Neighbors and the evolution of the comparative advantage of nations: Evidence of international knowledge diffusion?

The literature on knowledge diffusion shows that knowledge decays strongly with distance. In this paper we document that the probability that a product is added to a country's export basket is, on average, 65% larger if a neighboring country is a successful exporter of that same product. For existing products, growth of exports in a country is 1.5% higher per annum if it has a neighbor with comparative advantage in these products. While these results could be driven by a common third factor that escapes our controls, they align with our expectations of the localized character of knowledge diffusion.     

Unbundling democracy: Political rights and civil liberties

Much recent political economy and political science literature views democracy in terms of political rights. This view, often referred to as electoral democracy, is particularly pronounced in the empirical literature. We reincorporate the role of civil liberties, which are at the core of modern democracy, in two ways. We identify four fundamental sources of potential differences in the evolution of political rights and civil liberties. We present systematic, robust and varied empirical evidence on the direct impact of two of these potential sources of differences using cross-national panel data and accounting for the modernization hypothesis. We obtain two noteworthy empirical results: civil liberties exhibit greater persistence than political rights in affecting subsequent outcomes; and, our main result, civil liberties are complementary to political rights when affecting subsequent outcomes, while the reverse is not the case. Consequently, one must incorporate civil liberties as a determinant of electoral democracy. More generally, both dimensions must be considered to understand the setbacks recently experienced by many democracies, despite their holding of free and fair elections.     

Debt enforcement,investment, and risk taking across countries

We argue that the prospect of an imperfect enforcement of debt contracts in default reduces shareholder–debtholder conflicts and induces leveraged firms to invest more and take on less risk as they approach financial distress. To test these predictions, we use a large panel of firms in 41 countries with heterogeneous debt enforcement characteristics. Consistent with our model, we find that the relation between debt enforcement and firms’ investment and risk depends on the firm-specific probability of default. A differences-in-differences analysis of firms’ investment and risk taking in response to bankruptcy reforms that make debt more renegotiable confirms the cross-country evidence.     

Corporate Cash Holding in Asia

In this paper, we analyze the determinants of corporate saving in the form of changes in cash holdings for 11 Asian economies using firm‐level data from the Oriana Database for the 2002–2011 period. We find some evidence that cash flow has a positive impact on the change in cash holdings (i.e. that the cash flow sensitivity of cash is positive) and that the positive impact of cash flow on the change in cash holdings is larger and more significant in the case of smaller and presumably more constrained firms than in the case of larger and presumably less constrained firms in both developed and developing economies. Both of these findings corroborate the importance of financial constraints in Asian firms. In addition, we find that the cash flow sensitivity of cash declined after the global financial crisis and that Tobin's q has a positive impact on the change in cash holdings, especially in the case of larger and presumably unconstrained firms.     

Job Polarization and Task‐Biased Technological Change: Evidence from Sweden, 1975–2005

In this paper, we show that between 1975 and 2005, Sweden exhibited a pattern of job polarization with expansions of the highest‐ and lowest‐paid jobs compared to middle‐wage jobs. The most popular explanation for such a pattern is the hypothesis of task‐biased technological change, where technological progress reduces the demand for routine middle‐wage jobs but increases the demand for non‐routine jobs located at the tails of the job–wage distribution. However, our estimates do not support this explanation for the 1970s and 1980s. Stronger evidence for task‐biased technological change, albeit not conclusive, is found for the 1990s and 2000s. In particular, there is both a statistically and economically significant growth of non‐routine jobs and a decline of routine jobs. However, results for wages are mixed; while task‐biased technological change cannot explain changes in between‐occupation wage differentials, it does have considerable explanatory power for changes in within‐occupation wage differentials.     

Country Differences in Material Deprivation in Europe

This paper assesses to what extent differences in the characteristics of individuals (micro‐level perspective) and country‐specific factors (macro‐level perspective) can explain country differences with respect to material deprivation levels. Thus, our work aims to simultaneously consider the macro dimension and the predominantly individually‐oriented study field of material deprivation using multilevel techniques. We make use of the European Union Statistics on Income and Living Conditions. Our results show that country‐specific factors seem to be much more relevant than individual effects in explaining country differences in material deprivation. We estimate that the introduction of country‐specific factors reduces the proportion of total variance due to between‐country differences in deprivation by 72.7 percent, while individual‐level variables reduce this proportion by only 9.4 percent. We also show, through interaction variables, that the effect of sociodemographic characteristics can be shaped by institutional and structural factors, especially by the level of GDP.     

Measuring the Level and Inequality of Wealth: An Application to China

We construct and compare three distinct measures of household asset wealth that complement traditional income‐ or expenditure‐based measures of socioeconomic status. We apply these measures to longitudinal household survey data from China and demonstrate that household asset wealth has been increasing over time, a theme consistent with many previous studies on the process of development in China. Unlike other studies that have shown rising income inequality over time, however, we show that asset wealth inequality has actually been declining in recent years, indicating widespread participation in the benefits of economic reforms. Furthermore, the evolution in the cumulative distribution of household welfare is such that social welfare has been increasing with the passage of time, despite rising inequality in the early years of the survey.     

Internal Migration of Blacks in South Africa: An Application of the Roy Model

This study investigates the internal migration of black males in South Africa over the period after the formal end of Apartheid using the 1996 census data. The two issues of our primary interests are the following: (i) whether migration patterns of black individuals are consistent with the income‐maximising hypothesis as related to the destination choice; and (ii) whether the redistribution of human capital is detected in internal migration. The results from conditional logit regressions on choices among individuals in 318 districts show that individuals prefer districts with higher expected wages, conditional on other regional characteristics. In addition, there exist differing preferences on the share of population with post‐secondary education by individuals with commensurate educational attainments. Black individuals with post‐secondary education tend to migrate into areas with a higher share of population with post‐secondary education and vice versa, which confirms the divergence of human capital levels across districts.     

Analyzing the welfare‐improving potential of land in the former homelands of South Africa

This article contributes to the debate on the role of land in reducing poverty in rural South Africa. It uses the year of arrival in the former homelands as an instrument for land access and size. This identification strategy is based on the fact that African households were forcibly relocated to the homelands during the apartheid. Due to increasing population pressure, later arrivals were less likely to be assigned land. The results show that land has a large positive effect on household welfare. Because the homelands are relatively disadvantaged areas, these results provide a lower bound for the positive effects of land on household welfare.     

Climatic Factors as Determinants of International Migration

We examine natural disasters and long‐run climatic factors as potential determinants of international migration, implementing a panel dataset of bilateral migration flows from 1960 to 2000. We find no direct effect of long‐run climatic factors on international migration across our entire sample. These results are robust when conditioning on origin‐country characteristics, when considering migrants returning home, and when accounting for the potential endogeneity of migrant networks. Rather, we find evidence of indirect effects of environmental factors operating through wages. We find that epidemics and miscellaneous incidents spur international migration, and there is strong evidence that natural disasters beget greater flows of migrants to urban environs.