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Axel Dreher and Jan-Egbert Sturm (coauthored with James Vreeland)

Global horse trading and its consequences

We present the results of three complementary empirical investigations. First, we investigate whether temporary members of the United Nations Security Council receive favorable treatment from the International Monetary Fund and the World Bank using panel data for 197 countries over the period from 1951 to 2004. Our results indicate a robust positive relationship between temporary Security Council membership and participation in Fund and Bank programs, even after accounting for economic, political, and country-specific factors. Second, we examine whether politically motivated projects of the World Bank have lower quality than other World Bank projects. We find that this is not necessarily the case. But when politically important countries are economically vulnerable, their projects are indeed less likely to succeed. We suspect that this is because such programs are granted for political reasons and include less stringent conditionality than is warranted given their economic circumstances. With recipient countries facing immediate economic imperatives and donor countries facing short-run political objectives, the ultimate success of a World Bank project is undermined. Our conclusions are supported by the analysis of a panel dataset of 152 countries with 8,405 projects approved over the period from 1956 to 2006.

Lars P. Feld (coauthored with Thushyanthan Baskaran and Jan Schnellenbach)

On the Interaction between Fiscal Federalism and Regional Structural Change

The impact of fiscal federalism on economic development is intensively debated in developed and less developed countries alike, but the scientific knowledge as to whether and how the fiscal relationships within a country affect economic growth is still insufficient. In this paper, we argue that fiscal federalism could affect economic growth by its impact on structural change. The direction of this relationship can however not be unambiguously predicted by theoretical analyses alone as it depends on the particular characteristics of intergovernmental fiscal relationships. Therefore, we test on the impact of fiscal federalism on structural change in comparative case study of three cases: the Saarland as a region in the German cooperative federalism, Lorraine in the unitary state of France, and Luxembourg as being fully confronted with international fiscal competition. After highlighting the convergence of economic structures of the broader Saar-Lor-Lux region from the beginning of the 19th century (Industrial Revolution) to the Second World War, we show to what extent the three regions experienced a divergent development after the Second World War. Moreover, we examine the fiscal constitutions of these three regions and their contribution to the regions’ economic development in a time series analysis since the Saarland joined Germany after the Second World War.

Martin Paldam (coauthored with Erich Gundlach)

The agricultural and the democratic transitions: Causality and the Roundup model

Long-run development (in income) causes a large fall in the share of agriculture commonly known as the agricultural transition. We confirm that this conventional wisdom is strongly supported by the data. Long-run development (in income) also causes a large increase in democracy known as the democratic transition. Elsewhere we have shown that it is almost as strong as the agricultural transition. Recently, a method has been presented to weed out spuriousness. It makes the democratic transition go away by turning income insignificant, when it is supplemented by a set of formal controls. We show that the same method makes the agricultural transition go away as well. Hence, it seems to be a method that kills far too much, as suggested by the subtitle. This suggestion leads to a discussion of the very meaning of long-run causality.

Nicolaus Tideman

A Geoliberal Theory of Global Justice

A theory of global economic justice ought to be based on the axioms that people have rights to themselves and that all people have equal rights to natural opportunities. The first axiom leads to the principles that people have the right to emigrate and the right to cooperate with whom they choose for whatever purposes are mutually agreed. This includes the right to form communities with whatever laws they choose, provided that they permit emigration and do not intrude on the rights of non-citizens. Those who disagree are free to form their own communities. The second principle implies that every nation has an obligation to estimate the value of all of the scarce natural opportunities that it appropriates for itself, and, if they appropriate more than others are also able to appropriate, to compensate the nations with below-average shares. “Natural opportunities” includes land, minerals, wild animals, water, the frequency spectrum, geosynchronous orbits, pollution practices, and parenting opportunities. It does not include the talents of the nation’s citizens.