Endogenous Reversals of Fortune

The phenomenon of systemic changes in the fortunes of social groups is hard to reconcile with traditional macroeconomic models of intergenerational mobility. This paper, therefore, proposes a theory of endogenous reversal of fortune, whereby instilling strict work norms is an instrument to address moral hazard in poor families more so than in rich families, which is consistent with empirical regularities pertaining to work attitudes. The mechanism implies that hard-working children of the poor may eventually overtake leisure-prone children of the rich. This evolution, in particular, of work norms, is endogenously determined and is, therefore a better explanation of the rise and the fall of population groups than existing theories that rely on exogenous ability variations.work norms, intergenerational income mobility

The Political Economy of Sustainable Federations

This paper studies a constitutional framework that enables sustainable federative agreements. In the model, districts decide on local policies and envision the possibility of entering a federation. Focusing on rules for legislative bargaining in the federation, I find that a non-egalitarian bargaining rule, which assigns policy making power to one of the district's representatives is welfare inferior to the decentralized status quo. In contrast, under an egalitarian bargaining procedure, federation yields a welfare superior outcome. The analysis indicates the desirability of making such egalitarian bargaining rules credible.

The political economy of public spending on education, inequality, and growth

Public provision of education has often been perceived as universal and egalitarian, but in reality it is not. Political pressure typically results in incidence bias in favor of the rich. The author argues that the bias in political influence resulting from extreme income inequalities is particularly likely to generate an incidence bias, which we call social exclusion. This may then lead to a feedback mechanism whereby inequality in the incidence of public spending on education breeds higher income inequality, thus generating multiple equilibria: with social exclusion and high inequality; and with social inclusion and relatively low inequality. The author also shows that the latter equilibrium leads to higher long-run growth than the former. An extension of the basic model reveals that spillover effects among members of social groups differentiated by race or ethnicity may reinforce the support for social exclusion.Public Health Promotion,Environmental Economics&Policies,Decentralization,Economic Theory&Research,Health Monitoring&Evaluation,Inequality,Poverty Assessment,Governance Indicators,Achieving Shared Growth,Economic Theory&Research

Sobre los determinantes y efectos de la influencia de politica (On the Determinants and Effects of Political Influence)

En este trabajo se emplea una encuesta de gran alcance entre empresas de varios países para evaluar su influencia en las políticas oficiales. Se halló que la influencia guarda una relación con empresas más grandes propiedad del Estado que tienen un alto grado de concentración de la propiedad. Por el contrario, la tenencia foránea tiene escasa importancia. También se descubrió que la medida en que se considera que las políticas gubernamentales y la legislación entorpecen el crecimiento de las empresas disminuye junto con la influencia política e, independientemente, junto con el nivel de calidad institucional del país. (Disponible en inglés)

Education and Democratic Preferences

This paper examines the causal link between education and democracy. Motivated by a model whereby educated individuals are in a better position to assess the effects of public policies and hence favor democracy where their opinions matter, the empirical analysis uses World Values Surveys to study the link between education and democratic attitudes. Controlling for a variety of characteristics, the paper finds that higher education levels tend to result in rodemocracy views. These results hold across countries with different levels of democracy, thus rejecting the hypothesis that indoctrination through education is an effective tool in non-democratic countries.Education, democracy

Does Liberte = Egalite ? A survey of the empirical links between democracy and inequality with some evidence on the transition economies

The effect of the distribution of political rights on income inequality has been studied both theoretically and empirically. The authors review the existing literature and, in particular, the available empirical evidence. The literature suggests that formal exclusion from the political process through restrictions on the voting franchise appears to have caused a high degree of economic inequality. And democratization in the form of franchise expansion has typically led to an expansion in redistribution, at least in the small sample of episodes studied. In a less pronounced way, albeit more emphatically compared with the ambiguous results of earlier research, recent evidence indicates an inverse relationship between other measures of democracy, based on civil liberties and political rights, and inequality. The transition experience of Eastern European countries, however, seems to some extent go against these conclusions. This opens possible new vistas for research, namely the need to incorporate the length of democratic experience and the role played by ideology and social valuesLabor Policies,Politics and Government,Decentralization,Human Rights,Poverty Impact Evaluation,Poverty Impact Evaluation,Politics and Government,Governance Indicators,Inequality,Human Rights

Desigualdad, instituciones e informalidad

(Disponible en idioma inglés únicamente) En este trabajo se presentan la teoría y los elementos de prueba de los factores determinantes del tamaño del sector informal. Proponemos un modelo teórico simple en el que el tamaño del sector informal guarda una relación negativa con la calidad de las instituciones y una relación positiva con la desigualdad del ingreso. A continuación se validan empíricamente esas predicciones empleando diversas variables representativas del tamaño del sector informal, la desigualdad del ingreso y la calidad de las instituciones. Se muestra que los resultados son valederos con respecto a una variedad de especificaciones econométricas.

Educational expansion : evidence and interpretation

The authors document the vast expansion of schooling over the past several decades, as well as convergence in schooling measures across countries. They make the observation that poor countries today have higher average education levels than countries at the same level of economic development had in the past. They propose a simple model that suggests that these trends can be attributed to the intertemporal expansion of the world technological frontier, which enhances the demand for schooling. Their empirical analysis supports the view that educational expansion has occurred because of the increase in demand, especially in open economies, and not because of cost-reducing improvements in the education sector.Teaching and Learning,Decentralization,Labor Policies,Economic Theory&Research,Environmental Economics&Policies,Environmental Economics&Policies,Achieving Shared Growth,Economic Theory&Research,Teaching and Learning,Inequality

Redistributional Preferences and Imposed Institutions

To what extent do imposed institutions shape preferences? We consider this issue by comparing the market-versus-state attitudes of respondents from a capitalist country, Finland, and an ex-communist group of Baltic countries, and by arguing that the period of communist rule can be viewed as an experiment in institutional imposition. We find that, consistent with some earlier related work, citizens from ex-communist countries tend to be more supportive of state ownership than respondents from capitalist economies. However, they also favor increasing inequality and competition as the means to enhance incentives. We conclude that, in some important relevant dimensions, institutional imposition (which lasted for about 50 years) had a limited effect on preferences. The lessons for Latin America are straightforward.

Who's Afraid of Foreign Aid? The Donors' Perspective

Since efforts by industrial countries to increase the amount of foreign aid they provide have been on the rise recently, it is important to understand the determinants involved. This paper examines the factors affecting support for foreign aid among voters in donor countries. The theoretical model, which considers an endogenous determination of official and private aid flows, suggests that government efficiency is an important factor in this regard, and also ties individual income to aid support through the elasticity of substitution. An empirical analysis of individual attitudes, based on the World Values Surveys, reveals that two factors are positively related to an individual`s willingness to support foreign aid: satisfaction with own government performance and individual relative income. Furthermore, when using donor country data, we find that aid is negatively tied to inequality, corruption and taxes. These results are quite consistent with the analytical framework.