Essays on Development Policy and the Political Economy of Conflict

Electoral Rules and Leader Selection: Experimental Evidence from Ugandan Community Groups. Despite a large body of work documenting how electoral systems affect policy outcomes, less is known about their impact on leader selection. We study this by comparing two types of participatory decision making in Ugandan community groups: (i) vote by secret ballot and (ii) open discussion with consensus. Random assignment allows us to estimate the causal impact of the rules on leader types and social service delivery. Vote groups are found to elect leaders more similar to the average member while discussion group leaders are positively selected on socio-economic characteristics. Further, dropout rates are significantly higher in discussion groups, particularly for poorer members. After 3.5 years, vote groups are larger in size and their members save less and get smaller loans. We conclude that the secret ballot vote creates more inclusive groups while open discussion groups favor the already economically successful. Preparing for Genocide: Community Meetings in Rwanda. How do political elites prepare the civilian population for participation in violent conflict? We empirically investigate this question using data from the Rwandan Genocide in 1994. Every Saturday before 1994, Rwandan villagers had to meet to work on community infrastructure. The practice was highly politicized and, according to anecdotal evidence, regularly used by the political elites for spreading propaganda in the years before the genocide. This paper presents the first quantitative evidence of this abuse of the community meetings. To establish causality, we exploit cross-sectional variation in meeting intensity induced by exogenous weather fluctuations. We find that an additional rainy Saturday resulted in a five percent lower civilian participation rate in genocide violence. Selection into Borrowing: Survey Evidence from Uganda. In this paper, I study how changes to the standard credit contract affect loan demand and selection into borrowing, using a representative sample of urban micro enterprises, most with no borrowing experience. Hypothetical loan demand questions are used to test whether firm owners respond to changes in loans' contractual terms and whether take-up varies by firms' risk type and other firm owner characteristics. The results indicate that contracts with lower interest rates and less stringent collateral requirements attract less risky borrowers, suggesting that there is scope for improvement of standard financial contract terms. Credit Contract Structure and Firm Growth: Evidence from a Randomized Control Trial. We study the effects of credit contract structure on firm outcomes among small and medium sized firms. A randomized control trial was carried out to distinguish between some of the key constraints to efficient credit use connected to the firms' business environment and production function, namely (i) backloaded returns (ii) uncertain returns and (iii) indivisible fixed costs. Each firm was followed for the 1-year loan cycle. We describe the experiment and present preliminary results from the first 754 out of 2,340 firms to have completed the loan cycle. Firms offered a grace period have higher profits and higher household income than firms receiving a rebate later on as well as the control group. They also increased the number of paid employees  and reduced the number of unpaid employees, an effect also found among firms that received a cash subsidy at the beginning of the loan cycle. We discuss potential mechanisms behind these effects.

The political economy of sovereign debt

This dissertation examines international lending arrangements between a competitive foreign investor and a less-developed country. Given that the benefits and costs of borrowing are distributed unequally across society, it is of interest to examine the conditions under which borrowing occurs and how the borrowed funds are allocated. Three theoretical models are developed to consider optimal lending arrangements in the presence of sovereign risk. The models show how a society's level and distribution of wealth influences its access to loans and the terms of the loan agreements. Optimal loan contracts are established, which place either a debt ceiling or a debt floor on the amount of the loan that, will be offered. ^

The political economy of poverty alleviation strategies. The initiative for heavily indebted poor countries in Bolivia: More of the same

In the year 2000, approximately 1.1 billion people lived in extreme poverty while developed countries spent US$600 billion a year on defense. The Heavily Indebted Poor Countries (HIPC) Initiative is a recent component of a larger poverty reduction strategy supported by the International Financial Institutions, as well as many developed and developing countries. By implementing lessons of the past fifty years, this program attempts to diminish misery around the globe. As such, it provides debt relief while seeking to enable the poorest countries to simultaneously attain sustainable debt and promote human development. Interest in poverty reduction around the globe reemerged in the 1990s. This study contributes directly to this recent effort by presenting a nuanced approach that builds on the stepping-stones generated by other poverty scholars. To fulfill its goal, this investigation applies a political economy framework. Within this framework, the author conducts an actor-specific analysis. This dissertation addresses the following question: How do domestic and international actors respond to the implementation of poverty alleviation strategies? The author assumes actors desire to maximize their utility calculation and suggests these calculations are based on the player's motivations and external influences. Based on their motivations, the external influences, and the initiative's guidelines, each actor develops a set of expectations. To fulfill those expectations, stake holders utilize one or several strategies. Finally, the actors' ability to achieve their expectations determines each player's assessment of the initiative. The framework described is applied in an in-depth, actor-specific analysis of the HIPC in Bolivia. Bolivia's National Revolution represents the country's first attempt at reducing poverty. Since then, all governments have taken specific steps to combat poverty at the local and national levels. The Initiative for Heavily Indebted Poor Countries (HIPC) is one of the most recent macro strategies of this kind. The case study demonstrated that three factors (national ownership, effective sponsorship and the local context) determine the success levels of poverty reduction strategies from abroad. In addition, the investigation clearly shows that poverty reduction is not the sole motivation in the implementation of poverty alleviation strategies. All actors, however, share the dream of poverty reduction.

The political economy of inequality and growth: Essays on sovereign debt, democracy and saving

This dissertation addresses three issues in the political economy of growth literature. The first study empirically tests the hypothesis that income inequality influences the size of a country's sovereign debt for a sample of developing countries for the period 1970–1990. The argument examined is that governments tend to yield to popular pressures to engage in redistributive policies, partially financed by foreign borrowing. Facing increased risk of default, international creditors limit the credit they extend, with the result that borrowing countries invest less and grow at a slower pace. The findings do not seem to support the negative relationship between inequality and sovereign debt, as there is evidence of increases in multilateral, countercyclical flows until the mid 1980s in Latin America. The hypothesis would hold for the period 1983–1990. Debt flows and levels seem to be positively correlated with growth as expected. ^ The second study empirically investigates the hypothesis that pronounced levels of inequality lead to unconsolidated democracies. We test the existence of a nonmonotonic relationship between inequality and democracy for a sample of Latin American countries for the period 1970–2000, where democracy appears to consolidate at some intermediate level of inequality. We find that the nonmonotonic relationship holds using instrumental variables methods. Bolivia seems to be a case of unconsolidated democracy. The positive relationship between per capita income and democracy disappears once fixed effects are introduced. ^ The third study explores the nonlinear relationship between per capita income and private saving levels in Latin America. Several estimation methods are presented; however, only the estimation of a dynamic specification through a state-of-the-art general method of moments estimator yields consistent estimates with increased efficiency. Results support the hypothesis that income positively affects private saving, while system GMM reveals nonlinear effects at income levels that exceed the ones included in this sample for the period 1960–1994. We also find that growth, government dissaving, and tightening of credit constraints have a highly significant and positive effect on private saving. ^

Essays on political economy

The first chapter analizes conditional assistance programs. They generate conflicting relationships between international financial institutions (IFIs) and member countries. The experience of IFIs with conditionality in the 1990s led them to allow countries more latitude in the design of their reform programs. A reformist government does not need conditionality and it is useless if it does not want to reform. A government that faces opposition may use conditionality and the help of pro-reform lobbies as a lever to counteract anti-reform groups and succeed in implementing reforms.^ The second chapter analizes economies saddled with taxes and regulations. I consider an economy in which many taxes, subsidies, and other distortionary restrictions are in place simultaneously. If I start from an inefficient laissez-faire equilibrium because of some domestic distortion, a small trade tax or subsidy can yield a first-order welfare improvement, even if the instrument itself creates distortions of its own. This may result in "welfare paradoxes". The purpose of the chapter is to quantify the welfare effects of changes in tax rates in a small open economy. I conduct the simulation in the context of an intertemporal utility maximization framework. I apply numerical methods to the model developed by Karayalcin. I introduce changes in the tax rates and quantify both the impact on welfare, consumption and foreign assets, and the path to the new steady-state values.^ The third chapter studies the role of stock markets and adjustment costs in the international transmission of supply shocks. The analysis of the transmission of a positive supply shock that originates in one of the countries shows that on impact the shock leads to an inmediate stock market boom enjoying the technological advance, while the other country suffers from depress stock market prices as demand for its equity declines. A period of adjustment begins culminating in a steady state capital and output level that is identical to the one before the shock. The the capital stock of one country undergoes a non-monotonic adjustment. The model is tested with plausible values of the variables and the numeric results confirm the predictions of the theory.^

Essays on the political economy of trade policy and economic *development

This dissertation studies the political economy of trade policy in a developing country, namely Turkey, under different economic and political regimes. The research analyzes the effects of these different regimes on the import structure, the trade policy and the industrialization process in Turkey and derives implications for aggregate welfare. ^ In the second chapter, the effects of trade liberalization policies on import demand are examined. Using disaggregated industry-level data, import demand elasticities for various sectors have been computed, analyzed under different economic regimes, and compared with those of developed countries. The results are statistically significant and reliable, and conform to the predictions of economic theory. Estimation of these elasticities is also a necessary ingredient for the third chapter of the dissertation. ^ The third chapter examines the predictions of the state-of-the-art “Protection For Sale” model of Grossman and Helpman (1994). Employing advanced econometric methods and a unique data set, strong support is found for the fundamental predictions of the model in the context of Turkey. Specifically, the government is found to attach a much higher weight to social welfare than to political contributions. This weight is higher under the democratic regime than under the dictatorship, a result potentially of interest to all researchers in the area of political economy. ^ The fourth chapter looks at the effects of industry concentration and import price shocks on protection, promotion and the choice of policy instruments in Turkey. In this context, it examines and finds support for the predictions of some well-known models in the literature. ^

Essays On Political Economy

The first chapter analizes conditional assistance programs. They generate conflicting relationships between international financial institutions (IFIs) and member countries. The experience of IFIs with conditionality in the 1990s led them to allow countries more latitude in the design of their reform programs. A reformist government does not need conditionality and it is useless if it does not want to reform. A government that faces opposition may use conditionality and the help of pro-reform lobbies as a lever to counteract anti-reform groups and succeed in implementing reforms. The second chapter analizes economies saddled with taxes and regulations. I consider an economy in which many taxes, subsidies, and other distortionary restrictions are in place simultaneously. If I start from an inefficient laissez-faire equilibrium because of some domestic distortion, a small trade tax or subsidy can yield a first-order welfare improvement, even if the instrument itself creates distortions of its own. This may result in "welfare paradoxes". The purpose of the chapter is to quantify the welfare effects of changes in tax rates in a small open economy. I conduct the simulation in the context of an intertemporal utility maximization framework. I apply numerical methods to the model developed by Karayalcin. I introduce changes in the tax rates and quantify both the impact on welfare, consumption and foreign assets, and the path to the new steady-state values. The third chapter studies the role of stock markets and adjustment costs in the international transmission of supply shocks. The analysis of the transmission of a positive supply shock that originates in one of the countries shows that on impact the shock leads to an inmediate stock market boom enjoying the technological advance, while the other country suffers from depress stock market prices as demand for its equity declines. A period of adjustment begins culminating in a steady state capital and output level that is identical to the one before the shock. The the capital stock of one country undergoes a non-monotonic adjustment. The model is tested with plausible values of the variables and the numeric results confirm the predictions of the theory.

Essays on the political economy of the dominican reform process

This dissertation provides an analytical framework to study the political economy of policy reform in the Dominican Republic during the nineties. Based on a country study, I develop two theoretical models that replicate the mechanisms of policy approval in developing countries with weak democracies. The first model considers a pro-reform President who submits a tariff bill to an anti-reform Congress dominated by the opposition party. In between, two opposing lobbies try to get their favored policy approved. Lobbies act as Stackelberg leaders vis a vis a weak President. The behavior of the Congress is determined exogenously while the lobbies act strategically pursuing the approval of the reform bill and indirectly affecting the President's decision. I show that in such a setting external agents like the Press play an important role in the decision-making process of the political actors. The second model presents a similar framework. However, the President, who is a Stackelberg leader, is allowed only two choices, total reform or status-quo. I show how a lobby reacts to an increase in its rival's or its own size. These reactions depend on the President's level of commitment to the reform. Finally, I discuss the effect of variations in the size of the lobbies on the President's choice. The model suitably explains real events that took place in the Dominican Republic in the mid-nineties.

The Political Economy of Climate Adaptation and Environmental Health: The Case of Ethiopia

The environment affects our health, livelihoods, and the social and political institutions within which we interact. Indeed, nearly a quarter of the global disease burden is attributed to environmental factors, and many of these factors are exacerbated by global climate change. Thus, the central research question of this dissertation is: How do people cope with and adapt to uncertainty, complexity, and change of environmental and health conditions? Specifically, I ask how institutional factors, risk aversion, and behaviors affect environmental health outcomes. I further assess the role of social capital in climate adaptation, and specifically compare individual and collective adaptation. I then analyze how policy develops accounting for both adaptation to the effects of climate and mitigation of climate-changing emissions. In order to empirically test the relationships between these variables at multiple levels, I combine multiple methods, including semi-structured interviews, surveys, and field experiments, along with health and water quality data. This dissertation uses the case of Ethiopia, Africa’s second-most populous nation, which has a large rural population and is considered very vulnerable to climate change. My fieldwork included interviews and institutional data collection at the national level, and a three-year study (2012-2014) of approximately 400 households in 20 villages in the Ethiopian Rift Valley. I evaluate the theoretical relationships between households, communities, and government in the process of adaptation to environmental stresses. Through my analyses, I demonstrate that water source choice varies by individual risk aversion and institutional context, which ultimately has implications for environmental health outcomes. I show that qualitative measures of trust predict cooperation in adaptation, consistent with social capital theory, but that measures of trust are negatively related with private adaptation by the individual. Finally, I describe how Ethiopia had some unique characteristics, significantly reinforced by international actors, that led to the development of an extensive climate policy, and yet with some challenges remaining for implementation. These results suggest a potential for adaptation through the interactions among individuals, communities, and government in the search for transformative processes when confronting environmental threats and climate change.

The political economy of industrial policy in Peru and Ecuador: 1980-2010

This dissertation focuses on industrial policy in two developing countries: Peru and Ecuador. Informed by comparative historical analysis, it explains how the Import-Substitution Industrialization policies promoted during the 1970s by military administration unravelled in the following 30 years under the guidance of Washington Consensus policies. Positioning political economy in time, the research objectives were two-fold: understanding long-term policy reform patterns, including the variables that conditioned cyclical versus path-dependent dynamics of change and; secondly, investigating the direction and leverage of state institutions supporting the manufacturing sector at the dawn, peak and consolidation of neoliberal discourse in both countries. Three interconnected causal mechanisms explain the divergence of trajectories: institutional legacies, coordination among actors and economic distribution of power. Peru’s long tradition of a minimal state contrasts with the embedded character of Ecuador long tradition of legal protectionism dating back to the Liberal Revolution. Peru’s close policy coordination among stakeholders –state technocrats and business elites- differs from Ecuador’s “winners-take-all” approach for policy-making. Peru’s economic dynamism concentrated in Lima sharply departs from Ecuador’s competitive regional economic leaderships. This dissertation paid particular attention to methodology to understand the intersection between structure and agency in policy change. Tracing primary and secondary sources, as well as key pieces of legislation, became critical to understand key turning points and long-term patterns of change. Open-ended interviews (N=58) with two stakeholder groups (business elites and bureaucrats) compounded the effort to knit motives, discourses, and interests behind this long transition. In order to understand this amount of data, this research build an index of policy intervention as a methodological contribution to assess long patterns of policy change. These findings contribute to the current literature on State-market relations and varieties of capitalism, institutional change, and policy reform.

Land, Power and Technology : Essays on Political Economy and Historical Development

Land Ownership and Development: Evidence from Postwar Japan This paper analyzes the effect of land ownership on technology adoption and structural transformation. A large-scale land reform in postwar Japan enforced a large number of tenant farmers who were cultivating land to become owners of this land. I find that the municipalities which had many owner farmers after the land reform tended to experience a quick entry of new agricultural machines which became available after the reform. The adoption of the machines reduced the dependence on family labor, and led to a reallocation of labor from agriculture to industries and service sectors in urban centers when these sectors were growing. I also analyze the aggregate impact of labor reallocation on economic growth by using a simple growth model and micro data. I find that it increased GDP by about 12 percent of the GDP in 1974 during 1955-74. I also find a large and positive effect on agricultural productivity. Loyalty and Treason: Theory and Evidence from Japan's Land Reform A historically large-scale land reform in Japan after World War II enforced by the occupation forces redistributed a large area of farmlands to tenant farmers. The reform demolished hierarchical structures by weakening landlords' power in villages and towns. This paper investigates how the change in the social and economic structure of small communities affects electoral outcomes in the presence of clientelism. I find that there was a considerable decrease in the vote share of conservative parties in highly affected areas after the reform. I find the supporting evidence that the effect was driven by the fact that the tenant farmers who had obtained land exited from the long-term tenancy contract and became independent landowners. The effect was relatively persistent. Finally, I also find the surprising result that there was a decrease, rather than an increase, in turnout in these areas after the reform.  Geography and State Fragmentation We examine how geography affects the location of borders between sovereign states in Europe and surrounding areas from 1500 until today at the grid-cell level. This is motivated by an observation that the richest places in this region also have the highest historical border presence, suggesting a hitherto unexplored link between geography and modern development, working through state fragmentation. The raw correlations show that borders tend to be located on mountains, by rivers, closer to coasts, and in areas suitable for rainfed, but not irrigated, agriculture. Many of these patterns also hold with rigorous spatial controls. For example, cells with more rivers and more rugged terrain than their neighboring cells have higher border densities. However, the fragmenting effects of suitability for rainfed agriculture are reversed with such neighbor controls. Moreover, we find that borders are less likely to survive over time when they separate large states from small, but this size-difference effect is mitigated by, e.g., rugged terrain.

Strategic positioning of Huawei on the international political stage

Huawei is a giant Chinese telecommunications company which has become the focus of contract exclusion and finger pointing by certain western governments. The argument used by the US and Australia has been that of “national security”. This paper explores the causes and reasons for these actions and to ascertain what key strategic approaches and positioning lie behind the high level political tension. The controversy which this exclusion has provided and the causes behind it are the focal point of this paper. Whether it be due to Cold War legacies or business competition, the exclusions do not sit well in this globalised economy.

Critical Systems Theory: A Political Economy of Language, Thought, and Technology

An emergent form of political economy, facilitated by information and communication technologies (ICTs), is widely propagated as the apotheosis of unmitigated social, economic, and technological progress. Meanwhile, throughout the world, social degradation and economic inequality are increasing logarithmically. Valued categories of thought are, axiomatically, the basic commodities of the “knowledge economy”. Language is its means of exchange. This paper proposes a sociolinguistic method with which to critically engage the hyperbole of the “Information Age”. The method is grounded in a systemic social theory that synthesises aspects of autopoiesis and Marxist political economy. A trade policy statement is analysed to exemplify the sociolinguistically created aberrations that are today most often construed as social and political determinants.

Hypercapitalism:Political economy, electric identity, and authorial alienation

Hypercapitalism, with its "knowledge economy", is the form of capitalism under which thought itself is produced, commodified, and exchanged within the globally integrated system of communication technologies. As such, hypercapitalism may be seen as not so much a revolution, but rather an evolution: the progressively thorough, inexorable totalisation of social relations by Capital. The study on which this paper is based synthesises the sociological perspectives of Marx (1970, 1844/1975, 1846/1972, 1976, 1978, 1981) and Adorno (1951/1974, 1991; Horkheimer & Adorno, 1944/1998), and the Critical Discourse perspectives of Fairclough (1989, 1992) and Lemke (1995) to argue that alienated thought and language are the fundamental, irreducible commodity-forms of Cybersociety’s knowledge economy.