Explaining cross-country differences in growth rates requires not only an understanding of the link between growth and public policies, but also an understanding of why countries choose different public policies. This paper shows that ethnic diversity helps explain cross-country differences in public policies and other economic indicators. In the case of Sub-Saharan Africa, economic growth is associated with low schooling, political instability, underdeveloped financial systems, distorted foreign exchange markets, high government deficits, and insufficient infrastructure. Africa's high ethnic fragmentation explains a significant part of most of these characteristics.

We investigate share price responses to the formation of 345 strategic alliances spanning 1983–1992. The average stock price response is positive, with no evidence of wealth transfers. This is true for horizontal alliances (involving partner firms in industries with the same three-digit SIC codes) as well as non-horizontal alliances. For horizontal alliances, more value accrues when the alliance involves the transfer or pooling of technical knowledge than with nontechnical alliances. Finally, partnering firms tend to display better operating performance than their industry peers over the five-year period surrounding the year in which an alliance is formed.

This article evaluates the tax-loss-selling hypothesis against the window-dressing hypothesis as explanations for turn-of-the-year anomalies. The authors examine differences between securities dominated by individual investors versus those dominated by institutional investors and find that the effect is more pervasive in the former. Controlling for capitalization, they find that, in early January (late December), stocks with greater individual investor interest outperform (underperform) stocks with greater institutional investor interest. These results hold for both stocks that previously appreciated in value and stocks that previously depreciated in value. The results are more consistent with the tax-loss-selling hypothesis as an explanation for the turn-of-the-year effect.

This paper examines the claim that expansion of the voting franchise has been an important factor in the growth of government. State government spending and state and local spending are explained using a panel of 46 states for 1950-88. Elimination of poll taxes and literacy tests led to higher turnout, particularly among the poor, and a poorer pivotal voter. As predicted, we find that these changes, a fall in the income of voters relative to state income, and the ouster of Republicans from state government led to a sharp rise in welfare spending but no change in other spending.

This paper examines the claim that expansion of the voting franchise has been an important factor in the growth of government. State government spending and state and local spending are explained using a panel of 46 states for 1950-88. Elimination of poll taxes and literacy tests led to higher turnout, particularly among the poor, and a poorer pivotal voter. As predicted, we find that these changes, a fall in the income of voters relative to state income, and the ouster of Republicans from state government led to a sharp rise in welfare spending but no change in other spending.

The US economy experienced major regulatory changes in the banking and finance industry with the passage of five major acts over the period 1980 to 1991. This has generated an extensive literature investigating the effects of these changes on the US banking industry. In particular, this body of research has examined the share market reaction to regulatory changes, as well as their impact on the risk, return, market value and profitability of banking industry stocks. Generally, it has been found that the regulatory changes have had a substantial impact, although the effect has not been uniform across all depository institutions. This paper extends this literature by analysing the stability of a sample of eighteen US banking industry stock betas across five periods: a pre-regulatory change period, a monetary experiment period, a deregulation period, a reregulation period and a post-regulatory change period. Based on an analysis of weekly returns, we find that the level of bank risk has increased. Further, we also find a tendency towards greater beta instability in both the monetary experiment and deregulation samples. The degree of beta instability is lowest in the pre-regulatory change and post-regulatory change samples. Overall the monetary experiment and regulatory change coincided with an increased tendency towards beta instability. We also compare our results to a randomly selected control sample of non-banks and find some more general effects of regulatory change on individual stock betas.

This paper examines the roles of markets and banks when both are active, characterizing the effects of financial market development on the structure and market share of banks. Banks lower the cost of giving investors rapid access to their capital and improve the liquidity of markets by diverting demand for liquidity from markets. Increased participation in markets causes the banking sector to shrink, primarily through reduced holdings of long‐term assets. In addition, increased participation leads to longer‐maturity real and financial assets and a smaller gap between the maturity of financial and real assets.

When should a government provide a service in-house, and when should it contract out provision? We develop a model in which the provider can invest in improving the quality of service or reducing cost. If contracts are incomplete, the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee has. However, the private contractor's incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on noncontractible quality. The model is applied to understanding the costs and benefits of prison privatization.

The authors consider a family of rank tests based on the regression rank score process introduced by C. Gutenbrunner and J. Jureckova (1992) to test the unit root hypothesis in economic time series. In contrast to tests based on least-squares methods, the rank tests are asymptotically Gaussian under the null hypothesis, and have excellent power--particularly under innovation exhibiting heavy tails. These regression rank scores arise as a vector of solutions of the dual form of the linear program required to compute the regression quantile statistics of R. W. Koenker and G. Bassett (1978). For location model, they are simple ranks of the sample observations.