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1. The Political Origins of the Africa's Economic Revival

Author:
Robert H. Bates and Steven Block
Publication Date:
04-2014
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
Writing in the 1990's, William Easterly and Ross Levine famously labeled Africa a "growth tragedy." Less than twenty years later, Alwyn Young noted Africa's "growth miracle," while Steven Radelet less effusively pointed to an Africa that was"emerging" and noted its rising rate of economic growth, improving levels of education and health care, and increasing levels of investment in basic infrastructure: roads, ports, and transport. In this paper, we address Africa's economic revival. In doing so, we also stress the political changes that have taken place on the continent. Once notorious for its tyrants – Jean – Bedel Bokassa, Idi Amin, and Mobutu Sese Seko, to name but three – in the 1990s, Africa joined the last wave of democratization; self-appointed heads of state were replaced by rulers chosen in competitive elections. In this paper, we assert that the two sets of changes – the one economic and the other political – go together, and that, indeed, changes in Africa political institutions lent significant impetus to its economic revival.
Topic:
Development, Economics, and Reform
Political Geography:
Africa

2. Political Budget Cycles and Intergovernmental Transfers in a Dominant Party Framework: Empirical Evidence from South Africa

Author:
Verena Kroth
Publication Date:
11-2012
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
This paper tests the theory of context-conditional political budget cycles in South Africa's dominant party framework and demonstrates that the central government has both an incentive and the ability to implement PBCs on the subnational level. Using a unique panel dataset comprising South Africa's nine provinces over the period 1995–2010 generates two main results: First, provinces where the national ruling party faces greater electoral competition receive higher per capita transfers in the year before an election. Second, this increase is driven by the conditional grant, which is the nonformula-based component of total the intergovernmental transfer. The ability to implement political budget cycles is successfully constrained when it comes to the formula-based equitable share component of the total transfer for which no evidence of electorally-induced funding is found. Overall, the results suggest that even in a dominant party framework, political competition can function as an incentive to implement political budget cycles.
Topic:
Democratization, Economics, Government, and Governance
Political Geography:
Africa and South Africa

3. Moral Hazard in an Economic Union: Politics, Economics, and Fiscal Gimmickry in Europe

Author:
James Alt, David Dreyer Lassen, and Joachim Wehner
Publication Date:
07-2012
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
This paper examines empirically how transparency of the budget process affects fiscal rules and incentives for fiscal gimmickry or creative accounting in the European Union. Using stock-flow adjustment data for EU countries from 1990-2007, we show that pressure from a deficit limit rule as in the Stability and Growth Pact creates incentives for fiscal gimmicks, as does political pressure from the electoral cycle and economic pressure from negative shocks in the business cycle. However, we show that where institutional transparency is higher, these incentives are damped and largely disappear. We infer that fiscal rules do not work well when institutional transparency is low.
Topic:
Economics, International Trade and Finance, Monetary Policy, and Financial Crisis
Political Geography:
Europe

4. Does the Sun Shine Really Shine on the Financial Markets?

Author:
Manfred Fruehwirth and Leopold Sögner
Publication Date:
06-2012
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
After a series of papers has provided { partially ambiguous { results on the impact of weather variables on stock (index) returns, this article studies the impact of weather on a wide variety of financial market instruments, namely "risk-free" interest rates, the US corporate bond market, stock returns, stock index returns and the VIX volatility index. First, we construct a model that combines asset pricing and results from psychology to show how weather variables can affect asset prices in different market segments via mood. Second, in our empirical analysis we use several weather variables from the National Climatic Data Center (NCDC) and control variables motivated by economic theory. Applying various econometric techniques and using different market segments (motivated by differences in the risk level and institutional differences) allows to give a more detailed picture on the impact of weather on financial market prices. We demonstrate that on none of the market segments analyzed the weather has any significant impact.
Topic:
Economics, International Trade and Finance, Markets, Monetary Policy, and Financial Crisis

5. The Imperial Peace in Colonial Africa and Africa's Underdevelopment

Author:
Robert H. Bates
Publication Date:
12-2012
Content Type:
Book
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
When praised at all, imperialism is most often commended for the peace it bestowed. By demobilizing armies, deposing marauding princes and subduing war-like states, European powers fashioned a half-century of political order. The question nonetheless arises: Should they be lauded for that? In this chapter, I view Africa's history through the lens of comparative history and argue that the imperial peace may have retarded Africa's development.
Topic:
Development, Economics, Imperialism, Post Colonialism, and Natural Resources
Political Geography:
Africa and Europe

6. Socio-Psychological Motives of Socially Responsible Investors

Author:
Julia M. Puaschunder
Publication Date:
03-2012
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
The 2008/09 World Financial Crisis underlined the importance of social responsibility for the sustainable functioning of economic markets. Heralding an age of novel heterodox economic thinking, the call for integrating social facets into mainstream economic models has reached unprecedented momentum. Financial Social Responsibility bridges the finance world with society in socially conscientious investments. Socially Responsible Investment (SRI) integrates corporate social responsibility in investment choices. In the aftermath of the 2008/09 World Financial Crisis, SRI is an idea whose time has come. Socially conscientious asset allocation styles add to expected yield and volatility of securities social, environmental and institutional considerations. In screenings, shareholder advocacy, community investing, social venture capital funding and political divestiture, socially conscientious investors hone their interest to align financial profit maximization strategies with social concerns. In a long history of classic finance theory having blacked out moral and ethical considerations of investment decision making, our knowledge of socio-economic motives for SRI is limited. Apart from economic profitability calculus and strategic leadership advantages, this article sheds light on socio-psychological motives underlying SRI. Altruism, need for innovation and entrepreneurial zest alongside utility derived from social status enhancement prospects and transparency may steer investors' social conscientiousness. Self-enhancement and social expression of future-oriented SRI options may supplement profit maximization goals. Theoretically introducing potential SRI motives serves as a first step towards an empirical validation of Financial Social Responsibility to improve the interplay of financial markets and the real economy. The pursuit of crisis-robust and sustainable financial markets through strengthened Financial Social Responsibility targets at creating lasting societal value for this generation and the following.
Topic:
Economics, International Trade and Finance, Markets, Sociology, and Financial Crisis

7. Public Policy, Price Shocks, and Conflict: Price Shocks and Civil War in Developing Countries

Author:
Robert H. Bates and Brett L. Carter
Publication Date:
11-2011
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
Those who study the role of agriculture in the political economy of development focus on government policy choices on the one hand and the impact of price shocks on the other. We argue that the two should be studied together. We find that civil unrest (Granger) causes government policies, pushing governments in poor and medium income countries to shift relative prices in favor of urban consumers. We also find that while civil wars are related to food price shocks, when government policy choices are taken into account, the relationship disappears. We thus learn two things: Policies that placate urban consumers may inflict economic costs on governments, but they confer political benefits. And when estimating the relationship between price shocks and political stability, equations that omit the policy response of governments are misspecified.
Topic:
Agriculture, Development, Economics, Government, Markets, Political Economy, and Food

8. The New Institutionalism and Africa

Author:
Robert H. Bates, Steven Block, Ghada Fayad, and Anke Hoeffler
Publication Date:
10-2011
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
After briefly reviewing the new institutionalism, this article uses the history of political reform in Africa to test its key tenet: that power, if properly organized, is a productive resource. It does so by exploring the relationship between changes in political institutions and changes in economic performance, both at the macro- and the micro- level. The evidence indicates that political reform (Granger) causes increases in GDP per capita in the African subset of panels of global data. And, at the mIcro-level, it demonstrates that changes in national political institutions in Africa strongly relate to changes in total factor productivity in agriculture.
Topic:
Agriculture, Development, Economics, and Political Economy
Political Geography:
Africa

9. The Future of Convergence

Author:
Dani Rodrik
Publication Date:
10-2011
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
Novelists have a better track record than economists at foretelling the future. Consider then Gary Shteyngart's timely comic novel “Super Sad True Love Story” (Random House, 2010), which provides a rather graphic vision of what lies in store for the world economy. The novel takes place in the near future and is set against the backdrop of a United States that lies in economic and political ruin. The country's bankrupt economy is ruled with a firm hand by the IMF from its new Parthenon-shaped headquarters in Singapore. China and sovereign wealth funds have parceled America's most desirable real estate among themselves. Poor people are designated as LNWI (“low net worth individual s”) and are being pushed into ghettoes. Even skilled Americans are desperate to acquire residency status in foreign lands. (A degree in econometrics helps a lot, as it turns out). Ivy League colleges have adopted the names of their Asian partners and yuan-backed dollars are the only safe currency.
Topic:
Debt, Economics, Emerging Markets, Sovereign Wealth Funds, and Financial Crisis
Political Geography:
United States, China, America, and Singapore

10. How Did the 2008 Economic Crisis Affect: Social and Political Solidarity in Europe?

Author:
Jennifer L. Hochschild
Publication Date:
01-2010
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
One possible outcome of the economic crash of 2008 was that the majority or mainstream members of a society would direct their anger and fear against the minority or marginal members of their society. Commentators on television or the radio would claim, "it's all the fault of the immigrants!" or "if we didn't hand over so much of our tax dollars to the poor, the economy would not have deteriorated so much," or "social benefits to African Americans [or German Turks] have distorted the housing market." Citizens would come to believe these assertions, politicians would echo them – and the upshot would be not only a deteriorating national and international economy but also increased hostility and fear among racial, ethnic, or nationality groups in a country. Social solidarity would decline, perhaps irrevocably.
Topic:
International Relations, Economics, Politics, Social Stratification, and Financial Crisis
Political Geography:
Africa, America, Europe, and Germany