The Economic Welfare Cost of Conflict: An Empirical Assessment

War, whether external or internal, large or small, is a costly endeavor. Loss of life, loss of close friends or family, and the destruction of material possessions all play a part in the costs of war. The purpose of this paper is to capture only the material, economic welfare costs of conflict stemming from the altered path of consumption resulting from conflict. As such, our measure is quite a lower bound for the true and more encompassing welfare loss from living in a non-peaceful world. Remarkably, however, even these pure economic welfare losses from conflict are large. We find that, on average, individuals would give up over 8 percent of their current level of consumption to live in a peaceful world. Such large potential welfare gains from reducing warfare should make economists and policy-makers take note.Growth; Conflict; Welfare Costs

What’s in a Name?

Plenty. This paper analyzes two broad questions: Does your first name matter? And how did you get your first name anyway? Using data from the National Opinion Research Centers (NORC’s) General Social Survey, including access to respondents first names from the 1994 and 2002 surveys, we extract the important “first name features” (FNF), e.g. popularity, number of syllables, phonetic features, Scrabble score, “blackness” (i.e. the fraction of people with that name who are black), etc ... We then explore whether these first name features are useful explanatory factors of a respondent’s exogenous background factors (sex, race, parents’ education, etc...) and lifetime outcomes (e.g. financial status, occupational prestige, perceived social class, education, happiness, and whether they became a parent before 25). We find that first name features on their own do have significant predictive power for a number of these lifetime outcomes, even after controlling for a myriad of exogenous background factors. We find evidence that first name features are independent predictors of lifetime outcomes that are likely related to labor productivity such as education, happiness and early fertility. Importantly, however, we also find evidence based on the differential impacts of gender and race on the blackness of a name and its popularity that suggest that discrimination may also be a factor.names, identity, discrimination

What's in a Name?

Plenty. This paper analyzes two broad questions: Does your first name matter? And how did you get your first name anyway? Using data from the National Opinion Research Center’s (NORC's) General Social Survey, including access to respondent’s first names from the 1994 and 2002 surveys, we extract the important ``first name features'' (FNF), e.g. popularity, number of syllables, phonetic features, Scrabble score, `blackness’ (i.e. the fraction of people with that name who are black), etc ... We then explore whether these first name features are useful explanatory factors of an respondent's exogenous background factors (sex, race, parent's education, etc...) and lifetime outcomes (e.g. financial status, occupational prestige, perceived social class, education, happiness, and whether they became a parent before 25). We find that first name features on their own do have significant predictive power for a number of these lifetime outcomes, even after controlling for a myriad of exogenous background factors. We find evidence that first name features are independent predictors of lifetime outcomes that are likely related to labor productivity such as education, happiness and early fertility. Importantly, however, we also find evidence based on the differential impacts of gender and race on the blackness of a name and its popularity that suggest that discrimination may also be a factor.Names, Identity, Discrimination

War and Democracy

This paper presents a general equilibrium model of conflict based on a world populated by representative democracies. At the individual state level, when information regarding a leader's ability to defend the state against unavoidable conflict is va luable to voters, an incumbent leader seeking reelection may be tempted into potentially avoidable conflicts to demonstrate his ability and enhance his reelection prospects. As a result, democratic states may be responsible for at least some international conflict. In this paper, we investigate whether this motive is sufficiently important for war to persist in equilibrium if all countries are democracies. Three key findings emerge. First, the perpetual peace equilibrium hypothesized by Immanuel Kant (1795, 1991) always exists. The reason is that in the absence of the threat of war, leaders are unable to divert the public's attention away from domestic considerations. Consequently, the incentive for potentially avoidable conflicts vanishes. Second, if leader s are not sufficiently benevolent and wars are costly in expectation, then additional equilibria exist with a positive war frequency. Third, if multiple equilibria exist, the perpetual peace equilibrium may be unstable in which case an equilibrium with po sitive war frequency becomes the only stable outcome. The model is further extended to analyze the role of appropriative conflicts and non-democratic regimes. It is shown that if the diversionary motive of democratic leaders is strong, a more democratic world may not necessarily be more peaceful. We discuss the role that norms and institutions can play in facilitating a more peaceful world with democracies - for example, free trade areas and alliance formation.War, Democracy, Kant Hypothesis

Is the political business cycle for real?

This paper's macroeconomic model combines features from both real and political business cycle models. It augments a standard real business cycle tax model by allowing for varying levels of government partisanship and competence in order to replicate two important empirical regularities: First, that on average the economy expands early under Democratic presidents and contracts early under Republican presidents. Second, that presidents whose parties successfully retain the presidency have stronger-than-average growth in the second half of their terms. The model generates both of these features in conformity with U.S. post-World War II data.Business cycles

Is the Political Business Cycle for Real?

This paper constructs and examines a macroeconomic model which combines features from both real and political business cycle models. We augment a standard real business cycle tax model by allowing for varying levels of government partisanship and competence in order to replicate two important empirical regularities: First, that on average the economy expands early under Democratic Presidents and contracts early under Republican Presidents. Second, that Presidents whose parties successfully retain the presidency have stronger than average growth in the second half of their terms. The model generates both of these features that conform to U.S. Post World War II data.Political business cycle

The long-run costs of moderate inflation

Long-run price stability is generally considered to be a primary goal of monetary policymakers in many countries. One reason policymakers care about inflation is that it can harm economic performance. Numerous studies of the impact of inflation on economic performance have focused on whether increases in inflation reduce economic growth in the long run These studies have found that prolonged high inflation does in fact reduce economic growth, but they were not able to detect a significant long-run relationship between real growth and low or moderate inflation. Because anti-inflationary policies typically have short-run costs, such as higher unemployment and slower economic growth, the results from these studies may lead people to ask whether such policies are appropriate when inflation is low or moderate.> Hess and Morris contend that anti-inflationary policies may be appropriate, even if low to moderate long-run inflation does not reduce long-run growth, if inflation harms the economy in other ways. Three potentially harmful consequences of inflation are considered: (1) inflation uncertainty, (2) real growth variability, and (3) relative price volatility. These consequences are costly because they reduce economic efficiency and therefore the level of economic output and consumer welfare.> The authors discuss the costs of inflation uncertainty, real growth variability, and relative price volatility, and examine their empirical relationship with inflation. They show that inflation uncertainty, real growth variability, and relative price volatility all tend to rise as long-run inflation rises from low to moderate levels. As a result, they conclude that policymakers may find it justifiable to pursue anti-inflationary policies even when inflation is low.Inflation (Finance) ; Prices

Does wage inflation cause price inflation?

Is there any evidence to support the assumption that increased wages cause inflation? This study updates and expands earlier research into this question and finds little support for the view that higher wages cause higher prices. On the contrary, more evidence is found for higher prices leading to wage growth.Inflation (Finance) ; Wages ; Prices

Terrorism From Within: An Economic Model of Terrorism

In this paper, we develop and explore the implications of an economic model that links the incidence of terrorism in a country to the economic circumstances facing that country. We briefly sketch out a theory, in the spirit of Tornell (1998), that describes terrorist activities as being initiated by groups that are unhappy with the current economic status quo, yet unable to bring about drastic political and institutional changes that can improve their situation. Such groups with limited access to opportunity may find it rational to engage in terrorist activities. The result is then a pattern of reduced economic activity and increased terrorism. In contrast, an alternative environment can emerge where access to economic resources is more abundant and terrorism is reduced. Our empirical results are consistent with the theory. We find that for democratic, high income countries, economic contractions (i.e. recessions) can provide the spark for increased probabilities of terrorist activities.Growth; Terrorism; Political Economy

The Economic Welfare Cost of Conflict: An Empirical Assessment

War, whether external or internal, large or small, is a costly endeavor. Loss of life, loss of close friends or family, and the destruction of material possessions all play a part in the costs of war. The purpose of this paper is to capture only the material, economic welfare costs of conflict stemming from the altered path of consumption resulting from conflict. As such, the measure is quite a lower bound for the true and more encompassing welfare loss from living in a non-peaceful world. But how much would individual be willing to pay to avoid just the economic costs of conflict? Remarkably, even these pure economic welfare losses from conflict are quite large. I find that, on average, individuals who live in a country that has experienced some conflict during the 1960-1992 sample would permanently give up to approximately 8 percent of their current level of consumption to live in a purely peaceful world. Such large potential welfare gains from reducing warfare should make economists and policy-makers take note, and continue to investigate and advocate for domestic and international institutions to realize such gains.growth, conflict, welfare costs