Technical change and total factor productivity growth: The case of Chinese provinces

In the literature technical change (TC) is mostly assumed to be exogenous and specified as a function of the time trend or time dummies. However, some exogenous external factors other than time can also affect TC. In this paper we model TC via time trend (external non-economic) as well as other exogenous (external economic) factors (technology shifters). For this we define technology indices based on the external economic factors and the time trend. The specification of production function is then amended to accommodate these technology indices which are not necessarily separable from the traditional inputs. That is, these technology indices allow for non-neutral shift in the production function. In doing so we are able to decompose TC (a component of TFP change) into two parts. One part is driven by time and the other part is related to producer-specific external economic factors. The latter can further be decomposed into each external economic factors. The empirical model uses panel data on Chinese provinces. We identify a number of key technology shifters and their effect on technical change and TFP growth of provinces are examined.     

Valuing improved hurricane forecasts

The value to households of improved hurricane forecasts is estimated from a pilot survey using discrete choice econometric methods. Each household is willing to pay approximately $13 for improvements in forecast attributes such as landfall time and position, wind speed, and storm surge.     

Allocative efficiency measurement with endogenous prices

In the nonparametric measurement of allocative efficiency, output prices are fixed. If prices are endogenous, the overall output in the market determines the allocative efficient point. We develop an alternative semi-nonparametric model that allows prices to be endogenously determined.     

Consumption habits in an overlapping-generations model

This paper introduces consumption habits in the Blanchard (1985) overlapping-generations model. It shows that steady-state capital and consumption are higher if individuals have habits than otherwise. Moreover, “inward habits” lead to higher steady-state capital and consumption compared to “outward habits.”     

The role of the government in financial sector development

This study examines the impact of two dimensions of the government, namely, size and quality, on two dimensions of the financial sector, size and efficiency, in a cross section of 71 economies. The study finds that increased quality of the government as measured by governance and legal origin positively influences both financial sector size and efficiency. The size of the government proxied by government expenditure and the government ownership of banks has a negative effect on financial sector efficiency, and a positive impact on financial sector size, particularly in the low income economies.     

Reputation, group structure and social tensions

Social tensions impede social cohesion and public goods provision, and can be a driving force for more serious conflicts such as civil wars. Surprisingly, the emergence of social tensions has been studied only rarely in the literature. In the present contribution a game-theoretic model highlights how reputation concerns and the structure of group cleavages matter for the emergence of social tensions. In particular, the respective effects of ethnic fractionalization, polarization and segregation are analyzed. The differences between ethnicity and class, and the role of social mobility are also studied. The predictions of the model can account for recent empirical evidence.     

Political regimes and foreign intervention

We present a theory of endogenous political regimes that emphasizes foreign direct investment as a motive for foreign governments to either induce regime transitions or promote regime consolidations. We characterize different forms of foreign intervention and identify the conditions under which they occur. We highlight new channels through which economic factors affect political regime choices. Foreign intervention is most likely to originate from countries where the government has a substantial pro-investor bias and to be directed at destinations where FDI is highly profitable and where income inequality is high. Foreign-sponsored coups d'état are more likely to be directed at democratic governments of poor countries. In destinations where FDI is highly profitable but the domestic elite is weak, foreign intervention tends to be aimed at stabilizing dictatorships. We relate the analysis to evidence on foreign intervention from around the world.     

Rent-seeking distortions and fiscal procyclicality

Recent research has demonstrated that while government expenditures are countercyclical in most industrialized countries, they tend to be procyclical in developing countries. We develop a dynamic political-economy model to explain this phenomenon. In the model, public expenditures provide insurance to uninsured households, and optimal fiscal policy is countercyclical. The introduction of a political friction, in which successive governments disagree on the desired distribution of public spending, can lead to procyclical fiscal policies. Numerical simulations of the model allow us to compare quantitatively the relative role of common explanations for fiscal procyclicality. We conclude that political distortions in the fiscal process can explain fiscal procyclicality better than other common explanations, such as borrowing constraints and macroeconomic volatility.     

Income distribution, efficiency and rationing

This paper studies the impacts of income distribution on the efficiency of trade mechanism and rationing of agents who are priced out of trade in a dynamic search model with two-sided asymmetric information. Buyers and sellers have asymmetric information about valuations and incomes respectively. In such a frictional environment, the effects of several variants of changes in income distribution on efficiency of trading mechanism and the population of rationed buyers and sellers are elaborated.     

The impact of culture and ecology on cooperation in a common-pool resource experiment

Context affects decision-making in many ways. In this paper we explore differences in cooperation behaviour between communal farmers in Namibia and South Africa, who share the same ethnic origin but have had different historical and ecological constraints. We report on a series of field experiments based on a common-pool resource model. Our experimental design is framed according to the grazing situation in semi-arid rangelands. Dependent on the behaviour in previous rounds, participants are facing different states of resource availability with varying need to cooperate, coordinate and to be patient. While only 4% of the grazing areas in South Africa remain in good quality, Namibians achieve a level of 42%. We analyse the different experimental states and find that Namibians behave in all states more cooperatively. We argue that the large difference between the two regions is due to a combination of different historical developments and ecological preconditions: Namibian resource users have a longer experience in cooperative resource management and intact traditional norms. Moreover, the real-life payoffs to cooperation are higher in Namibia stemming from ecological factors.