Illegal Drugs and Public Corruption: Crack Based Evidence from California

Do illegal drugs foster public corruption? To estimate the causal effect of drugs on public corruption in California, we adopt the synthetic control method and exploit the fact that crack cocaine markets emerged asynchronously across the United States. We focus on California because crack arrived here in 1981, before reaching any other state. Our results show that public corruption more than tripled in California in the first three years following the arrival of crack cocaine. We argue that this resulted from the particular characteristics of illegal drugs: a large trade-off between profits and law enforcement, due to a cheap technology and rigid demand. Such a trade-off fosters a convergence of interests between criminals and corrupted public officials resulting in a positive causal impact of illegal drugs on corruption

Economic Efficiency of Milk Production for Different Sizes of Modern Dairy Farms in Hamadan Province, Iran

Iran has limited water resources and attention has been focused on selecting agricultural subsectors, such as dairy farming, that maximise economic returns to this limited resource. The study measures the levels of production efficiency of a sample of modern farms located in the Hamadan province of north-west Iran. Though the production levels of modern farms are higher than those of traditional farms, levels of production efficiency are in many cases well below potential resulting in lower profit margins and less investment in dairy farming. This study was concerned with quantifying efficiency in a sample of modern dairy farms

Oil, Volatility and Institutions:Cross-Country Evidence from Major Oil Producers

This paper examines the long-run effects of oil revenue and its volatility on economic growth as well as the role of institutions in this relationship. We collect annual and monthly data on a sample of 17 major oil producers over the period 1961. 2013, and use the standard panel autoregressive distributed lag (ARDL) approach as well as its cross-sectionally augmented version (CS-ARDL) for estimation. Therefore, in contrast to the earlier literature on the resource curse, we take into account all three key features of the panel: dynamics, heterogeneity and cross-sectional dependence. Our results suggest that (i) there is a significant negative effect of oil revenue volatility on output growth, (ii) higher growth rate of oil revenue significantly raises economic growth, and (iii) better fiscal policy (institutions) can offset some of the negative effects of oil revenue volatility. We therefore argue that volatility in oil revenues combined with poor governmental responses to this volatility drives the resource curse paradox, not the abundance of oil revenues as such

A Counterfactual Economic Analysis of Covid-19 Using a Threshold Augmented Multi-Country Model

This paper develops a threshold-augmented dynamic multi-country model (TG-VAR) to quantify the macroeconomic effects of Covid-19. We show that there exist threshold effects in the relationship between output growth and excess global volatility at individ

Oil, Volatility and Institutions:Cross-Country Evidence from Major Oil Producers

This paper examines the long-run effects of oil revenue and its volatility on economic growth as well as the role of institutions in this relationship. We collect annual and monthly data on a sample of 17 major oil producers over the period 1961. 2013, and use the standard panel autoregressive distributed lag (ARDL) approach as well as its cross-sectionally augmented version (CS-ARDL) for estimation. Therefore, in contrast to the earlier literature on the resource curse, we take into account all three key features of the panel: dynamics, heterogeneity and cross-sectional dependence. Our results suggest that (i) there is a significant negative effect of oil revenue volatility on output growth, (ii) higher growth rate of oil revenue significantly raises economic growth, and (iii) better fiscal policy (institutions) can offset some of the negative effects of oil revenue volatility. We therefore argue that volatility in oil revenues combined with poor governmental responses to this volatility drives the resource curse paradox, not the abundance of oil revenues as such

The dynamics and determinants of Kuwait's long-run economic growth

This paper develops a quarterly macro-econometric model for the Kuwaiti economy estimated over the period 1979Q2-2013Q1, allowing us to investigate the long-run role of oil income in the development of Kuwait as well as the direct effects of oil revenue, foreign output, and equity price shocks on real output. More specifically, we examine to what extent Kuwaiti real output in the long run is shaped by oil revenue through their impact on capital accumulation, and technological transfers through foreign output. Using the same modelling strategy we also explore the role of oil income in terms of long-run private and public sector output growth (separately). The estimates suggest that real domestic output in the long run is influenced by oil revenues and foreign output (a proxy for technological progress), and technological growth in Kuwait is on a par with the rest of the world. Furthermore, while we show that both oil revenues and foreign output drive growth in the public sector, it seems that technological progress is the main (and only) driver for private sector real growth. Finally, our results show that oil revenue and global equity market shocks have a large and significant long-run impact on Kuwait's real output and public sector GDP. In comparison, the effects of the foreign output shock is muted

Debt, Inflation and Growth: Robust Estimation of Long-Run Effects in Dynamic Panel Data Models

This paper investigates the long-run effects of public debt and inflation on economic growth. Our contribution is both theoretical and empirical. On the theoretical side, we develop a cross-sectionally augmented distributed lag (CS-DL) approach to the estimation of long-run effects in dynamic heterogeneous panel data models with cross-sectionally dependent errors. The relative merits of the CS-DL approach and other existing approaches in the literature are discussed and illustrated with small sample evidence obtained by means of Monte Carlo simulations. On the empirical side, using data on a sample of 40 countries over the 1965-2010 period, we find significant negative long-run effects of public debt and inflation on growth. Our results indicate that, if the debt to GDP ratio is raised and this increase turns out to be permanent, then it will have negative effects on economic growth in the long run. But if the increase is temporary, then there are no long-run growth effects so long as debt to GDP is brought back to its normal level. We do not find a universally applicable threshold effect in the relationship between public debt and growth. We only find statistically significant threshold effects in the case of countries with rising debt to GDP ratios

Long-Run Effects in Large Heterogenous Panel Data Models with Cross-Sectionally Correlated Errors

This paper develops a cross-sectionally augmented distributed lag (CS-DL) approach to the estimation of long-run effects in large dynamic heterogeneous panel data models with cross-sectionally dependent errors. The asymptotic distribution of the CS-DL estimator is derived under coefficient heterogeneity in the case where the time dimension (T) and the cross-section dimension (N) are both large. The CS-DL approach is compared with more standard panel data estimators that are based on autoregressive distributed lag (ARDL) specifications. It is shown that unlike the ARDL type estimator, the CS-DL estimator is robust to misspecification of dynamics and error serial correlation. The theoretical results are illustrated with small sample evidence obtained by means of Monte Carlo simulations, which suggest that the performance of the CS-DL approach is often superior to the alternative panel ARDL estimates particularly when T is not too large and lies in the range of 30 _ T < 100

Is There a Debt-threshold Effect on Output Growth?

This paper studies the long-run impact of public debt expansion on economic growth and investigates whether the debt-growth relation varies with the level of indebtedness. Our contribution is both theoretical and empirical. On the theoretical side, we develop tests for threshold effects in the context of dynamic heterogeneous panel data models with cross-sectionally dependent errors and illustrate, by means of Monte Carlo experiments, that they perform well in small samples. On the empirical side, using data on a sample of 40 countries (grouped into advanced and developing) over the 1965-2010 period, we and no evidence for a universally applicable threshold effect in the relationship between public debt and economic growth, once we account for the impact of global factors and their spillover effects. Regardless of the threshold, however, we find significant negative long-run effects of public debt build-up on output growth. Provided that public debt is on a downward trajectory, a country with a high level of debt can grow just as fast as its peers

Can Italy grow out of its NPL overhang? A panel threshold analysis

This paper examines whether a tipping point exists for real GDP growth in Italy above which the ratio of non-performing loans (NPLs) to total loans falls significantly. Estimating a heterogeneous dynamic panel–threshold model with data on 17 Italian regions over the period 1997–2014, we find that growth above 1.2%, if sustained for a number of years, is associated with a significant decline in the NPL ratio