Corruption and the Military in Politics: Theory and Evidence from around the World

Recent theoretical developments and case study evidence suggests a relationship between the military in politics and corruption. This study contributes to this literature by analyzing theoretically and empirically the role of the military in politics and corruption for the first time. By drawing on a cross sectional and panel data set covering a large number of countries, over the period 1984-2007, and using a variety of econometric methods substantial empirical support is found for a positive relationship between the military in politics and corruption. In sum, our results reveal that a one standard deviation increase in the military in politics leads to a 0.22 unit increase in corruption index. This relationship is shown to be robust to a variety of specification changes, different econometric techniques, different sample sizes, alternative corruption indices and the exclusion of outliers. This study suggests that the explanatory power of the military in politics is at least as important as the conventionally accepted causes of corruption, such as economic development.

Education and the local equity bias around the world

Using a panel of 38 economies, over the period 2001 to 2010, we analyse the link between different facets of education and diversification in international portfolios. We find that university education, mathematical numeracy, in addition to financial skill, play an important role in reducing home bias. After separating countries according to their level of financial development, we find that less developed economies with more university graduates, or with higher level of mathematical numeracy, have lower level of local equity bias compared to more developed countries. We also find that the beneficial effect of education is more pronounced during the most recent financial crisis, especially for economies with less developed financial markets.

The Known Unknowns of Governance.

Empirical researchers interested in how governance shapes various aspects of economic development frequently use the Worldwide Governance indicators (WGI). These variables come in the form of an estimate along with a standard error reflecting the uncertainty of this estimate. Existing empirical work simply uses the estimates as an explanatory variable and discards the information provided by the standard errors. In this paper, we argue that the appropriate practice should be to take into account the uncertainty around the WGI estimates through the use of multiple imputation. We investigate the importance of our proposed approach by revisiting in three applications the results of recently published studies. These applications cover the impact of governance on (i) capital flows; (ii) international trade; (iii) income levels around the world. We generally find that the estimated effects of governance are highly sensitive to the use of multiple imputation. We also show that model misspecification is a concern for the results of our reference studies. We conclude that the effects of governance are hard to establish once we take into account uncertainty around both the WGI estimates and the correct model specification.