#InstitutionsMatter #Well-Being #Development
The most recent issue of Commercio Exterior Bancomext magazine is dedicated to Institutions and Development and includes an article on Institutions and Well-Being, authored by Boris Nikolaev, Toke Aidt and myself. It is in Spanish, but Google should provide you the option to translate to English.
#InstitutionsMatter #Well-Being #Development
My paper (joint with Hugo Faria, James Gwartney and Daniel Morales Romero), "Economic Institutions and Comparative Economic Development: A Post-Colonial Perspective" has been accepted for publication in World Development.
Here are the highlights:
• Develop novel identification strategy to estimate the effect of institutions on economic development in former colonies.
• Identification accounts for both settlement conditions and colonizer identity, treating them as complements rather than substitutes.
• Use Economic Freedom of the World index as measure of broad cluster of mutually reinforcing economic institutions.
• Provide robust evidence that institutions exert a strong, positive, and potentially causal impact on log real GDP per capita.
• Geography (i.e., malaria ecology) exerts both direct and indirect effects via institutions on economic development.
Download a copy of the paper on my journal articles page.
The European Journal of Political Economy has accepted my joint paper with Boris Nikolaev, "Give me liberty and give me control: Economic freedom, control perceptions and the paradox of choice".
In the paper, we explore the relationship between individual control perceptions and the degree to which a country's institutions and policies are consistent with the principles of economic freedom. Using data from the World Values Surveys (WVS) and the Economic Freedom of the World (EFW) index, we find that people living in more economically free countries are more likely to perceive greater control over their lives. This effect is not diminishing at higher levels of economic freedom. One possible channel that explains this relationship is the perception of procedural fairness and social mobility. Decomposing the EFW index, we further find that the area of sound money is what drives the results.
The paper is published open access and available for free download here.
I have an article in the latest issue of the Cato Journal. The issue is in honor of Richard Vedder's 50+ years of public policy research. My article explores the relationship between economic freedom and economic performance across the U.S. states and Canadian provinces over the period 1980-2010, finding that economic freedom is associated with higher levels of income per capita, lower unemployment rates, and more income inequality.
The article is entitled "Subnational Economic Freedom and Performance in the United States and Canada" and is available here.
The Richmond Times-Dispatch published an OpEd that I penned discussing how the state of Virginia fared in the recently released Economic Freedom of the North America rankings.
My working paper "A Tale of Two Capitalisms:Perilous Misperceptions About Capitalism, Entrepreneurship, Government, and Inequality" was recently discussed on the popular Contra Corner blog. A version of the paper will appear as the lead chapter in the forthcoming book Economic Behavior, Entrepreneurship and Economic Freedom, which is to be published by Edward Elgar.
Richard Vedder and I published our paper "A Dynamic Analysis of Economic Freedom and Income Inequality in the 50 U.S. States: Empirical Evidence of a Parabolic Relationship" in a 2013 issue of the Journal of Regional Analysis & Policy. In the paper, we find that economic freedom across U.S. states is associated with less income inequality, but that there may exist a Kuznets freedom-inequality curve such that inequality increases with economic freedom up to a certain level of freedom, but additional increases in economic freedom beyond this level are associated with less inequality. This paper has been cited numerous times by policy organizations and the media, including mentions by The National Center for Policy Analysis, The Freeman, Towhhall, the Hawaii Free Press and Reason
For interested readers, here is a link to my Ph.D. dissertation "Essays on Institutions, Economic Development, and Inequality."
China is set to announce reforms of its legal system next week that are intended to reduce instances of cronyism in legal disputes. Legal disputes over contracts are often decided in local courts based on how much influence a given party of the suit has with local government officials. In other words, the legal system is an extension of the one-party political system.
Such cronyism skews the investment decisions of entrepreneurs in several ways. First, it creates significant uncertainty that contracts will be legally enforced such that entrepreneurs are less likely to make long-term investments, reducing the growth potential of the economy. Second, it incentivizes entrepreneurs to invest resources unproductively into gaining political favoritism as opposed to productively in the development of new products or processes that make their firm more competitive. Economists refer to the phenomenon of (mis)allocating resources towards gaining a political advantage as rent-seeking, which also reduces the growth prospects of an economy.
Reforms that move China towards a more equitable rule of law would give its economy a big boost in the long-run, but it remains to be seen whether the planned changes will have any teeth without instituting an independent judiciary that would separate legal decision making from the one-party rule in China. After all, such reforms will have distributional effects that harm the economic livelihoods of corrupt officials and their cronies
Assistant Professor of Economics at Patrick Henry College.