Development outcomes, resource abundance,and the transmission through inequality

The paper studies the effect of resource abundance on human development. A simple theory is presented to show that resource abundance negatively affects human development through its effect on inequality. The prediction of the theory is then tested using a system of three equations. Estimates indicate that the transmission channel through inequality is statistically significant and economically relevant even after controlling for per-capita income, institutional quality, and other determinants of both human development and inequality.

Political, Institutional and Economic Determinants of Coalition Cabinets Survival

Event history analysis is used to investigate the determinants of cabinet duration in a sample of 14 western European parliamentary democracies. A broad set of covariates is considered in order to account for the impact of political, institutional, environmental and economic factors. It turns out that the probability for a government to collapse increases the higher the degree of ideological heterogeneity of coalition partners, the higher the degree of polarisation of the system, the lower the rate of survival of the legislature, the shorter the time horizon to next mandatory elections and the worse the overall economic conditions of the country. Some other institutional and political variables do play some role. Finally there is clear evidence of positive duration dependence: the longer the cabinet has stayed in power, the higher the probability it will collapse in the near future.

The Road to Regional Integration in Africa: Macroeconomic Convergence and Performance in COMESA

COMESA (Common Market for Eastern and Southern Africa) aims at the establishment of a currency union in 2025. To this purpose, a policy harmonization program and a set of convergence criteria have been set up. A number of projects to foster trade, economic and financial integration have also been launched. Using timeseries econometrics, this paper provides evidence on some of the dimensions involved by such a process. Some highlights are as follows. The monetary policy stance mildly converges across countries; fiscal stabilization is instead still problematic in several member states. In spite of a low level of intra-regional trade, the economic fundamentals in a bulk of member states share a common stochastic trend; this suggests that shocks might be symmetric and hence business cycles synchronized. The implications is that countries might indeed benefit from deep forms of monetary integration. The distribution of income across countries in the region is highly unequal and there is no sign of convergence. In fact, the gap between poorer and richer countries appears to be widening. Against these results, some policy implications can be drawn concerning the design of transition towards monetary unity, mechanisms for self-financing of regional projects and compensation, removal of barriers to trade integration.Regional economic integration, COMESA, optimal currency area, policy convergence, income convergence.

EFFICIENCY OF INSTITUTIONS, POLITICAL STABILITY AND INCOME DYNAMICS

In a simple theoretical framework, the quality of institutions affects individual’s investment decisions, and hence income levels and distribution. When institutions deteriorates and inequalities increase, the incumbent undertakes redistributive taxation to maintain political support. The quality of institutions and the extent of redistribution depend on the degree of government responsiveness to citizens and on the credibility of the political opposition to the incumbent. The econometric analysis is based on both single equation models and systems of equations. Good institutions are found to reduce the Gini coefficient and to increase average income, growth, and income of the poor. However, some non-linearites are detected in the institutions-Gini relationship.Institutions, income distribution, poverty, per-capita income, growth

Theory and Evidence on the Political Economy of Growth

Some recent developments in the literature on the political economy of economic growth are considered in this paper. First, limitations of traditional cross-sectional analysis are discussed. Attention is focused on the problems of omitted variables and model uncertainty. Advantages and disadvantages of alternative methods are discussed as well as evidence obtained from the application of panel techniques and time-series analysis. Second, the relationship between initial inequality and subsequent economic growth is reconsidered in the light of the empirical evidence recently produced by contributions that make use of panel models and high-quality data on income distribution. Third, the role of special interest politics is investigated. Other than lobbying, the “common-pool” problem is an instance of main interest in the political economy literature. It predicts that more fragmented governments are associated to lower growth. I test this prediction on a panel of western European countries. Results appear to be consistent with the theoretical argument.Political variables, growth empirics and theory

Political Data for Applied Political Economy Research

The availability of appropriate empirical measures to represent political and institutional factors is a crucial issue in the applied political economy research. This paper is intended as a contribution to the collection and circulation of political data. Having been involved for quite a considerable time in projects on the empirical analysis of political economy models, I have in the end assembled a data-set for the group of western European countries that includes a variety (about 40) of indicators. Some of these indicators have been previously used in the literature, but others are innovative. The categories of variables in the data set are presented and two econometric applications discussed. The first application is an analysis of the determinants of government duration. Differently from most of the literature in this area, the specification of the statistical model is theory-based and not driven by an inductive approach. The second application is an analysis of the determinants of government spending decisions. Again, specific theoretical predictions are tested. The focus is on the role of the ideological (and numerical) fragmentation of the government. The data-set will be soon made available on the WWW and, for the time being, is available from the author upon request.political economy, data collection, government duration, government expenditure

A NOTE ON INCOME CONVERGE EFFECTS IN REGIONAL INTEGRATION AGREEMENTS

This paper investigates the extent of per-capita income convergence in regional integration initiatives. Panel unit root testing is performed on 28 regional groupings. There is evidence of convergence in South- South integration, but this might be taking place to the bottom.Regional integration, Income convergence, Heterogeneous dynamic panels.

The Making of Pro-poor Growth

A system of three endogenous equations is used to estimate the determinants of poverty eduction. The system incorporates: (i) the direct effect of growth and income inequality on poverty, (ii) the feedback effect of poverty on inequality and growth, and (iii) different channels through which economic policies can affect poverty reduction. Results indicate the existence of a virtuous and a vicious equilibrium. The policy mix is then critical in deciding to which of the two equilibria a country converges.

The Characteristics of Business Cycles in Selected European Emerging Market Economies

This paper analyses the business cycles of selected European emerging market economies (EME) in terms of their statistical properties and degree of synchronization with the euro area, and discusses the associated policy implications. The evidence suggests that in these economies cyclical fluctuations are wider and more frequent than in the euro area, that there is moderate consumption smoothing, and that technological shocks and labour hoarding are driving labour-market dynamics. The macroeconomic policy stance is not significantly countercyclical. Furthermore, the degree of synchronization of domestic business cycles with the business cycle of the euro area is weak in all the EME except Hungary and Poland.business cycles, European macroeconomics, emerging market economies

Political Bias in Fiscal Policy Formation: an Econometric Analysis of Coalition Systems

This paper provides a comprehensive econometric analysis of some debated issues concerning the political and institutional determinants of fiscal policy outcomes. Several innovative results are obtained. It turns out that a significant effect on fiscal policy formation can be traced back to the ideological orientation of the policymaker, to the degree of cabinet instability, to cross-country differences in electoral and budgetary institutions and to the dispersion of political power within the ruling coalition. Instead, the preferences of the median voter appear to have little importance. The evidence also rejects the theory of fiscal illusion in decision-making.Fiscal Policy, Policy-making, deficit