Economica最新文献

Why do modern states allow parts of their territory to be governed by non-state actors? We study this question using the Frontier Crimes Regulation (FCR) in Pakistan, a British Colonial law abrogated only in 2018, which left governance to pre-colonial tribal councils in large parts of modern day Pakistan. In areas where the FCR did not apply, the British and then Pakistani state built modern political and bureaucratic institutions. Using primary legal documents, we build a dataset of when and where the FCR applied between 1901 and 2012. The territorial extent of the formal state is both cleanly demarcated by this law and varies substantially over time, permitting an empirical examination of the determinants of state control. The data reveal that the Green Revolution's potential to transform agriculture played a major role in extending the formal state. The law was repealed first from areas where agricultural productivity benefited the most from the Green Revolution. This is consistent with a model in which technological changes that shift the returns to control influence where states choose to govern.

We investigate the causal nexus between pandemic distress and anti-immigration sentiments. We exploit the disruption brought about by the Covid-19 outbreak to randomly provide survey respondents with information on the economic or health consequences of the pandemic. Overall, we find that pessimistic information about the economic outlook reinforces overall adversity to immigration and the wish to exclude immigrants from access to healthcare. This effect is less pronounced in areas with larger immigrant populations. Our theoretical model pins down two possible mechanisms explaining these results: a zero-sum game to split scarce public resources between residents and immigrants on the one hand, and on the other, fear of contagion.

We examine the spatial variation in variety of manufactured consumer goods to study how choice fades across space. We use data on 132 consumer goods and over 800 brands available from a purpose-designed survey of fixed shops and periodic market stalls in towns and villages in Ethiopia. We find that local consumer choice fades, with fewer varieties in remoter villages. On average, these villages have approximately half the number of available items compared to their nearest market town. A fall in travel time of a half-hour is associated with 4 extra goods and 9 brands. Variety also increases with inequality and market size. Furthermore, we estimate a model of heterogeneous consumers with a preference for variety and monopolistically competitive traders to disentangle the role of transport costs from the taste for variety, and to assess the consequences for prices. Our model estimates suggest that local consumer prices contain a markup of 8% above source town prices and transport costs. We demonstrate the significant costs to consumers from both low variety and high trade costs. Ignoring such costs means that poverty is underestimated in remote places. In turn, when infrastructure investments raise variety, the likely fall in poverty will be underestimated too.

UK top income shares have varied hugely over the past two centuries, ranging from more than 30% to less than 7% of pre-tax national income allocated to the top 1 percentile. We build a congruent dynamic linear regression model of the top 1% income share allowing for economic, political and social factors. Saturation estimation is used to model outliers and trend breaks, proxying underlying structural changes driving income inequality in the UK. We use the model to forecast the top 1% income share over the last 15 years, and compare to a range of forecast devices. Despite a well-specified constant parameter model conditioning on significant explanatory variables, the best performing forecasts are obtained from a random walk and a smoothed random walk. These results are explained by the presence of shifts in the income share over the forecast period, resulting in forecasts from equilibrium correction models converging to the wrong equilibrium. Our best prediction for 2026 based on the most recent data from 2021 (a 5-year ahead projection) is that the pre-tax top 1% income share will remain at the most recent realized value of 12.7%, but there is a large degree of uncertainty, with a 95% confidence band ranging from 10% to 15.7%.

This paper revisits the conventional but unproven wisdom that voters penalize governments for adopting fiscal austerity in a sample of advanced economies. We consider the composition of the austerity package and the economic manifesto of the implementing government, and find that austerity packages consisting mostly of tax hikes have a significant electoral cost, which is larger for government parties that campaigned on a free-market manifesto. Conversely, expenditure-based austerity is costlier for government parties that did not run on a small-government platform, but may be beneficial for those that did.

Previous literature has identified income, health status and social relationships as the most important predictors of subjective wellbeing (SWB). In addition, the literature has identified a non-linear relationship between age and SWB, with a dip in SWB in midlife. Explanations of the non-linear age–SWB relationship include the notion of unmet aspirations and the idea that people's emotional response to the drivers of SWB changes with age. Against this background, we use representative longitudinal data for Germany (1992–2019) with about 570,000 observations for more than 88,000 individuals aged 16–105 years to investigate if and how the association between SWB and its main predictors changes over the lifecycle. Using fixed effects estimation to control for cohort effects and unobserved personal characteristics, we find that the marginal effects of income and social relationships vary with age in a wave-like fashion, while the positive marginal effect of good health status increases monotonically and progressively with age. Our results are similar for alternative measures of SWB (life satisfaction and living in misery), and for men and women separately. The age-related changes in the importance of income and social relationships for SWB found in this paper help to explain the relationship between age and SWB found in previous literature.

This paper explains the structure of corruption networks as response to ex ante transparency, defined as visibility of authorities whose cooperation clients may need, in due course, to execute corrupt transactions. It also characterizes the optimal transparency policy given the network response, as a function of connection costs, sanctions, the corruption surplus and the detection probability (hence the anti-corruption budget and ex post transparency). Corruption chains may emerge in equilibrium if authority is expected to be shared by multiple offices, where the office with higher solo assignment probability becomes the intermediary. Otherwise, clients penetrate the bureaucracy by inducing the star network, or contend with single connection. I show that the optimal policy always assigns one office, sometimes alone, sometimes jointly with others. It is often possible to deter corruption networks through an ex ante transparent policy that parcels out authority to multiple offices with probability 1—a common feature of many US bureaucracies. Decomposing transparency into its components reveals nuances in the transparency–corruption relationship, suggesting that ex ante transparency is instrumental except in environments in which anti-corruption enforcement is extremely effective or extremely ineffective.

With one-fifth of the UK labour force employed in the public sector, public sector pay and its interaction with private sector pay is an important driver of the macroeconomy. Using new data on sector-level earnings and sector–industry-level pay settlements, this paper addresses the fundamental question of which sector leads and which follows in terms of earnings determination. We find that in the long run, public sector wages adjust to wages set in the private sector, maintaining a consistent relationship. We further find that there can be significant wage spillovers from the public sector to the private sector in the short run. These tend to be more pronounced for private sector industries that are domestically facing, characterized by low worker bargaining power, or reliant on public sector inputs. This paper's findings have important implications for macroeconomic policy that aims to balance inflationary forces and fiscal funding pressures.

We present an easy-to-apply non-parametric revealed preference method to identify observed preference heterogeneity from cross-sectional data. Building on the partitioning approach that was developed by Crawford and Pendakur (Economic Journal, 2013, 123(567), 77–95) and Cosaert (Computational Economics, 2019, 53(2), 533–54), it quantifies the contribution of observable consumer characteristics to describing the identified preference heterogeneity. We demonstrate the practical usefulness of our method through an application to newly gathered experimental data on consumer choice behaviour in two types of decision situations: the allocation of money (choosing between two products) and the allocation of time (choosing between leisure and work). We investigate whether the same consumer characteristics drive the observed variation in choice behaviour in these two settings.

We use a randomized experiment (across 200 public primary schools in Puebla, Mexico) to study the impact of providing schools with cash grants on student test scores. Treated schools received on average $��\sim �$16 USD per student each year for two years, an increase of $��\sim �$20% in public spending per child, after teacher salaries. Overall, the grants had no impact on student test scores. Lack of a treatment effect does not seem to be driven by poor implementation or a substitution away from other inputs (e.g. household expenditure).