This document outlines a study examining how poor institutions may create more "losers" from globalization. It presents three hypotheses: 1) Countries with poor institutions create more losers from trade than those with good institutions, 2) Countries with more losers from trade have slower trade liberalization progress, and 3) There is a feedback loop between trade, inequality, and institutions. The methodology uses a 3SLS approach with three equations to model the interrelationships between trade, inequality, and institutions. Inequality is measured using country-level Gini coefficients from 1960-2015. The results are intended to show how poor institutions can generate unnecessary losers from trade and slow further trade liberalization.
This document discusses the role of institutions in development and the challenges of using foreign aid to improve institutions. It finds that institutions are deeply rooted and usually durable, while aid focuses on short-term projects. There is no evidence that aid can stimulate growth or improve institutions, and some evidence it can harm institutions by creating moral hazard or rent-seeking. Lastly, it argues that building intellectual capital through local scholars and research may provide alternative ideas to potentially enable institutional change over time.
Two Tiers Of Representation And Policy The Eu And The Future Of ...legal2
This document summarizes and analyzes the representation of football in the European Union through two frameworks - the associative state model and the company state model. It discusses the formation and goals of the G-14 organization, which represents large European clubs and advocates for the commercial interests of football. It also discusses UEFA's role and how it emphasizes principles of solidarity over commercial interests. The document examines the EU's involvement in football from perspectives of competition policy, its role as a regulatory state, and its goal of increasing legitimacy among European citizens. It analyzes the tensions between viewing football as primarily an economic activity versus a social one.
This document discusses institutions and economic development. It summarizes the evolution of thinking around institutions and development, from the Washington Consensus era to the rise of New Institutional Economics and its limitations. More recent frameworks like Acemoglu and Robinson's theory of inclusive vs extractive institutions and North, Wallis, and Weingast's theory of open vs limited access orders are described. The document argues that informal institutions like "deals" between elites and economic actors better explain economic growth and stagnation in most developing countries compared to formal institutional indicators. Shifts between different "deals environments" like disordered to ordered can trigger growth accelerations, while maintaining openness is key for sustained growth, but difficult due to elite resistance.
Arrangements by which influential firms receive economic favors, has been documented in numerous case studies but rarely formalized or analyzed quantitatively. We offer a formal voting model in which political influence is modeled as a contract by which politicians deliver a more preferential business environment to favored firms who, in exchange, protect politicians from the political consequences of high unemployment. From this perspective, cronyism simultaneously lowers a firm’s fixed costs while raising its variable wage costs. Testing several of the implications of the model on firm-level data from 26 transition countries, we find that more influential firms face fewer administrative and regulatory obstacles and carry bloated payrolls, but they also invest and innovate less. These results do not change when using propensity-score matching to adjust for the fact that influence is not randomly assigned.
This document analyzes how privatization impacted small enterprise formation in post-Soviet Russia. It discusses how privatization could either enhance or deter small businesses by influencing the local business environment. The document finds that small-scale privatization deterred small enterprise formation, as it often involved insider deals between business and government officials, while large-scale privatization enhanced small businesses by increasing transparency. The analysis uses regional data on numbers of small businesses and privatized firms from 1994-1999 to estimate the effects, controlling for factors like regional openness, reform support, and natural resource dependence.
Arrangements by which politically connected firms receive economic favors are a common feature around the world, but little is known of the form or effects of influence in business-government relationships. We argue that influence not only brings significant privileges for selected firms, but requires firms to relinquish certain control rights in exchange for subsidies and protection. We show that, under these conditions, political influence can actually harm firm performance. Enterprise surveys from approximately 8,000 firms in 40 developing countries indicate that influential firms benefit from lower administrative and regulatory barriers (including bribe taxes), greater pricing power, and easier access to credit. But these firms also provide politically valuable benefits to incumbents through bloated payrolls and greater tax payments. These firms are also less likely to invest and innovate, and suffer from lower productivity than their non-influential counterparts. Our results highlight a potential channel by which cronyism leads to persistent underdevelopment.
This document summarizes a study examining the characteristics and effects of political influence on firms in developing countries. The study finds that politically influential firms receive economic benefits like lower taxes and easier access to credit. However, these firms also provide benefits to politicians through maintaining higher employment levels and paying more taxes. While influential firms earn higher profits, they are less productive than non-influential firms and are less likely to invest or innovate due to restrictions on firing workers and unpredictable taxes imposed on them. Overall, the study suggests that political influence undermines firm performance and can prolong economic underdevelopment.
Political institutions and the level of accountability can impact financial development and stability. In systems with low accountability, special interests are more able to capture regulation for their own benefit, limiting access to credit and increasing fragility. Democracies generally support broader access and competition, but may also produce instability if they excessively promote credit growth. The evidence shows tighter usury laws in US states with less political competition reduced lending, while captured regulation distorted development in some countries. The theoretical model predicts greater entry in systems with more accountable politicians due to weaker lobbying against competition. Empirically, countries with freer media have stronger investor protections linked to higher entry and more firms, especially in externally dependent sectors.
This document discusses the role of institutions in development and the challenges of using foreign aid to improve institutions. It finds that institutions are deeply rooted and usually durable, while aid focuses on short-term projects. There is no evidence that aid can stimulate growth or improve institutions, and some evidence it can harm institutions by creating moral hazard or rent-seeking. Lastly, it argues that building intellectual capital through local scholars and research may provide alternative ideas to potentially enable institutional change over time.
Two Tiers Of Representation And Policy The Eu And The Future Of ...legal2
This document summarizes and analyzes the representation of football in the European Union through two frameworks - the associative state model and the company state model. It discusses the formation and goals of the G-14 organization, which represents large European clubs and advocates for the commercial interests of football. It also discusses UEFA's role and how it emphasizes principles of solidarity over commercial interests. The document examines the EU's involvement in football from perspectives of competition policy, its role as a regulatory state, and its goal of increasing legitimacy among European citizens. It analyzes the tensions between viewing football as primarily an economic activity versus a social one.
This document discusses institutions and economic development. It summarizes the evolution of thinking around institutions and development, from the Washington Consensus era to the rise of New Institutional Economics and its limitations. More recent frameworks like Acemoglu and Robinson's theory of inclusive vs extractive institutions and North, Wallis, and Weingast's theory of open vs limited access orders are described. The document argues that informal institutions like "deals" between elites and economic actors better explain economic growth and stagnation in most developing countries compared to formal institutional indicators. Shifts between different "deals environments" like disordered to ordered can trigger growth accelerations, while maintaining openness is key for sustained growth, but difficult due to elite resistance.
Arrangements by which influential firms receive economic favors, has been documented in numerous case studies but rarely formalized or analyzed quantitatively. We offer a formal voting model in which political influence is modeled as a contract by which politicians deliver a more preferential business environment to favored firms who, in exchange, protect politicians from the political consequences of high unemployment. From this perspective, cronyism simultaneously lowers a firm’s fixed costs while raising its variable wage costs. Testing several of the implications of the model on firm-level data from 26 transition countries, we find that more influential firms face fewer administrative and regulatory obstacles and carry bloated payrolls, but they also invest and innovate less. These results do not change when using propensity-score matching to adjust for the fact that influence is not randomly assigned.
This document analyzes how privatization impacted small enterprise formation in post-Soviet Russia. It discusses how privatization could either enhance or deter small businesses by influencing the local business environment. The document finds that small-scale privatization deterred small enterprise formation, as it often involved insider deals between business and government officials, while large-scale privatization enhanced small businesses by increasing transparency. The analysis uses regional data on numbers of small businesses and privatized firms from 1994-1999 to estimate the effects, controlling for factors like regional openness, reform support, and natural resource dependence.
Arrangements by which politically connected firms receive economic favors are a common feature around the world, but little is known of the form or effects of influence in business-government relationships. We argue that influence not only brings significant privileges for selected firms, but requires firms to relinquish certain control rights in exchange for subsidies and protection. We show that, under these conditions, political influence can actually harm firm performance. Enterprise surveys from approximately 8,000 firms in 40 developing countries indicate that influential firms benefit from lower administrative and regulatory barriers (including bribe taxes), greater pricing power, and easier access to credit. But these firms also provide politically valuable benefits to incumbents through bloated payrolls and greater tax payments. These firms are also less likely to invest and innovate, and suffer from lower productivity than their non-influential counterparts. Our results highlight a potential channel by which cronyism leads to persistent underdevelopment.
This document summarizes a study examining the characteristics and effects of political influence on firms in developing countries. The study finds that politically influential firms receive economic benefits like lower taxes and easier access to credit. However, these firms also provide benefits to politicians through maintaining higher employment levels and paying more taxes. While influential firms earn higher profits, they are less productive than non-influential firms and are less likely to invest or innovate due to restrictions on firing workers and unpredictable taxes imposed on them. Overall, the study suggests that political influence undermines firm performance and can prolong economic underdevelopment.
Political institutions and the level of accountability can impact financial development and stability. In systems with low accountability, special interests are more able to capture regulation for their own benefit, limiting access to credit and increasing fragility. Democracies generally support broader access and competition, but may also produce instability if they excessively promote credit growth. The evidence shows tighter usury laws in US states with less political competition reduced lending, while captured regulation distorted development in some countries. The theoretical model predicts greater entry in systems with more accountable politicians due to weaker lobbying against competition. Empirically, countries with freer media have stronger investor protections linked to higher entry and more firms, especially in externally dependent sectors.
This document summarizes a research paper that examines the economic development effects of coups. It finds that coups overthrowing democratic governments have distinctly negative effects on economic growth, lowering GDP per capita by 1-1.3% per year over a decade. By contrast, coups in autocratic countries show smaller and imprecise positive effects. These results are robust across different empirical methods and not explained by alternative hypotheses. Additionally, coups reversing economic reforms, increasing debt, and reducing social spending, suggesting a shift in priorities away from the public.
In many organizations, decisions are taken by unanimity giving each member veto power. We analyze a model of an organization in which members with heterogenous productivity privately contribute to a common good. Under unanimity, the least efficient member imposes her preferred effort choice on the entire organization. The threat of forming an "inner organization" can undermine the veto power of the less efficient members and coerce them to exert more effort. We also identify the conditions under which the threat of forming an inner organization is executed. Finally, we show that majority rules effectively prevent the emergence of inner organizations.
Version of July 2009.
Read more research publications at: https://www.hhs.se/site
Dictatorships do not survive by repression alone. Rather, dictatorial rule is often explained as an ― authoritarian bargain by which citizens relinquish political rights for economic security. The applicability of the authoritarian bargain to decision-making in non-democratic states, however, has not been thoroughly examined. We conceptualize this bargain as a simple game between a representative citizen and an autocrat who faces the threat of insurrection, and where economic transfers and political influence are simultaneously determined. Our model yields precise implications for the empirical patterns that are expected to exist. Tests of a system of equations with panel data comprising 80 non-democratic states between 1975 and 1999 confirm the predictions of the authoritarian-bargain thesis, with some variation across different categories of dictatorship.
China goes Global: Present Theories and Future DirectionsIlan Alon
Chinese globalization is upon us. But the Chinese companies internationalization, speed of internationalization and mode of entry follow a different pattern from their Western peers. The talk will review the extant literature and theories and suggest new ways to think about and research China’s drive to global markets.
This document discusses the concepts of competitiveness and innovation and questions their traditional meanings and implications for policy. It makes three main conclusions:
1. While territories compete in some respects, competitiveness should not assume a zero-sum "win-lose" relationship between territories.
2. A concept of competitiveness should integrate wider socio-economic aims beyond just income growth, and these aims should be determined through democratic processes.
3. Measures of progress and competitiveness need to consider economic, social, and environmental factors together to assess socioeconomic development more holistically.
This document presents an abstract for a paper that develops a political-economic model to analyze how a government sets optimal institutional reforms while considering foreign direct investment, benefits to honest and dishonest citizens, and political contributions from dishonest citizens who want lower institutional standards. The model suggests the optimal level of institutional reform depends on the efficiency of legal structures compared to illegal structures like corruption. It aims to provide an institutional explanation for how corruption and foreign investment interact to determine appropriate reform policies.
Weak states are good for business, Strong ones are better - Diego Ruiz BrizuelaDiego Ruiz Brizuela
This document discusses the differences between strong and weak states from a business perspective. It argues that strong states, which have coherent bureaucracies and can offer political stability, are better for businesses than weak states. Strong states, also called developmental states, can fairly control access to the political process and attract talented individuals. They also prioritize long-term economic goals over short-term profit maximization. In contrast, weak states have less control over political access and are more susceptible to interest group pressures, making them riskier for businesses. While weak states may offer opportunities for short-term gains, their higher investment risks generally make strong states better partners for achieving long-term business objectives.
This chapter discusses the political and legal environments facing international business. It begins with an opening case on China's evolving business environment. The chapter then covers the main political systems like democracy and totalitarianism, trends in political risk, and approaches to managing political risk. Next, it examines major legal systems like common law and civil law, and how they differ. It also profiles legal issues that affect international business operations and strategies. The chapter concludes by discussing intellectual property rights and the challenges of software piracy globally.
The document discusses the evolution of post-communist economic systems in Central and Eastern Europe and China over the past 25+ years. It argues that in Central and Eastern Europe, the collapse of communism led to a process of disintegration of the communist state apparatus and competition between networks seeking to grab power and assets, resulting in weak institutions, corruption and kleptocracy. In contrast, China's transition involved the communist party consciously replacing central planning with market forces to maintain control. Accession to the EU helped strengthen institutions in some Central European countries.
In this paper we argue that aid effectiveness may suffer when partnerships with new regimes need to be established. We test this argument using the natural experiment of the break-up of communism in the former Eastern Bloc. We find that commercial and strategic concerns influenced both aid flows and the urgency of entry into new partnerships in the first half of the 1990s, while developmental objectives became more important only over time. These results hold up to a thorough sensitivity analysis, including using a gravity model to instrument for bilateral trade flows. We also find that aid fractionalization increased substantially, and that aid to the region was more likely to be tied, more volatile and less predictable than to aid to other recipients at the time. Overall, these results suggest that the guidelines for aid effectiveness agreed upon in the Paris Declaration are likely to be challenged by the current political transition in parts of the Arab world. Hopefully being aware of these challenges can help donors avoid making the same mistakes.
Kliman-Williams, CJE advance access, Camb. J. Econ.-2014-Kliman-cje-beu033Shannon Williams
This article summarizes and critiques arguments made in the financialization literature regarding the relationship between financialization and declining capital accumulation in the US. Specifically, it addresses claims that rising financial payments and purchases by corporations have come at the expense of productive investment, leading to slower capital accumulation. The article finds that official US government data does not support this argument. While corporations have become more involved in financial markets, productive investment did not decline during the period of rising financialization due to corporations increasingly funding financial expenditures through borrowing rather than diverting profits away from productive investment. The article concludes the fall in the US rate of capital accumulation is fully explained by the decline in the rate of profit earned by corporations.
The document presents a theoretical political-economic model that analyzes how corruption and foreign direct investment (FDI) interact to determine an optimal institutional policy level in a developing country. There are two types of people - honest people who work in the private sector, and dishonest people who work for the corrupt civil service. The model considers the costs to firms of paying taxes through both legal and illegal structures, and how the institutional policy level affects these costs. The optimal policy level depends on the relative efficiency of the legal versus illegal structures, as well as the degree of corruption in the political process and the size of political contributions from dishonest lobby groups.
This document discusses how income inequality has increased over the past 30 years and provides a framework to understand the interconnected processes that drive this trend. It presents a mechanism with two main circuits - a money circuit involving credit expansion and rising asset prices, and a debt circuit of rising household and corporate debt. These circuits are linked by social pressures of envy and peer emulation that exacerbate inequality, as well as fear and anxiety over debt, which influence policies amplifying the problems. The framework aims to identify policy targets to effectively address inequality.
When a government creates an agency to gather information relevant to policymaking, it faces two critical organizational questions: whether the agency should be given authority to
decide on policy or merely supply advice, and what should the policy goals of the agency be. Existing literature on the first question is unable to address the second, because the question
of authority becomes moot if the government can simply replicate its preferences within the agency. In contrast, this paper examines both questions within a model of policymaking under time inconsistency, a setting in which the government has a well-known incentive to create an agency with preferences that differ from its own. Thus, our framework permits a meaningful analysis of delegation versus communication with an endogenously chosen agent. The first main finding of the paper is that the government can do equally well with a strategic choice of agent, from which it solicits advice, instead of delegating authority, as long as the time inconsistency problem is not too severe. The second main finding is that the government may strictly prefer seeking advice to delegating authority if there is prior uncertainty with respect to what is the optimal policy.
By Anders Olofsgård (with R. Luma), published in Journal of Public Economics.
A Presentation prepared to inform participants in the inaugural workshop about the proposed Fylde Coast LEP on the role and purpose of Local Enterprise Partnership
This document analyzes survey data from over 40 developing countries to understand determinants of radicalism, support for violence, and participation in anti-regime actions. It finds that individuals who feel politically and economically marginalized are more likely to harbor extremist views but less likely to join collective political movements. This potentially explains why marginalized groups are difficult to mobilize in nation-wide movements, despite their attitudes. It also finds that arenas for active political participation are more likely dominated by upper-middle income groups committed to preserving the status quo. Suppressing these forms of participation may push these groups towards more radical preferences. The findings suggest the poor may be caught in a cycle of increasing self-exclusion and marginalization.
This document discusses political risk and strategies for companies expanding internationally. It identifies risks companies may face entering Russia like an inconsistent legal system and centralized government. France poses uncertainty risks from strict regulations. The document explains that quantifying but not weighting risks allows for flexibility. Setting up local partnerships or affiliates in Iran could help reduce expropriation risks. It also discusses how terrorism has impacted foreign interests in countries like Iran and Saudi Arabia for oil.
The document provides a book review of The Global Public Management Revolution by Donald Kettl. It summarizes the following key points:
- Kettl's book discusses worldwide public management reform movements that took place in both developed and developing countries during the 1980s and 1990s.
- Reforms aimed to improve government performance and responsiveness by replacing traditional bureaucracy with market-based competition.
- However, the author argues that applying market principles did not necessarily improve efficiency or spending. Privatization alone does not guarantee these outcomes.
- Implementing reforms was more challenging for developing countries that lacked necessary preconditions like good governance, justice systems and financial systems. Direct imitation of Western models was also difficult due to cultural
Informal sector dynamic in times of fragile growthDr Lendy Spires
This document summarizes a study on the dynamics of Madagascar's informal sector between 1995 and 2004, a period of economic growth and crisis. The informal sector absorbed labor during the economic downturn in 2002 but was otherwise heterogeneous. During growth, some sectors accumulated capital by creating new firms rather than expanding existing ones, consistent with higher returns for low levels of capital. Capital returns were low for firms with high capital levels, suggesting limited growth potential. The heterogeneity in capital returns across informal firms points to inefficient capital allocation.
This document discusses the drivers of inequality and presents both orthodox and emerging views. The orthodox view is that rising inequality is inevitable due to technological change and globalization, but this view is inadequate. The emerging view is that inequality results from growing economic power asymmetries, weakened labor protections, tax changes benefiting the wealthy, the outsized influence of the financial sector, privatization, and macroeconomic policies favoring stability over full employment. The document argues that policy interventions can help reduce inequality by strengthening collective bargaining, reforming banks, raising taxes on the wealthy, focusing economic development on stable jobs, and adopting macroeconomic policies promoting both stability and full employment.
Rao 3e issues and institutions in governanceSizwan Ahammed
This document discusses various aspects of governance as it relates to food security, including:
1) It outlines different types of organizations involved in food governance, including community, state, non-governmental, food sector, and local organizations.
2) It discusses concepts of governance failures and the importance of coordination and cooperation between these organizations to effectively govern food security.
3) Key issues addressed include lack of influence of the poor in governance systems, goals versus ability to implement policies, and the role of moral economies in ensuring food access.
This document summarizes a research paper that examines the economic development effects of coups. It finds that coups overthrowing democratic governments have distinctly negative effects on economic growth, lowering GDP per capita by 1-1.3% per year over a decade. By contrast, coups in autocratic countries show smaller and imprecise positive effects. These results are robust across different empirical methods and not explained by alternative hypotheses. Additionally, coups reversing economic reforms, increasing debt, and reducing social spending, suggesting a shift in priorities away from the public.
In many organizations, decisions are taken by unanimity giving each member veto power. We analyze a model of an organization in which members with heterogenous productivity privately contribute to a common good. Under unanimity, the least efficient member imposes her preferred effort choice on the entire organization. The threat of forming an "inner organization" can undermine the veto power of the less efficient members and coerce them to exert more effort. We also identify the conditions under which the threat of forming an inner organization is executed. Finally, we show that majority rules effectively prevent the emergence of inner organizations.
Version of July 2009.
Read more research publications at: https://www.hhs.se/site
Dictatorships do not survive by repression alone. Rather, dictatorial rule is often explained as an ― authoritarian bargain by which citizens relinquish political rights for economic security. The applicability of the authoritarian bargain to decision-making in non-democratic states, however, has not been thoroughly examined. We conceptualize this bargain as a simple game between a representative citizen and an autocrat who faces the threat of insurrection, and where economic transfers and political influence are simultaneously determined. Our model yields precise implications for the empirical patterns that are expected to exist. Tests of a system of equations with panel data comprising 80 non-democratic states between 1975 and 1999 confirm the predictions of the authoritarian-bargain thesis, with some variation across different categories of dictatorship.
China goes Global: Present Theories and Future DirectionsIlan Alon
Chinese globalization is upon us. But the Chinese companies internationalization, speed of internationalization and mode of entry follow a different pattern from their Western peers. The talk will review the extant literature and theories and suggest new ways to think about and research China’s drive to global markets.
This document discusses the concepts of competitiveness and innovation and questions their traditional meanings and implications for policy. It makes three main conclusions:
1. While territories compete in some respects, competitiveness should not assume a zero-sum "win-lose" relationship between territories.
2. A concept of competitiveness should integrate wider socio-economic aims beyond just income growth, and these aims should be determined through democratic processes.
3. Measures of progress and competitiveness need to consider economic, social, and environmental factors together to assess socioeconomic development more holistically.
This document presents an abstract for a paper that develops a political-economic model to analyze how a government sets optimal institutional reforms while considering foreign direct investment, benefits to honest and dishonest citizens, and political contributions from dishonest citizens who want lower institutional standards. The model suggests the optimal level of institutional reform depends on the efficiency of legal structures compared to illegal structures like corruption. It aims to provide an institutional explanation for how corruption and foreign investment interact to determine appropriate reform policies.
Weak states are good for business, Strong ones are better - Diego Ruiz BrizuelaDiego Ruiz Brizuela
This document discusses the differences between strong and weak states from a business perspective. It argues that strong states, which have coherent bureaucracies and can offer political stability, are better for businesses than weak states. Strong states, also called developmental states, can fairly control access to the political process and attract talented individuals. They also prioritize long-term economic goals over short-term profit maximization. In contrast, weak states have less control over political access and are more susceptible to interest group pressures, making them riskier for businesses. While weak states may offer opportunities for short-term gains, their higher investment risks generally make strong states better partners for achieving long-term business objectives.
This chapter discusses the political and legal environments facing international business. It begins with an opening case on China's evolving business environment. The chapter then covers the main political systems like democracy and totalitarianism, trends in political risk, and approaches to managing political risk. Next, it examines major legal systems like common law and civil law, and how they differ. It also profiles legal issues that affect international business operations and strategies. The chapter concludes by discussing intellectual property rights and the challenges of software piracy globally.
The document discusses the evolution of post-communist economic systems in Central and Eastern Europe and China over the past 25+ years. It argues that in Central and Eastern Europe, the collapse of communism led to a process of disintegration of the communist state apparatus and competition between networks seeking to grab power and assets, resulting in weak institutions, corruption and kleptocracy. In contrast, China's transition involved the communist party consciously replacing central planning with market forces to maintain control. Accession to the EU helped strengthen institutions in some Central European countries.
In this paper we argue that aid effectiveness may suffer when partnerships with new regimes need to be established. We test this argument using the natural experiment of the break-up of communism in the former Eastern Bloc. We find that commercial and strategic concerns influenced both aid flows and the urgency of entry into new partnerships in the first half of the 1990s, while developmental objectives became more important only over time. These results hold up to a thorough sensitivity analysis, including using a gravity model to instrument for bilateral trade flows. We also find that aid fractionalization increased substantially, and that aid to the region was more likely to be tied, more volatile and less predictable than to aid to other recipients at the time. Overall, these results suggest that the guidelines for aid effectiveness agreed upon in the Paris Declaration are likely to be challenged by the current political transition in parts of the Arab world. Hopefully being aware of these challenges can help donors avoid making the same mistakes.
Kliman-Williams, CJE advance access, Camb. J. Econ.-2014-Kliman-cje-beu033Shannon Williams
This article summarizes and critiques arguments made in the financialization literature regarding the relationship between financialization and declining capital accumulation in the US. Specifically, it addresses claims that rising financial payments and purchases by corporations have come at the expense of productive investment, leading to slower capital accumulation. The article finds that official US government data does not support this argument. While corporations have become more involved in financial markets, productive investment did not decline during the period of rising financialization due to corporations increasingly funding financial expenditures through borrowing rather than diverting profits away from productive investment. The article concludes the fall in the US rate of capital accumulation is fully explained by the decline in the rate of profit earned by corporations.
The document presents a theoretical political-economic model that analyzes how corruption and foreign direct investment (FDI) interact to determine an optimal institutional policy level in a developing country. There are two types of people - honest people who work in the private sector, and dishonest people who work for the corrupt civil service. The model considers the costs to firms of paying taxes through both legal and illegal structures, and how the institutional policy level affects these costs. The optimal policy level depends on the relative efficiency of the legal versus illegal structures, as well as the degree of corruption in the political process and the size of political contributions from dishonest lobby groups.
This document discusses how income inequality has increased over the past 30 years and provides a framework to understand the interconnected processes that drive this trend. It presents a mechanism with two main circuits - a money circuit involving credit expansion and rising asset prices, and a debt circuit of rising household and corporate debt. These circuits are linked by social pressures of envy and peer emulation that exacerbate inequality, as well as fear and anxiety over debt, which influence policies amplifying the problems. The framework aims to identify policy targets to effectively address inequality.
When a government creates an agency to gather information relevant to policymaking, it faces two critical organizational questions: whether the agency should be given authority to
decide on policy or merely supply advice, and what should the policy goals of the agency be. Existing literature on the first question is unable to address the second, because the question
of authority becomes moot if the government can simply replicate its preferences within the agency. In contrast, this paper examines both questions within a model of policymaking under time inconsistency, a setting in which the government has a well-known incentive to create an agency with preferences that differ from its own. Thus, our framework permits a meaningful analysis of delegation versus communication with an endogenously chosen agent. The first main finding of the paper is that the government can do equally well with a strategic choice of agent, from which it solicits advice, instead of delegating authority, as long as the time inconsistency problem is not too severe. The second main finding is that the government may strictly prefer seeking advice to delegating authority if there is prior uncertainty with respect to what is the optimal policy.
By Anders Olofsgård (with R. Luma), published in Journal of Public Economics.
A Presentation prepared to inform participants in the inaugural workshop about the proposed Fylde Coast LEP on the role and purpose of Local Enterprise Partnership
This document analyzes survey data from over 40 developing countries to understand determinants of radicalism, support for violence, and participation in anti-regime actions. It finds that individuals who feel politically and economically marginalized are more likely to harbor extremist views but less likely to join collective political movements. This potentially explains why marginalized groups are difficult to mobilize in nation-wide movements, despite their attitudes. It also finds that arenas for active political participation are more likely dominated by upper-middle income groups committed to preserving the status quo. Suppressing these forms of participation may push these groups towards more radical preferences. The findings suggest the poor may be caught in a cycle of increasing self-exclusion and marginalization.
This document discusses political risk and strategies for companies expanding internationally. It identifies risks companies may face entering Russia like an inconsistent legal system and centralized government. France poses uncertainty risks from strict regulations. The document explains that quantifying but not weighting risks allows for flexibility. Setting up local partnerships or affiliates in Iran could help reduce expropriation risks. It also discusses how terrorism has impacted foreign interests in countries like Iran and Saudi Arabia for oil.
The document provides a book review of The Global Public Management Revolution by Donald Kettl. It summarizes the following key points:
- Kettl's book discusses worldwide public management reform movements that took place in both developed and developing countries during the 1980s and 1990s.
- Reforms aimed to improve government performance and responsiveness by replacing traditional bureaucracy with market-based competition.
- However, the author argues that applying market principles did not necessarily improve efficiency or spending. Privatization alone does not guarantee these outcomes.
- Implementing reforms was more challenging for developing countries that lacked necessary preconditions like good governance, justice systems and financial systems. Direct imitation of Western models was also difficult due to cultural
Informal sector dynamic in times of fragile growthDr Lendy Spires
This document summarizes a study on the dynamics of Madagascar's informal sector between 1995 and 2004, a period of economic growth and crisis. The informal sector absorbed labor during the economic downturn in 2002 but was otherwise heterogeneous. During growth, some sectors accumulated capital by creating new firms rather than expanding existing ones, consistent with higher returns for low levels of capital. Capital returns were low for firms with high capital levels, suggesting limited growth potential. The heterogeneity in capital returns across informal firms points to inefficient capital allocation.
This document discusses the drivers of inequality and presents both orthodox and emerging views. The orthodox view is that rising inequality is inevitable due to technological change and globalization, but this view is inadequate. The emerging view is that inequality results from growing economic power asymmetries, weakened labor protections, tax changes benefiting the wealthy, the outsized influence of the financial sector, privatization, and macroeconomic policies favoring stability over full employment. The document argues that policy interventions can help reduce inequality by strengthening collective bargaining, reforming banks, raising taxes on the wealthy, focusing economic development on stable jobs, and adopting macroeconomic policies promoting both stability and full employment.
Rao 3e issues and institutions in governanceSizwan Ahammed
This document discusses various aspects of governance as it relates to food security, including:
1) It outlines different types of organizations involved in food governance, including community, state, non-governmental, food sector, and local organizations.
2) It discusses concepts of governance failures and the importance of coordination and cooperation between these organizations to effectively govern food security.
3) Key issues addressed include lack of influence of the poor in governance systems, goals versus ability to implement policies, and the role of moral economies in ensuring food access.
Globalization and Structural Shifts in the Developed World – from Industriali...Economic Policy Dialogue
The document discusses the structural shifts that have occurred in developed economies as they transitioned from industrialized to de-industrialized to post-industrial states in a globalized world. It outlines key characteristics of each phase, from vibrant domestic manufacturing and high employment in industrialized economies, to declining manufacturing and mass layoffs and the rise of multinational corporations in de-industrialized economies, to near foreign manufacturing dependency and the gig economy in post-industrial economies. It raises questions about whether this level of liberal globalization and reliance on free markets has undermined domestic economies and employment, fueling social anxieties and the rise of nationalism in developed nations.
Governance and Corruption in International BusinessIlan Alon
Reviews and presents an overview of corruption research in international business, highlighting particular moderators such as trust, regime type, and learning.
PMI Sydney Chapter Presentation 11 10 05Bryan Fenech
Presentation describing how Project Portfolio Management is a means of applying modern market and investment disciplines to the internal management and governance of large organisations.
The document discusses New Institutional Economics (NIE) and its relevance for the International Food Policy Research Institute (IFPRI). NIE examines how institutions, both formal and informal, shape economic performance and outcomes. It analyzes how transaction costs influence organizational forms and contracts between parties. NIE is useful for IFPRI's work in developing countries, where market failures and imperfect institutions are common. The document provides examples of how NIE insights could further IFPRI's research on issues like contract farming and international food standards.
This document summarizes key factors that determine a country's level of economic development according to an international business textbook. It discusses metrics like gross national income per capita, purchasing power parity, economic growth rates, and the Human Development Index. Political systems like democracy and property rights protection are seen as important for innovation and entrepreneurship. Geography, education levels, and political/economic reforms can also influence economic progress. The document considers implications for international managers in evaluating country markets and risks.
Pricing and Non-Pricing Strategies discusses Bury implementing strategies for his digitized books business. As he has a patent eliminating competition, he can set market prices and quality standards. Current projections show continued market growth, allowing for financial success if strategies attract customers. Bury can use pricing tactics like periodically lowering prices to boost sales. His non-pricing strategies should focus on developing unique products to retain loyal customers through lifetime value.
The document discusses different forms of state intervention in market systems and their impact on society. It provides examples of fiscal policy, monetary policy, regulation, and nationalization used by states to influence economic conditions. It also examines the advantages and disadvantages of market systems and debates around balancing state intervention with free markets. Figures and tables are presented analyzing the relationship between different political economies and outcomes like physical well-being, education, and safety. The conclusion discusses finding the right balance between states and markets.
The document discusses the Washington Consensus and its effects on development. It examines three groups of factors within the Washington Consensus, and discusses current views on its successes and failures. Critics argue that inequality and lack of institutional support limited its effectiveness, and that distribution and social institutions play an important role in development. The role of trade, financial liberalization, and interventions are also debated. Overall, the document analyzes different perspectives on the Washington Consensus and its prescriptions for growth.
CTGE Session 2 Globalisation and DevelopmentJames Wilson
The document outlines the agenda for a course on competitive territories in the global economy. It discusses several key topics:
1) Globalization and its implications for business competitiveness and territorial competitiveness.
2) Clusters, global value chains, and competitive territories. It will examine how clusters link firm and territorial competitiveness.
3) Open innovation and its relationship to territorial competitiveness.
4) Innovation systems and the role of public policy in supporting innovation and competitiveness within a territory.
The course aims to explore what makes territories competitive in the current global economic context.
One of the best ways to learn a concept is to teach a concept, and i.docxcarlibradley31429
One of the best ways to learn a concept is to teach a concept, and in this assignment it will be necessary for the learner to understand and explain the concepts from
Modules 1
and
2
in a 7–10-slide PowerPoint presentation. The Internet will be a great resource for completing this assignment because the learner can use keyword phrases to pull the specifics needed to cover the topics and complete the assignment.
You have been asked to create a PowerPoint presentation to train a group of new employees for Future Trends Financial Firm on key concepts of emerging markets. Include the following in your presentation:
Identify and explain key concepts of emerging technologies, highlighting their use and availability for emerging and developed markets.
Define and describe common industry concepts including: institutional voids, business groups, technological capabilities, changing income distribution, and bottom of the pyramid. Please be sure that the correlation between concepts and various markets is appropriate.
Develop a 7–10-slide presentation in PowerPoint format, utilizing at least two scholarly sources. Apply APA standards to the citation of sources.
Make sure you write in a clear, concise, and organized manner; demonstrate ethical scholarship in accurate representation and attribution of sources; display accurate spelling, grammar, and punctuation.
Information from Module 1:
In
Module 1
, you will begin your journey into understanding the concept of EMs. This module’s discussion question and assignment are both designed to help in building the foundation knowledge of understanding EMs.
What is an EM? According to Investopedia (n.d.), an EM is, “A nation's economy that is progressing toward becoming advanced, as shown by some liquidity in local debt and equity markets and the existence of some form of market exchange and regulatory body” (para. 1).
EMs surfaced in the 1970s as
less developed economies
. Countries that are considered EMs possess certain distinguishing traits. Some of the common traits are:
Demanding culture
High rates of immigration
Fragmented market
Growing youthful population
Investors are shifting their investments to EMs because of their potential long-term growth rate (Johnston, 2011). One of the main reasons EMs are rapidly growing is due to the countries' visible economic advancements. According to EPFR Global, a fund tracking company, investors invested more than $50 billion into EMs in 2012 (Bloomberg Businessweek, 2013).
Investopedia. (n.d.).
Emerging market economy
. Retrieved from
http://www.investopedia.com/terms/e/emergingmarketeconomy.asp
Johnston, M. (2011, November 23).
5 factors to consider in choosing an emerging markets ETF
. Retrieved from
http://seekingalpha.com/article/309867-5-factors-to-consider-in-choosing-an-emerging-markets-etf
Bloomberg Businessweek. (2013, January 31).
The top 20 emerging markets
. Retrieved from
http://images.businessweek.com/slideshows/2013-01-31/the-top-20-emergi.
The document summarizes key findings from the 2017 OECD Business and Finance Outlook report. It addresses 8 questions on issues related to globalization and the impact of technology and trade on middle-income jobs. The summary discusses how openness and a level global playing field are important for companies to innovate and gain productivity. However, some countries use subsidies, exchange rate management and pricing strategies to gain unfair export advantages over competitors. Overall, the document argues that non-transparent practices like these undermine open markets and fair global competition.
Introduction to international development myungnam kim finalKBS
South Korea faces serious problems of wealth (asset) inequality according to an academic paper. Wealth is highly concentrated among the top 1% of earners who make over 9 times the average income. This level of inequality can increase corruption, reduce economic growth, and undermine fair institutions. The paper argues that addressing asset inequality through tax policy reforms is needed to promote social justice and sustained economic growth in South Korea.
Stefano Pagliano: "A Global Financial Governance?"Global Utmaning
A presentation held by PhD Stefano Pagliari, Departement of International Politics, City University London, at the high level seminar "Towards a sustainable financial system", hosted by the Stockholm based think tank Global Challenge in cooperation with London School of Economics and Swedish House of Finance on September 12th 2013.
The document is a chapter from an economics textbook on poverty, inequality, and development. It discusses measuring and understanding poverty and inequality, including concepts like Lorenz curves and Gini coefficients. It also examines the relationship between economic growth, poverty reduction, and changes in inequality. Key policies for addressing poverty are outlined, such as redistributing assets, progressive taxation, and direct transfers to the poor. The chapter includes country-level data and case studies to illustrate these concepts.
The document summarizes criticisms of the economic arguments in favor of the Transatlantic Trade and Investment Partnership (TTIP) agreement between the EU and US. It argues that the projected economic gains from TTIP are very small, potential distributional impacts and costs to disadvantaged groups are being ignored, and the agreement would further concentrate economic power and extend monopolies for certain industries like big pharmaceutical companies. The document concludes that the case for TTIP is not clear cut and more analysis is needed of its potential impacts, especially at the Scottish level.
This document discusses factors that drive economic growth according to various economists. It provides GDP data for various countries from 1990-2010 that shows high growth rates in China, India, and other developing economies. Theories discussed include how physical and human capital accumulation, technology improvements, and institutions like private property rights systems can influence economic growth. It also examines China's high growth despite a relatively weak legal system, noting the role of informal institutions like guanxi social networks in enabling business transactions.
Similar to Do Poor Institutions Create More Losers from Globalisation? (20)
Eesti Panga president Madis Müller ja finantsstabiilsuse osakonna juhataja Jaak Tõrs tutvustasid kõigile majandushuvilistele äsja valminud Eesti finantssektori ülevaadet.
Karsten Staehr. Macroeconomic News and Sovereign Interest Rate Spreads before...Eesti Pank
1. The document analyzes how the effect of macroeconomic news on Italian sovereign interest rate spreads changed before and during the ECB's quantitative easing program from 2014-2022.
2. It finds that macroeconomic news had a significant effect on spreads before QE, with a coefficient of around -4, whereas the effect during QE was near zero, with the difference being statistically significant.
3. The results were robust to different specifications and definitions of news shocks. This suggests that QE helped insulate sovereign bond spreads from the impact of macroeconomic news by removing tail risks and "killing normal market reactions to news."
Majanduse Rahastamise Ülevaade. Veebruar 2023Eesti Pank
22.02.2023 Eesti Panga ökonomistid Taavi Raudsaar ja Mari Tamm tutvustasid äsja valminud Majanduse Rahastamise Ülevaadet ehk millised on Eesti majapidamiste ja ettevõtete rahastamisvõimalused.
The Sufficiency of Debt Relief as a Panacea to Sovereign Debt Crisis in Sub-S...Eesti Pank
The thesis analyzes the efficacy of debt relief as a solution to sovereign debt crises in Sub-Saharan Africa, using Ghana, Nigeria, and Zambia as case studies. It conducts debt sustainability analyses under various scenarios of partial or full debt reduction, cancellation, and standstills. Structural impulse response analyses show how macroeconomic factors like growth, interest rates, and exchange rates impact debt levels over time. The results suggest that debt relief can reduce debt burdens but economic reforms are also needed for long-term sustainability. Limitations include low frequency data and lower assumed interest rates.
Luck and skill in the performance of global equity funds in Central and Easte...Eesti Pank
The document summarizes a study examining the performance of actively managed global equity funds in Central and Eastern Europe between 2005-2019. The study uses a bootstrap methodology to separate fund manager skill from luck. Key findings include:
- Approximately 5% of funds showed skill in outperforming their benchmarks gross of fees, with one fund in particular outperforming factor returns net and gross of fees.
- Most funds that underperformed did so due to lack of skill rather than bad luck.
- Fees were too high relative to the abnormal performance added by many mutual funds.
- While some fund managers possessed skill, it was generally not enough to cover their fees, suggesting fees may be too high or competition
The document summarizes a study examining how Lithuanian food manufacturing firms adjusted to trade sanctions imposed by Russia in 2014 that banned many agricultural imports from the EU.
The main adjustments included:
- Reducing part-time employment as the most flexible margin of adjustment. Larger reductions occurred for firms more exposed to the Russian market.
- Increasing exports to other countries to compensate for lost Russian exports. More exposed firms increased other exports more.
- Decreasing investment and full-time employment for more exposed firms, though full-time employment adjustments took longer.
A conceptual framework is presented predicting this sequence of adjustments, with part-time labor adjusting first due to lower costs, followed by exports, investment,
The document provides an economic forecast for Estonia from 2022-2025. It finds that high inflation and energy prices are hurting the global and European economies. Inflation in Estonia is projected to remain high in 2023 before slowly falling in 2024-2025. Interest rates are also expected to continue rising to curb inflation. Fiscal policy measures risk exacerbating inflation. Overall the Estonian economy is forecast to recover by late 2023 but high costs and uncertainty will continue weighing on growth.
Fabio Canovaand Evi Pappa. Costly disasters, energy consumption, and the role...Eesti Pank
Neljapäeval, 20. oktoobril 2022 toimus Eesti Panga avatud seminar, kus rahvusvaheliselt tunnustatud majandusteadlane Fabio Canova tutvustas koos Evi Pappaga valminud uurimustööd „Kulukad looduskatastroofid, energiatarbimine ning eelarvepoliitika“ (Costly disasters, energy consumption, and the role of fiscal policy).
Romain Duval. IMF Regional Economic Outlook for EuropeEesti Pank
31. oktoobril 2022 toimus Eesti Panga avatud seminar, kus Rahvusvahelise Valuutafondi esindaja Romain A. Duval tutvustas IMFi Euroopa osakonnas vastvalminud regionaalset majandusväljavaadet.
Pressikonverents Eesti Pangas, kus keskpanga president Madis Müller ja finantsstabiilsuse osakonna juhataja Jaak Tõrs tutvustavad ülevaadet, mis analüüsib suuremaid riske Eesti finantssektoris.
Pressikonverentsil saab teada:
kuidas majanduse jahenemine, kiire hinnakasv ja intresside tõus mõjutavad inimeste ja ettevõtete võimet laene tagasi maksta
milline mõju saab majanduse jahenemisel olema uute laenude andmisel ettevõtetele ja inimestele
kuidas mõjutavad võlakirjaturgudel toimuvad muutused Eesti pangandussektori rahastamist
milliseid samme tuleb keskpanga hinnangul astuda finantssektori tugevuse kindlustamiseks.
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby...Donc Test
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Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
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where can I find a legit pi merchant onlineDOT TECH
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Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
BONKMILLON Unleashes Its Bonkers Potential on Solana.pdfcoingabbar
Introducing BONKMILLON - The Most Bonkers Meme Coin Yet
Let's be real for a second – the world of meme coins can feel like a bit of a circus at times. Every other day, there's a new token promising to take you "to the moon" or offering some groundbreaking utility that'll change the game forever. But how many of them actually deliver on that hype?
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
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Abhay Bhutada Leads Poonawalla Fincorp To Record Low NPA And Unprecedented Gr...Vighnesh Shashtri
Under the leadership of Abhay Bhutada, Poonawalla Fincorp has achieved record-low Non-Performing Assets (NPA) and witnessed unprecedented growth. Bhutada's strategic vision and effective management have significantly enhanced the company's financial health, showcasing a robust performance in the financial sector. This achievement underscores the company's resilience and ability to thrive in a competitive market, setting a new benchmark for operational excellence in the industry.
2. Outline
1. Some Background on Trade
2. The Institutional Link
3. Hypotheses
4. Identification Strategy and Data
5. Results
6. Discussion and Conclusions
3. Background
• The benefits of trade liberalization one of the
least controversial maxims of economics
– Theoretically, empirically, morally trade is an
unmitigated good
• However, political and economic effects
occur in the opening to trade
– Disruptions affects specific sectors, creating
“losers”
– Governments may try to compensate the
“losers” via policies funded by the “winners”
4. Trade and “Losers”
Figure 1 – Trade as a % of GDP in the World and High/Low Income
Countries
0.33
0.34
0.35
0.36
0.37
0.38
0.39
0.4
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
60.00
65.00
70.00
AverageGiniCoefficient
Tradeas%ofGDP
Average Gini Coefficient (rhs) World High income Low income
Source: World Development Indicators and Author’s Calculations from Solt (2016)
5. Background (II)
• Compensatory policies may be less effective in
convincing the populace of trade’s value if the
number of losers reaches a critical mass
– The dispersed economic benefits of trade may be
overwhelmed by the concentrated costs
• Indeed, if distortions in an economy generate
an artificially large number of losers:
– Fiscal policies could be strained or, in the worst
case, unable to cope with the compensation
process
– Backsliding could occur in future trade liberalization
6. The Institutional Link
What factors may create abnormal levels
of “losers” from trade?
Poor institutions, first and foremost!
• Complex interdependencies between
trade and institutions
– Acemoglu et al. (2005) detail how trade
influenced institutional development in
Europe in the 16th through the 19th
centuries
– Good institutions contribute to trade
openness itself, creating a virtuous
circle (Greif 1993, Dollar and Kraay
2003)
7. Hypotheses
H1: Countries with poor institutions create more
losers from trade than those with good institutions
• Poor institutions can generate “unnecessary”
losers from trade by creating distortions in an
economy
H2: Countries with more losers from trade have
slower trade liberalisation progress
• Effects of poor institutions are dynamic, can
create a vicious cycle where increased
inequality feeds back into institutional
deterioration and this slows further openness
8. Hypotheses – A Graphic Representation
Trade
Openness/Globalization
Institutions Losers from
Globalization
9. First Things First: Who is a “Loser?”
• No real accepted definition
– O’Brien and Leichenko (2003) note that terms “winners” and “losers” have
both political and economic meanings
• Economists generally focus on class, income level, and/or source of
income
– Effect of trade on income distributions or on segments of society
• Common usage of poorest 1% or 5% as a reference point for potential
losers
– Poorest often located in informal economy and cannot reap gains from
globalisation (alternately more exposed to shocks)
– Unfortunately, empirical evidence is less uniform on the effects of trade on
the poorest
– Milanovic (2013) finds that the losers from globalisation are those between
the 75th and the 90th percentile in income globally, whose incomes grew
much more slowly than other percentiles (bottom 5% grew much more
quickly!)
– Other research (Dollar and Kraay 2004, Topalova 2010) shows that the poor
are a diverse lot who tend to benefit from trade
10. First Things First: Who is a “Loser?” (II)
• Trade literature instead focuses on skill levels
– Tend to be correlated with but do not exclusively overlap
with income levels
• Davidson and Matusz (2006) an example
– two groups of losers from liberalisation: “stayers” who
are stuck in the low-tech sector and “movers” who go
through costly training to switch from the low- to the
high-tech sector.
• However, effects of globalisation on workers
conditional on level of development
– Low-skilled workers in high-income countries have
greater bargaining power than low-skilled workers in low-
income countries (Rudra 2005)
– This means wages remain high (Lawrence and
Slaughter 1993)
11. First Things First: Who is a “Loser?” (III)
• Losers not necessarily the poor but the
relatively disadvantaged
– Graham (2001): losers are newly vulnerable
members of the middle class who perceive that
gains from have gone disproportionately to top
incomes
– Kriesi et al. (2006): individuals who have a
strong sense of identity with their national
community likely to perceive themselves as
losers under globalisation due to “de-
nationalisation” which accompanies trade
liberalisation.
12. Settling on a Definition
• If “loss” under globalisation is a relative phenomenon, then
relative metrics are needed to measure it
• This paper uses within-country income inequality, measured by
Gini coefficient (taken from Solt 2016), as proxy for losses due to
trade
• Several benefits:
– Workers or industries disadvantaged by globalisation will fall behind,
creating a widening gap with those who have successfully taken
advantage of globalisation
– Mitigates reality that development level of an economy matters for
determining the impact of trade; benchmark is not against an
idealised representative worker, but against the country’s own
income distribution
– Econometrically, there are numerous sources of income inequality
but they may be controlled for (leaving much of any widening gap
attributable directly to trade)
13. Institutions and “Losers”: the Theory
• Globalisation is a process, usually a discrete policy change but
with long-term effects
– Way in which an economy reacts depends upon the incentives
prevalent throughout the country
• Institutions are the creators, enforcers, and guarantors of various
incentive structures in a country
– Institutions mediate returns to factors of production precisely via
power they exert on incentives, altering relative prices through
information dispersion or negatively via transaction costs or cultural
and organisational barriers
– Poor institutions have an adverse effect on incentives and thus
retard the gains from trade (Kapstein 2000).
• Strong empirical connection between poor institutional quality
and inequality globally (Chong and Calderon 2000; Chong and
Gradstein 2007; Lin and Fu 2016)
14. The Reality of “Institutions”
• Institutions are not an
amorphous lump or a black box
– differentiated by form and
function:
– Political: Pertaining to distribution
of political power
– Economic: Designed or arising to
maximize the utility of principals in
the economic sphere, by solely
influencing and mediating
economic outcomes pertaining to
distribution of resources.
– Social: Institutions not explicitly
concerned with political power or
economic incentives but geared
towards behavior and norms
outside these spheres
15. Which Institutions would Mitigate Trade-
Related Losses?
• Labour market institutions a good candidate for
affecting gains from trade
– Rigid markets and EPL can impact reallocation of
resources
– Minimum wage and EPL could also help lower poverty
for insiders
• Property rights another important guarantor of
incentives
– Contract enforcement allows poor to extract rents as well
as the rich
– Property rights allows for income mobility (collateralizing
assets) and actual mobility (sale and disposal of assets)
– Inequality can decrease property rights as rich cling to
their spoils (Sonin 2003)
16. Which Institutions would Mitigate Trade-
Related Losses? (II)
• Democracy, a key political institution, also has a
role to play
– Polities choose their labour market institutions, as
noted
– Also allows for choice of fiscal policies for
redistribution and “credible commitment” for future
redistribution
• Empirical evidence mixed
– Simpson (1990) found a U-shaped relationship
between democracy and inequality
– Rodrik (1998) shows stronger linear association
between democracy and lessened inequality
– Inequality may actually be lower in authoritarian
regimes, in order to buy off social unrest
(Gradstein and Milanovic 2004)
– Reuveny and Li (2003) show that democracy in
the presence of economic openness reduces
income inequality over a sample of 69 countries
17. Feedback Effects
Democracy
• Chong and Gradstein (2007) demonstrate feedback
effects between institutions and inequality, showing
inequality is directly tied to poorer-quality political
institutions
• Democracy may also amplify the effects of trade-related
losses onto future trade liberalization – too many losers
means a polity less willing to vote for future liberalization
Property Rights
• Keefer and Knack (2002) note that social polarisation is
bad for property rights, showing that inequality leads to a
more interventionist government with short time-horizons
• Politically-created inequality creates further barriers to
entry in the form of weak property rights
18. Methodology and Data
• A three-legged triangle of influence needs an appropriate
system of equations
• This paper uses a 3SLS approach to model the
interlinked influences of trade, inequality, and institutions
• Bootstrapped standard errors and country fixed effects
• Data for 196 countries from 1960-2015
– Compiled from a large number of publicly available sources,
including Solt (2016), the World Bank’s World Development
Indicators (WDI), the International Country Risk Guide (ICRG),
the IMF’s International Financial Statistics (IFS), previous
research, and others
– Gaps in the data and in institutional metrics generally leave us
with a set of between 1,000 – 2,000 observations
19. Methodology (II)
3SLS approach has a separate equation for each
leg of the triangle
(1) 𝐼𝑁𝐸𝑄𝑖𝑡 = 𝛼𝑇𝑅𝐴𝐷𝐸𝑖𝑡 + 𝛽𝐼𝑁𝑆𝑇𝐼𝑇𝑈𝑇𝐼𝑂𝑁𝑆𝑖𝑡 +
𝛾𝑇𝑅𝐴𝐷𝐸 ∗ 𝐼𝑁𝑆𝑇𝐼𝑇𝑈𝑇𝐼𝑂𝑁𝑆𝑖𝑡 + 𝛿𝑋𝑖𝑡
′
+ 𝜇 𝑡 + 𝜖𝑖𝑡
(2) 𝐼𝑁𝑆𝑇𝐼𝑇𝑈𝑇𝐼𝑂𝑁𝑆𝑖𝑡 = 𝛼𝑇𝑅𝐴𝐷𝐸𝑖𝑡 + 𝛽𝐼𝑁𝐸𝑄𝑖𝑡 +
𝜌𝑌𝑖𝑡
′
+ 𝜇 𝑡 + 𝜖𝑖𝑡
(3) 𝑇𝑅𝐴𝐷𝐸𝑖𝑡 = 𝛼𝐼𝑁𝑆𝑇𝐼𝑇𝑈𝑇𝐼𝑂𝑁𝑆𝑖𝑡 + 𝛽𝐼𝑁𝐸𝑄𝑖𝑡 +
𝜏𝑍𝑖𝑡
′
+ 𝜇 𝑡 + 𝜖𝑖𝑡
20. Methodology (III): Measuring Inequality
Two approaches to capturing inequality
• Within-country inequality
– Mentioned before, use of Gini coefficient from Solt (2016)
– Solt generates 100 country observations per year to
encapsulate uncertainty, averages used here
• Sigma convergence (Sala-i-Martin 1996)
– Li et al. (1998) note much variation in inequality does not
actually occur within-country but across countries
– Dispersion metric equal to the standard deviation of a
country’s log per capita GDP versus all other countries in
that particular year
– Used to capture divergence of entire country due to
trade-related losses or gains
21. Methodology (IV): Measuring Institutions
• Property Rights
– ICRG Investor Protection
• Risk of expropriation, contract enforcement, and repatriation of profits,
scored on a scale from 0-12 with higher numbers indicating better protection
– Contract-intensive money
• Proportion of money held outside the formal banking sector:
𝑀2 − 𝐶
𝑀2
• Higher numbers indicate more money in the formal financial sector, and thus
higher property rights
• Clague et. al (1999:200) note, “Where citizens believe that there is sufficient
third-party enforcement, they are more likely to allow other parties to hold
their money in exchange for some compensation.”
• Democracy
– ICRG Democratic Accountability indicator
• Extent of responsiveness of a government to its people, rated from 1 to 6,
with higher number indicating more democracy
22. Methodology (V)
Equation 1:
Inequality
• GDP per capita (level
and squared, to capture
Kuznets-type effects)
• Labour market
efficiency (national
unemployment rate)
• Democracy
• Government spending
• Natural Resource
Rents
• Female Mortality
• Human Capital
(schooling and WEF
HCI)
Equation 2:
Property
Rights
• Natural Resource Rents
• Latitude
• Level of democracy
• Population size
• Financial market
development
• Labour market efficiency
• Initial GDP per capita
• Initial levels of education
(gross secondary
enrollment)
• Dummies for legal origin
(La Porta et al. 2008)
Equation 3:
Trade
Openness
• Country Size
• Population
• Latitude
• Landlockedness
• Resource Endowment
• Human Capital
• Labour Market Efficiency
• Investment Potential (initial
levels of schooling)
• Government Spending
• Access to Finance and/or
Financial Depth (bank deposits
to GDP)
• Structure of the Economy
(agriculture as a percentage of
GDP).
Different Control Set for Each Equation
24. Interpretation of Results
Within-country inequality
• Trade openness has a marginal positive impact
on inequality but only with inclusion of contract-
intensive money
• Both forms of property rights increase inequality
(theoretically a good and proper result)
• Interaction of contract-intensive money and
openness and democracy and openness both
appear to mitigate inequality
– Investor protection has no effect
– Democratic accountability a more fragile result and
scale is very small
26. Interpretation of Results (II)
Between-country inequality (Sigma convergence)
• Trade openness unequivocally reduces
between-country inequality
• Property rights have a strong negative
association with between-country inequality (no
matter which metric of rights is used)
– Interacting property rights and trade openness
shows divergence in incomes across countries
• Democratic accountability has little effect
27. Extension: Granger Causality
Null Hypothesis Lags Obs
F-
Statistic
Prob.
Trade Openness does not Granger Cause
Income Inequality
4 3485
2.87139 0.022
Income Inequality does not Granger Cause
Trade Openness
2.02025 0.089
Income Inequality (-5 years) does not
Granger Cause Trade Openness
4 3132
3.55478 0.007
Trade Openness does not Granger Cause
Income Inequality (-5 years)
0.83373 0.504
Income Inequality (-10 years) does not
Granger Cause Trade Openness
4 2549
4.00152 0.003
Trade Openness does not Granger Cause
Income Inequality (-10 years)
0.04032 0.997
30. Interpretation of Results (III)
• Longer lags of the Gini coefficient have
smaller scale but still have a positive effect
on trade openness
• Investor protection has a positive effect but
overall property rights have a (puzzling)
negative effect)
• Interacting the Gini coefficient with
democracy shows that prolonged inequality
can reduce trade openness
31. Tentative Conclusions
• Trade has not had a massive effect on income
inequality but has created some losers
• Better institutions in the face of trade seem to
mitigate trade-related losses within a country
• Property rights might help poor countries
become rich but also helps rich countries
become richer (sigma results)
• Prolonged inequality does indeed stifle a
democracy’s appetite for future trade
liberalization
32. Still left to do…
• Robustness tests/extension of the baseline
regressions
– Additional controls (Democracy equation experienced
some problems)
– BMA analysis to narrow down control set?
– Other institutional metrics which might give more
observations
– Country sub-groups as in Braga de Macedo et al.
(2013)
• Other facets of globalization?
– Trade only examined here, perhaps financial
globalization as well
• Comments welcome!