The political economy of foreign bank entry and its impact: theory and a case study

We apply Becker's (1983) model of lobbying to show that liberalization of foreign bank entry may result from political changes and a fall in domestic bank efficiency caused by lack of competition, which raises the costs to domestic banks of restricting foreign bank entry. We also show that in equilibrium, reform may be too limited to improve efficiency. We use this model and Data Envelopment Analysis techniques to interpret the liberalization of foreign bank entry in the Philippines in 1994. Declines in banking efficiency reduced resistance to foreign bank entry, but the effects of liberalization on efficiency were modest.Monetary policy - East Asia ; Inflation (Finance)

Foreign aid encourages trade liberalization when given topolitically insecure leaders

Can foreign aid be a useful tool to promote trade liberalization? In new research which studies 66 autocracies over two decades, Daniel Yuichi Kono and Gabriella R. Montinola find that foreign aid does encourage trade liberalization – but only in countries where leaders are politically insecure. They write that the less chance that an autocratic leader has of staying in power, the greater the effect of aid on tariff reductions

Foreign Aid and Climate Change Policy: What Can(’t) the Data Tell Us?

Climate-related foreign aid is on the rise, with signatories to the Paris Climate agreement pledging $100 billion annually to promote mitigation and adaptation in recipient countries. While this seems like a welcome development, we have little evidence that climate aid actually encourages recipients to adopt climate legislation. In this article, we examine the relationship between climate aid and recipient climate policy. Using multiple measures of each, we find no evidence that the former is systematically related to the latter. Although this suggests that climate aid is ineffective, this conclusion must be qualified due to the poor quality of both climate aid and climate policy data. More definitive conclusions will require more accurate coding of climate aid as well as better climate policy measures that distinguish truly consequential policies from less consequential ones

Women’s Empowerment and Foreign Aid Effectiveness

The longstanding debate on whether foreign aid promotes development suggests that aid’s efficacy depends on conditions in recipient states. Advocates of gender equality argue that empowering women is desirable not only in its own right but also as a means to other sought-after outcomes. We bring together these issues and argue that women’s empowerment in aid-receiving countries should enhance the effect of foreign aid on child development outcomes. We find support for this argument in analyses of up to 107 developing countries from 1986-2010. Our results indicate that aid is associated with greater reductions in infant mortality where women are more empowered. Furthermore, we find that among the different dimensions of empowerment—political, economic and social—political participation has the strongest and most consistent mediating effect on foreign aid. Our work has implications for research on aid effectiveness, the consequences of gender equality, and the politics of presence

Federalism, Chinese Style: The Political Basis for Economic Success in China

The remarkable success of China's economic reform is built on a solid political foundation. That success has been made possible by a considerable degree of credible commitment to markets achieved through institutional reforms that we have called "federalism Chinese style." Because these reforms are endowed with a degree of political durability, they provide a significant amount of protection to the market from unwanted political intrusions. Political decentralization, in turn, has provided individuals and local governments with the incentives to pursue economic prosperity

Foreign aid, government spending, and contributions toward public goods: Experimental evidence from the Philippines

Scholars have long argued that government spending crowds out contributions to public goods through taxes or through nonprofit organizations. In developing countries where public goods are often financed by foreign donors, foreign aid may have a similar inhibiting effect. Aid, it is argued, leads citizens to question the legitimacy of their state and reduces their willingness to comply with taxes. Recent studies show that externally funded non-government organizations and programs fail to catalyze collective action as expected. Bringing together these strands of research, we examine whether information on government and/or foreign financing crowds out willingness to contribute to public goods, and explore mechanisms linking the information and individuals’ responses. Using a survey experiment on elite university students in the Philippines, we find that both government spending and foreign aid reduce willingness to contribute to the public good, albeit not uniformly across different modes of engagement. Moreover, we find that individuals are likely to reduce their contributions, not because they view government and foreign financing as perfect substitutes for their contributions, as the classic crowding out thesis suggests, but because they have little confidence that existing resources will be properly disbursed. Our results point to a general lack of confidence in the state as well as other intermediary institutions involved in the implementation of government and aid programs. © 2020, Springer Science+Business Media, LLC, part of Springer Nature