Reading, writing, and religion: Institutions and human capital formation

In this paper, we empirically test the role that religious and political institutions play in the accumulation of human capital. Using a new data set on literacy in colonial India, we find that Muslim literacy is negatively correlated with the proportion of Muslims in the district, although we find no similar result for Hindu literacy. We employ a theoretical model which suggests that districts which experienced a more recent collapse of Muslim political authority had more powerful and better funded religious authorities, who established religious schools which were less effective at promoting literacy on the margin than state schools. We test this hypothesis econometrically, finding that the period of Muslim political collapse has a statistically significant effect on Muslim literacy while controlling for it eliminates the significance of the proportion of Muslims on Muslim literacy. This suggests that the “long hand of history” has played some role in subsequent differences in human capital formation through the persistence of institutions discouraging literacy.     

Must we choose? European unemployment, American inequality, and the impact of education and labor market institutions

In the last 15 years, two equilibria have arisen in the advanced world. On the one hand, wage dispersion has widened in those countries where unemployment has remained low (with cyclical variations). On the other hand, wherever income inequality has remained unchanged, unemployment has shot upwards. To account for these distinct patterns, we develop a political–economic model showing that, controlling for the skills of the population, the effects of technological and trade shocks (that have affected OECD nations) that are contingent on the institutional rules in place. Economies with generous unemployment allowances adjust through subsidized unemployment. By contrast, low levels of social protection lead to less unemployment but wider wage dispersion. The level of qualifications of the labor force determines the extent of the adjustment for a given institutional arrangement. We derive, in turn, the institutional structure of each country from the political conditions in place at the time of the shock. The empirical part successfully tests the model for the sample of European regions and US states.     

Institutions, infrastructure, and economic growth

This paper develops a structural model of infrastructure and output growth that takes account of institutional and economic factors that mediate in the infrastructure–GDP interactions. Cross-country estimates of the model indicate that the contribution of infrastructure services to GDP is substantial and, in general, exceeds the cost of provision of those services. The results also shed light on the factors that shape a country's response to its infrastructure needs and offer policy implications for facilitating the removal of infrastructure inadequacies.     

Institutions, social norms, and decision-theoretic norms

This article attempts to contribute to the debate on how to define and theorize institutions, particularly regarding normativity and explanations for conformity. Firstly, it proposes some distinctions and concepts: it separates moral from epistemic values, leading to different types of legitimacy and social norms; then it distinguishes different meanings of the term ‘normative’ and introduces the concept of decision-theoretic norm. Secondly, the article defends a broad concept of institutions by arguing that some institutions are neither social norms nor decision-theoretic ones, a point that matters for institutional change and stability. Some conventions from which innovators break are highlighted as an example.     

Determinants of control structure choice between entrepreneurs and investors in venture capital-backed startups

This study examines two kinds of control structures in venture capital-backed startups. Based on incomplete contracting theory, we analyze the influence of various factors on these control structures in venture capital models, from the perspectives of investors, entrepreneurs, and startups. In particular, we show how factors such as bargaining power, monitoring costs, private benefits, and risk aversion impact the allocation of control rights. Using the survey data on a heterogeneous group of venture capital-backed startups in China, we empirically examine the impacts of various factors on the control structures of these enterprises. Based on the full sample of enterprises, we find that the stronger the venture capitalist’s bargaining power and the higher the monitoring costs, the more likely investors and entrepreneurs are to prefer joint control. Further, the greater the entrepreneur’s financing need and private benefits, the more likely investors and entrepreneurs are to choose joint control. High-tech startups are more likely to choose a joint control model than those in traditional industries. This is especially true for high-tech startups at an early stage of development. In addition, for high-tech startups, the probability of choosing joint control shows a negative relationship with investors’ strategic benefits and a positive relationship with investors’ risk aversion. Regarding startups in traditional industries, investors’ strategic benefits and risk aversion have an insignificant impact on their control structures.     

How and when entrepreneurs’ passion lead to firms’ radical innovation: moderated mediation model

ABSTRACT

The extant literature affirms that passion is important for entrepreneurs’ success. However, the related studies have failed to explain how and when entrepreneurial passion (EP) affects firms’ radical innovation (RI). The current study explores the connections between EP and firms’ RI and mediation of exploratory learning (EL) in this relationship. Moreover, we investigate the moderating role of the Zhong–Yong thinking (ZYT) of Chinese entrepreneurs. Findings from 310 new Chinese enterprises demonstrate that EP directly influences RI and indirectly through EL. ZYT of entrepreneurs can likewise reinforce the connection between their EP and RI via EL. Lastly, we discuss the theoretical and practical implications of our findings.     

From necessities to imaginary worlds: Structural change,product quality and economic development

In this paper we explore how innovation and structural change affected economic development in the long run, by which we mean a period such as the one between the industrial revolution and the present. We separate the period since the industrial revolution into two sub periods, which we call ‘necessities’ and ‘imaginary worlds’ and focus on three trajectories, increasing productive efficiency, increasing output variety, and increasing output quality and differentiation. In the paper we show how a combination of the three trajectories gave rise to the transition between ‘necessities’ and ‘imaginary worlds’ and propose a mechanism of economic development which could have given rise to the type of economic system which we can observe today. To create growing output quality and differentiation higher competencies were required. These higher competencies required higher levels of education and demanded higher wages, which contributed to raise consumers' purchasing power. These phenomena, combined with the income effect of the creation of new sectors, generated the disposable income with which consumers could purchase the new, higher quality, non necessities, goods and services generated by innovation. In the paper we study the impact of several model parameters on the stability of the virtuous circle previously described.     

The link between institutions, technical change and macroeconomic volatility

This paper evaluates the role of technical change as a mediating channel through which the effects of institutions trickle down to affect growth volatility. Using different samples, estimation procedures and indicators of institutions and technical change, the results show that technical change is an important stabilizing force of growth volatility and that at least part of the stabilizing force of technical change originates from strong institutions. This conclusion does not appear to be generated by weak data, simultaneity bias or measurement errors and is remarkably robust to a large number of alternative specifications.     

Institutions and environmental governance: A reconceptualization

This article presents the conceptual revisions needed to extend the new institutional approach to environmental governance from its current local and international domains of application to all governance solutions, including national environmental and natural resource use policies and multi-level governance solutions that are increasingly used to address global environmental change. The article suggests that environmental governance is best understood as the establishment, reaffirmation or change of institutions to resolve conflicts over environmental resources. It also explains why the choice of these institutions is a matter of social justice rather than of efficiency. The article suggests a way to understand formal and state-centered governance solutions as forms of collective ownership not unlike common property. The article demonstrates how institutional analysis can gain resolution by looking at the functional and structural tiers, organization of governance functions, and formulation of key institutional rules as key aspects of the design of governance institutions.     

On the interaction between education and social security

This paper uses an overlapping generations model with endogenous fertility choices to analyze the quantitative costs and benefits of subsidizing higher education, paying particular attention to the interaction between such policy and the sustainability of the social security system. The paper focuses on the demographic change as the mechanism that link both policies. It is found that an increase in education subsidies changes the educational composition of the population and lowers average fertility. Lower average fertility and higher life expectancy of educated individuals translates into changes in the age structure of the population that requires an increase in the social security tax rate in order to balance the pension budget. Such process reduces the welfare benefits of this educational policy since the rise in social security taxes lowers the after-tax lifetime earnings of almost all individuals born in the period of the policy reform and over.     

Micro-heterogeneity and aggregate productivity development in the German manufacturing sector

A decomposition of aggregate productivity growth of German manufacturing firms that pertain to 11 different industries at a roughly two-digit level observed over the period 1981–1998 is performed. Productivity is measured by a nonparametric frontier function approach. The decompositions of productivity allow for an explanation of the aggregate outcomes by the quantification of the effect of structural change and the contributions of entering and exiting firms. Our results show that these forces drive aggregate productivity to a considerable extent. Remarkably, the large productivity improvements after the German reunification are mainly driven by structural change.

Tests for structural change,aggregation, and homogeneity

Structural change can be considered by breaking up a sample into subsets and asking if these can be aggregated or pooled. Strategies for constructing tests for aggregation and structural change in this setting have not received sufficient attention in the literature. Our methodology for testing generalizes to multiple regimes a discussion of Pesaran et al. (1985) for the case of two regimes. This treatment permits a unified approach to a large number of testing problems discussed separately in the literature, as special cases or as parts of a test of homogeneity. We also provide a simple alternative to much more complex testing strategies currently being researched and developed in testing for structural change.     

Structural change in a growing open economy: Attitudes and institutions in Latin America and Asia

This article provides a formal assessment of the interplay between structural and institutional change. We highlight the sharp contrast between societies whose past experiences condition them to regard innovative change with antipathy and those with favourable attitudes. Using Thirlwall's law as the connecting bridge, we present empirical evidence relating attitudes and the productive structure for a sample of 20 Latin American and 14 Asian countries between 1980 and 2014. Our findings are formalised in terms of two agent-based models. The first admits multiple equilibria and is used to discuss the experiences of modern Latin America and Asia. Allowing for feedback effects from growth to attitudes towards change, the second model shows how a complex economy might be associated with a better distribution of power. It is demonstrated that endogenous cyclical trajectories may arise, providing further insights on the nature of structural and institutional change.     

Public spending and growth: The role of government accountability

This paper examines the role of institutions in the nexus between public spending and economic growth. Empirical results based on a newly assembled dataset of 80 countries over the 1970–2010 period suggest that particularly when institutions prompt governments to be accountable to the general citizen does public capital spending promote growth. Taking account of the type of financing for this spending, we show that the growth-promoting effect under an accountable government appears to prevail for various financing sources, including a reallocation from current spending, an increase in revenue, and a rise in the budget deficit. However, government accountability does not seem to play a key role in the growth effects of current spending.     

Institutions and Development From a Historical Perspective: the Case of the Brazilian Development Bank

ABSTRACT

This paper analyzes the role played by the Brazilian Development Bank (BNDES) in different periods of Brazil’s development process since its founding in 1952. The bank’s history is nonlinear, varying with socio-economic and political changes over time. Four major periods in its history are: (i) from its creation to the debt crisis in the 1980s, a period known as ‘developmentalism’; (ii) the neoliberal movement of the 1990s; (iii) the reintroduction of the BNDES as a relevant tool for development in the 2000s; and (iv) a new neoliberal movement that arose beginning in mid-2016. Each of these periods is characterized by certain development conventions that shape how institutions, such as the BNDES, operate, and at the same time are shaped by them. In contrast to mainstream economics, which focuses on a one-size-fits-all institution for development, this paper evaluates the interactions between development and institutions as historical processes, with an emphasis on the prevailing development conventions. The trajectory and different roles assumed by the BNDES over time exemplify this permanent relationship, rejecting the idea that particular types of institutions are related to development.     

我国农村金融机构的基本事实、发展模式及政策取向

近些年来，在我国农村的正规金融机构采取了以商业化、市场化为导向的改革，由此造成了正规金融供给不足，而非正规金融机构的地位和作用得到强化？如何处理两者的关系？本文认为：应该允许两者同时存在，并且通过政策引导使它们建立一种合理的垂直分工体系，从而充分发挥各自的优势。     

中国省级预算中的非正式制度:一个交易费用理论框架

运用交易费用经济学 ,本文研究了中国省级预算中非正式制度出现的原因及其主要形式。本文的主要观点是 :中国省级预算中存在的非正式制度是省级政治中的政治家发展出来解决他们制定和实施预算合同时所面临的交易费用问题的。主要的非正式制度包括三种横向非正式制度 ,即预算产权、部分等级制和完全等级制 ,以及围绕着这三种横向非正式制度而形成的“以关系为基础”的纵向非正式制度。     

The creation of effective states in the OECD since 1870: The role of inequality

Research shows that state capacity is crucial for economic development, yet the impact of inequality on state capacity is not well understood. This paper examines the impact of income inequality on three key dimensions of state capacity, namely legal, fiscal and collective capacity using annual data for a core of 21 OECD countries over the period 1870–2013. We find that the marked reduction in inequality over most of the last century starting from 1916 was pivotal to the significant improvements in legal, fiscal and collective capacity in the OECD countries over the same period.     

The double trap: Institutions and economic development

The empirical growth literature has established that institutional quality is a deep determinant of economic growth. We examine whether institutional quality in low income countries converges to the level witnessed in high income countries, or whether they are trapped in convergence clubs that stagnate or even deteriorate over time. Using the log-t-test suggested by Phillips and Sul (2007), we find evidence of multiple equilibria in institutional quality, with several countries stuck in poor quality institutions traps. We further find that per capita incomes of some of the developing countries are also stuck in low-level traps. Finally, using bivariate probit estimations, we establish that poor institutional traps are major determinants of low income traps. These results indicate that these countries are caught in a double trap where their incomes are stuck in low-level traps from which it is difficult to escape, because the institutions that enable growth are also stuck in low-quality traps.     

The price of education and inequality

Constructing a simple model that includes the price of education, this paper shows that the educational expenditure of rich households could prevent poor households from escaping poverty. The paper offers an explanation for persistent inequality.