Average treatment effects for stayers with correlated random coefficient models of panel data

Correlated random coefficient (CRC) models provide a useful framework for estimating average treatment effects (ATE) with panel data by accommodating heterogeneous treatment effects and flexible patterns of selection. In their simplest form, they lead to the well-known difference-in-differences estimator. CRC models yield estimates of ATE for “movers” (i.e., cross-sectional units whose treatment status changed over time) while ATE for “stayers” (i.e., cross-sectional units who retained the same treatment status over time) are not identified. We study additional restrictions on selection into treatment that lead to the identification of ATE for stayers by an extrapolation from quantities identified by the CRC model. We discuss estimation and testing of the extrapolation's validity, then use our results to estimate the returns to agricultural technology adoption among maize farmers in Kenya.     

The Government‐Sponsored Enterprises and the Mortgage Crisis: The Role of the Affordable Housing Goals

I use regression discontinuity analysis to measure the effect of one of the Affordable Housing Goals, the Underserved Areas Goal (UAG), on the number of whole single‐family mortgages purchased by Fannie Mae and Freddie Mac (GSEs) in undeserved census tracts for 1996–2002. Focusing additionally on tracts that became UAG‐eligible in 2005–2006, I measure the effect of the UAG during peak years for the subprime market. The results suggest a small UAG effect and challenge the view that the goals caused the GSEs to supply substantially more credit to high‐risk borrowers than they otherwise would have supplied during the subprime boom.     

Is ‘Good’ governance good for business? A cross-national analysis of firms in African countries

Good governance can reduce uncertainty, transaction, search and production costs, and ultimately affect firm performance. In this paper, we explore the link between good governance and the profitability of individual firms in African countries. We employ the governance indices developed at the World Bank and assemble a sample of companies from 21 countries over four years. Contrary to prior research that found a negative association between institutional development and profitability, our evidence shows that an improvement of good governance in countries currently with low levels of governance ratings has greater positive effects on the firm profitability than a similar improvement in countries with relatively higher ratings of good governance. Good governance reduces the variability of the company's profitability, leading to high-return and low-risk investments. Finally, we find that the role of good governance depends upon the country's income level. When the income level is lower, an improvement in public governance is more likely to impact firm performance than when the income level is relatively higher. Good governance is more important for the stability of the profitability of firms in countries with higher levels of good governance ratings than lower ratings.     

The Discouraging Effect of Risks in WTO Negotiations: Determinants and Perceived Changes

The observation has frequently been made that uncertainty about the legal meaning and the economic and political effects of WTO agreements exert a discouraging effect on the progress of multilateral trade negotiations. This article identifies the determinants of uncertainty and risk in the WTO. It also examines changes in these determinants over time, pointing to increasing levels of uncertainty and risk. The argument is based on a series of interviews conducted with members of national delegations to the WTO and with WTO employees.     

Technological Change and Transition: Relative Contributions to Worldwide Growth During the 1990s*

In this paper we use the Kumar and Russell [American Economic Review (2002) Vol. 92, pp. 527–548] growth‐accounting procedure to examine cross‐country growth during the 1990s. Using a data set comprising developed, newly industrialized, developing and transitional economies, we decompose the growth of output per worker into components attributable to technological catch‐up, technological change and capital accumulation. In contrast to the study by Kumar and Russell, which concludes that capital deepening is the major force of growth and change in the world income per worker distribution over the 1965–90 period, our analysis shows that, during the 1990s, the major force in the further divergence of the rich and the poor is due to technological change, whereas capital accumulation plays a lesser and opposite role. Finally, although on average we find that transitional economies perform similar to the rest of the world, the procedure is able to discover some interesting patterns within the set of transitional countries.     

Non‐linear geographics and the economics of transition and democratization1

The purpose of this study is to analyse the effects of geography on the transition process in authoritarian political regimes, and to investigate the nature of the links between political change, economic reforms and geographical location. A simple model of transition and democratization is presented wherein we show that the effectiveness of repression by the incumbent elite is a negative function of the distance to the ‘free world’. In consequence, geography has conflicting effects on shifts in political power. This article provides a rationale for the counterintuitive fact that the first authoritarian country to start a transition process towards democratization is not necessarily the one nearest to the free world.     

Measuring potential gains from reallocation of resources

In this work we consider the case when efficient operation of individual economic units does not necessarily imply efficiency for a group of these units. Merging theoretical findings of Li and Ng (Int Adv Econ Res, 1995, 1, 377.) and Färe and Zelenyuk (Eur J Oper Res, 2003, 146, 615), we develop new group-wise efficiency indexes that measure the extent to which the performance of a group of economic units can be enhanced, even if all these units are individually efficient. The existence of such potential improvement is attributed to non-optimal allocation of inputs across the individual economic units from the point of view of a group of these units.     

The Political Economy of Education and Development in an Open Economy

If the price effect of opening up a developing economy may be expected to act as a disincentive for investment in human capital, the opposite is likely to be true of the income effect, especially in the presence of credit market imperfections among the poor. It is shown in this paper that this may no longer be the case in a society initially dominated by an oligarchic capitalist elite that is afraid of losing its political control in favor of an educated middle class. Although it may sometimes be in its interest to democratize by subsidizing education when the economy is closed, incentives to do so disappear when the economy is open to trade or factor flows.