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11. Does Lootable Wealth Breed Disorder? A Political Economy of Extraction Framework

Author:
Richard Snyder
Publication Date:
07-2004
Content Type:
Working Paper
Institution:
Kellogg Institute for International Studies
Abstract:
This article proposes a political economy of extraction framework that accounts for political order and state collapse as alternative outcomes in the face of lootable wealth. Different types of institutions of extraction can be built around lootable resources—with divergent effects on political stability. If rulers are able to forge institutions of extraction that give them control over the revenues generated by lootable resources, then these resources can contribute to the maintenance of political order by providing the income with which to govern. In contrast, the breakdown or absence of such institutions increases the risk of civil war by making it easier for rebels to get income. The framework is used to explain two puzzling cases that experienced sharply contrasting political trajectories in the face of lootable resources: Sierra Leone and Burma. A focus on institutions of extraction provides a stronger understanding of the wide range of political possibilities—from chaos, through dictatorship, to democracy—in resource-rich countries.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Burma and Sierra Leone

12. On the Role of Distance for Outward Foreign Direct Investment

Author:
Peter Egger
Publication Date:
06-2004
Content Type:
Working Paper
Institution:
Kellogg Institute for International Studies
Abstract:
This paper focuses on the estimation of three distance-related effects on outward foreign direct investment (FDI). (i) Distance harms vertical multinationals, since they engage in trade. (ii) It makes non-trading multinationals better off than exporters. (iii) This positive effect on horizontal FDI is expected to rise with bilateral country size due to the home market effect. The use of panel data and related econometric methods is highly recommended to avoid parameter bias from endogenous, unobserved, time-invariant effects. A unified estimation approach to assess all three hypotheses then has to rely on instrumental variable techniques for generalized leastsquares methods. In the empirical analysis of 1989–1999 bilateral US outward FDI stocks at the industry level, it is shown that testing and accounting for autocorrelation is extremely important for parameter inference. In sum, the paper lends strong support to the theory of horizontally organized multinationals as outlined in Markusen and Venables (2000).
Topic:
Economics and International Trade and Finance
Political Geography:
United States

13. Unemployment, Macroeconomic Policy and Labor Market Flexibility: Argentina and Mexico in the 1990s

Author:
Roberto Frenkel and Jaime Ros
Publication Date:
02-2004
Content Type:
Working Paper
Institution:
Kellogg Institute for International Studies
Abstract:
This paper compares the divergent unemployment experiences in Argentina and Mexico in the 1990s, examining in detail the remarkable contrasts in the adjustment of the labor market in these two countries that occur despite equally striking similarities in the evolution of a number of macroeconomic variables and external economic shocks. The paper focuses on the role of macroeconomic policies and the type of industrial restructuring in these developments and considers to what extent the divergent unemployment experiences can be explained by differences in the institutional characteristics of the labor market.
Topic:
Economics and Industrial Policy
Political Geography:
Argentina, South America, North America, and Mexico

14. Voter Inequality, Turnout And Information Effects in a Cross-National Perspective

Author:
Gábor Tóka
Publication Date:
05-2002
Content Type:
Working Paper
Institution:
Kellogg Institute for International Studies
Abstract:
The paper empirically tests the proposition that because of the unequal social distribution of politically relevant resources, some groups of citizens may be less successful in expressing their specifically political preferences in the vote than others. Hence, the electoral arena may give different people different degrees of political influence even when the formal equality of all citizens before the law is rigorously upheld in the electoral process. Survey data on voting behavior in 18 democratic party systems from the Comparative Study of Electoral Systems and Larry Bartels's (1996) simulation procedure—now extended to the analysis of multiparty-systems, turnout effects and non-linear information effects on the vote—are utilized to explore the question. The results show that social differences in both turnout and political knowledge may lead to the hypothesized political inequalities but their size is remarkably modest.
Topic:
Economics, Government, and International Trade and Finance

15. Government Expenditures and Equilibrium Real Exchange Rates

Author:
Ronald J. Balvers and Jeffrey H. Bergstrand
Publication Date:
04-2002
Content Type:
Working Paper
Institution:
Kellogg Institute for International Studies
Abstract:
Economists have long investigated theoretically and empirically the relationship between government spending and equilibrium real exchange rates. As Frenkel and Razin (1996) summarize for a small open economy, government expenditures (financed by lump-sum taxes) influence real exchange rates via a resource-withdrawal channel and a consumption-tilting channel. Recent theoretical and empirical studies, such as Froot and Rogoff (1991), Rogoff (1992), De Gregorio, Giovannini, and Krueger (1994), De Gregorio, Giovannini, and Wolf (1994), De Gregorio and Wolf (1994), and Chinn and Johnston (1996), have focused only upon the effects of government spending through the resource-withdrawal channel. Extending Frenkel and Razin (1996), this paper generates closed-form theoretical solutions for the relationships among the real exchange rate, relative per capita private consumption, relative per capita government consumption, and relative per capita tradables and nontradables production in a two-country general equilibrium model. Using relative price level, private and government per capita consumption, and relative productivity data from the Summers and Heston (1991) Penn World Tables and OECD (1996) data for a sample of OECD countries relative to the United States, we estimate the model's structural equations. The results suggest that government expenditures influence equilibrium real exchange rates approximately equally via the resource-withdrawal and consumption-tilting channels. Moreover, the results imply that government spending and private consumption are complements in utility.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
United States

16. On the Economic Determinants of Free Trade Agreements

Author:
Scott L. Baier and Jeffrey Bergstrand
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
Kellogg Institute for International Studies
Abstract:
The purpose of this study is to provide the first systematic empirical analysis of the economic determinants of the formation of free trade agreements (FTAs) and of the likelihood of FTAs between pairs of countries using a qualitative choice model. We develop this econometric model based upon a general equilibrium theoretical model of world trade with two factors of production, two monopolistically competitive product markets, and explicit intercontinental and intracontinental transportation costs among multiple countries on multiple continents. The empirical model correctly predicts, based solely upon economic characteristics, 83 percent of the 289 FTAs existing in 1996 among 1,431 pairs of countries and 97 percent of the remaining 1,142 pairs with no FTAs.
Topic:
Economics, International Trade and Finance, and Treaties and Agreements

17. The Taxing Task of Taxing Transnationals

Author:
Thomas A. Gresik
Publication Date:
06-2001
Content Type:
Working Paper
Institution:
Kellogg Institute for International Studies
Abstract:
Financial and real investment flexibility, tax competition, and superior economic information by transnationals both creates a rationale for corporate income taxation and limits the effectiveness of such taxation. While these factors have led to a variety of transnational tax policies, such as deferral, double taxation, apportionment, and trade rules, very few of these institutional features have been integrated into tax competition and agency models. This paper shows how the integration of investment flexibility, tax competition, and agency issues is crucial to our understanding of corporate tax policies.
Topic:
Economics, Government, and International Trade and Finance

18. Open Regionalism: Lessons from Latin America for East Asia

Author:
Clark Winton Reynolds
Publication Date:
08-1997
Content Type:
Working Paper
Institution:
Kellogg Institute for International Studies
Abstract:
The process of regional integration is part of the reshaping of the international economic order at the end of the 20th century. Much if it is impelled by raw market forces, or what one may term 'silent integration.' In this process the increasingly liberalized movement of goods and services, factors of production (capital, technology, and labor through migration and as embodied in trade in goods and services), and tastes offers new prospects and challenges. There are opportunities for major increases in income and wealth for the most intrepid, skilled, mobile, and aggressive participants in the process. There are threats of lost income, power, prestige, values, and institutions for those left behind. There is a need to go behind the impulse of market forces, taking advantage of their dynamic but finding ways to manage interdependence so as to best reconcile differences among social groups, institutions, and values to ensure that the process of liberalized exchange produces gains that are equitable, stable, and sustainable.
Topic:
Economics, International Organization, and International Political Economy
Political Geography:
Israel, East Asia, South America, and Latin America

19. APEC beyond Economics: The Politics of APEC

Author:
Brian L. Job and Frank Langdon
Publication Date:
10-1997
Content Type:
Working Paper
Institution:
Kellogg Institute for International Studies
Abstract:
This paper deals with the history, formation, and objectives of APEC. It describes the tensions between the Anglo-Saxon and the East Asian APEC members and the clashes of interests between the large and small and developed and less developed nations, which show how precarious the formation of APEC was. Within the short term APEC does not seem destined to become an overarching regional, political, security, and economic institution. Indeed, certain forces within the region, such as increased arms acquisitions in some states, friction arising over trade disputes, protectionism, and investment flows, and tension between China and Taiwan, could hinder the objectives of the organization. It remains possible that the very process of finding common ground through APEC may contribute more to fostering community and to ensuring security in the region than the proposals actually agreed upon by all member nations.
Topic:
Economics and International Organization
Political Geography:
China and Europe