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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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)....
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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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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
01 Jan 2009
87 citations
"On the looting of nations" refers background or methods in this paper
...Many economic and political studies list examples of such resource-inspired looting-type behavior (e.g., Jayachandran and Kremer 2006; Bates 2008)....
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...This is akin to the voluntary liquidation—or “looting”—option first modeled by Akerlof and Romer (1994) and discussed in the context of African economies by Bates (2008)....
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...Panel A represents the growth equation (8) and Panel B presents the results from our equation for looting (9)....
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...We estimate equations (8) and (9) jointly by Full Information Maximum Likelihood (FIML) using a treatment regression approach....
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...Lootit = { 1 if Loot∗ it > 0 0 otherwise (9)...
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Book•
22 Mar 2015
TL;DR: The authors traces the ideas that have driven changing approaches to development, focusing also on the Prebisch-Singer thesis, which seeks to explain the widening gaps between rich and poor nations, caused by unequal distribution of trade benefits.
Abstract: Since the 1940s, development thinking has been the subject of fierce debate and continual evolution. This title traces the ideas that have driven changing approaches to development, focusing also on the Prebisch-Singer thesis, which seeks to explain the widening gaps between rich and poor nations, caused by unequal distribution of trade benefits. They discuss both aid during and after the Cold War, and the rise and subsequent liberalization crisis of the Asian "tiger economies". The book goes on to explore the structural roots of the debt crisis and considers the impact of debt management on North-South economic relations, exposing certain double standards that tilt global markets further against the South. Encouraged by successful opposition to neoliberalism, it finally proposes ideas for a world where people seem to matter.
70 citations
Posted Content•
TL;DR: The authors estimate ex post returns to emerging market debt by combining secondary market prices with observed flows based on World Bank data and find that returns averaged 9 percent per annum, about the same as returns on a ten-year U.S. treasury bond.
Abstract: We estimate ex post returns to emerging market debt by combining secondary-market prices with observed flows based on World Bank data. From 1970-2000, returns averaged 9 percent per annum, about the same as returns on a ten-year U.S. treasury bond. This reflects the combined effect of the 1980s debt crisis and much higher returns during 1989-2000. Annual returns since 1986 have been less volatile than emerging market equity returns but more volatile than returns on U.S. corporate or high-yield bonds. However, unlike returns on these bonds, emerging market debt returns do not seem significantly correlated with U.S. or world stock markets.
60 citations
"On the looting of nations" refers background in this paper
...As Klingen et al. (2004) have demonstrated, “the strategy of rolling over and waiting for a debt restructuring with official backing seems to have worked well in containing losses and even making profits in some cases....
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22 Mar 2002
TL;DR: In this paper, Rogoff and Rogoff argued that the existence of official creditors made debt renegotiation more difficult and complex, by hardening the positions of debtors and creditors, and that the legal infrastructures of the industrial countries were being used to lend developing countries more money than the underlying economics warranted.
Abstract: FIRST MEXICO, THEN Asia, then Russia and Brazil Now Argentina and Turkey As always when financial, crises occur, questions arise about whether first world governments should change their role in the restructuring of third world debt, by restructuring the multilateral international financial institutions (IFIs), creating an international bankruptcy court, or adopting one of the many other proposals for reforming the international financial architecture (1) Kenneth Rogoff and I wrote a series of papers addressing these and related issues between 1988 and 1992: (2) --In 1988 we argued that the existence of the official creditors led to increased emerging-market and developing-country debt, because private creditors would be able to count on the official creditors to pay back part of their loans (3) In 1990 we further claimed that the existence of the official creditors made debt renegotiation more difficult and complex, by hardening the positions of debtors and creditors --In 1990 we argued that the legal infrastructures of the industrial countries were being used to lend developing countries more money than the underlying economics warranted We maintained that it would be better if creditors were forced to rely much more on debtor-country legal structures to create a level playing field for equity and foreign direct investment --In 1988 and 1992 we argued that official creditors, defined broadly as a group, are at best equal in seniority and possibly even junior to private creditors (4) These arguments underlay the reform proposals that we made in our 1990 paper Rogoff reiterated many of these views shortly before becoming chief economist at the International Monetary Fund (IMF) Similarly, my views have not changed The proposals we made then still make sense today: --Multilateral loans should largely, and in some cases completely, be replaced by aid --The United States should repeal the relevant portion of the Foreign Sovereign Immunities Act of 1976, and the United Kingdom the part of the 1978 State Immunity Act, that allows developing countries to waive their immunity when they borrow money abroad That is, to the extent possible, jurisdiction over a sovereign's debts should be in its own courts This would include the debt of banks that are nationalized during debt crises --The IFIs should be kept out of the international bailout business (5) --The aid should be disbursed through an International Citizenship Fund and focused on issues that involve externalities, such as environment and education, rather than on macroeconomic structural adjustment In the context of our 1990 proposal, I would be extremely cautious about proposals for either a real or a metaphorical international bankruptcy court Such proposals run the risk of moving some sovereign obligations from debtor-country courts to external jurisdictions, making it even harder for industrial-country governments to avoid getting enmeshed in resolving these crises Proposals to coordinate creditors through collective action clauses, such as those suggested by Under Secretary of the US Treasury for International Affairs John Taylor or already existing in UK law, or through mechanisms that also coordinate different classes of creditors, as suggested by the IMF's First Deputy Managing Director Anne Krueger, have some appeal in simplifying the renegotiation bargaining problem Countries may well want to adopt such provisions within the context of their domestic restructuring laws But the key step is to coordinate as much of the bargaining as possible under the auspices of the debtor's own legal system Whereas in 1990 our proposals were treated as quite radical, they no longer seem so today The Meltzer Commission has now advocated aid in place of loans, and the White House and the Treasury have called for dramatically increasing the proportion of aid in official financing for developing countries, particularly the poorest …
54 citations
"On the looting of nations" refers background in this paper
...Bulow (2002) believes that the problem is traceable, fundamentally, to the intervention of external institutions in rescuing commercial banks from defaults....
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...This sort of moral hazard in the financial markets leading to excessive lending to sovereigns has been noted previously (Bulow 2002).1 A casual look at the data confirms some basic findings highlighted in the literature....
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...This is because lenders see little reason to exercise restraint in lending to resource-rich states, since the resources (and liabilities) remain behind even when the regime changes (see introductory quote above) (Bulow 2002)....
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...Our story is also related to the literature on efficient contracts for sovereign lending (Bulow 2002; Kletzer and Wright 2000)....
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...The importance of restricting short-term liquidity to aid the enforceability of loan agreements has been long-noted (Bulow and Rogoff 1989) as has been the tendency of banks to ignore such advice (Bulow 2002)....
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