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Begin New Search Publishing Institution Weatherhead Center for International Affairs, Harvard University

71. The Estimated Trade Effects of the Euro: Why Are They Below Those From Historical Monetary Unions Among Smaller Countries?

Author:
Jeffrey Frankel
Publication Date:
04-2009
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
Andy Rose (2000), followed by many others, has used the gravity model of bilateral trade on a large data set to estimate the trade effects of monetary unions among small countries. The finding has been large estimates: Trade among members seems to double or triple, that is, to increase by 100-200%. After the advent of EMU in 1999, Micco, Ordoñez and Stein and others used the gravity model on a much smaller data set to estimate the effects of the euro on trade among its members. The estimates tend to be statistically significant, but far smaller in magnitude: on the order of 10-20% during the first four years. What explains the discrepancy? This paper seeks to address two questions. First, do the effects on intra-euroland trade that were estimated in the euro's first four years hold up in the second four years? The answer is yes. Second, and more complicated, what is the reason for the big discrepancy vis-à-vis other currency unions? We investigate three prominent possible explanations for the gap between 15% and 200%. First, lags. The euro is still very young. Second, size. The European countries are much bigger on average than most of those who had formed currency unions in the past. Third, endogeneity of the decision to adopt an institutional currency link. Perhaps the high correlations estimated in earlier studies were spurious, an artifact of reverse causality. We test the hypotheses regarding lags and size directly; and we address the endogeneity problem by means of a natural experiment involving trade between the CFA countries of Africa and the euro countries of Europe. Contrary to expectations, we find little evidence that any of these factors explains a substantial share of the gap, let alone all of it.
Topic:
International Trade and Finance, Bilateral Relations, and Monetary Policy
Political Geography:
Europe

72. Addressing the Leakage/Competitiveness Issue in Climate Change Policy Proposals

Author:
Jeffrey A. Frankel
Publication Date:
04-2009
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
We will likely see increasing efforts to minimize leakage of carbon to non-participating countries and to address concerns on behalf of the competitiveness of carbon-intensive industry. Environmentalists on one side and free traders on the other side fear that border measures such as tariffs or permit-requirements against imports of carbon-intensive products will collide with the WTO. There need not necessarily be a conflict, if the measures are designed sensibly. There are precedents -- the shrimp-turtle case and the Montreal Protocol -- that could justify border measures to avoid undermining the Kyoto Protocol or its successors, if the measures are carefully designed. But if the design is dominated by politics, as is likely, import penalties are likely to run afoul of the WTO, to distort trade, and perhaps even to fail in the goal of preventing leakage.
Topic:
Climate Change, Environment, and International Trade and Finance
Political Geography:
China

73. Institutionalizing Cooperation: Public Goods Experiments in the Aftermath of Civil War

Author:
Fotini Christia and Marcus Alexander
Publication Date:
03-2009
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
Fostering cooperation is one of the main tasks of state building in the aftermath of civil wars, yet little is known about the effects of institutions of integration in increasing interethnic cooperation and facilitating peace. We conducted N-person public goods experiments with costly sanctions in the ethnically-divided city of Mostar in Bosnia-Herzegovina to examine whether and how the introduction of institutions of integration affects cooperation both within and across ethnic groups-in our case Catholic Bosnian Croats and Muslim Bosniacs. Our results indicate that even a limited policy intervention such as the creation of an integrated high school can offset the negative effects of ethnic heterogeneity, driving up peoples' willingness to contribute to public goods. We find that the introduction of institutions of integration is distinct from, and may be necessary for, the effectiveness of sanctions in driving up contributions. The results of this experiment suggest that the presence of integrative institutions can bring about cooperation even when increased heterogeneity diminishes it, thus introducing new ways of thinking about the role of institutions in post-conflict divided societies.
Topic:
Civil War and Ethnic Conflict
Political Geography:
Balkans

74. Increasing Migration, Diverging Communities: Changing Character of Migrant Streams in Rural Thailand

Author:
Filiz Garip
Publication Date:
02-2009
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
This paper studies how increasing migration changes the character of migrant streams in sending communities. Cumulative causation theory posits that past mi- gration patterns determine future flows, as prior migrants provide resources, influence, or normative pressures that make individuals more likely to migrate. The theory implies uniform patterns of exponentially increasing migration flows that are decreasingly selective. Recent research identifies heterogeneity in the cumulative patterns and selectivity of migration in communities. We propose that this heterogeneity may be ex- plained by the differential accessibility of previously accumulated migration experience. Multi-level, longitudinal migration data from 22 rural Thai communities allow us to measure the distribution of past experience as a proxy for its accessibility to community members. We find that migration becomes a less-selective process as migration expe- rience accumulates, and migrants become increasingly diverse in socio-demographic characteristics. Yet, selectivity within migrant streams persists if migration experience is not uniformly distributed among, and hence not equally accessible to, all community members. The results confirm that the accumulation and distribution of prior mi- grants' experiences distinctly shape future migration flows, and may lead to diverging cumulative patterns in communities over time.
Topic:
Migration, Political Economy, and Sociology
Political Geography:
Thailand and Southeast Asia

75. Commodity Price Volatility and World Market Integration since 1700

Author:
David S. Jacks, Kevin H. O'Rourke, and Jeffrey G. Williamson
Publication Date:
02-2009
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
Poor countries are more volatile than rich countries, and we know this volatility impedes their growth. We also know that commodity price volatility is a key source of those shocks. This paper explores commodity and manufactures price over the past three centuries to answer three questions: Has commodity price volatility increased over time? The answer is no: there is little evidence of trend since 1700. Have commodities always shown greater price volatility than manufactures? The answer is yes. Higher commodity price volatility is not the modern product of asymmetric industrial organizations - oligopolistic manufacturing versus competitive commodity markets - that only appeared with the industrial revolution. It was a fact of life deep into the 18th century. Does world market integration breed more or less commodity price volatility? The answer is less. Three centuries of history shows unambiguously that economic isolation caused by war or autarkic policy has been associated with much greater commodity price volatility, while world market integration associated with peace and pro-global policy has been associated with less commodity price volatility. Given specialization and comparative advantage, globalization has been good for growth in poor countries at least by diminishing price volatility. But comparative advantage has never been constant. Globalization increased poor country specialization in commodities when the world went open after the early 19th century; but it did not do so after the 1970s as the Third World shifted to labor-intensive manufactures. Whether price volatility or specialization dominates terms of trade and thus aggregate volatility in poor countries is thus conditional on the century.
Topic:
Economics, Globalization, and Monetary Policy
Political Geography:
Africa, South Asia, and Latin America

76. Ottoman De-Industrialization 1800-1913: Assessing the Shock, Its Impact and the Response

Author:
Jeffrey G. Williamson and Şevket Pamuk
Publication Date:
02-2009
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
India and Britain were much bigger players in the 18th century world market for textiles than was Egypt, the Levant and the core of the Ottoman Empire, but these eastern Mediterranean regions did export carpets, silks and other textiles to Europe and the East. By the middle of the 19th century, they had lost most of their export market and much of their domestic market to globalization forces and rapid productivity growth in European manufacturing. Other local industries also suffered decline, and these regions underwent de-industrialization as a consequence. How different was Ottoman experience from the rest of the poor periphery? Was de-industrialization more or less pronounced? Was the terms of trade shock bigger or smaller? How much of Ottoman de-industrialization was due to falling world trade barriers—ocean transport revolutions and European liberal trade policy, how much due to factory-based productivity advance in Europe, how much to declining Ottoman competitiveness in manufacturing, how much to Ottoman railroads penetrating the interior, and how much to Ottoman policy? The paper uses a price-dual approach to seek the answers. It documents trends in export and import prices, relative to each other and to non-tradables, as well as to the unskilled wage. The impact of globalization, European productivity advance, Ottoman wage costs and policy are assessed by using a simple neo-Ricardian three sector model, and by comparison with what was taking place in the rest of the poor periphery.
Topic:
Economics, Globalization, International Trade and Finance, and Markets
Political Geography:
Britain, Europe, Turkey, India, and Egypt

77. Vanishing Third World Emigrants?

Author:
Jeffrey G. Williamson and Timothy J. Hatton
Publication Date:
02-2009
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
This paper documents a stylized fact not well appreciated in the literature. The Third World has been undergoing an emigration life cycle since the 1960s, and, except for Africa, emigration rates have been level or even declining since a peak in the late 1980s the early 1990s. The current economic crisis will serve only to accelerate those trends. The paper estimates the economic and demographic fundamentals driving these Third World emigration life cycles to the United States since 1970-the income gap between the US and the sending country, the education gap between the US and the sending country, the poverty trap, the size of the cohort at risk, and migrant stock dynamics. It then projects the life cycle up to 2024. The projections imply that pressure on Third World emigration over the next two decades will not increase. It also suggests that future US immigrants will be blacker and fewer will speak Spanish.
Topic:
Demographics, Economics, Migration, and Third World
Political Geography:
Africa and United States

78. Practicing Peace, Living with War: Going Upriver in Colombia

Author:
Kimberly Theidon
Publication Date:
01-2009
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
It is disconcerting to share a hotel room with someone who needs to tell you in detail how he learned to use a machete to chop the human body up into unrecognizable chunks of flesh. Vladimiro's military training showed not only in his butchering prowess, but also in his upright posture, an odd juxtaposition of perfect etiquette and lethal brutality.
Topic:
Conflict Resolution, Political Violence, and Counterinsurgency
Political Geography:
Colombia and Latin America

79. The Political Economy of Heterogeneous Development: Quantile Effects of Income and Education

Author:
Marcus Alexander, Matthew Harding, and Carlos Lamarche
Publication Date:
01-2009
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
Does development lead to the establishment of more democratic institutions? The key to the puzzle, we argue, is the previously unrecognized fact that based on quantitative regime scores, countries over the past 50 years have clustered into two separate, very distinct, yet equally-common stages of political development—authoritarian states with low levels of freedom on one side an d democracies with liberal institutions on the other side of a bimodal distribution of political regimes. We develop a new empirical strategy—exploiting exogenous world economic factors and introducing new panel data estimators—that allows for the first time to estimate the effects of development as well as unobserved country effects in driving democracy at these different stages of political development. We find that income and education have the least effect on democracy when authoritarian regimes are consolidated and that only country effects, possibly accounting for institutional legacies, can lead to political development. Ironically, it is in highly democratic and wealthiest of nations that income and education start to play a role; however greater wealth and better educated citizenry can both help and hurt democracy depending again on what the country's institutional legacies are. Far from accepting the notion that much of the developing world is cursed by unchanging and poor long-run institutions, policy-makers should take note that with democratization we also see country-specific factors that in turn condition the difference income and education make for democracy.
Topic:
Democratization, Development, Economics, Political Economy, and Third World
Political Geography:
Africa, United States, China, Asia, and Germany

80. Who Gets Bought? Vote Buying, Turnout Buying, and Other Strategies

Author:
Jordan Gans-Morse, Sebastian Mazzuca, and Simeon Nichter
Publication Date:
04-2009
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
During elections in many countries, political parties distribute particularistic benefits to individuals. The existing literature reveals that parties choose from at least five distinct strategies when distributing benefits, but fails to explain how parties allocate resources across these strategies. Our formal model provides insight into this key question. Most studies focus exclusively on "vote buying," a strategy by which parties reward voters for switching their votes. Our model first shows how parties trade off between "vote buying" and "turnout buying," a strategy by which parties reward supporters for showing up at the polls (Nichter 2008). We then show how parties combine these and other commonly observed strategies.
Topic:
Corruption and Democratization
Political Geography:
United States and Argentina