Showing papers by "Axel Dreher published in 2006"

Does Globalization Affect Growth? : evidence from a new Index of Globalization

Abstract: The study develops an index of globalization covering its three main dimensions: economic integration, social integration, and political integration. Using panel data for 123 countries in 1970–2000 it is analysed empirically whether the overall index of globalization as well as sub-indexes constructed to measure the single dimensions affect economic growth. As the results show, globalization indeed promotes growth. The dimensions most robustly related with growth refer to actual economic flows and restrictions in developed countries. Although less robustly, information flows also promote growth whereas political integration has no effect.

Cross-Country Determinants of Life Satisfaction: Exploring Different Determinants Across Groups in Society

Abstract: This paper explores a wide range of cross-country determinants of life satisfaction exploiting a database of 90,000 observations in 70 countries. We distinguish four groups of aggregate variables as potential determinants of satisfaction: political, economic, institutional, and human development and culture. We use ordered probit to investigate the importance of these variables on individual life satisfaction and test the robustness of our results with Extreme Bounds Analysis. The results show that only a small number of factors, such as openness, business climate, postcommunism, the number of chambers in parliament, Christian majority, and infant mortality robustly influence life satisfaction across countries while the importance of many variables suggested in the previous literature is not confirmed. This remains largely true when the analysis splits national populations according to gender, income and political orientation also.

The Impact of Globalization on the Composition of Government Expenditures: Evidence from Panel Data

Abstract: According to the disciplining hypothesis, globalization restrains governments by inducing increased budgetary pressure. As a consequence, governments shift their expenditures in favour of transfers and subsidies and away from capital expenditures. This expenditure shift is potentially enhanced by citizens' preferences to be compensated for the risks of globalization ("compensation hypothesis"). Employing two different datasets and various measures of globalization, we analyze whether globalization has indeed influenced the composition of government expenditures. For a sample of 108 countries, we examine the development of four broad expenditure categories for the period 1970-2001: capital expenditures; expenditures for goods and services; interest payments; and subsidies and other current transfers. A second dataset provides a much more detailed classification: public expenditures, expenditures for defence, order, economic environment, housing, health, recreation, education, and social expenditures. However, this second data set is only available since 1990 - and only for the OECD countries. Our results show that globalization did not influence the composition of government expenditures.

The Impact of Political Leaders' Profession and Education on Reforms

Abstract: This paper analyzes whether the educational and professional background of a head of government matters for the implementation of market-liberalizing reforms. Employing panel data over the period 1970-2002, we present empirical evidence based on a novel data set covering profession and education of more than 500 political leaders from 73 countries. Our results show that entrepreneurs, professional scientists, and trained economists are significantly more reform oriented. Contrary, union executives tend to impede reforms. We also highlight interactions between profession and education with time in office and the political leaning of the ruling party.

Does US Aid Buy UN General Assembly Votes? A Disaggregated Analysis; KOF Working Papers

Abstract: Using panel data for 143 countries over the period 1973-2002, this paper empirically analyzes the influence of US aid on voting patterns in the UN General Assembly. We use disaggregated aid data to account for the fact that various forms of aid may differ in their ability to induce political support by recipients. We obtain strong evidence that US aid buys voting compliance in the Assembly. More specifically, our results suggest that general budget support and untied grants are the major aid categories by which recipients have been induced to vote in line with the United States. When replicating the analysis for other G7 donors, no comparable patterns emerge.

Corruption and the shadow economy

Abstract: This paper analyzes the influence of the shadow economy on corruption and vice versa. We hypothesize that corruption and shadow economy are substitutes in high income countries while they are complements in low income countries. The hypotheses are tested for a crosssection of 120 countries and a panel of 70 countries for the period 1994-2002. Our results show that the shadow economy reduces corruption in high income countries, but increases corruption in low income countries. We also find that stricter regulations increase both corruption and the shadow economy.

Do IMF and World Bank Influence Voting in the UN General Assembly

Abstract: Using panel data for about 100 countries over the period 1970-2002 this paper analyzes empirically the influence of the IMF and the World Bank on voting patterns in the UN General Assembly. The main hypotheses tested relate to the impact of overall foreign aid, and IMF and World Bank loans in particular. The influence of trade and foreign direct investment, democracy, dependence, and cultural as well as political proximity on voting behavior is also analyzed. Our results, based on Extreme Bounds Analysis, show that countries receiving concessional IMF loans are significantly more likely to vote with the G7 countries, while (non-concessional) money from the IBRD significantly reduces voting coincidence. Bilateral aid from G7 countries is not robustly related to voting in the General Assembly.

Corruption and the Shadow Economy: An Empirical Analysis

Abstract: This paper analyzes the influence of the shadow economy on corruption and vice versa. We hypothesize that corruption and shadow economy are substitutes in high income countries while they are complements in low income countries. The hypotheses are tested for a cross-section of 120 countries and a panel of 70 countries for the period 1994-2002. Our results show that the shadow economy reduces corruption in high income countries, but increases corruption in low income countries. We also find that stricter regulations increase both corruption and the shadow economy.

Does membership on the UN security council influence IMF decisions?: evidence from panel data

Abstract: TWe analyse the effects of the pension reform of 2011 on individuals’ retirement age, adequacy and distribution of the benefits for various categories of Italian workers. The main findings are an increase in the average retirement age, generally raising over time, coupled with a sizeable increase in average replacement rates. However, the most affected group is represented by women employees born in 1955 and retiring in the period 2012-2021, who face an average increase in retirement age of four years, while benefiting from an increase in the average replacement rate of thirteen percentage points.

Does Membership on the UN Security Council Influence IMF Decisions? Evidence from Panel Data

Abstract: We investigate whether temporary members of the UN Security Council receive favorable treatment from the IMF, using panel data for 191 countries over the period 1951 to 2004. Our results indicate a robust positive relationship between temporary UN Security Council membership and participation in IMF programs, even after accounting for economic and political factors, as well as regional and country effects, and duration dependence. There is also evidence that UNSC membership reduces the number of conditions included in IMF programs. The size of the loan, however, is not affected by UNSC membership.

Is there a causal link between currency and debt crises

Abstract: Though currency and debt crises quite often occur simultaneously, the links between these two types of crises are not well understood. We review how currency and debt crises could be related due to common causes, contagion effects from one crisis to the other, and complementary budget financing aspects. In an empirical analysis based on a panel of 80 countries over the period 1975–2000, we first investigate the determinants of each crisis separately. Then we estimate links between both crises employing instrumental variables techniques. We find that, while there is a negative lagged influence of currency crises on debt crises, currency crises significantly increase the risk of contemporaneous debt crises and vice versa. Copyright © 2006 John Wiley & Sons, Ltd.

Sectoral aid priorities: Are donors really doing their best to achieve the millennium development goals?

Abstract: We analyze the aid portfolio of various bilateral and multilateral donors, testing whether they have prioritised aid in line with the Millennium Development Goals (MDGs). In doing so, we combine sectorally disaggregated aid data with indicators reflecting the situation of recipient countries regarding the MDGs. Our results show that donors differ not only in terms of their overall generosity and the general poverty orientation of aid, but also in the extent to which their sectoral aid allocation is conducive to achieving more specific MDGs such as all children completing a full course of primary schooling, reducing child and maternal mortality as well as reversing the spread of HIV/AIDS. Overall, while some MDGs, e.g., the fight against HIV/AIDS, have shaped the allocation of aid, the sector-specific results reveal that with respect to other MDGs, most notably primary education, there is a considerable gap between donor rhetoric and actual aid allocation. These results invite the conclusion that the current focus on substantially increasing aid in order to turn the tide in trying to achieve the MDGs misses one important point: Unless the targeting of aid is improved, higher aid will not have the desired effects. Our results suggest that at least part of the blame for missing the MDGs falls on insufficient targeting of aid.

Does US aid buy UN general assembly votes

Abstract: Using panel data for 143 countries over the period 1973-2002, this paper empirically analyzes the influence of US aid on voting patterns in the UN General Assembly. We use disaggregated aid data to account for the fact that various forms of aid may differ in their ability to induce political support by recipients. We obtain strong evidence that US aid buys voting compliance in the Assembly. More specifically, our results suggest that general budget support and untied grants are the major aid categories by which recipients have been induced to vote in line with the United States. When replicating the analysis for other G7 donors, no comparable patterns emerge.

The Impact of Political Leaders' Profession and Education on Reforms

Abstract: This paper analyzes whether the educational and professional background of a head of government matters for the implementation of market-liberalizing reforms. Employing panel data over the period 1970-2002, we present empirical evidence based on a novel data set covering profession and education of more than 500 political leaders from 73 countries. Our results show that entrepreneurs, professional scientists, and trained economists are significantly more reform oriented. Contrary, union executives tend to impede reforms. We also highlight interactions between profession and education with time in office and the political leaning of the ruling party.

The Impact of Globalization on the Composition of Government Expenditures: Evidence from Panel Data; KOF Working Papers

Abstract: According to the disciplining hypothesis, globalization restrains governments by inducing increased budgetary pressure. As a consequence, governments may attempt to curtail the welfare state, which is often seen as a drag on international competitiveness, by reducing especially their expenditures on transfers and subsidies. This globalization-induced welfare state retrenchment is potentially mitigated by citizens’ preferences to be compensated for the risks of globalization (“compensation hypothesis”). Employing two different datasets and various measures of globalization, we analyze whether globalization has indeed influenced the composition of government expenditures. For a sample of 60 countries, we examine the development of four broad expenditure categories for the period 1971–2001: capital expenditures, expenditures for goods and services, interest payments, and subsidies and other current transfers. A second dataset provides a much more detailed classification: public expenditures, expenditures for defence, order, economic affairs, environment, housing, health, recreation, education, and social expenditures. However, this second data set is only available since 1990—and only for OECD countries. Our results show that globalization did not influence the composition of government expenditures in a notable way.

Power to the People? The Impact of Decentralization on Governance

Abstract: The paper analyzes the impact of decentralization on governance employing four indicators of governance and five measures of decentralization. Depending on data availability, crosssections for a maximum of 129 countries are estimated. Results for a panel of about 70 countries over the period 1984-2001 are also presented. The results show that decentralization – measured as the share of sub-national employment, revenues or, respectively, expenditures – improves governance. This is particularly true for low income countries but – depending on the indicator employed – to some extent for high income countries also. However, the number of sub-national government tiers exerts a negative impact on some dimensions of governance.

Power to the People? The Impact of Decentralization on Governance

Abstract: The paper analyzes the impact of decentralization on governance employing four indicators of governance and five measures of decentralization. Depending on data availability, crosssections for a maximum of 129 countries are estimated. Results for a panel of about 70 countries over the period 1984-2001 are also presented. The results show that decentralization - measured as the share of sub-national employment, revenues or, respectively, expenditures - improves governance. This is particularly true for low income countries but - depending on the indicator employed - to some extent for high income countries also. However, the number of sub-national government tiers exerts a negative impact on some dimensions of governance.

The Impact of Globalization on the Composition of Government Expenditures: Evidence from Panel Data: evidence from panel data

Abstract: According to the disciplining hypothesis, globalization restrains governments by inducing increased budgetary pressure. As a consequence, governments shift their expenditures in favour of transfers and subsidies and away from capital expenditures. This expenditure shift is potentially enhanced by citizens’ preferences to be compensated for the risks of globalization (“compensation hypothesis”). Employing two different datasets and various measures of globalization, we analyze whether globalization has indeed influenced the composition of government expenditures. For a sample of 108 countries, we examine the development of four broad expenditure categories for the period 1970-2001: capital expenditures; expenditures for goods and services; interest payments; and subsidies and other current transfers. A second dataset provides a much more detailed classification: public expenditures, expenditures for defence, order, economic environment, housing, health, recreation, education, and social expenditures. However, this second data set is only available since 1990 – and only for the OECD countries. Our results show that globalization did not influence the composition of government expenditures.

Does Aid for Education Educate Children? Evidence from Panel Data

Abstract: This paper empirically analyzes the impact of aid on education for about 100 countries over the period 1970-2005. We estimate a system of equations to test whether and to what extent the impact of sector-specific aid on educational attainment depends on (i) the extent to which aid adds to overall educational expenditure of the recipient government, (ii) the strength of the link between government expenditure and education, (iii) the quality of institutions in the recipient country, and (iv) whether aid encourages institutional reforms. According to our results, aid significantly increases primary school enrolment. This result is robust to the method of estimation, employing instruments to control for the endogeneity of aid, and the measure of institutional quality employed. The degree of institutional quality, however, has no robust impact on this relationship.

Does the shadow economy raise observed aggregate efficiency? A cross-country comparison

Abstract: We analyze how adding the shadow economy to official output figures affects technical efficiency. We find that this only slightly affects the ranking of efficiency scores, but increases average efficiency. Our results are robust to the functional form of the production technology and the adjustment of labor to account for years of schooling.

When is a central bank governor fired?: Evidence based on a new data set

Abstract: This paper uses a new data set on the term in office of central bank governors in 137 countries covering the period 1970-2004 to estimate a model for the chance that a central bank governor is replaced. We formulate a number of hypotheses based on the literature on the determinants of central bank independence that are tested using conditional logit models and the Extreme Bounds Analysis. We conclude that, apart from the share of the current term in office elapsed, high levels of political and regime instability, the occurrence of elections, and high inflation increase the probability of a turnover.

Does US Aid Buy UN General Assembly Votes? A Disaggregated Analysis

Abstract: Using panel data for 143 countries over the period 1973-2002, this paper empirically analyzes the influence of US aid on voting patterns in the UN General Assembly. We use disaggregated aid data to account for the fact that various forms of aid may differ in their ability to induce political support by recipients. We obtain strong evidence that US aid buys voting compliance in the Assembly. More specifically, our results suggest that general budget support and untied grants are the major aid categories by which recipients have been induced to vote in line with the United States. When replicating the analysis for other G7 donors, no comparable patterns emerge.

Do IMF and World Bank Influence Voting in the Un General Assembly

Abstract: Using panel data for 188 countries over the period 1970-2002 this paper empirically analyzes the influence of the IMF and the World Bank on voting patterns in the UN General Assembly. Countries receiving adjustment programs and larger non-concessional loans from the World Bank vote more frequently in line with the average G7 country. The same is true for countries obtaining non-concessional IMF programs. Regarding voting coincidence with the US, World Bank (concessional and non-concessional) loans have a significant impact, while the IMF has not. These results are robust to the inclusion of control variables and method of estimation.

Has Globalisation Increased Inequality

Abstract: There has been no shortage of theories which purport to explain why globalisation may have, adverse, insignificant or even beneficial effects on income and earnings inequality. Surprisingly, the empirical realities remain an almost complete mystery. In this paper we use data on industrial wage inequality, household income inequality as well as measures of the economic, social and political dimensions of globalisation to examine this controversial issue. We find that the economic dimension of globalisation, and - less robustly - political integration, have exacerbated wage inequality in developed countries. In contrast, the impact of globalisation on both income and earnings inequality in less-developed countries has been negligible.

Sectoral Aid Priorities: Are Donors Really Doing Their Best to Achieve the Millennium Development Goals?

Abstract: We analyze the aid portfolio of various bilateral and multilateral donors, testing whether they have prioritised aid in line with the Millennium Development Goals (MDGs). In doing so, we combine sectorally disaggregated aid data with indicators reflecting the situation of recipient countries regarding the MDGs. Our results show that donors differ not only in terms of their overall generosity and the general poverty orientation of aid, but also in the extent to which their sectoral aid allocation is conducive to achieving more specific MDGs such as all children completing a full course of primary schooling, reducing child and maternal mortality as well as reversing the spread of HIV/AIDS. Overall, while some MDGs, e.g., the fight against HIV/AIDS, have shaped the allocation of aid, the sector-specific results reveal that with respect to other MDGs, most notably primary education, there is a considerable gap between donor rhetoric and actual aid allocation. These results invite the conclusion that the current focus on substantially increasing aid in order to turn the tide in trying to achieve the MDGs misses one important point: Unless the targeting of aid is improved, higher aid will not have the desired effects. Our results suggest that at least part of the blame for missing the MDGs falls on insufficient targeting of aid.

Student Flows and Migration: An Empirical Analysis; KOF Working Papers

Abstract: Using panel data for 78 countries of origin we examine the impact of student flows to the United States on subsequent migration there over the period 1971-2001. What we find is that the stock of foreign students is an important predictor of subsequent migration. This holds true whether or not the lagged endogenous variable is included. The relationship is robust to the inclusion of time and country dummies, and remains when we account for outliers. The basic results also hold for a cross section of 36 countries of origin and 9 host countries. Our results have important policy implications which we discuss in the last section.