Oil Price Shocks, Income, and Democracy

We examine the effect of oil price fluctuations on democratic institutions over the 1960–2007 period. We also exploit the very persistent response of income to oil price fluctuations to study the effect of persistent (oil-price-driven) income shocks on democracy. Our results indicate that countries with greater net oil exports over GDP see improvements in democratic institutions following upturns in international oil prices. We estimate that a 1 percentage point increase in per capita GDP growth due to a positive oil price shock increases the Polity democracy score by around 0.2 percentage points on impact and by around 2 percentage points in the long run. The effect on the probability of a democratic transition is around 0.4 percentage points

The rise of the middle class and economic growth in ASEAN

We present instrumental variables estimates of the relationship between the share of income accruing to the middle class and GDP per capita. The increase in GDP per capita that ASEAN economies experienced during 1970–2010 significantly contributed to a higher share of income accruing to the middle class in these countries. Econometric model estimates show that the impact of a rise of the middle class on economic growth depends on initial levels of GDP per capita. In the majority of ASEAN countries, a rise of the middle class that is unrelated to GDP per capita growth would have had a significant negative effect on economic growth for levels of ASEAN economies' GDP per capita in 1970. In contrast, for recent values of GDP per capita a rise of the middle class would positively contribute to growth of GDP per capita in ASEAN. We show that investment is an important channel through which the income share of the middle class affects economic growth

Trade Uncertainty and Income Inequality

This paper examines the relationship between trade uncertainty and income inequality. In countries where only a small share of the population is educated, an increase in trade uncertainty is associated with a significant increase in income inequality. As education of the population increases the relationship between trade uncertainty and income inequality becomes more muted. Trade uncertainty has no significant effect on income inequality in countries that are world leaders in education. Developing countries that want to reduce income inequality arising from trade uncertainty should therefore consider further improving their education system

Rent extraction by capitalists

Rent extraction by capitalists is present if the capital income share exceeds the capital output elasticity. Based on a sample of 111 countries during the period 1970–2010, panel model estimates show that: (i) the average capital income share significantly exceeds the average capital output elasticity; (ii) the difference between the average capital income share and the average capital output elasticity has increased over time; (iii) in democracies the average capital income share is not significantly different from the average capital output elasticity. The findings suggest that there exists more rent extraction by capitalists in autocracies and anocracies than in democracies

Democracy and Corruption

I examine the relationship between democracy and the perceived risk of corruption in a panel of 130 countries. My panel model controls for country fixed effects and enables the estimation of a within-country relationship between democracy and corruption. My main finding is that democracy significantly reduces the risk of corruption, but only in countries where ethnic fractionalization is low. In strongly fractionalized countries a transition from autocracy to democracy does not significantly reduce corruption. One explanation for these findings is that the corruption-reducing effect of greater accountability of politicians under democracy is undermined by the common pool problem; fractionalization increases the severity of the common pool problem

Economic Growth and the GDP Share of Consumption: An Empirical Analysis for Asia

The majority of Asian countries, in particular, those located in East Asia, such as China, are characterized by high GDP shares of consumption. While over the past two decades there has been a remarkable growth in consumption, and to a lesser extent of consumption per capita, the GDP share of the consumption has declined by a considerable amount in Asia. The article presents projections of the GDP consumption share. The projections are based on time series models and an econometric model that relates the GDP share of consumption to GDP growth. Instrumental variables estimates show that the GDP share of consumption is significantly negatively related to growth: A decrease in PPP GDP per capita growth of 1 percentage point increases the GDP share of consumption by around 2 percentage points. Slower growth in Asia would thus significantly contribute to a higher GDP share of consumption in that region

Adult mortality and urbanization: Examination of a weak connection in sub-Saharan Africa

Estimation of a panel model during the period 1960–2013 shows that there is no significant negative correlation between adult mortality and urbanization in sub-Saharan Africa. For the rest of the world the correlation between adult mortality and urbanization is significantly negative. A high prevalence of HIV likely explains the absence of a significant negative correlation between adult mortality and urbanization in the sub-Saharan African region. During the 1960s and 1970s, i.e. prior to the HIV epidemic, adult mortality and urbanization are significantly negatively correlated in sub-Saharan Africa. Panel model estimates show that the urban health premium is significantly decreasing in HIV prevalence. So much so, that for countries with very high HIV prevalence rates, i.e. above 10 percent, there is a significant urban health penalty. Despite a number of features of sub-Saharan Africa that significantly increase the urban health premium – such as a large share of the population at risk of contracting Malaria and high average temperatures – the high HIV prevalence rates during the 1990s and 2000s completely overshadow these features so that, on average, there is no significant negative correlation between urbanization and adult mortality in the sub-Saharan African region

An instrumental variables approach to estimating tax revenue elasticities: evidence from Sub-Saharan Africa

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