The effects of disasters on income mobility: Bootstrap inference and measurement error simulations

We evaluate the impact of disasters on income mobility by drawing on "natural experiments". While the poor have a much higher probability of remaining poor when entering a crisis compared to normal times, there is also a negative effect in the year after. Richer households seem to be unaffected. A simple bootstrap method is proposed to facilitate statistical inference for mobility matrices. Also, we simulate measurement error to illustrate its magnitude on these matrices. Small errors induce a substantial downward bias of the probability of remaining poor, while comp arisons across states seem more robust, which is promising for impact analysis.Income mobility Effects of disasters Bootstrap Measurement error Simulations Natural experiments Control group Treatment group Poverty

Powerful donors and foreign policy: The role of multilateral financial institutions

The opportunity for a powerful donor country, such as the United States, to use a multilateral financial institution (MFI) strategically in order to promote its own foreign policy goals has received little attention. The gain to a donor that is able to make the World Bank or other MFIs adapt to this donor's view on an issue can be substantial. In that case, all the contributions from the other member nations will also stand behind the MFI's stance on the particular issue, and recipients may feel compelled to comply with this massive counterpart. As a result, influencing MFIs may give much more leverage to a donor's foreign assistance in the foreign policy arena than pursuing the same goals bilaterally with the same amount of aid. We present a model where a donor tries to influence a MFI to put pressure on a recipient to comply with the foreign policy interests of the donor. This game-theoretic multi-agent model with one donor, two MFIs and one recipient illustrates the virtue of using the multilateral as an instrument in foreign policy as seen from the powerful donor's point of view. Similarly, we show how this strategic behavior is damaging for the recipient in particular and for development in general.Foreign policies Conditionality Unilateralism

Is bonded labor voluntary? A framework against forced work

UN estimate that 20 million are held in bonded labor. Several economic analyses assert that bonded laborers accept these contracts voluntarily, which could imply that a ban would make such laborers worse off. We question the voluntariness of bonded labor, and present a mechanism that keeps workers trapped. With different types of landlords not revealed to the laborer, we show how some landlords manipulate contract terms so that the laborer becomes bonded. Enforcement mechanisms and the monopolistic market for credit thus play a joint role. Providing alternative sources of credit, offer proper conflict resolution institutions over labor-contract disputes and banning could emancipate bonded labor, which would make them better off.Coercion Debt slavery Power Bonded labor Nepal Asia

Finding Induced Subgraphs via Minimal Triangulations

Potential maximal cliques and minimal separators are combinatorial objects which were introduced and studied in the realm of minimal triangulations problems including Minimum Fill-in and Treewidth. We discover unexpected applications of these notions to the field of moderate exponential algorithms. In particular, we show that given an n-vertex graph G together with its set of potential maximal cliques Pi_G, and an integer t, it is possible in time |Pi_G| * n^(O(t)) to find a maximum induced subgraph of treewidth t in G; and for a given graph F of treewidth t, to decide if G contains an induced subgraph isomorphic to F. Combined with an improved algorithm enumerating all potential maximal cliques in time O(1.734601^n), this yields that both problems are solvable in time 1.734601^n * n^(O(t)).Comment: 14 page

Multilateral Aid Agencies and Strategic Donor Behaviour

The paper builds on recent empirical evidence on the importance of strategic donor behaviour in aid allocation in order to develop a theoretical model where donor pressure on a recipient for influencing the aid disbursement of a multilateral institution is endogenously determined. Our game-theoretic, multi-agent model with one aid recipient, two bilateral donors and one multilateral institution illustrates the advantage of putting pressure on the recipient as an instrument for foreign policy, as seen from the mighty donor's point of view. The model shows how this strategic donor behaviour is damaging to the aid-recipient; we also show that other donors not sharing foreign policy goals similar to the strategic, influential donors will, in fact, reduce their aid contributions to the multilateral organizations. This may obviously have profound implications for the volume of total aid flows and may crucially undermine current efforts to substantially increase ODA to meet the Millennium Development Goals by 2015. Our paper also contributes to the common debate on foreign aid by presenting a rigorous model that explains the coexistence of both multilateral aid organizations and bilateral aid programmes.foreign aid, strategic donor behaviour, multilateral aid agencies

Determinants of foreign direct investment in services

This study uses industry level foreign direct investment (FDI) data from 57 countries 1989-2000, to examine the host country determinants of FDI flows in services as a whole, and in the major service industries. Consistent with the observation that many services are non-tradable, we find that service FDI is market-seeking, and unaffected by trade openness. Producer services are important in binding together vertically disintegrated chains of production, accordingly we find a strong correlation between FDI in manufacturing and FDI in finance and transport. While composite political risk does not affect FDI in services, disaggregate socio-political indices prove significant in certain service industries.Foreign direct investment Services

Promoting investment in small Caribbean states

This study performs an econometric analysis to determine the main policy levers for investment promotion in the Caribbean. The results provide the following policy advice to Caribbean policy makers seeking to increase investment in, and hence the growth prospectives of, their countries. 1. Investment, both foreign and domestic, is higher in countries that are open to international trade. Our results also suggest that Caribbean countries might see a greater effect of trade integration than other countries. Caribbean governments should therefore pursue regional trade arrangements, and actively support the WTO process of global trade liberalization. 2. Investment, both foreign and domestic, is higher in countries whose domestic markets are larger and more advanced. Regional integration to expand what is considered the domestic market, is thus beneficial. 3. Investment, both foreign and domestic, is higher in countries with greater political stability. To inspire confidence among investors, Caribbean countries should avoid major political disruptions, by pursuing inclusive and participatory policies. Our results suggest that investment is particularly responsive to stability issues in countries like Haiti, Guyana, Dominica, and Grenada. 4. Foreign investors are discouraged by bad macro-economic policies, poor infrastructure, and excessive regulation. Caribbean countries should avoid periods of high inflation and large debt burdens, and develop functional infrastructure and regulatory frameworks.FDI (Foreign Direct Investment Domestic investment Small states Caribbean

Large induced subgraphs via triangulations and CMSO

We obtain an algorithmic meta-theorem for the following optimization problem. Let \phi\ be a Counting Monadic Second Order Logic (CMSO) formula and t be an integer. For a given graph G, the task is to maximize |X| subject to the following: there is a set of vertices F of G, containing X, such that the subgraph G[F] induced by F is of treewidth at most t, and structure (G[F],X) models \phi. Some special cases of this optimization problem are the following generic examples. Each of these cases contains various problems as a special subcase: 1) "Maximum induced subgraph with at most l copies of cycles of length 0 modulo m", where for fixed nonnegative integers m and l, the task is to find a maximum induced subgraph of a given graph with at most l vertex-disjoint cycles of length 0 modulo m. 2) "Minimum \Gamma-deletion", where for a fixed finite set of graphs \Gamma\ containing a planar graph, the task is to find a maximum induced subgraph of a given graph containing no graph from \Gamma\ as a minor. 3) "Independent \Pi-packing", where for a fixed finite set of connected graphs \Pi, the task is to find an induced subgraph G[F] of a given graph G with the maximum number of connected components, such that each connected component of G[F] is isomorphic to some graph from \Pi. We give an algorithm solving the optimization problem on an n-vertex graph G in time O(#pmc n^{t+4} f(t,\phi)), where #pmc is the number of all potential maximal cliques in G and f is a function depending of t and \phi\ only. We also show how a similar running time can be obtained for the weighted version of the problem. Pipelined with known bounds on the number of potential maximal cliques, we deduce that our optimization problem can be solved in time O(1.7347^n) for arbitrary graphs, and in polynomial time for graph classes with polynomial number of minimal separators

The role of participation and empowerment in income and poverty dynamics in Indonesia 1993-2000

The objective of this study is to assess whether living in a community that has a more democratic decision making system or in a society with a higher degree of participation and cooperation has any effect on household income changes and poverty reduction in Indonesia. Constructing an empowerment index and a participation index, we find that a household would have had a two percentage point higher income growth from 1993 to 2000 if it had been in a society with a high degree of cooperation compared to a society with the lowest degree of cooperation, if our results imply causality. This is substantial, since the average household per capita real income growth between 1993 and 2000 was 11 %. The participation index was found to be insignificant.Household income Poverty reduction Indonesia