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Journal ArticleDOI

On the looting of nations

TL;DR: The authors developed a dynamic discrete choice model of an unchecked ruler making decisions regarding the development of a resource rich country, and showed that unstructured lending from international credit markets can create incentives to loot the country; and an enhanced likelihood of looting causes greater political instability, and diminishes growth.
Abstract: We develop a dynamic discrete choice model of an unchecked ruler making decisions regarding the development of a resource rich country. Resources serve as collateral and facilitate the acquisition of loans. The ruler chooses either to stay in power while facing the risk of being ousted, or loot the country’s riches by liquefying the resources through lending. We show that unstructured lending from international credit markets can create incentives to loot the country; and an enhanced likelihood of looting causes greater political instability, and diminishes growth. Using a treatment effects model, we find evidence that supports our predictions.

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Citations
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01 Jan 1906

578 citations

Journal ArticleDOI
TL;DR: The authors evaluated the impact of major natural resource discoveries since 1950 on GDP per capita using panel fixed-effects estimation and resource discoveries in countries that were not previously resource-rich as a plausibly exogenous source of variation.

212 citations


Cites background from "On the looting of nations"

  • ...Another form treats institutions as exogenous to resource wealth, and the interaction between resources and institutions explains the divergent outcomes of resource-rich countries (Robinson et al 2006, Mehlum et al 2006, Sarr et al 2011)....

    [...]

Journal ArticleDOI
TL;DR: This article examined the impact of military expenditure on economic growth on a large balanced panel, using an exogenous growth model and dynamic panel data methods for 106 countries over the period 1988-2010.
Abstract: This paper examines the impact of military expenditure on economic growth on a large balanced panel, using an exogenous growth model and dynamic panel data methods for 106 countries over the period 1988–2010 A major focus of the paper is to consider the possibility group heterogeneity and non-linearity Having estimated the model for all of the countries in the panel and finding that military burden has a negative effect on growth in the short and long run, the panel is broken down into various groupings based upon a range of potentially relevant factors, and the robustness of the results is evaluated The factors considered are different levels of income, conflict experience, natural resources abundance, openness and aid The estimates for the different groups are remarkably consistent with those for the whole panel, providing strong support for the argument that military spending has adverse effects on growth There are, however, some intriguing results that suggest that for certain types of countries

115 citations

01 Mar 2008
TL;DR: In this paper, the authors proposed a method to solve the problem of the lack of resources in the South Korean market, by using the concept of "social media" and "social networks".
Abstract: 본 논문은 자원부국들의 천연자원 수출이 각기 다른 경제적 영향을 보이는 이유에 대해 연구하였다. 가령 라틴아메리카의 경우 다른 자원부국들과는 달리 저조한 경제성장을 보였다. 이에 대해 선행연구에서는 천연자원의 풍요가 오히려 경제성장에 부정적인 영향을 준다고 논증한 바 있다. 그러나 본 연구에서는 1인당 국민소득이 어느 수준 이상일 경우 천연자원 수출과 경제성장 간의 역의 상관관계가 존재하지 않음을 보이고 있다. 분석에 따르면, 1인당 국민소득이 낮은 라틴아메리카 국가들의 경우 풍부한 천연자원이 경제성장에 부정적인 영향을 미치는 반면, 1인당 국민소득이 높은 선진국의 경우 이러한 음의 효과가 나타나지 않았다. 이같이 천연자원 수출이 자원부국들 간 서로 다른 영향을 보인 이유는, 정부의 효율성, 법치, 부패통제 등 ‘제도의 질’이 낮은 라틴아메리카의 경우 천연자원 수출로 얻은 자원을 비효율적으로 활용하여 인적·물적 자원을 축적하지 못했으며, 이로 인해 궁극적으로 저조한 경제성장을 이루게 되었다는 데 있다.

96 citations

References
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Journal ArticleDOI
TL;DR: In this paper, a simple game-theoretic model is presented to highlight the choice of the government between raising its defence expenditures or giving away some "gifts" to his opponents, as a means to defend his position in power.
Abstract: This paper analyses a simple game-theoretic model to highlight the choice of the government between raising its defence expenditures or giving away some “gifts” to his opponents, as a means to defend his position in power. If the government is a Cournot-Nash player, then there is no gift in equilibrium, and any increase in the budget will lead to more inefficient defence expenditures. However, if the government is a Stackelberg-leader, then he will use the “gift” as a tool in his policy for staying in power.

147 citations


"On the looting of nations" refers background in this paper

  • ...This dilemma has also been analyzed by Azam (1995)....

    [...]

  • ...vstay(k,d) = max c,k′,d′∈Γ(k,d) ( 1− exp(−λk′) )[ c1−σ 1−σ +βEε ′V (k′,d′) ] (5)...

    [...]

Journal ArticleDOI
TL;DR: In particular, the possibility of simultaneous innovation changes the patenting decision: firms tap patents for a defensive purpose, since the choice is no longer between patenting or resorting to trade secrecy, but between patents or letting competitors patent as mentioned in this paper.
Abstract: Multiple innovators can and do come up with the same invention independently. A famous case is the telephone: two hours after Alexander Graham Bell filed a patent application for it, another application for the same invention arrived at the patent office. Many scholars, such as Ilkka Rahnasto (2003) and Hal R. Varian et al. (2004), argue that since Bell’s time, simultaneous innovation has become increasingly common. We feel, and our discussions with industry practitioners confirm, that the simultaneous model of innovation characterizes especially network industries such as consumer electronics, the Internet, software, telecommunications, and payment systems, where standardization limits the possible paths for future technologies and so firms concentrate their R&D activities on the same fields. We suggest that simultaneous or independent invention has major implications for intellectual property (IP) policy. In particular, the possibility of simultaneous innovation changes the patenting decision: firms tap patents for a defensive purpose, since the choice is no longer between patenting or resorting to trade secrecy, but between patenting or letting competitors patent. By exploiting the vulnerability of innovative firms to rival innovation, it is possible to design a welfareimproving patent system that induces innovators to patent rather than keep their innovations secret. Taking the simultaneous nature of innovation seriously also changes the way one should think about the relationship between IP and competition policies.

100 citations

01 Jul 2006
TL;DR: In this paper, the authors present a model where natural-resource abundance generates power struggles, thereby increasing the effective discount rate of the governing group, as a result, the elite makes fewer investments in the long-run development of the country.
Abstract: Empirical evidence suggests that the natural-resource curse operates through the behavior of the political elite, yet there are few models that convincingly illustrate the mechanism at work. I present a model where natural-resource abundance generates power struggles, thereby increasing the effective discount rate of the governing group. As a result, the elite makes fewer investments in the long-run development of the country.

99 citations


"On the looting of nations" refers background in this paper

  • ...Also, other theories suggest that resources generate civil conflict as interest groups compete to secure rents (Collier and Hoeffler 2004; Caselli 2006 )....

    [...]

ReportDOI
TL;DR: In this article, the role of domestic political incentives in the accumulation of large external debts by developing countries during 1972-81 was studied theoretically and empirically, and the evidence indicates a positive effect of political instability on the demand for sovereign loans, as predicted by the theory.
Abstract: This paper studies theoretically and empirically the role of domestic political incentives in the accumulation of large external debts by developing countries during 1972-81. The theoretical model characterizes two equilibrium regimes. In one regime the borrower is on its demand curve and changes in the loan size demand are accommodated by the lenders. In the other regime the borrower is credit rationed, and the loan size is determined by the perceived country risk. Higher political instability increases the equilibrium loan size in the first regime and decreases it in the second. Using out-of-sample of evidence, we identify the two regimes in the data. We then find that in the unconstrained regime political instability has a significant positive effect on the loan size, whereas it has no significant effect in the credit rationing regime. Hence the evidence indicates a positive effect of political instability on the demand for sovereign loans, as predicted by the theory.

99 citations

Posted Content
TL;DR: In this paper, a theoretical model for the role of entrepreneurial networks in both enterprises and the process of economic growth is presented, based on cross-sectional data from Ghana, where the authors show that entrepreneurial networks are an input into the production process and possibly source of external economies of scale and economic growth.
Abstract: In an earlier paper (Barr (1994)) I set out a theoretical model describing the role of entrepreneurial networks in both enterprises and the process of economic growth. In this paper I reformulate the model in such a way that it can be estimated using cross-sectional data from Ghana. The results of the analysis suggest that entrepreneurial networks are an input into the production process and possibly source of external economies of scale and economic growth. In the theoretical model entrepreneurial networks facilitate the process of economic growth by helping the entrepreneur capture of knowledge externalities. There is a pool of these externalities, which are productive, non-rival, free and potentially available to all firms. They may be used in conjunction with the rival factors, capital and labour, in the process of production. Where a factor of production is rival, the market determines how it is to be distributed between firms. Where a factor of production is non-rival and non- or only partially excludable, i.e. where the factor is an externality, the market cannot operate as the distributing mechanism. Faced with this market failure, economists interested in growth usually assume that the entire stock of knowledge is available to each firm. Here, as in my earlier paper, I propose that although the entire stock of knowledge is potentially available to each firm, the amount that is actually available is significantly less. In the theoretical model the extent to which an entrepreneur can access or harness the overall stock of knowledge for use in her firm’s production process is determined by the density, size and functionality of the network that connects all the entrepreneurs in the system. In the context of empirical work we must allow for asymmetry in the network, so the position of the agent within that network is also important. On a more general level the paper is one of few formal tests of the hypothesis that the structure of society is important in determining economic outcomes. Several researchers have suggested that the key to understanding the so called ‘East Asian miracle’ is to look at the structure of society and not only dynamic factors such as investment in physical and human capital. Indeed, the World Bank (1993) was able to explain only 36% of the difference in growth performance between Africa and the high performing Asian economies (HPAEs) with reference to these more traditional factors. The literature on this topic includes contributions from several disciplines. Economic sociologists, such as Biggart and Hamilton (1992), argue that the standard neoclassical model is not appropriate for the analysis of ‘Asia’s network capitalism’ (page 472) and that ‘persuasive explanations for the success of Asian business will ultimately come from an institutional analysis of Asian societies and the economies embedded in them.’ (page 488). Coming from a business orientation, Porter (1990) writes that ‘the principal function of the keiretsu (groups of companies affiliated by shareholdings) and the shita-uke structures is to facilitate interchange among related companies (the role of the keiretsu in strategy formulation and financing is greatly overstated in most Western accounts). Companies loosely linked in Japanese groups look to each other for guidance and input on new products, new processes, and new businesses. Japanese trade associations also promote the links between suppliers and buyers, by collecting information and sponsoring studies’ (page 408). Although this paper does not look directly at the HPAEs and the source of their success it does provide an analysis of the interplay between social structure and firm performance. The paper is arranged in five sections. Following the introduction, in Section 2 I develop the empirical formulation of the model. In Section 3 I explain how the entrepreneurial networks in Ghana were measured and provide a description of the structure of the Ghanaian manufacturing community based on the data collected. Section 4 contains the results of the regression analysis and a discussion of their significance for endogenous growth theory. I conclude in Section 5.

96 citations