Are incentives against economic justice?

We consider the problem of fairly allocating a social endowment of indivisible goods and money when the domain of admissible preferences contains, but is not restricted to, quasi-linear preferences. We analyze the manipulability of the Generalized Money Rawlsian Fair (GMRF) solutions. (i) We show that the Nash and strong Nash equilibrium correspondences of the “preference revelation game form” associated with each GMRF solution coincide with the no-envy solution (in equilibrium, efficiency is preserved according to agents' true preferences). (ii) A corollary is that the GMRF solutions “naturally implement” the no-envy solution in Nash and strong Nash equilibria.     

Are financial incentives for wellness fair?

Employers have shown considerable enthusiasm for programs that use financial incentives to stimulate health-related changes in employee behavior and lifestyle. This article raises fairness issues in relation to these programs.     

Are elections debt brakes? Evidence from French municipalities

We show that voters are fiscal conservatives, although in the long run only: while the average (over the mandate) level of debt has a negative impact on the probability of reelection, pre-election debt accumulation by incumbents increases their probability of reelection. As the negative impact becomes larger as the debt level becomes higher, it compensates for the short run effect. Elections thus appear as a disciplining device, even if a weak one.     

Bilateral foreign aid: how important is aid effectiveness to people for choosing countries to support?

We conduct a discrete choice experiment to determine how important aid effectiveness is to people relative to other criteria for choosing countries to support with bilateral foreign aid. We find that aid effectiveness is important, on a par with recipient-country need as proxied by the level of hunger and malnutrition. Both criteria are more important than others.     

Do elites benefit from democracy and foreign aid in developing countries?

A popular argument for the absence of any beneficial effects of foreign aid is that it is skimmed by political elites in recipient countries. However, studies also suggest that aid may be more effective in relatively democratic developing countries. By exploring data on income quintiles derived from the World Income Inequality Database for 88 developing countries, a set of results indicate that foreign aid and democracy in conjunction are associated with a higher share of income held by the upper quintile. It thus appears that foreign aid, contrary to popular beliefs, leads to a more skewed income distribution in democratic developing countries while the effects are negligible in autocratic countries. The paper closes with a discussion of potential mechanisms generating this perverse effect.     

Does foreign aid really raise per capita income? A time series perspective

Abstract. We analyze the relationship between per capita income and foreign aid. We employ annual data and five‐year averages and carefully examine the time‐series properties of the data. Panel estimations with dynamic feasible generalized least‐squares (DFGLS) show that aid generally has an insignificant or minute negative significant impact on per capita income (particularly in highly aid‐dependent countries). This holds true for countries with different levels of human development and income, as well as for different regions. We also find that aid has a small positive impact on investment, but a significant negative impact on domestic savings (crowding out) and the real exchange rate (appreciation). JEL classification: F35, O11, C23, C51     

Changing aid regimes? U.S. foreign aid from the Cold War to the War on Terror

This paper explores how U.S. bilateral economic aid has changed over time, focusing on how the recent era-in which the War on Terror has played a prominent role in the Bush administration's aid policy-differs from previous eras. In particular, has the renewed geopolitical role of aid coincided with a reduction of aid to the poorest countries or less weight on need in U.S. aid allocation decisions? We start with an analysis of annual U.S. aid budgets from 1955 to 2006. Controlling for domestic political and economic conditions, we find that the War on Terror's effect on the aid budget is significantly larger than is immediately apparent. To explore how the emphasis on need may have changed over time, we use country-level panel data on aid allocations to 119 countries across the same time period. This shows that U.S. aid flows-for the poorest as well as other developing countries-increased with the War on Terror. However, after rising for 35 years, the emphasis placed on need has been falling steadily for core aid recipients during the War on Terror.     

Saving less when there is more foreign lending? Foreign debt and savings in developing countries

Although literature has given considerable attention to the effects of foreign debt on growth, we still know little about its effects on the internal potential for capital formation. Literature suggests a number of channels through which the availability of foreign financing could affect domestic savings. We test empirically this relationship using data for Sub‐Saharan Africa and Latin America and the Caribbean over 1975–2004. Controlling for endogeneity, we find that foreign debt adversely influences domestic savings especially in the long run. The results are not susceptible to the choice of countries, although few outliers should be noted.     

Re-examining the relationship between domestic investment and foreign aid: does political stability matter?

While past studies had conflicting conclusions regarding the impact of foreign aid on growth and development of a nation, recent studies have tried to delve deeper into the question, ‘what makes aid work?’ (see, Dutta, Leeson, and Williamson, 2013; Burnside and Dollar, 2000, 2004; Svensson, 1999). This paper tests how political stability (vis-à-vis political instability) affects the relationship between domestic investment and foreign aid. Applying dynamic panel estimators, our results show that political stability affects aid’s effectiveness on domestic capital formation. The paper considers alternative measures of political stability (vis-à-vis instability), focusing on the political characteristics of a system that have the potential to make a nation stable. Political stability affects policy selection by the government positively and, thus, public resources such as foreign aid are put to the desired use. The estimated marginal impacts show that foreign aid enhances domestic investment in the presence of a stable political climate, but there is a diminishing return to aid.     

Are Ecosystem Services Replaceable by Technology?

This paper assesses the evidence for and against the view that the processes that deliver ecosystem services are so fundamental within ecosystems that neither the services themselves nor the goods that they deliver to humans could be replaced technologically. I consider cases where the natural processes have been replaced and also the probably more common and usually less invasive cases where they have been enhanced by technological interventions. Supporting services are probably least amenable to technology, with the major exception of nutrient cycling, which has been extensively replaced by the use of chemical fertilizers. Final services offer more examples of actual or potential replacement, including the highly controversial example of geoengineering for climate regulation. Finally, there are numerous examples of replacement technologies for environmental goods, especially in the case of energy (fossil and many renewable fuels), fibres (artificial fibres) and biochemicals (industrial pharmaceuticals). The full economic costs of replacement technologies have rarely been explored, and in some cases it appears that the replacement is more expensive than the natural service. Enhancement technologies, in contrast, supplement the output of ecosystem services and are probably in most cases more benign. The doubts about true costs and the fact that many supporting and final services seem either irreplaceable or only replaceable at huge cost adds to the need to protect them.     

Are Commodity Prices Driven by Fundamentals?

Physical scarcity is hardly sufficient to explain commodity price swings. However, despite of clues of commodity market inefficiency in the last decade, excess volatility in commodity markets emerges only under strong assumptions. When we allow for non‐stationarity in commodity prices and time variation in commodity‐specific risk premia, evidence of commodity market inefficiency becomes significantly weaker. Moreover, there is some evidence of commodity‐specific regime changes in commodity markets, with negligible or even positive correlation between efficiency and market liquidity.     

The (small) blessing of foreign aid: further evidence on aid’s impact on democracy

In an empirical contribution to the literature of foreign aid, we estimate the impact of foreign aid on democracy in a panel of 93 developing economies during 1971–2010. We find that foreign aid promotes democracy, with the result robust to different estimation methodologies and control variables and to instrumenting for foreign aid.     

Do remittances and foreign aid augment the gross savings: Bangladesh,India and Philippines perspective?

Savings is considered to be a principal determinant to achieve long-run economic growth. Remittances and foreign aid are two important foreign capital inflows to meet the savings deficiency of developing nations. The objective of this study is to investigate the long-run impact of remittance to stimulate savings in remittance recipient countries. This paper contributes to the macroeconomic impact of remittance through a comparative study on Bangladesh, India and Philippines that positioned among the top ten largest remittance recipient countries from 2008 and onwards. The analysis makes use of an annual time series data over the period of 1980–2015. The Johansen cointegration test suggested long-run cointegrating relationship of remittance and foreign aid on gross savings. The test result suggests positive effect of remittances on gross savings for Bangladesh and Philippines although an insignificant negative effect for India. However, foreign aid has significant negative long-run impact in all the three cases. Government policy should focus on leveraging remittance flows to facilitate savings and investment for capital accumulation.     

Does aid affect inequality?

We show that there was a negative correlation between pro-poor aid and inequality in the period before the mid-2000s. This article provides an explanation for this observed relationship. Using panel data on 34 countries for the period 1996–2014, we test the hypothesis that pro-poor aid has an inequality-reducing effect. To demonstrate that the negative correlation is not spurious, we use dynamic panel techniques with alternative specifications. We show that the share of pro-poor aid has a negative effect on inequality. In addition, we show that the interaction term between the poverty rate and the change in pro-poor aid has a significant effect. These empirical results are consistent with our theoretical predictions. The results imply that aid can reduce inequality by altering the allocation of aid, rather than by increasing the amount of aid.     

Rogue aid? An empirical analysis of China's aid allocation

Foreign aid from China is often characterized as “rogue aid” that is guided by selfish interests alone. We collect data on Chinese project aid, food aid, medical staff and total aid money to developing countries, covering the 1956–2006 period, to empirically test to what extent self‐interests shape China's aid allocation. While political considerations shape China's allocation of aid, China does not pay substantially more attention to politics compared to Western donors. What is more, China's aid allocation seems to be widely independent of recipients' endowment with natural resources and institutional characteristics. Overall, denoting Chinese aid as “rogue aid” seems unjustified.     

Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China

At the center of the pollution haven debate is the claim that foreign investors from industrial countries are attracted to weak environment regulations in developing countries. Some recent location choice studies have found evidence of this attraction, but only for inward FDI in industrial countries. The few studies of inward FDI in developing countries have been hampered by weak measures of environmental stringency and by insufficient data to estimate variation in firm response by pollution intensity. This paper tests for pollution haven behavior by estimating the determinants of location choice for equity joint ventures (EJVs) in China. Beginning with a theoretical framework of firm production and abatement decisions, we derive and estimate a location choice model using data on a sample of EJV projects, Chinese effective levies on water pollution, and Chinese industrial pollution intensity. Results show EJVs in highly-polluting industries funded through Hong Kong, Macao, and Taiwan are attracted by weak environmental standards. In contrast, EJVs funded from non-ethnically Chinese sources are not significantly attracted by weak standards, regardless of the pollution intensity of the industry. These findings are consistent with pollution haven behavior, but not by investors from high income countries and only in industries that are highly polluting. Further investigation into differences in technology between industrial and developing country investors might shed new light on this debate.     

Are momentum crashes pervasive regardless of strategy? Evidence from the foreign exchange market

This article studies the option-like behaviour of popular momentum strategies implemented in foreign exchange markets. The results confirm recent research findings of strong option-like behaviour for momenutm measures, based on the cumulative return from 12 and 6 months prior to the formation date Surprisingly, there is no such evidence for the popular momentum strategy accounting for a 1-month formation period.     

Is NGO aid not so different after all? Comparing the allocation of Swiss aid by private and official donors

Being closer to the poor, NGOs are widely believed to provide better targeted aid than state agencies. But empirical evidence is largely lacking. We contribute to closing this gap by drawing on an exceptionally detailed Swiss database that covers different forms of NGO aid and several official aid benchmarks. The Tobit estimations account for both altruistic and selfish aid motivations. Whether or not NGOs provide better targeted aid depends on the source of NGO funding as well as the choice of the official benchmark. In contrast to widespread belief, however, the allocation of self-financed NGO aid reveals striking similarities to the allocation of official Swiss development aid.     

Are bidders in auctions anchored by their bidder number?

This article examines whether bidders in a school fundraising auction were anchored by their bidder number. We find no evidence that they were.