Friend or foe? Social ties in bribery and corruption

Experimental Economics - This paper studies how social ties interact with bribery and corruption. In the laboratory, subjects are in triads where two ‘performers’ individually complete...     

Violence and political outcomes in Ukraine—Evidence from Sloviansk and Kramatorsk

In this paper, we study the effects of violence on political outcomes using a survey of respondents in Sloviansk and Kramatorsk – two cities that were affected heavily by the conflict in Eastern Ukraine. We show that experiencing physical damage goes together with lower turnout, a higher probability of considering elections irrelevant and a lower probability of knowing one's local representatives. We also find that property damage is associated with greater support for pro-Western parties, lower support for keeping Donbas in Ukraine and lower support for compromise as a way to stop the conflict. Our paper thus shows the importance of investigating the impact of different kinds of victimization, as different degrees of victimization can have different, sometimes even conflicting outcomes. Our paper also suggests that one of the more optimistic conclusions of previous studies, that victimization can increase political participation, does not necessarily carry over to Ukraine, which illustrates the importance of country and context-specific studies.     

The biological standard of living and body height in colonial and post-colonial Indonesia, 1770–2000

How did the biological standard of living develop in Indonesia during colonial times? Did it increase substantially after decolonization? In our study, we use four sets of anthropometric data to construct time series of average human height since the 1770s. The paper observes a significant decline in heights in the 1870s, followed by only modest recovery during the next three decades, both of which are related to a sequence of disasters. Average heights increased from the 1900s and accelerated after World War II. The World Economic Crisis, the Japanese occupation and the war of independence in the 1930s and 1940s constituted a difficult period. Average height growth thereafter is related to improvements in food supply and the disease environment, particularly hygiene and medical care.     

What leads to official corruption in China? A politico-economic analysis of economic opportunities and government corruption across China’s provinces

This paper investigates the relationship between economic opportunities and official corruption in China. We construct a cross-province sample of corrupted officials to analyse the effects on official corruption of mineral reserve, coal production, real estate and road construction, while including control variables such as population, GDP per capita, economic growth rate, private assets, provincial government capacity, fiscal transparency and distance of the province from Beijing. Spanning from December 2012 to November 2015, our sample contains 526 high-level government officials who worked in various provinces in China. We find through multivariate regression that economic opportunities represented by coal, minerals, real estate and road construction all have a positive and significant effect on official corruption in China at the levels of provincial department director or deputy director; meanwhile, capacity of political extraction, road construction and coal production are better indicators of official corruption at the level of governor or deputy governor.     

Price behaviour in European countries: testing the law of one price in the short– and long–run at various levels of aggregation

The objectives of this paper are to test the relaltive version of the law of one price in the short and the long run at various levels of aggregation for traded goods. The use of an error-correction model is made to test the validity of the hypothesis in the short run with a built-in tendency to one price in the long run. Using unit value trade data at the aggregate, 2-digit and 3-digit levels of the Standard International Trade Classification, the law of one price is generally rejected in the short run, although a long-run proportional relatlionship between prices of fairy homogeneous products are used the hypothesis is rejected both in the short and long run. This suggests that non-price changes which are likely to be incorporated in unit values are probably gradual and affect EEC countries in a similar manner. Price changes, however, are somewhat erratic and hence with unitvalue data, the law of one price in the long run is not contradicted, while it is refuted at the disaggregate level when price data are used.     

Are financial development and corruption control substitutes in promoting growth?

While financial development and corruption control have been studied extensively, their interaction has not. We develop a simple model in which low corruption and financial development both facilitate the undertaking of productive projects, but act as substitutes in doing so. The substitutability arises because corruption raises the need for liquidity and thus makes financial improvements more potent; conversely, financial underdevelopment makes corruption more onerous and thus raises the gains from reducing it. We test this substitutability by predicting growth, of countries and industries, using measures of financial development, lack of corruption, and a key interaction term. Both approaches point to positive effects from improving either factor, as well as to a substitutability between them. The growth gain associated with moving from the 25th to the 75th percentile in one factor is 0.63–1.68 percentage points higher if the second factor is at the 25th percentile rather than the 75th. The results show robustness to different measures of corruption and financial development and do not appear to be driven by outliers, omitted variables, or other theories of growth and convergence.     

The effects of externalities and framing on bribery in a petty corruption experiment

Using a simple one-shot bribery game simulating petty corruption exchanges, we find evidence of a negative externality effect and a framing effect. When the losses suffered by third parties due to a bribe being offered and accepted are high and the game is presented as a petty corruption scenario instead of in abstract terms bribes are less likely to be offered. Higher negative externalities are also associated with less bribe acceptance. However, framing has no effect on bribe acceptance, indicating that the issue of artificiality may be of particular importance in bribery experiments.     

The Map of Europe: Continuity and Change in Administrative Boundaries (1850–2000)

This article presents a series of digital maps that track the evolution of intermediate level administrative boundaries in Western and Central Europe between 1850 and 2000. Our research led us to consider why neighbouring states often base the organisation of their respective administrative units on quite different principles. Although each European state has its own history and dynamic, it is also possible to distinguish a series of general characteristics and common traits. We have identified two basic groups of patterns, which we have called the rationalistic and conservative models. The former is characterised by a radical reform of the previous system of territorial organisation and administration. This generally took place after the French Revolution of 1789 and followed the example of the administrative reforms implemented in France under Napoleon. The latter has largely respected and conserved traditional boundaries and institutions and has only modified them when they become unviable and effectively obsolete. This offers considerable flexibility in the face of changing circumstances, as particularly observed in the sub-group of that we have referred to as ‘functionalist states’.     

The Ukraine conflict,economic–military power balances and economic sanctions

The evolution and outcomes of conflicts in Europe, including the current one in Ukraine, have been influenced by the dynamics of economic, technological and military balances, which in turn are affected by the economic warfare and sanctions that have been used to alter them. This article reviews defence economic concepts of relevance to the Ukraine conflict and then draws out lessons for the present concerning power balances, military capabilities, conventional deterrence, economic warfare and counter-measures against sanctions from experiences in Europe in the twentieth century. An evaluation is made of the impacts of economic sanctions on Russia and Ukraine in 2014–2016.     

Country governance,corruption, and the likelihood of firms’ innovation

Using a sample of firms from the World Bank Enterprise Survey for the period 2006–2016 in emerging and developing countries, we find that corruption has a negative impact on the likelihood of innovations, thus supporting the “sanding-the-wheels” hypothesis. Our empirical results also show that corruption at the firm level, in the manufacturing industry, and in regions with the worst governance or that are more corrupt has a significant negative effect on innovation. In addition, country governance plays a particularly important role in innovative activity for corrupt firms. The policy implication is that the government or authority should strengthen the positive role of government effectiveness, rule of law, regulatory quality, and control of corruption in order to improve firms’ innovation within an environment of corruption.     

The EU Structural Funds and trust in politicians: another unwanted outcome?

Empirica - Amidst concerns about the effectiveness of the EU Structural Funds and discoveries of their unintended effects, could it be that they also undermine trust in politicians in the recipient...     

External sustainability in Spanish economy: Bubbles and crises, 1970–2020

We address the issue of the sustainability Spain's external debt, using data for the period 1970–2020. To detect episodes of potentially explosive behavior of the Spanish net foreign assets over GDP ratio and the current account balance over GDP ratio, as well as episodes of external adjustments over this long period, we employ a recursive unit root test approach. Our empirical analysis leads us to conclude that there is some evidence of bubbles in the ratio between Spanish net foreign assets and the GDP. In contrast, the evidence that the ratio between the Spanish current account balance and the GDP had explosive subperiods is very weak. The episode of explosive behavior identified in the position of net foreign assets during the period 2002–2015 was the result of the country's economic expansion 1995–2007. The results also show an external adjustment during the period 2008–2019 after the start of a cyclical economic recession.     

Subject pool effects in a corruption experiment: A comparison of Indonesian public servants and Indonesian students

We report results from a corruption experiment with Indonesian public servants and Indonesian students. Our results suggest that the Indonesian public servant subjects have a significantly lower tolerance of corruption than the Indonesian students. We find no evidence that this is due to a selection effect. The reasons given by the subjects for their behaviour suggest that the differences in behavior across the subject pools are driven by their different real life experiences. For example, when abstaining from corruption, public servants more often cite the need to reduce the social costs of corruption as a reason for their actions, and when engaging in corruption, they cite low government salaries or a belief that corruption is a necessary evil in the current environment. In contrast, students give more simplistic moral reasons. We conclude by emphasizing that results obtained from different subject pools can complement each other in illuminating different aspects of the same problem. We would like to thank Charles Noussair and the participants of the Experimental Economics Workshop (2006) at the University of Melbourne for their comments. Daniel Piccinin and Revy Sjahrial have provided excellent research assistance. We are grateful to the Australian Research Council and the World Bank for their financial assistance.     

A story of large landowners and math skills: Inequality and human capital formation in long-run development, 1820–2000

We create a new dataset to test the influence of land inequality on long-run human capital formation in a global cross-country study and assess the importance of land inequality relative to income inequality. Our results show that early land inequality has a detrimental influence on math and science skills even a century later. We find that this influence is causal, using an instrumental variable (IV) approach with geological, climatic and other variables that are intrinsically exogenous. A second major contribution of our study is our assessment of the persistence of numerical cognitive skills, which are an important component of modern human capital measures. Early numeracy around 1820 is estimated using the age-heaping strategy. We argue that countries with early investments in numerical education entered a path-dependency of human capital-intensive industries, including skill-intensive agriculture and services. The combined long-run effects of land inequality and human capital path-dependence are assessed for the first time in this article.     

The Effect of Regulatory and Risk Management Advancement on Non-Performing Loans in European Banking, 2000–2011

We study whether the implementation of advanced risk management techniques in compliance with the internal ratings-based (IRB) approaches in the Basel Capital Accord reduced non-performing loans (NPLs) and, hence, had a significant impact in controlling credit risk in emerging and advanced European banks during 2000–2011. Our analysis reveals that there exists wide variation in terms of adoption of such advanced techniques across European banks. Emerging Europe, which suffered the most from the surge in NPLs in the post-crisis period, lags significantly behind the Eurozone economies in terms of the intensity of IRB adoption rates. We employ dynamic generalized method of moments (GMM) estimation methods in our panel regressions to investigate the effect of such regimes on the level of NPLs on a country level. Our findings confirm that the intensity of IRB usage within a banking system leads to a statistically significant decrease in the aggregate amount of NPLs in the post-crisis period, after controlling for macroeconomic and bank-specific characteristics of individual economies. This result is consistent with the view that the efficiency of credit risk management may turn out to be a critical factor in avoiding widespread banking distress and for improving the profitability and solvency of banking systems as a whole.     

Believing Facts in the Fog of War: Identity,Media and Hot Cognition in Ukraine’s 2014 Odesa Tragedy

ABSTRACT

How do people form beliefs about the factual content of major events when established geopolitical orders are violently challenged? Here, we address the tragic events of 2 May 2014, in Odesa, Ukraine. There, Euromaidan protest movement supporters and opponents clashed following Russia’s annexation of Crimea and the onset of the Donbas conflict, culminating in the worst civilian death toll the city had seen since World War II. Shortly after, we surveyed Ukraine’s population about who they thought had actually perpetrated the killings and relate people’s answers to alternative narratives (frames) that an original content analysis finds were available to Ukrainian citizens through different media. We find evidence, consistent with theories of hot cognition and motivated reasoning, that the Odesa violence triggered emotional responses linked to ethnic, regional, and partisan identity, which then activated attitudes associated with these identities that, in turn, led people to adopt very different (sometimes highly improbable) beliefs about who carried out the killings. Ethnic identity in particular is found to have strongly moderated the effects of television, with Ukrainian television greatly influencing Ukrainians but backfiring among Russians, and Russian television mainly impacting non-Ukrainians. Education and local information are found to reduce susceptibility to televised factual narratives.     

Multi-Regime Interactions in the Dutch Energy Sector: The Case of Combined Heat and Power Technologies in the Netherlands 1970–2000

This article is about multi-regime interactions in energy sectors. Multi-regime interactions are interactions between fairly well defined and separated systems of production, intermediation and use. It is argued that multi-regime interactions have been underexposed in previous innovation literature, yet it is hypothesized that multi-regime interactions are critically important for understanding transition processes, and in particular for current transitions in European energy sectors. Based on a case study on combined heat and power (CHP) in the Netherlands, a typology is developed of four types of interaction: competition, symbiosis, integration and spill over.     

Déjà Vu? Short-term training in Germany 1980–1992 and 2000–2003

Short-term training has recently become the largest active labor market program in Germany regarding the number of participants. Little is known about the effectiveness of different types of short-term training, particularly their long-run effects. This paper estimates the effects of short-term training programs in West Germany starting in the time periods 1980–1992 and 2000–2003 on the three outcomes employment, earnings, and participation in long-term training programs. We find that short-term training shows mostly persistently positive and often significant employment effects. Short-term training focusing on testing and monitoring search effort shows slightly smaller effects compared to the pure training variant. The lock-in periods lasted longer in the 1980s and 1990s compared to the early 2000s. Short-term training results in higher future participation in long-term training programs.     

Causes of world trade growth in agricultural and food products, 1951–2000: a demand function approach

The objective of the present study is to analyse the causes of the growth of international agricultural and food trade in volume terms from 1951 to 2000. The results suggest that income growth has been the principal reason for this expansion, while exchange rate stability and the real price of agricultural products played only a minor role. Multilateral trade liberalization and trade costs, given their long-term stability, are not elements that could have stimulated their growth. Finally, the intensive liberalization of trade which took place in various economic regions, especially in Europe, became a key factor in promoting agricultural trade among the countries participating in regional trade agreements. The study results also indicate that the determinants of trade growth for these goods were different to those for other goods and other periods.