Using a unique dataset collected in 59 rural Gambian villages, we study how ethnic heterogeneity is related to the structure of four economic exchange networks: land, labor, inputs and credit. We find that different measures of village-level ethnic fragmentation are mostly uncorrelated with network structure. At a more disaggregated level, household heads belonging to ethnic minorities are not less central than those from the predominant ethnicity in any of the networks and, at the dyadic level, the fact that two households share ethnicity is not an economically significant predictor of link formation. Our results indicate that, in the particular setting of our study, the structure of the exchange networks is better defined by other variables than ethnicity, and that ethnic heterogeneity is unlikely to be a driver for sub-optimal economic exchanges. We argue that our findings can be interpreted in a causal way as the current distribution of ethnic groups in rural Gambia is largely influenced by specific historical features of the British colonial administration. Moreover, the network structure of our data allow us to include fixed effects at different levels as well as to precisely measure kinship ties, a confounding variable often omitted in previous studies.
We extend the celebrated Rothschild and Stiglitz (1970) definition of Mean Preserving Spreads to scalar diffusion processes. We provide sufficient conditions under which a family of diffusion processes satisfies the dynamic counterparts to the famous Rothschild and Stiglitz integral conditions. We prove that the only Brownian bridge with non-constant drift that displays the Dynamic Mean-Preserving Spread (DMPS) property is given by the ballistic super-diffusive process. We illustrate our results in the context of the cannonical examples of investment under uncertainty and option pricing.
The increase in the level of greenhouse gas (GHG) emissions in the atmosphere in the last centuries, and the subsequent increase in temperature, has been a widely studied area in the last few decades. Climate change has become a key item on the political agenda due to concerns regarding the sustainability of current human consumption for future generations. Consumption of food and agricultural goods constitutes an important part of household based GHG emissions, and the relatively low costs associated with environmental improvements make it an interesting area of study to understand behavioural changes. Despite general agreement on the need to curb the amount of GHG emissions worldwide, little evidence exists regarding the best instruments policymakers can employ to stimulate changes toward more sustainable consumption. The present work explores which instruments are most effective in fostering change to more environmentally friendly food consumption. The instruments tested are CO2 labelling, GHG abatement subsidy and product-specific bans. We used a simulated online shopping trip in supermarkets in the Greater London area in the United Kingdom, where respondents shopped in four product categories: cola, milk, meat (chicken and beef), and butter/margarine. Consumer preferences reveal that, in the presence of these instruments, quantity instruments performed better than price incentives and labelling.
We study how stochasticity in the evolution of agricultural productivity interacts with economic and population growth, and the associated demand for food. We use a two-sector Schumpeterian model of growth, in which a manufacturing sector produces the traditional consumption good and an agricultural sector produces food to sustain contemporary population. In addition, sectors differ in that agriculture also demands land as an input, itself treated as a scarce form of capital. In our model both population and sectoral technological progress are endogenously determined, and key technological parameters of the model are structurally estimated using 1960-2010 data on world GDP, population, cropland and technological progress. Introducing random shocks to the evolution of total factor productivity in agriculture, we show that uncertainty optimally requires more land to be converted into agricultural use as a hedge against production shortages, and that it significantly affects both consumption and population trajectories.
An interaction can be observed between a company’s level of exports and its domestic sales. Estimates made using data on French companies show that a 10% increase (decrease) in exports is accompanied, in the same year, by a 1% to 3% increase (decrease) in domestic sales. This strong interaction between sales in different markets can result from short-term funding constraints that make companies more sensitive to changes in their international environment. During the crisis, the sharp contraction in demand recorded in some of the euro area markets could therefore have had a negative impact on the activity of French companies in the domestic market, in particular for the most vulnerable.
We structurally estimate a two-sector Schumpeterian growth model with endogenous population and finite land reserves to study the long-run evolution of global population, technological progress and the demand for food. The estimated model closely replicates trajectories for world population, GDP, sectoral productivity growth and crop land area from 1960 to 2010. Projections from 2010 onwards show a slowdown of technological progress, and, because it is a key determinant of fertility costs, significant population growth. By 2100 global population reaches 12.4 billion and agricultural production doubles, but the land constraint does not bind because of capital investment and technological progress.
Why give aid to resource-rich autocrats? We find that the interaction between natural resources and most forms of international aid results in enhanced political instability in most autocratic countries. Interestingly, some types of government aid (notably humanitarian aid) do not have this effect, indicating that the impact of aid varies with its form. Furthermore, we find that only aid structured in the form of loans (rather than grants) is more likely to flow toward resource-rich autocracies. This combination of loans with any political instability they may induce, can create speculative rights (for the donor) in the resource-riches of the recipient country. This potential claim on resources provides one important strategic reason to give aid to resource-rich autocrats. Aid can act as a form of foreign intervention in the pursuit of regime change, and claims on resources.
The basic tenet of the present policy paper is that economic institutions are the key determinant of economic growth and development, and that policy-makers and developing country governments dealing with trade and finance must concentrate on “getting the institutions right.” In order to be implementable, policy recommendations must correct inefficiencies that the market system will not, implying that correcting market (and institutional) failures constitutes the crux of the policy options. These fall under four headings,informed by the standard list of canonical market failures. First, the widespread existence of externalities and coordination failure imply that: (i) strategic use should be made of official development assistance and blended finance; (ii) domestic resources in developing countries should be better mobilized through stronger domestic tax institutions and a more transparent international tax system; (iii) guidelines should be adopted for broadly-used private standards that affect trade; and (iv) duty-free and quota-free preferences, alongside liberal rules of origin with extended cumulation provisions, should be extended to all least developed countries. Second, standard public goods arguments imply a pressing need for: (i) development-led legal and regulatory reform; (ii) the implementation of a long overdue trade facilitation framework for services; (iii)the realignment of incentives that determine the sectoral allocation of Aid for Trade funds towards the services sector; (iv) ensuring the availability of correspondent banks in all low-income countries which are otherwise largely cut off from the trading system; and (v) contributing to the construction of a global coordination mechanism for trade and supply chain finance. Third, natural monopoly arguments at the regional level call for: (i) enhanced mechanisms for regional regulatory cooperation in general and financial services in particular; and (ii) enhanced regional aid for trade. Fourth, the existence of asymmetric information problems faced both by developing country governments and international investors suggest a pressing need to: (i) improve technical advice on international economic agreements (including public-private partnerships) available to developing country governments; and (ii)adopt model solvency schemes and debt restructuring approaches. The paper concludes with a recommendation on measuring progress on these policy options through the construction of an aggregate index of “institutional readiness.”
