OLIGARCHIES AND DEVELOPMENT IN A GLOBAL ECONOMY: A TALE OF TWO ELITES

This paper studies how comparative advantage and the political elites' endowments shape long‐run performance in economies with imperfect political institutions. The trade regime interacts with industrial policy and regulations on capital mobility in governing capital accumulation. In a capital‐scarce economy, capitalist oligarchs striving for import substitution industrialization (ISI) initially shelter the economy from trade, while promoting industrial policies that promote total factor productivity growth in the manufacturing sector. This gradually shifts the comparative advantage toward manufacturing and renders the economy attractive to foreign investors. Allowing for trade and foreign capital inflows are thus complementary policies that spur growth in the capital oligarchy. By contrast, landed oligarchs in a capital‐scarce economy favor openness to trade at an early stage of development, neglect industrial policies, and block foreign capital to maximize extractable rents. The policy mix causes the economy to stagnate. Consistent with the experiences of South Korea and Argentina in the postwar era, the model predicts that the success of ISI policies depends crucially on the conditions governing the incentives for capital accumulation. (JEL F10, F20, P40, P50, O10, O24)     

ANTIDUMPING ECHOING

This article documents that antidumping (AD) “echoing” (i.e., different countries sequentially imposing AD measures on the same product from the same exporter) is common practice among users of AD. We develop a dynamic game where two competing importers can impose AD measures on a third exporting country in one of two periods, if at all. Assuming that governments are politically motivated (favoring their import‐competing industry), AD echoing occurs only for intermediate values of a country's political‐economy parameter. This result is confirmed by our econometric analysis, demonstrating that countries' political‐economy‐driven AD actions are interdependent and should not be analyzed in isolation. (JEL F12, F13, F14)     

GROWTH OPPORTUNITIES,STRATEGIC SAVINGS,AND THE DOT‐COM BOOM AND BUST

Data from the dot‐com boom‐bust episode suggest that growth opportunities played an important role in explaining firms' financing strategy during this understudied episode. The low leverage of this sector was mainly driven by high growth firms which increased their leverage following the crash despite suffering a much larger fall in their market value. We present a parsimonious dynamic firm financing model where growth opportunities alone can generate the heterogeneous patterns in the financing and performance between high and low growth information technology firms prior to and following the market crash. The calibrated model also sheds light on the role played by monetary policy during that episode. (JEL G32, E22, E5)     

Elites,Rent‐Cycling and Development: Adjustment to Land Scarcity in Mauritius,Kenya and Côte d'Ivoire

According to rent‐cycling theory, low rent aligns the interests of the elite and the majority in providing public goods and efficiency incentives to promote economic growth, while high rent risks deflecting the elite into self‐enriching rent deployment, which distorts the economy and triggers a collapse from which recovery is protracted because rent recipients resist reform. The theory also predicts, however, that this collapse will self‐correct by shrinking per capita rent, which strengthens incentives for wealth creation. This article tests the prediction in Mauritius, Kenya and Côte d'Ivoire where intensifying land scarcity has shrunk per capita rent; Mauritius meets the prediction, but Kenya and Côte d'Ivoire do not.     

Commodities in action: measuring embeddedness and imposing values

Recent approaches in political economy look at the effects of technology and social values on economic action. Combining these approaches with those of economic anthropologists, this article poses that the way the economy is instituted can be understood by looking at reasons actors have for participating in actor‐networks of production, distribution and consumption. Using the author's research on American recycling, this article first shows that much of the‘making’or instituting of the economy happens outside the market, through political machinations, contracts and standards. Second, it suggests that these relationships impose value upon goods differently than do market relations. The details of the recycling‘chain’show the ways actors shape the network and demonstrate that the social values that add‘economic value’to goods are not uniform, but are highly contextual. Starting from Mark Granovetter's notion of 'social embeddedness', the article explains that the measure of social embeddedness is not as important as the values imposed upon other actors through social structure in the economy. It calls for a close observation of economic action in the locales within which production takes place to understand better the‘actions‐at‐a‐distance’where the politics of technology, social movements and power create the empirical, instituted economy.     

LATIN AMERICA'S DECLINING SKILL PREMIUM: A MACROECONOMIC ANALYSIS

The decline in Latin America's skill premium and income inequality during the 2000s was partly driven by an economic expansion that favored low‐skill‐intensive service sectors. Evidence shows inequality becomes countercyclical in the 2000s, and unlike previous expansions, the boom was concentrated on services while manufacturing lagged behind. I build an open economy general equilibrium model that features a low‐skill‐intensive nontradable sector. The model suggests that favorable shocks to commodity prices and international interest rate spreads, such as those that buffeted Latin America in the 2000s, account for about a fifth of the observed decline in the skill premium. (JEL D31, E32, F41, O15, O54)     

Explaining microfinance's resilience: the case of microfinance in Australia

ABSTRACT

Microfinance has been unsuccessfully deployed as a poverty reduction strategy in the Global South. However, despite advocates acknowledging this shortcoming, the sector continues to grow. Moreover, over the past decade it has expanded its geographic scope, targeting poor communities in the Global North under the banner of financial inclusion. This article investigates the growth of the Australian sector. Analyzing the impacts of reforms to Australia's social security system alongside the political economy of the microfinance industry, it argues the debtfare state in Australia has provided fertile ground for microfinance's expansion. Documenting the advocacy strategies and tools to target vulnerable communities used by microfinance organizations and corporate partners, it charts how government support and subsidies have created a favourable regulatory environment, driving the sector's growth. This has benefitted these coalitions while displacing other forms of social security, despite the lack of robust evidence demonstrating microfinance's benefits for the poor.     

ASSET PRICE BUBBLES AND TECHNOLOGICAL INNOVATION

We introduce borrowing constraints into a two‐sector Schumpeterian growth model and examine the impact of asset price bubbles on innovation. In this environment, rational bubbles arise when the intermediate good producing R&D sector is faced with adverse productivity shocks. Importantly, these bubbles help alleviate credit constraints and facilitate innovation in the stagnant economy. On the policy front, we make a case for debt financed credit to the R&D sector. Further, we establish that a constant credit growth rule (akin to the Friedman rule) outperforms the often prescribed counter‐cyclical “lean against the wind” credit policy. (JEL E32, E44, O40)     

Relocating Civil Society in a Politics of Civic‐Driven Change

Politics is central to development discourse, yet remains peripheral. Over some twenty years, a civil‐society narrative has not fulfilled its potential to ‘bring politics back in’. Reasons can be found in conceptual confusion, in selectivity in donor thinking, in policies towards civil society and in the growth‐driven political economy of NGO‐ism. Remedies for the political lacunae are being sought through a focus on rights, citizenship and leadership that show valuable focused progress. This article examines a comprehensive complement to such efforts referred to as civic‐driven change (CDC). Originating in a grounded empirical approach, the constituent principles and elements of CDC offer a lens that can both sharpen and deepen insights and advance analysis of socio‐political processes.     

Oil,Polity, and Civil Society: The Construction of a Hegemonic System in Iraq (1945–1958)

Conventional theories of political economy assume that dependency on natural resources, such as oil, have a negative impact on the development of a democratic political system. While there is a developed body of work that explains the different mechanisms that shape this relationship, one mechanism, the role of the civil society, remains mostly ungrasped. As a result, the aim of this paper is to expand our understanding of the group formation effect, first discussed by Michael Ross (2001), and unpack the mechanisms that underline it, by looking at the relationship between rent from oil production, the civil society, and the rise of authoritarianism in Iraq during the period of 1945–1958. We argue that examining the relationship between these variables will help us understand the past and the current situation in Iraq, and it will improve our knowledge of the political formations and activism in oil‐producing countries in general.     

Political Economy,Ecological Modernization,and Energy Use: A Panel Analysis of State‐Level Energy Use in the United States, 1960–1990

The present study will examine energy consumption from two competing perspectives within environmental social science: political economy and ecological modernization. These frameworks will be evaluated with a fixed‐effects panel analysis of state‐level energy use between the years 1960 and 1990, based on data for 50 states plus Washington, DC, from the Energy Information Administration’s State Energy Data System. The results from the panel analysis show that the increase in total energy use between 1960 and 1990 depended on both increasing economic growth and urbanization, even after controlling for population size, industrialization, and inflation‐adjusted energy prices. The results challenge the claims of ecological modernization theory and support a political economic approach to the study of changes in energy use. In the conclusion, the study’s findings will be framed within the context of the early twenty‐first‐century economic and ecological crises. In light of efforts to reduce greenhouse gas emissions, this study can also further advance the renewable energy debate by reminding us of the social drivers of energy use.     

WHY DID UNIVERSITIES PRECEDE PRIMARY SCHOOLS? A POLITICAL ECONOMY MODEL OF EDUCATIONAL CHANGE

Universities were first established in Europe around the twelfth century, although primary schools did not appear until the nineteenth. This paper accounts for this phenomenon using a political economy model of educational change on who are educated (the elite or the masses) and what is taught (general or specific/vocational education). A key assumption is that general education is more effective than specific education in enhancing one's skills in a broad range of tasks, including political rent‐seeking. Its findings suggest that specific education for the masses is compatible with the elite rule, whereas mass general education is not, which refines the conventional association between education and democracy. (JEL O10, O40, P16, N10)     

SECTORAL COMPOSITION OF GOVERNMENT SPENDING AND MACROECONOMIC (IN)STABILITY

This article examines the quantitative interrelations between sectoral composition of public spending and equilibrium (in)determinacy in a two‐sector real business cycle model with positive productive externalities in investment. When government purchases of consumption and investment goods are set as constant fractions of their respective sectoral output, we show that the public‐consumption share plays no role in the model's local dynamics, and that a sufficiently high public‐investment share can stabilize the economy against endogenous belief‐driven cyclical fluctuations. When each type of government spending is postulated as a constant proportion of the economy's total output, we find that there exists a trade‐off between public consumption versus investment expenditures to yield saddle‐path stability and equilibrium uniqueness. (JEL E32, E62, O41)     

Effects of Rural and Urban Population Dynamics and National Development on Deforestation in Less‐Developed Countries, 1990–2000*

While prior research and theorization establish connections between population growth and environmental degradation, there is a relative paucity of research on what particular aspects of population dynamics are most closely associated with specific types of degradation. Considering all less‐developed countries for which data are available, using Ordinary Least Square (OLS) regression we generate quantitative, cross‐national models for rates of deforestation in the last decade of the twentieth century. The opposite effects of rural and urban population dynamics are of particular concern. While both influence deforestation rates, the effects of rural population change tend to be more profound and more robust. We discuss these findings in light of theoretical work about circular migration and rural encroachment. In addition, we examine the impact of economic development on deforestation while controlling for political and social welfare variables. Findings suggest a trend toward rapidly increasing rates of deforestation in the least‐developed countries. We conclude with a discussion of how rural–urban population dynamics, in combination with other aspects of national development, affect the natural environment, particularly in light of an increasingly interconnected world economy.     

Impacts of the Triple Global Crisis on Growth and Poverty: The Case of Yemen

Yemen is an oil‐exporting and food‐importing country with the highest levels of poverty in the Middle East and North Africa. The impacts of the triple crisis are likely to further complicate pre‐existing conditions of conflict, oil depletion and governance failure. Using a dynamic CGE model, this article finds that oil‐driven growth in 2008 dominated the negative growth impacts of the food crisis, but that growth was not pro‐poor. The financial crisis of 2009 slowed growth sharply and raised the poverty rate to 42.8%, up from 34.8% in 2005/6. Poverty continues to be higher in rural areas, where almost half the population live in poverty.     

Status and income inequality in a knowledge economy

This paper models a market for status contained in a knowledge economy. Technological progress favours the knowledge sector and inequality of income rises with productivity. We show that the expected utility of all agents can fall while output and productivity grow; and such an outcome of “immiserizing growth” hinges crucially upon the combination of concern for status and technology-induced rises in inequality.     

NOMINAL WAGE CONTRACTS AND THE MONETARY TRANSMISSION MECHANISM

We introduce staggered and synchronized nominal wage contracts into a one‐sector monetary dynamic general equilibrium model to analyze the importance of the monetary transmission mechanism. We find a stronger monetary propagation mechanism under a synchronized setting as compared to a staggered setting. This causes the economy under staggering to be less volatile, better matching the data, as well as bringing about lower welfare costs (measured in terms of consumption). However, our results are mixed when it comses to evaluating the contemporaneous correlations and cross‐correlations. We conclude that overall staggered contracts do better in matching the U.S. economy. (JEL E32, E51, J41)     

Changing Patterns of Interracial Marriage in a Multiracial Society

We use incidence data from the 1980 Census and 2008 American Community Survey to track recent trends in interracial marriage. Intermarriage with Whites increased rapidly among Blacks but stalled among Asians and American Indians. Black–White intermarriage increased threefold over 1980–2008, independent of changing socioeconomic status, suggesting declining social distance between Blacks and Whites. Marriages between the U.S.‐ and foreign‐born populations also grew rapidly. Marriages to immigrants increased fivefold among U.S.‐born Asian women and doubled among U.S.‐born Latinas since 1980. Out‐marriage to Whites also was higher among self‐identified biracial than monoracial individuals, but these differences were smallest among Blacks. Interracial couples were overrepresented among cohabiting couples. Finally, log‐linear models provide evidence of growing racial exogamy, but only after adjusting for changing demographic opportunities for intermarriage. Marriages between U.S.‐ and foreign‐born coethnics have been driven by new immigration while slowing the upward trajectory of interracial marriage in America.     

Global Governance,neoliberalism and national responses: The case of Bangladesh’s ready‐made garment (RMG) sector

This article on the ready‐made garment (RMG) sector of Bangladesh shows how over‐reliance on foreign capital for development financing and deregulated investment—a hallmark of neoliberal economic arrangements—undermines the incorporation of SDGs’ and INGOs’ equity principles, contributing to biased policy responses yielding unequal outcomes. The article cautions that while countries prioritize economic growth over social and environmental nourishment and continue to adopt neoliberal economic policies to promote economic growth, inequity is unavoidable, if not inevitable. Thus, the way forward may be to shift the focus of ‘development’ from the economy to society, to building ‘good societies’ where institutions and strategies, including those that contribute to economic growth, are organized such that these complement not compromise the evolution of such societies.     

MAKING FRIENDS TO INFLUENCE OTHERS: ENTRY AND CONTRIBUTION DECISIONS THAT AFFECT SOCIAL CAPITAL IN AN ASSOCIATION

We examine factors affecting entry and contribution to an association that provides different goods using social capital formed by heterogeneous firms that lobby in a political economy environment. We identify how associations attract the most productive firms or the least productive firms in an industry and explain how such associations differ in their intensive and extensive marginal contributions to social capital. We find that the level of regulatory stringency, association products including capital goods for members or lobbying to influence regulation, and government influenceability affect membership and contribution decisions. These results vary with firm productivity. Often, an increase in government influenceability increases social capital in associations composed of highly productive firms because they prefer to influence policy while less productive firms prefer more association‐produced production inputs. (JEL D71, D73)