External commitment mechanisms,institutions, and FDI in GCC countries

The purpose of this paper is to empirically examine the influence of bilateral investment treaties and domestic institutions on foreign direct investment (FDI) in the GCC countries. Using panel data for the period 1984–2002 and instrumental variables estimation methodology, the paper finds that bilateral investment treaties (BITs) contracted with OECD and upper middle-income countries have a surprisingly negative influence and seem to be prevailed by the significantly positive influence of domestic institutions on FDI. BITs contracted with high-income non-OECD countries have a positive influence and prevail domestic institutions. The results have important institutional reform implications for GCC economic diversification efforts.     

Social media adoption: A process-based approach

This research conceptualizes and measures social media adoption (SMA) of companies with a process-based approach and explains its antecedents of micro- and macro-environment, size, and ownership, as well as its consequence of intention to increase resources dedicated to social media. Based on data from 310 Turkish small and medium enterprises, the study first develops a conceptual framework on the pillars of internal and external stakeholder focus as well as relationship and information oriented implementation. Based on these two dimensions, it discusses the novel concepts of social customer relations, social stakeholder communication, social intelligence, and social responsiveness related to SMA. The study further indicates that ownership type and micro environment play a role in SMA and that path dependence exists in the interplay of current adoption and future intentions.     

Aid Effectiveness: Looking at the Aid–Social Capital–Growth Nexus

The authors examine the impact of institutional quality and social capital on aid effectiveness. They find strong evidence that social capital and institutions enhance aid effectiveness. Moreover, once they account for the role of social capital and institutions, the impact of policies tends to disappear. These findings have important policy implications as they indicate that conditioning aid allocation on "good policies" may not lead to an optimal (or fair) allocation of aid, as countries with high social capital at the macrolevel could actually make good use of aid regardless of the quality of policy. This casts doubt on the conclusions in Burnside and Dollar (2000 ) and the policy lessons derived from their findings.     

Diaspora and government welfare spending: Do migrant remittances increase public social protection?

This paper contributes to the debate on the impact of migrant remittances on welfare spending. It empirically examines the influence that remittances have on public social protection (SP) expenditures using macrolevel panel data on a sample of 38 high‐ and middle‐income countries over the period 2005–2014. The paper finds that remittances have a negative influence on public SP expenditures, suggesting that they serve as a private substitute to public SP. The results highlight the importance of remittances to government welfare spending and sustainable development.     

Antecedents of trust in industrial districts: an empirical analysis of inter-firm relations in a Turkish industrial district

Structural features and institutional settings of industrial districts, rather than contracts as a co-coordinating mechanism, promote trust in exchanges between firms in industrial districts. Based on this assumption, the paper explores the antecedents of trust in a Turkish industrial district at three levels: institutional environment; institutional arrangements; and inter-firm exchanges. In relation to institutional environment, dominant institutions of the Turkish economy – mainly state and finance – and their policies that undermine the role of SMEs in economic development are studied. In this context a third institution, the ‘district association’ that has a vital role in promoting trust-based governance has been analysed. At the second level, formal and informal institutional arrangements that govern the web of exchanges between firms are surveyed. The third level of analysis is directed at entrepreneurs and their attitudes towards family, friendship, expertise and reputation are studied. The research site is the Merter textile district in Istanbul. Data for second and third levels of analysis has been collected through structured interviews and is analysed quantitatively. For institutions and institutional environment, data has been collected mainly by in-depth interviews and is supported by secondary data. Research findings show that informal institutional arrangements are more important than formal arrangements and reputation and expertise of the other firm is more important than family-friendship connections as antecedents of trust.     

Does the Exchange Rate Matter to Agricultural Bilateral Trade between Canada and the U.S.?

This study examines the effects of the Canada–U.S. exchange rate on bilateral trade of agricultural goods between the two countries and on U.S. farm income. Special attention is given to agricultural trade between the two countries under the Canada–U.S. Free Trade Agreement (CUSTA). This study utilizes two time series models: the vector error correction model (VECM) and the vector moving average model (VMA) with quarterly time series data from 1983 to 2000. It is found that the exchange rate has a significant impact on U.S. agricultural trade with Canada, but the impact on U.S. agricultural price and income is insignificant. The exchange rate between the two currencies is found to be weakly exogenous in the U.S. agricultural sector, which answers a fundamental question about the role of the exchange rate in Canada–U.S. bilateral trade for agricultural products. In addition, the results point to a significant, though minimal, effect on bilateral trade due to CUSTA.     

The Impact of the Shadow Economy on Indirect Tax Revenues

This paper examines empirically the impact of the shadow economy on indirect tax revenues in an unbalanced panel of 125 countries for the period 1990–2011. The same analysis is conducted excluding at first and then including international trade tax revenues in (total) indirect tax revenues, as a way to disentangle any impact of trade liberalization. In both cases, the results suggest that the size of the shadow economy increases the ratio of indirect tax revenues to GDP, as long as informality does not exceed a cutoff value. When the size of the shadow economy exceeds that level, any further increase affects indirect taxation negatively. The findings are robust to a number of sensitivity tests and when addressing the problem of potential endogeneity. The empirical evidence is in line with the predictions provided by the theoretical framework of the paper.     

Financial Development and Income in North Africa

We explore the short-run dynamics and long-run relationship between income and financial development in Algeria, Egypt, and Morocco. We use co-integration and VECM models and four indicators of financial development. The empirical results indicate that there is a long-run relationship between income and each financial development indicator, except credit to the private sector in Algeria. On the other hand, Granger-causality test results indicate that the evidence on the direction of causality is mixed.