Gifts of Mars: Warfare and Europe's early rise to riches

Today, per capita income differences around the globe are large ? varying by as much as a factor of 35 across countries (Hall and Jones 1999). These differentials mostly reflect the "Great Divergence" (Sam Huntingon) ? the fact that Western Europe and former European colonies grew rapidly after 1800, while other countries grew much later or stagnated. What is less well-known is that a "First Divergence" preceded the Great Divergence: Western Europe surged ahead of the rest of the world long before technological growth became rapid. Europe in 1500 was already twice as rich on a per capita basis as Africa, and one-third richer than most of Asia (Maddison 2007). In this essay, we explain how Europe's tumultuous politics and deadly penchant for warfare translated into a sustained advantage in per capita incomes.

Leverage and beliefs: Personal experience and risk taking in margin lending

What determines risk-bearing capacity and the amount of leverage in financial markets? Thispaper uses unique micro-data on collateralized lending contracts during a period of financialdistress to address this question. An investor syndicate speculating in English stocks wentbankrupt in 1772. Using hand-collected information from Dutch notarial archives, we examinechanges in lenders' behavior following exposure to potential (but not actual) losses. Before thedistress episode, financiers that lent to the ill-fated syndicate were indistinguishable from therest. Afterwards, they behaved differently: they lent with much higher haircuts. Only lendersexposed to the failed syndicate altered their behavior. The differential change is remarkable sincethe distress was public knowledge, and because none of the lenders suffered actual losses ? allfinanciers were repaid in full. Interest rates were also unaffected; the market balanced solelythrough changes in collateral requirements. Our findings are consistent with a heterogeneousbeliefs-interpretation of leverage. They also suggest that individual experience can modify thelevel of leverage in a market quickly.

From breaking the rule to making the rules : the adoption, entrenchment and diffusion of gender quotas in France

Once a country allergic to any type of preferential treatment or quota measure for women, France has become a country that applies gender quotas to regulate women's presence and representation in politics, the business sector, public bodies, public administration, and even some civil society organizations. While research has concentrated on the adoption of electoral gender quotas in many countries and their international diffusion, few studies focus on explaining the successful diffusion of gender quotas from politics to other domains in the same country. This paper proposes to fill this gap by studying the particularly puzzling case of a country that at one point strongly opposed the adoption of gender quotas in politics, but, in less than a decade, transformed into one of the few countries applying gender quotas across several policy domains. This paper argues that the legal entrenchment of the parity principle, the institutionalization of parity in several successive women's policy agencies, and key players in these newly created agencies are mainly responsible for this unexpected development. The diffusion of gender quotas in France thus offers an illuminating example of under which conditions women's policy agencies can act autonomously to diffuse and impose a new tool for gender equality

The purpose of consumer co-operation: implications for the management and governance of co-operatives

Extant research on consumer co-operation has acknowledged that the corporate purpose of consumer co-operatives deviates significantly from the purpose of investor-owned firms (IOFs – the dominant form in market economies and in theory development in the field of business economics) and also suggested that the management of consumer co-operatives differs from the management of IOFs. Despite this, there is a scarcity of research focusing on the management of consumer co-operatives in general and the ways this different purpose manifests in their management in particular. In other words, research on consumer cooperatives has only started to discover the importance of identifying the premises of these organizations and generating management and organization theories that take them into account. The overall objective of this study is to map out some of the implications that the purpose of consumer co-operation has for the management and governance of consumer co-operatives. To put it more precisely, by combining interview data gathered from Finnish consumer cooperatives (S Group, OP Bank Group and POP Bank) and extant literature, this study aims to generate or elaborate on definitions and outlines of the features that co-operative purpose poses for the strategic management, governance and managerial competence needed for consumer co-operatives. The study consists of two parts. The first part introduces the research topic, methods and publications, as well as discusses the overall outcomes. The second part consists of four publications that address the research questions from different viewpoints. The analyses of this study indicate that due to the purpose of consumer co-operation, the roles of locality and regionality become emphasized in their management. While locality and regionality are potential sources of competitive advantage for consumer co-operatives, geographic boundness sets significant boundary conditions for the strategic management of these organizations. Further, the purpose of consumer co-operation may pose several challenges to governance and set specific competence demands for the managers of these organizations. Associating the observations from various streams of research on management and governance with the purpose of consumer co-operation and examining these issues further, the thesis contributes to elaboration of theory in the field. While the thesis is by no means comprehensive (but instead reflects a co-operative research project in its early stages), it does shed light on some key ideas of management and governance and offers leads to theory and, thereby, will prove useful to elaborators, disseminators and appliers of knowledge on co-operation.

Profits and votes: Entrepreneurs and the government in Brazilian housing policy

ABSTRACTAfter more than twenty years of low housing construction output, the housing policy recovered its momentum in the country with the ascent of the Partido dos Trabalhadores (Workers' Party, PT) to the seat of the federal government. This article demonstrates - through the analysis of documents, interviews and research conducted with businessmen - that the impetus of such a state policy is a part of the PT electoral strategy, which is based on economic growth and the expansion of social programs. The research analyses the dovetailing of interests between the Lula (the Brazilian President from 2003 to 2010) administration and the civil construction business - the latter concerned with expanding its business, and the former with increasing the supply of jobs and the level of economic activity. This process culminated in the launching of the largest social housing program to be implemented in the country. Minha Casa, Minha Vida (My House, My Life), is a project in whose planning building companies played a key role, performing feasibility studies and carrying out social housing projects.

Inflation Targeting Under Asymmetric Preferences

This paper develops and estimates a game-theoretical model of inflation targeting where the central banker's preferences are asymmetric around the targeted rate. In particular, positive deviations from the target can be weighted more, or less, severely than negative ones in the central banker's loss function. It is shown that some of the previous results derived under the assumption of symmetry are not robust to the generalization of preferences. Estimates of the central banker's preference parameters for Canada, Sweden, and the United Kingdom are statistically different from the ones implied by the commonly used quadratic loss function. Econometric results are robust to different forecasting models for the rate of unemployment but not to the use of measures of inflation broader than the one targeted.

Investment Under Demand Uncertainty: the Newsboy Problem Revisited.

In this article we study the effect of uncertainty on an entrepreneur who must choose the capacity of his business before knowing the demand for his product. The unit profit of operation is known with certainty but there is no flexibility in our one-period framework. We show how the introduction of global uncertainty reduces the investment of the risk neutral entrepreneur and, even more, that the risk averse one. We also show how marginal increases in risk reduce the optimal capacity of both the risk neutral and the risk averse entrepreneur, without any restriction on the concave utility function and with limited restrictions on the definition of a mean preserving spread. These general results are explained by the fact that the newsboy has a piecewise-linear, and concave, monetary payoff witha kink endogenously determined at the level of optimal capacity. Our results are compared with those in the two literatures on price uncertainty and demand uncertainty, and particularly, with the recent contributions of Eeckhoudt, Gollier and Schlesinger (1991, 1995).

Termes de l'échange endogènes et cycles économiques réels : une application à la Côte-d'Ivoire

À l’aide d’un modèle de cycles réels, la présente étude vise à expliquer, de façon endogène, les fluctuations des termes de l’échange en Côte-d’Ivoire. Pour ce faire, nous cherchons principalement à répondre aux deux questions suivantes : les chocs d’offre et de demande sur le marché d’exportation suffisent-ils à expliquer les variations des termes de l’échange? Et quelle est leur importance relative dans la dynamique des termes de l’échange? Les résultats montrent que les deux chocs considérés expliquent bien la volatilité des termes de l’échange. Nous avons noté que ces deux sources d’impulsions ont un impact significatif sur les fluctuations économiques en Côte-d’Ivoire.

The Inflation Bias When the Central Bank Targets, the Natural Rate of Unemployment

This paper studies the proposition that an inflation bias can arise in a setup where a central banker with asymmetric preferences targets the natural unemployment rate. Preferences are asymmetric in the sense that positive unemployment deviations from the natural rate are weighted more (or less) severely than negative deviations in the central banker's loss function. The bias is proportional to the conditional variance of unemployment. The time-series predictions of the model are evaluated using data from G7 countries. Econometric estimates support the prediction that the conditional variance of unemployment and the rate of inflation are positively related.

Methods to Estimate Dynamic Stochastic General Equilibrium Models

This paper employs the one-sector Real Business Cycle model as a testing ground for four different procedures to estimate Dynamic Stochastic General Equilibrium (DSGE) models. The procedures are: 1 ) Maximum Likelihood, with and without measurement errors and incorporating Bayesian priors, 2) Generalized Method of Moments, 3) Simulated Method of Moments, and 4) Indirect Inference. Monte Carlo analysis indicates that all procedures deliver reasonably good estimates under the null hypothesis. However, there are substantial differences in statistical and computational efficiency in the small samples currently available to estimate DSGE models. GMM and SMM appear to be more robust to misspecification than the alternative procedures. The implications of the stochastic singularity of DSGE models for each estimation method are fully discussed.

Time Reversibility of Stationary Regular Finite State Markov Chains

We propose an alternate parameterization of stationary regular finite-state Markov chains, and a decomposition of the parameter into time reversible and time irreversible parts. We demonstrate some useful properties of the decomposition, and propose an index for a certain type of time irreversibility. Two empirical examples illustrate the use of the proposed parameter, decomposition and index. One involves observed states; the other, latent states.

The Transmission of Monetary Policy in a Multi-Sector Economy

This paper constructs and estimates a sticky-price, Dynamic Stochastic General Equilibrium model with heterogenous production sectors. Sectors differ in price stickiness, capital-adjustment costs and production technology, and use output from each other as material and investment inputs following an Input-Output Matrix and Capital Flow Table that represent the U.S. economy. By relaxing the standard assumption of symmetry, this model allows different sectoral dynamics in response to monetary policy shocks. The model is estimated by Simulated Method of Moments using sectoral and aggregate U.S. time series. Results indicate 1) substantial heterogeneity in price stickiness across sectors, with quantitatively larger differences between services and goods than previously found in micro studies that focus on final goods alone, 2) a strong sensitivity to monetary policy shocks on the part of construction and durable manufacturing, and 3) similar quantitative predictions at the aggregate level by the multi-sector model and a standard model that assumes symmetry across sectors.

Why Have Aggregate Skilled Hours Become So Cyclical Since the Mid-1980's?

This paper documents and discusses a dramatic change in the cyclical behavior of aggregate hours worked by individuals with a college degree (skilled workers) since the mid-1980’s. Using the CPS outgoing rotation data set for the period 1979:1-2003:4, we find that the volatility of aggregate skilled hours relative to the volatility of GDP has nearly tripled since 1984. In contrast, the cyclical properties of unskilled hours have remained essentially unchanged. We evaluate the extent to which a simple supply/demand model for skilled and unskilled labor with capital-skill complementarity in production can help explain this stylized fact. Within this framework, we identify three effects which would lead to an increase in the relative volatility of skilled hours: (i) a reduction in the degree of capital-skill complementarity, (ii) a reduction in the absolute volatility of GDP (and unskilled hours), and (iii) an increase in the level of capital equipment relative to skilled labor. We provide empirical evidence in support of each of these effects. Our conclusion is that these three mechanisms can jointly explain about sixty percent of the observed increase in the relative volatility of skilled labor. The reduction in the degree of capital-skill complementarity contributes the most to this result.

The Exchange Rate in a Dynamic-Optimizing Current Account Model with Nominal Rigidities: a Quantitative Investigation.

This paper studies a dynamic-optimizing model of a semi-small open economy with sticky nominal prices and wages. the model exhibits exchange rate overshooting in response to money supply shocks. the predicted variability of nominal and real exchange rates is roughly consistent with that of G7 effective exchange rates during the post-Bretton Woods era.