This paper argues that while a long-term solution to climate change may require the global market-based solution envisioned in the Kyoto Protocol, a more flexible near-term approach is necessary. First, a broad range of domestic policies need to be embraced and encouraged by an international agreement, not constrained or discouraged by it. Second, developing countries need to be an increased focus of engagement, with expansion and reform of project-based crediting. Finally, a global agreement needs to recognize both technology and mitigation policies and to develop ways to evaluate efforts along each of these dimensions. Over the longer term, such an agreement should evolve toward greater reliance on global market-based solutions, and therefore near-term steps should be viewed both in terms of their immediate practicality and their potential to be refined over time.(This abstract was borrowed from another version of this item.)
This article provides an empirical investigation of the determinants of terrorism at the country level. In contrast with the previous literature on this subject, which focuses on transnational terrorism only, I use a new measure of terrorism that encompasses both domestic and transnational terrorism. In line with the results of some recent studies, this article shows that terrorist risk is not significantly higher for poorer countries, once the effects of other country-specific characteristics such as the level of political freedom are taken into account. Political freedom is shown to explain terrorism, but it does so in a non-monotonic way: countries in some intermediate range of political freedom are shown to be more prone to terrorism than countries with high levels of political freedom or countries with highly authoritarian regimes. This result suggests that, as experienced recently in Iraq and previously in Spain and Russia, transitions from an authoritarian regime to a democracy may be accompanied by temporary increases in terrorism. Finally, the results suggest that geographic factors are important to sustain terrorist activities.
It has been increasingly recognized that entrepreneurship plays a crucial role in successful economies. The Schumpeterian approach to growth (Aghion and Howitt, 1997) advances the view that entrepreneurial dynamism is the key to innovation and growth. A growing body of policy work emphasizes the important role of entrepreneurs in economic development (World Bank, 2003). Yet, research on entrepreneurship in economics is rather limited. There are three distinct perspectives on entrepreneurship in social sciences. The first perspective focuses on the role of economic, political, and legal institutions in fostering or restricting entrepreneurship. Institutional problems are seen in credit constraints that make it impossible to borrow and set up businesses; insecurity of property rights that provides insufficient incentives for entrepreneurs; and regulatory burdens that make setting up new enterprises difficult. The second perspective focuses on the sociological variables shaping entrepreneurship. For example, sociologists study the role of values and social networks in promoting or discouraging entrepreneurial activities. Social networks may work through a variety of channels, such as family, friends, or ethnic groups. The third perspective emphasizes individual characteristics of entrepreneurs. Psychologists have studied the traits associated with entrepreneurship such as a personal need for achievement, belief in the effect of personal effort on outcomes, attitudes towards risk, and individual self-confidence. Although there are studies on each perspective, little work looks at each of these factors taking the other into account. This is precisely what we do in this paper, using a new data set of Chinese entrepreneurs and a matching sample of non-entrepreneurs with similar age, gender, and educational characteristics. The survey covers both entrepreneurs and non-entrepreneurs in order to understand how they differ in individual characteristics, family background, social networks, values and beliefs, and perceptions of the institutional environment. The data further allow us to separate Chinese entrepreneurs into two groups, by necessity and by opportunity, and to differentiate non-entrepreneurs in three groups, those who never thought to be entrepreneurs, those who thought but never became entrepreneurs, and those who became entrepreneurs but eventually failed. This is a richer data set than a previous survey in Russia.
Much of the empirical work and the conceptual discussion of the impact of institutions on economic development either implicitly or explicitly assumes that institutions persist. Although Acemoglu et al. (2001) provide evidence that constraints on the executive persist, many aspects of institutions change frequently. Less-developed countries cycle between democracy and dictatorship and often change their constitutions. Relatedly, while the current economic problems in Latin America are often traced back to colonial times (Stanley L. Engerman and Kenneth L. Sokoloff, 1997; Acemoglu et al., 2002), the specific institutions that once underpinned the colonial economy, such as the encomienda, the mita, or slavery, vanished long ago. These observations suggest that we need to develop a framework in which changes in certain dimensions of institutions are consistent with overall institutional persistence. In this paper, we make an attempt to highlight some important mechanisms for understanding simultaneous change and persistence in institutions. Institutional persistence, in this context, refers to the persistence of a cluster of economic institutions, such as the extent of enforcement of property rights for a broad cross section of society (Acemoglu et al., 2001). Such lack of property rights enforcement may be driven by quite different specific institutions, e.g., risk of expropriation, entry barriers, or economic systems such as serfdom or slavery. In turn, these different specific economic institutions may exist under different political institutions, including dictatorships, absolutist monarchies, oligarchies, and corrupt or even populist democracies. Given this rich array of possibilities, a useful framework must specify which aspects of institutions can change, which others have a tendency to persist in equilibrium, and how the persistence of certain types of institutions could have lasting effects on economic outcomes. In this paper, we provide a simple model of the coexistence of change and persistence in institutions. First we describe some existing approaches to the persistence of social arrangements, as well as the essence of the mechanism we propose. Next, we illustrate the key issues using the experience of the southern United States, and last we provide a simple model that formalizes the main mechanism in the paper. We conclude by discussing a complementary mechanism to the one presented in this paper.
This paper uses a dynamic general equilibrium model to analyze and quantify the aggregate effects of the timing of tax rate changes enacted in 2001 (which called for successive rate reductions through 2006) and 2003 (which made immediate tax rate cuts scheduled for 2004 and 2006). The phased-in nature contributed to the slow recovery from the 2001 recession, while the elimination of the phase-in helped explain the increase in economic activity in 2003. The simulations suggest while the tax policy was a drag on the economy in 2001 and 2002, it increased economic growth in 2003, once phase-ins were eliminated.
Owners of intellectual property or mere sponsors of an idea (e.g., authors, security issuers, sponsors of standards) resort to more or less independent certifiers to persuade potential users (buyers or adopters) of the worth of their property or idea. We analyze the sponsor's choices of certifier and design, social preferences regarding these choices, and the impacts thereon of multiple categories of users, of a downstream presence of the sponsor, and of certifier market power. Finally, we study strategic forum shopping by sponsors of competing ideas.
Wages and Employment in a Random Social Network with Arbitrary Degree Distribution by Yannis M. Ioannides and Adriaan R. Soetevent. Published in volume 96, issue 2, pages 270-274 of American Economic Review, May 2006
Most countries are members of preferential trade agreements (PTAs). The effect of these agreements has attracted much interest and raised the question of whether PTAs promote or slow multilateral trade liberalization, i.e., whether they are a “building block” or “stumbling block” to multilateral liberalization. Despite this long-standing concern with PTAs and the lack of theoretical consensus, there is no systematic evidence on whether they are actually a stumbling block to multilateral liberalization. We use detailed data on U.S. multilateral tariffs to provide the first systematic evidence that the direct effect of PTAs was to generate a stumbling block to its MTL. We also provide evidence of reciprocity in multilateral tariff reductions.
We propose a framework for analyzing transformations of demand. Such transformations frequently stem from changes in the dispersion of consumers' valuations, which lead to rotations of the demand curve. In many settings, profits are a U-shaped function of dispersion. High dispersion is complemented by niche production, and low dispersion is complemented by mass-market supply. We investigate numerous applications, including product design; advertising, marketing and sales advice; and the construction of quality-differentiated product lines. We also suggest a new taxonomy of advertising, distinguishing between hype, which shifts demand, and real information, which rotates demand.