

Download PDF

Norris, Pippa. 2004. “Gender Equality and Democracy”.Abstract

Multiple factors have been found to determine the structure of opportunities for women?s representation in elected office, including the institutional context like the electoral system and the use of affirmative action strategies within party lists, and the resources that women and men bring to the pursuit of fulltime legislative careers, such as their social and occupational networks (Rule 1987; Norris 1997; Karam 1998; Kenworthy and Malami 1999; Caul 1999; Reynolds 1999). What this study seeks to demonstrate is that in addition to these factors, the trend toward gender equality is intimately linked with the broader process of cultural change and democratization.

Download PDF

Rodrik, Dani. 2004. “Getting Institutions Right”.Abstract

A user's guide to the recent literature on institutions and growth.

Download PDF

Cooper, Richard N. 2004. “A Glimpse of 2020”.Abstract

To help get our bearings in a complex and ever-changing world, it is useful to ask what the world will look like in a decade or two. Forecasting the future accurately is of course impossible. And of course we cannot forecast surprises, by definition. But by projecting known trends and tendencies, it is possible to say a remarkable amount about the broad outlines of the world one to two decades from now. In particular, we can identify with high confidence four factors, which we hardly notice from year to year, but which accumulate relentlessly over time, such that by 2020 they will have profoundly transformed the world as we now know it. The four factors are population growth, growth in per capita income, increasing international mobility among national firms and individuals, made possible and driven by both technological changes in transportation and communication, and the aging of existing political leaders (as well as everyone else).

For concreteness, I will focus below on the year 2020. The year should not be taken literally, but as the rough mid–point of one to two decades from now. That looks beyond the immediate issues of today, and allows the cumulation of small annual changes in the trends mentioned above. But it is also a comprehensible distance into the future, the same distance as the year 1988, which many adults can remember, is into the past.

Download PDF

Simmons, Beth A. 2004. “The Globalization of Liberalization: Policy Diffusion in the International Political Economy”.Abstract

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 adequately capture influences on these policy choices. Evidence suggests that the adoption of liberal economic practices is highly clustered both temporally and spatially. We hypothesize that this clustering might be due to processes of policy diffusion. We think of diffusion as 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.

Download PDF
Hausmann, Ricardo. 2004. “Growth Accelerations”.Abstract

Unlike most cross–country growth analyses, we focus on turning points in growth performance. We look for instances of rapid acceleration in economic growth that are sustained for at least eight years and identify more than 80 such episodes since the 1950s. Growth accelerations tend to be correlated with increases in investment and trade, and with real exchange rate depreciations. Political–regime changes are statistically significant predictors of growth accelerations. External shocks tend to produce growth accelerations that eventually fizzle out, while economic reform is a statistically significant predictor of growth accelerations that are sustained. However, growth accelerations tend to be highly upredictable: the vast majority of growth accelerations are unrelated to standard determinants and most instances of economic reform do not produce growth accelerations.

Download PDF

Abrami, Regina M. 2004. “On the High Road: Trade, International Standards, and National Competitiveness”.Abstract

What's fair when it comes to setting the terms of market access? The rules of the World Trade Organization (WTO) were meant to answer this question, as well as settle disputes surrounding it. On these grounds, it was also sold as the best means to open markets, encourage economic development, and facilitate economic exchange between countries, large and small—in effect, lifting all boats. Yet now, some ten years later, the organization is facing a tidal wave of charges regarding the uneven power of its member countries and persistent barriers to exchange. Some of the most vocal critics hail from the developing world. Their frustration over unequal market access, agricultural subsidies, and the inability "to right the rules" of trade culminated in disruption of the 1999 WTO meetings in Seattle, the collapse of WTO talks at Cancun in 2003, and the cautious optimism over recent gains in Geneva. At issue is whether the rules of international trade are being used to hold up or push ahead prosperity in the developing world.

Download PDF
Kydd, Andrew H. 2004. “The Honest Broker: Mediation and Mistrust”.Abstract

Mediation is one of the most widespread techniques for preventing con ict and pro–moting cooperation. Unfortunately, the literature on mediation has not yet reached consensus on what makes mediation work. For instance, some have argued that mediators should be unbiased, while others argue that biased mediators are effective. This paper examines the conditions under which mediators can facilitate cooperation by building trust between the two parties. Mediators can be credible trust builders in one round interactions only if they prefer mutual non–cooperation to either side exploiting the other. A biased mediator or one who is solely interested in promoting cooperation will be ineffective. If the mediator is involved in an ongoing relationship with the par–ties, biased mediators can function as trustbuilders, provided that the degree of bias is not too great.

Download PDF

Frankel, Jeffrey. 2004. “How the US Government Flubbed Its Opportunity to Exercise Global Economic Leadership”. Download PDF

Helmke, Gretchen, and Steven Levitsky. 2004. “Informal Institutions and Comparative Politics: A Research Agenda”.Abstract

Mainstream comparative research on political institutions focuses primarily on formal rules. Yet in many contexts, informal insti–tutions, ranging from bureaucratic and legislative norms to clientelism and patrimonialism, shape even more strongly political behavior and outcomes. Scholars who fail to consider these informal rules of the game risk missing many of the most important incentives and constraints that underlie political behavior. In this article we develop a framework for studying informal institutions and integrating them into comparative institutional analysis. The framework is based on a typology of four patterns of formal–informal institutional interaction: complementary, accommodating, competing, and substitutive. We then explore two issues largely ignored in the literature on this subject: the reasons and mechanisms behind the emergence of informal institutions, and the nature of their stability and change. Finally, we consider challenges in research on informal institutions, including issues of identification, measurement, and comparison.

Download PDF

Robinson, James A. 2004. “Institutions as the Fundamental Cause of Long-Run Growth”.Abstract

This paper develops the empirical and theoretical case that differences in economic institutions are the fundamental cause of differences in economic development. We first document the empirical importance of institutions by focusing on two "quasi–natural experiments" in history, the division of Korea into two parts with very different economic institutions and the colonization of much of the world by European powers starting in the fifteenth century. We then develop the basic outline of a framework for thinking about why economic institutions differ across countries. Economic institutions determine the incentives of and the constraints on economic actors, and shape economic outcomes. As such, they are social decisions, chosen for their consequences. Because different groups and individuals typically benefit from different economic institutions, there is generally a conflict over these social choices, ultimately resolved in favor of groups with greater political power. The distribution of political power in society is in turn determined by political institutions and the distribution of resources. Political institutions allocate de jure political power, while groups with greater economic might typically possess greater de facto political power. We therefore view the appropriate theoretical framework as a dynamic one with political institutions and the distribution of resources as the state variables. These variables themselves change over time because prevailing economic institutions affect the distribution of resources, and because groups with de facto political power today strive to change political institutions in order to increase their de jure political power in the future. Economic institutions encouraging economic growth emerge when political institutions allocate power to groups with interests in broad–based property rights enforcement, when they create effective constraints on power–holders, and when there are relatively few rents to be captured by power–holders. We illustrate the assumptions, the workings and the implications of this framework using a number of historical examples.

Download PDF

Robinson, James A. 2004. “Institutions, Volatility, and Crises”.Abstract

In Takatoshi Ito and Andrew K. Rose eds. Growth and Productivity in East Asia, Chicago and London; The University of Chicago Press.

There is a growing consensus among economists that differences in institution, in particular the enforcement of property rights, rule of law, and constraints placed on politicians and elites, have a first–order effect on long–run economic development? Recent empirical findings support this notion. There is a strong correlation between institutions and economic financial development? especially when we look at the historically determined differences in institutions?
In this paper and a companion paper, Acemoglu et al. (2003), we argue that institutions also have a first–order effect ion short– and medium–run economic instability. We document that societies that have weak institutions for historical reasons have suffered substantially more output volatility and experienced more severe output, exchange rate, banking, and political crises over the past thirty years. The link we document between the historically determined component of institutions and economic instability calls for a quiet different view of medium–run macroeconomic volatility, and for more work to understand the relationship between institutions and volatility. This paper is therefore meant more as a progress report to encourage others to investigate these issues.

Download PDF

Desai, Mihir A. 2004. “Market Reactions to Export Subsidies”.Abstract

This paper analyzes the economic impact of export subsidies by investigating stock price reactions to a critical event in 1997. On November 18, 1997, the European Union announced its intention to file a complaint before the World Trade Organization (WTO), arguing that the United States provided American exporters illegal subsidies by permitting them to use Foreign Sales Corporations to exempt a fraction of export profits from taxation. Share prices of American exporters fell sharply on this news, and its implication that the WTO might force the United States to eliminate the subsidy. The share price declines were largest for exporters whose tax situations made the threatened export subsidy particularly valuable. Share prices of exporters with high profit margins also declined markedly on November 18, 1997, suggesting that the export subsidies were most valuable to firms earning market rents. This last evidence is consistent with strategic trade models in which export subsidies improve the competitive positions of firms in imperfectly competitive markets.

Download PDF

Hiscox, Michael, and Brian Burgoon. 2004. “The Mysterious Case of Female Protectionism: Gender Bias in Attitudes Toward International Trade”.Abstract

We examine new survey data on attitudes toward international trade showing that women are significantly less likely than men to support increasing trade with foreign nations. This gender gap remains large even when controlling for a broad range of socio-economic characteristics among survey respondents, including occupational, skill, and industry-of-employment differences that feature in standard political-economy models of individuals’ trade policy preferences. Measures of the particular labor-market risks and costs associated with maternity do not appear to be related at all to the gender gap in trade preferences. We also do not find any strong evidence that gender differences in non-material values or along ideological dimensions have any affect on attitudes toward trade. The data do clearly reveal that the gender gap exists only among college-educated respondents and is larger among older cohorts. We argue that differences in educational experience—specifically, exposure to economic ideas at the college level—appear to be most plausible explanation for gender differences in attitudes toward trade. The findings suggest the possibilities of a renewed theoretical and empirical focus on the political roles played by ideas, not just among policymakers but also among the broader electorate. In practical terms, there are also implications for trade policy outcomes in different contexts and for how debates over globalization contribute to broader gender divisions in politics.

Download PDF
Braumoeller, Bear F. 2004. “Nested Politics: A New Systemic Theory of IR”.Abstract

This paper attempts to capture the behavior of agents (states), and the effects of international systemic structure, and the relationship of each to the other in a systemic, dynamic theory of international politics. The "nested politics" model describes how three layers of political authority– individual autonomy nested within state hierarchy nested within interna–tional anarchy–constitute an engine for both changes in state behavior and changes in the distributions that constitute the structure of the inter–national system. This paper discusses the model and examines its logical implications for existing explanations of Great Power behavior.

Download PDF

Norris, Pippa. 2004. “The 'New Cleavage' Thesis and the Social Basis of Radical Right Support”.Abstract

The rise of the radical right is open to multiple interpretations. The question addressed in this paper is whether many of these parties have fostered an enduring social base among core voters and, if so, which social sectors are most likely to support them. Part I discusses the alternative theoretical frameworks provided by the classic accounts of the 1950s and 1960s, the ?new social cleavage? thesis common during the last decade, and the theory of partisan dealignment. The chapter then compares evidence to analyze rival hypotheses about the social basis of the radical right vote across fifteen nations, using data drawn from the European Social Survey, 2002 and the Comparative Study of Electoral Systems, 1996–2001. Part II focuses upon the role of socioeconomic indicators, while Part III considers the enduring gender gap and patterns of generational support. The conclusion considers the implications of these results for understanding the basis of radical right popularity, and for the stability and longevity of these parties.

This paper is drawn from Chapter 6 of Radical Right: Parties and Electoral Competition, a new book by the author forthcoming with Cambridge University Press (2005).

Download PDF

Desai, Mihir A. 2004. “Old Rules and New Realities: Corporate Tax Policy in a Global Setting”.Abstract

This paper reassesses the burden of the current U.S. international tax regime and reconsiders well–known welfare benchmarks used to guide international tax reform. Reinventing corporate tax policy requires that international considerations be placed front and center in the debate on how to tax corporate income. A simple framework for assessing current rules suggests a U.S. tax burden on foreign income in the neighborhood of $50 billion a year. This sizeable U.S. taxation of foreign investment income is inconsistent with promoting efficient ownership of capital assets, either from a national or a global perspective. Consequently, there are large potential welfare gains available from reducing the U.S. taxation of foreign income, a direction of reform that requires abandoning the comfortable, if misleading, logic of using similar systems to tax foreign and domestic income.

Download PDF