Trust and Trade

This paper presents a model demonstrating how trust affects the volume of trade in a society. There are two ways in which this happens. First, at minimum, societies need a certain level of trust in order to observe trading activity. Second, once this minimum condition is satisfied, the probability of observing a larger volume of trade is high only if the level of trust is sufficiently high. Our results help explain empirical findings that demonstrate a positive relationship between trust and the volume of sales, or the value added of trade. The model also shows that institutions can compensate for low levels of trust-that is, societies with low levels of trust can achieve volumes of trade comparable to those of societies with high levels of trust by spending more resources on increasing the quality of the relevant institutions.trust, volume of trade, social capital, contract enforcement

Rent-seeking For Public Goods: Group´s Size and Wealth Heterogeneity

In this paper, we study how between-group wealth and size heterogeneity affectsuccess probabilities as well as aggregate rent-seeking efforts when two groups compete for the allocation of a pure public good. Unlike with previous models, we measure the utility cost of rent-seeking in terms of the loss in private consumption confronting individuals when contributing to this activity. This allows us to escape from most of the neutrality results found in the literature, and to offer new and sensible results regarding the effect of group heterogeneity on rent-seeking efforts. Our model predicts that the total sum of rent-seekers and their between-group distribution do affect group success probabilities and aggregate rent-seeking efforts. Our model also predicts that it is possible to observe a poorer group being more successful than a richer group due to the former having a larger group-size. On the other hand, it shows that greater between-group wealth equality does not necessarily imply more aggregate rent-seeking efforts. The existence of group size asymmetries plays a key role in determining this effect.Rent-seeking, public goods, group size, wealth inequality, group asymmetries.

Anti-Poverty Programs and Presidential Election Outcomes: Familias en Acción in Colombia

Using a comprehensive data set for Colombian municipalities between 2002 and 2010, in this paper we study the effects of large anti-poverty programs on presidential election outcomes. In particular, we test for two of the main assumptions on voters´ behavior adopted by the political economics literature. First, we examine whether the incumbent governing coalition has been politically rewarded due to the expansion exhibited by the program during the last decade. Second, we test whether voters have been willing to tradeoff their ideological attachments in exchange of a higher level of income - obtained through the cash transfer payments provided by the program. Our estimates correct for potential simultaneity problems previously identified by the literature in this field. Our results provide empirical support for both hypotheses and open the discussion on how to prevent the use of large anti-poverty programs for political purposes.voting, presidential elections, anti-poverty programs, electoral rewards,Colombia.

Decentralization, corruption, and political accountability in developing countries

Powerful local elites are quite common in developing countries. Thus, whether decentralization reduces or not the level of corruption in the presence of these elites is a relevant issue for these economies. We motivate this paper with some empirical evidence. Using cross-country information we find that the negative average effect of decentralization on corruption documented in the literature is absent for developing countries. Then, we build an imperfect information model of corruption and political accountability to study if the influence local elites may have on the allocation of public resources can explain this outcome. We find that not only the power of the elites but also other unexpected factors matter. In particular, both the existence of regions with a relatively weak accountability sector and the design of decentralization and grants can also explain the lack of success of decentralization in combating corruption in these economies.Decentralization, corruption, political accountability, capture, localelites

Bargaining In Legislature: Number Of Parties And Ideological Polarization

This paper studies whether a government party always prefers to negotiate with another compact party rather than with many different parties in a legislature. We claim that the interaction between ideological polarization and number of parties plays an important role in this decision. We start by modeling two types of legislatures: The 2-parties legislature, in which the government party negotiates with another compact party; and the m+1-parties legislature, in which it negotiates with m>2 parties. Parties negotiate on both a public (ideological) and a distributive (private) policy. Our main result shows that the government party does not always prefer to negotiate in a bilateral situation. If the level of ideological polarization in the 2-parties legislature is high enough, it prefers to negotiate with m less polarized parties. We also find that if there are two legislatures with the same number of parties, the government party prefers to negotiate in that with the smallest level of ideological polarization.number of parties, bargaining, legislature

Political Fragmentation and Government Spending: Bringing Ideological Polarization into the Picture

The literature has come to no agreement about the empirical validity of the so-called weak government hypothesis. According to this hypothesis, political fragmentation should lead to higher government expenditure. With the aim of reconciling the empirical evidence with theory, in this paper we discuss and test a new hypothesis about this relationship: that fragmentation should matter for public spending only to the extent that the degree of polarization is high enough. Our results for a sample of presidential democracies show that a marginal change in the level of fragmentation in the governing coalition affects positively the size of the budget, but only if there is some degree of polarization. We also find that what matters for fiscal policy in presidential democracies is the degree of fragmentation and polarization within the governing coalition, rather than in the legislature at large. For parliamentary democracies we find erratic patterns for the relationship between fragmentation and public spending. Our results suggest interesting differences between presidential and parliamentary systems.Common-pool resource problem, government spending, politicalfragmentation, ideological polarization

THE LINK BETWEEN FARMGATE AND WORLD PRICES IN THE WAKE OF TRADE LIBERALIZATION: THE CASE OF COLOMBIA

The study measures the extent to which farmgate price levels have effectively increased their degree of integration with world price movements following trade liberalization in Columbia. Results show that the extent of integration varies greatly depending upon the crop, and that market-specific policies have isolated some farmers from international influences.Demand and Price Analysis, International Relations/Trade, Marketing,

EN COLOMBIA 1984-2000: ¿QUIÉN GANA MÁS, QUIÉN PIERDEMÁS?

Utilizando la encuesta de hogares trimestral para las siete principales ciudades de Colombia en el período 1984-2000, se examinó el impacto de choques globales y sectoriales de la actividad económica sobre el desempleo, la ocupación, la participación, los ingresos laborales, horas trabajadas y horas remuneradas para diferentes grupos demográficos. Los individuos se clasifican según género, edad y nivel educativo. Con modelos de regresión simple se mide la variación relativa de cada grupo con respecto al grupo de referencia, frente al ciclo económico. Los resultados muestran que los jóvenes y mujeres, con menores niveles de educación son más sensibles que los hombres más educados ante fluctuaciones en la actividad económica.Series de tiempo