Education, Corruption and the Natural Resource Curse

The empirical evidence on the determinants of growth across countries has found that growth is lower when natural resources are abundant, corruption widespread and educational attainment low. An extensive literature has examined the way in which these three variables can impact growth, but has tended to address them separately. In this paper we argue that corruption and education are interrelated and that both crucially depend on a country’s endowment of natural resources. The key element is the fact that resources affect the relative returns to investing in human and in political capital, and, through these investments, output levels and growth. In this context, inequality plays a key role both as a determinant of the possible equilibria of the economy and as an outcome of the growth process.natural resources, corruption, human capital, growth, inequality

Endogenous Strength of Intellectual Property Rights

In recent empirical work, institutions have been shown to explain a significant share of the differences in cross-country accumulation, productivity, and output levels. The key institution that determines sustained development in R&D based growth models is the strength of intellectual property rights, which have thus far been assumed to be exogenous. In this paper we endogenize the strength of the intellectual property rights institutions to study how incentives to protect and exploit property rights affect economic growth. Our model explains endogenous differences in the strength of intellectual property rights across countries and highlights development thresholds that are related to the quality of such property rights. We show that market size is a crucial determinant of the existence and high quality of such institutions. In addition we find that the endogenous determination of the strength of intellectual property rights generates multiple equilibria and an institutional development threshold that must be overcome if an economy is to have strong institutions and rapid growth in the long run. This result is in line with the observed transition of early/small economic communities with common property laws to mature nation states with large institution-based societies.€+•

Redistribution and Occupational Choice in a Schumpeterian Growth Model

We consider an R&D-driven endogenous growth model in which innovation is risky and agents are risk averse. Growth is determined by the occupational choice of agents who can either work in production for a wage or become entrepreneurs. In this context, we examine the impact of redistributive taxation and compute socially optimal tax rates. Redistribution acts as social insurance, thus encouraging innovation and accelerating growth. The general equilibrium effects of the reallocation of labour induced by taxation can offset the direct distributive impact of taxes and result in a Pareto improvement. Optimal tax rates are a hump-shaped function of the intertemporal spillover effect.growth, innovation, optimal taxation, occupational choice

Inequality and growth: Goal conflict or necessary prerequisite?

In this paper I discuss recent theories on the relationship between growth and inequality, and ask whether the two move together or not. Output growth can be due to increases in either physical capital, human capital,the labour supply or the level of technology, and I argue that each of these represents a mechanism that relates our two variables of interest. The literature indicates that there are two difficulties in answering the question. The first concerns causation, since inequality affects growth, growth impacts distribution, and third factors have an effect on both. The second is the fact that, depending on the source of growth, inequality and growth may be positively or negatively related. This means that we have to be much more precise in the way in which we ask the question. On the one hand, we need to identify the particular source of growth before we can assess how it relates to inequality. On the other, different dimensions of inequality have different impacts. Both the theory and the empirical evidence indicate that inequality at the top of the distribution does not have the same effect as inequality at the bottom. JEL classification:

Factor Components of Inequality: A Cross-Country Study

This paper uses data from the Luxembourg Income Study to examine some of the forces that have driven changes in household income inequality over the last three decades of the 20th century. We decompose inequality for 6 countries (Canada, Germany, Norway, Sweden, the UK, and the US) into the three sources of market income (earnings, property income and income from self-employment) and taxes and transfers. Our findings indicate that although changes in the distribution of earnings are an important aspect of recent increases in inequality, they are not the only one. Greater earnings dispersion has in some cases been accompanied by a reduction in the share of earnings that dampened its impact on overall household income inequality. In some countries the contribution of self-employment income to inequality has been on the rise, while in others, increases in inequality in capital income account for a substantial fraction of the observed distributional changes

Labour market institutions and income inequality

The recent debate on trends in inequality in industrial countries has been marred by the lack of consensus about the relevant concept of inequality. Labour economists are concerned with inequality in earnings, macroeconomists with movements in the wage share, while policy-makers tend to focus on household income inequality. We provide a unifying framework to study the relationship between these three concepts of inequality and the way in which labour market institutions affect them. Institutions emerge as a key determinant of inequality, yet they play different roles depending on the extent to which they complement or substitute each other. As a result, we are able to propose a set of inequality minimizing institutions. Institutions that decrease inequality are, however, associated with higher unemployment, and our analysis allows us to quantify the magnitude of this trade-off

Why Are Women Less Democratic Than Men? Evidence from Sub-Saharan African Countries

A substantial literature has examined the determinants of support for democracy and although existing work has found a gender gap in democratic attitudes, there have been no attempts to explain it. In this paper we try to understand why females are less supportive of democracy than males in a number of countries. Using data for 20 Sub-Saharan African countries, we test whether the gap is due to individual differences in policy priorities or to country-wide characteristics. We find that controlling for individual policy priorities does not offset the gender gap, but those women who are interested in politics are more democratic than men. Furthermore, our results indicate that the gap disappears in countries with high levels of human development and political rights

Factor components of inequality: Cross-country differences and time changes

Recent work on inequality has examined either changes in the distribution of income or in that of earnings, without examining how the latter affects the former. In this paper we perform a factor decomposition of income inequality in order to assess the importance of earnings and income from other sources in recent changes in inequality. We examine data for 8 industrial countries over the last three decades of the 20th century. Our findings indicate that although changes in the distribution of earnings are an important aspect of recent increases in inequality, they are not the only one. In some countries the contribution of self-employment income to inequality has been on the rise. In others, increases in inequality in capital income - probably caused by tax changes - account for a substantial fraction of changes in the distribution of income

On Gender Gaps and Self-fulfilling Expectations: Theory, Policies and Some Empirical Evidence

This paper considers a simple model of self-fulfilling expectations that leads to a multiple equilibrium of gender gaps in wages and participation rates. Rather than resorting to moral hazard problems related to unobservable effort, like in most of the related literature, our model fully relies on statistical discrimination. If firms believe that women will quit their jobs more often than equally productive men when shocks affecting household chores take place, our model predicts that this belief will increase the wage gap in favour of men which, in turn, will exacerbate lower female participation in the labour market. Hence, both effects lead to a gendered equilibrium with large gaps, even though an ungendered equilibrium with no gaps is feasible. We examine the effects of gender-based and gender-neutral subsidies and find that the latter are more effective in removing the gendered equilibrium. Empirical analysis based on a time use survey for Spain is provided to test some implications of the model.gender gaps, self-fulfilling expectations, gender policies, time-use surveys

Inequality and Economic Growth: The Perspective of the New Growth Theories

We analyze the relationship between inequality and economic growth from two directions. The first part of the survey examines the effect of inequality on growth, showing that when capital markets are imperfect, there is not necessarily a trade-off between equity and efficiency. It therefore provides an explanation for two recent empirical findings, namely, the negative impact of inequality and the positive effect of redistribution upon growth. The second part analyzes several mechanisms whereby growth may increase wage inequality, both across and within education cohorts. Technical change, and in particular the implementation of "General Purpose Technologies," stands as a crucial factor in explaining the recent upsurge in wage inequality.Economic