The Devil is in the Shadow: Do Institutions Affect Income and Productivity or Only Official Income and Official Productivity

This paper assesses the relationship between institutions, output, and productivity, when official output is corrected for the size of the shadow economy. Our results confirm the usual positive impact of institutional quality on official output and total factor productivity, and its negative impact on the size of the underground economy. However, once output is corrected for the shadow economy, the relationship between institutions and output becomes weaker. The impact of institutions on total (“corrected”) factor productivity even becomes insignificant. Differences in corrected output must then be attributed to differences in factor endowments. These results survive several tests for robustness

Behind Closed Doors: Revealing the ECB’S Decision Rule

This paper aims at discovering the decision rule the Governing Council of the ECB uses to set interest rates. We construct a Taylor rule for each member of the council and for the euro area as a whole, and aggregate the interest rates they produce using several classes of decision-making mechanisms: chairman dominance, bargaining, consensus, voting, and voting with a chairman. We test alternative scenarios in which individual members of the council pursue either a national or a federal objective. We then compare the interest-rate path predicted by each scenario with the observed euro area's interest rate. We find that scenarios in which all members of the Governing Council are assumed to pursue Euro-area-wide objectives are dominated by scenarios in which decisions are made collectively by a council consisting of members pursuing national objectives. The best-performing scenario is the one in which individual members of the Governing Council follow national objectives, bargain over the interest rate, and their weights are based on their country's share of the zone's GDP

Distributive consequences of a monetary union: what can we learn from a referendum?

A logit model is used to study the approval rate during the referendum on the Maastricht Treaty held in France in 1992. Results show a remarkable correlation between the approval rate in French departments and their economic characteristics as defined by the theory of optimum currency areas. They support the view that individual agents' opinions towards EMU depended on its impact on their welfare.

L'integration europeenne a-t-elle permis une diversification des risques macroeconomiques ?

L'argument du partage du risque prevoit qu'une union economique beneficie de la diversite de ses membres si des transferts sont possibles entre eux. Dans le cadre de l'Union europeenne, cet argument souleve deux questions que traite cet article en appliquant la theorie du portefeuille aux pays europeens consideres comme des portefeuilles de secteurs : la capacite a partager le risque en Europe s'est-elle recemment amelioree en raison de l'evolution de la composition sectorielle des pays ?Integration economique; diversification; Union europeenne; theorie du portefeuille

Informal Institutions and Foreign Direct Investment

Foreign direct investment (FDI) inflows cannot solely be determined by conventional variables such as availability of natural resources, high skilled manpower or modern infrastructure. Important explanations also include the crucial role of institutions in attracting investment flows. This study explores the role of informal institutions in investment flows as well as the relationship between formal and informal institutions in the context of FDI flows. The term informal institutions has been used to describe a diverse set of practices such as corruption or culture thus leading to a serious conceptual ambiguity. This study attempts to provide a more precise and analytically useful definition. It builds on the Helmke and Levitsky typology of informal institutions