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What do the educated future of Angola make of their future in Angola? A recent survey of university students in Angola documents a grave concern about inequality, and strong preferences for redistribution. At the same time, many students see a path to success through hard work which is not available to people in general.

Since the year 2000, an international reform process has been underway to reduce the negative impacts of tax havens. This paper analyzes whether the reform period has favoured protected tax havens, i.e. havens with strong connections to the UK, the EU, the United States and China, relative to tax havens without such connections. Using a difference in difference approach, we show that portfolio investment in protected havens increased significantly more than in unprotected havens in the period 1997 to 2015. In other words, through their associated territories, some of the most powerful countries in the world seem to have cornered the market for tax haven services during the reform period. This may make further reform more difficult.

Does self-serving elite behaviour make citizens more politically active? This paper presents the results of a randomized field experiment where voters in Tanzania were given information about elite use of tax havens. Information provided in a neutral form had no effect on voting intentions. Information phrased in more morally charged terms led to a reduction in voting intentions. Additional evidence suggests that rather than increase the perceived importance of voting, charged information tends to undermine confidence in political institutions and the social contract. The effects are particularly pronounced among the less well-off, indicating that increased transparency in the absence of perceived agency may not improve democratic accountability.

In October 2010, the Norwegian Nobel Committee awarded the Nobel peace prize to Chinese dissident Liu Xiaobo. The Chinese government responded by freezing political and economic relations with Norway, introducing sanctions against imports of fish and other products, and limiting diplomatic interaction. Using a synthetic control approach, this paper estimates the effect of Chinese sanctions following the peace prize on Norwegian exports to China, and on Norwegian foreign policy. Allowing for potential interference (effects of the sanctions on control units), we find that the sanctions reduced direct exports of fish to China by between 125 and 176 million USD in the period 2011–13, and direct total exports from Norway to China by between 780 and 1300 million USD. By 2014, however, exports had rebounded to normal levels. One possible explanation for this normalization could be Norwegian government efforts to distance itself from the peace prize committee, and a weakening of the Norwegian foreign policy position on human rights. This paper shows that immediately following the peace prize, Norwegian agreement with Chinese voting in the United Nations on human rights resolutions increased. The results suggest that the Chinese government can effectively use economic sanctions to affect the foreign policy positions of democratic governments, with potentially chilling effects for international progress on human rights. China has become too big to fault. Keywords: Sanctions, trade, foreign policy, international political economy, China, Norway JEL codes: F14, F51, F53, P33

Personal characteristics and capacities are important for whether microcredit clients succeed in business. In particular, a client’s education influences business profitability. However, to benefit from group-based microcredit, clients also need to be in credit groups that develop appropriate norms of solidarity. The education of group members may help develop in-group solidarity, but certain types of within-group heterogeneity can be detrimental to group norms and group survival.

This paper studies the relation between self-serving elite behaviour and citizen political participation. We use a fixed effects approach to analyze the association between portfolio investment in tax havens and voter turnout, using data from 213 parliamentary elections in 65 countries for the period 1998-2014. For well-functioning democracies, we find a positive relation between the use of tax havens and voter turnout, suggesting that self-serving elite behaviour is associated with citizen political mobilization rather than voter apathy. The estimated relationship is stronger in the period after the 2008 economic crisis, when elite behaviour was a particularly salient issue.

Using survey data of voters in Tanzania, this paper shows that while education does not affect self-reported voting in general elections, it increases actual voting. The less educated are more likely to claim to have voted without having done so, which may explain why previous studies of voting in developing countries fail to find an effect of education. We demonstrate the importance of this finding by using our survey data to generate predicted voting probabilities for the respondents to the 2012 Afrobarometer survey in Tanzania, and show that while mean self-reported voting does not differ much at different levels of education, the differences become significant when taking into account voting misrepresentation.

This paper suggests that an optimal local content policy in the context of flawed institutions is a more minimal one than those typically pursued by developing countries with recently discovered petroleum reserves. We argue that local content requirements need to be seen as a public expenditure question: such requirements increase multinationals' costs and hence reduce the taxes that can be extracted from these companies. There are thus opportunity costs in imposing local content requirements, since the forgone taxes could be used in other ways to improve development prospects. Such requirements can also exacerbate key problems of patronage and rent-seeking.

The effect of within-group heterogeneity on the survival of social groups is theoretically ambiguous. A greater diversity of ideas, experience, and networks can have a positive effect on members’ benefits from group membership, but diversity also creates a potential for conflict. This paper presents an analysis of the exit of microcredit groups, using data from Angola. The results suggest that group fragmentation in terms of social identities, or more specifically religious fractionalization, is associated with a greater probability of group exit. Results for within-group economic inequality suggest, however, that inequality is associated with a decrease in the probability of exit, but at a diminishing rate.

The effect of government decentralization on corruption is theoretically ambiguous. On the one hand, bringing government closer to the people could increase accountability and reduce corruption. On the other hand, decentralization could increase local capture and uncoordinated bribe taking across government levels. This paper estimates the effect of decentralization on experienced corruption, using individual-level bribery data from 36 countries. Crucially, we distinguish between the effect of decentralization on the frequency of contact with public officials, and its effect on the probability that a bribe is paid given contact. To identify the causal effect, we use an original instrument based on countries’ climatic heterogeneity. The results show that decentralization increases contact with officials, but there is no significant effect on the propensity to pay bribes given contact. We hence find no evidence that decentralization increases accountability. Moreover, higher aggregate corruption in decentralized societies is at least partly due to greater interaction with public officials, and not necessarily due to greater local capture.

Our recent research indicates that increased corruption brings increased foreign direct investment (FDI) in the extractive industries. Moreover, corruption has no effect on FDI in the energy provision industries. This brief focuses on the lessons Bangladesh can draw from these findings in meeting future energy needs. Bangladesh needs to expand its access to energy and depends on foreign investment. This brief explores some of the challenges and risks.

Quantitative studies show that democracy reduces corruption. This implies that building a well-functioning democracy should remain part of an anti-corruption approach. This policy brief takes a critical look at the evidence and explores the issue in relation to Bangladesh.

There is a move towards more use of engagement strategies in responsible investment. This change in strategies is motivated by a number of claims about the effectiveness of engagement versus exclusion of companies from the investment universe. This paper examines the basis for three central claims: i) That engagement, in contrast to exclusion, does not reduce the investment universe; ii) That exclusion reduces an investor’s influence on a company; and iii) That engagement with exclusion is necessarily a more effective means of influencing companies than pure exclusion. All three claims are argued to be open to challenge. It is possible that the move towards more engagement reflects bureaucratic incentives and political considerations among institutional investors, rather than arguments about the effectiveness and efficiency of engagement.

Angola has the second most concentrated economy in the world, oil representing more than 97 per cent of its exports in 2011. Concentration has increased since independence in 1975, and since the end of the civil war in 2002. This policy brief takes a look at the current state of diversification in Angola and its evolution in the decades going back to independence. It discusses economic and political effects of diversification, and diversification policy in the Angolan context. While diversification may have desirable effects on key challenges facing resource rich countries, diversifying resource rich economies is not straightforward.

Angola is the world’s second most concentrated country in terms of exports. Furthermore, concentration has increased during recent years. Angola also faces the challenge of a resource curse prevalent in resource rich countries with weak institutions. This brief argues that diversification has to address the scope for patronage and rent seeking if it is to efficiently counteract the resource curse. We focus on how diversification affects the scope for patronage through its effect on institutions of democratic accountability. We find that it is the pattern of industrial activity rather than diversification per se which affects institutions like democracy.

A number of studies document an in-group bias in social dilemma situations. While group structure and dynamics are important in shaping in-group favouritism, less attention has been paid to individual characteristics affecting favouritism. Using data from dictator games conducted among 523 microcredit clients in Angola, this paper analyzes the effect of education on in-group favouritism. When addressing the endogeneity of education, we find that education increases in-group bias. This goes against the conventional view that education broadens the perspectives of an individual. In addition, our results suggest that in-group favouritism is related to gender, family background and access to particular forms of networks.

Do natural resources reduce social trust? And if so, do natural resources have a direct effect on trust, or is their effect indirect through variables such as corruption? This issue paper reviews the literature on natural resources and on trust. The existing theoretical and empirical literature suggests that natural resources can reduce trust through several indirect mechanisms. Notably, studies show that natural resources lead to institutional degradation, corruption, inequality, and civil war, all of which have been associated with reduced trust. The paper tests empirically whether there is a direct effect of natural resources on trust (The Pearl Hypothesis), using cross-country data. The results indicate that no such direct effect exists, suggesting that any effect of resources on trust runs through intermediate variables such as institutions, corruption, inequality, and civil war. Importantly, however, the relationship between corruption and trust turns out to be non-linear, indicating that the effect of natural resources on trust depends on the initial corruption level of a country.

Microcredit clients are often assigned to credit groups with joint liability for loans. But what makes a credit group work well? What credit groups are likely to generate the internal social dynamics needed for group solidarity to form and repayment to happen? This is a matter of both group dynamics and individual characteristics, as some individuals conform more easily to in-group norms. This brief presents an experiment conducted among microcredit clients in Angola. The results suggest that more educated clients and female clients are more likely to favour members of their credit group over outside demands.

Os clientes do microcrédito são frequentemente designados para grupos de crédito com responsabilidade conjunta sobre os empréstimos. Mas o que faz um grupo de crédito funcionar? O que possibilita aos grupos de crédito a gerarem dinâmicas sociais internas necessária para formar a solidariedade do grupo e garantir os pagamentos? Esta é uma questão tanto de dinâmica do grupo como de características individuais, pois algumas pessoas se conformam mais facilmente às regras do seu grupo. Este brief apresenta uma experiência conduzida entre clientes de microcrédito em Angola. Os resultados sugerem que pessoas com maior grau de escolaridade e clientes femininas são mais propensas a favorecerem membros do seu grupo de crédito do que elementos externos.

Embora as instituições sejam importantes para o desenvolvimento económico, particularmente em países ricos em recursos, a interacção entre empresas multinacionais e as instituições do país anfitrião não é inteiramente compreendida. Este artigo apresenta um estudo de caso detalhado das actividades de RSE de companhias petrolíferas multinacionais em Angola. Os resultados mostram que a RSE é de um modo geral relativamente pouco importante para obter licenças e contratos em Angola. Na medida em que a RSE é valorizada, parece ser usada estrategicamente pelas empresas para aumentar as suas possibilidades de ganhar licenças e contratos. Além disso, as companhias petrolíferas não tratam de problemas de governance em Angola. Estes resultados têm implicações nas teorias da maldição dos recursos e da RSE estratégica. Usando estrategicamente a RSE há um risco das empresas multinacionais facilitarem os problemas de patronage em países ricos em recursos, exacerbando a maldição dos recursos. Além disso, o pressuposto habitual de que as ‘boas’ instituições são do interesse das empresas, ignora as consequências distributivas da reforma institucional. O fracasso em lidar com problemas de governance pode assim reflectir uma complacência colectiva das empresas, mais do que problemas de acção colectiva.

Les ressources naturelles fournissent souvent un terreau favorable à la corruption. Etant donné qu’un grand nombre de pays partenaires de la coopération au développement sont riches en ressources naturelles, l’efficacité de l’action des bailleurs de fonds relève de la gageure. Le risque de corruption s’immisce dans plusieurs filières de ressources naturelles, allant des ressources non renouvelables telles que le pétrole, le gaz, les minéraux et les métaux, aux ressources renouvelables forestières, halieutiques et agricoles. Toutefois, les enjeux de ces filières en terme de corruption ainsi que les démarches permettant de les relever sont multiples.

La corruption constitue un véritable fléau dans de nombreux pays riches en pétrole et autres ressources naturelles. Elle est en grande partie responsable du faible développement socio‑économique de ces pays. Depuis peu, il est envisagé d’inscrire la transparence dans un processus de réforme afin de lutter efficacement contre la corruption et d’autres problèmes liés à la malédiction des ressources. Ces constats nous amènent à nous interroger sur le véritable rôle de la transparence dans la lutte anti‑corruption des pays riches en pétrole.

Chinese outward foreign direct investment (FDI) has increased substantially in recent years. Though this has generated considerable interest in the motivations and drivers of Chinese investment abroad, there have been few systematic empirical studies of these questions. This paper performs an econometric analysis of the host country determinants of Chinese outward FDI in the period 2003-2006. The focus is in particular on institutional and natural resource-related determinants, and their interaction. We find that Chinese outward FDI is attracted to large markets, and to countries with a combination of large natural resources and poor institutions. Disaggregation shows that the former effect is related to OECD countries, whereas the latter interaction effect holds for non-OECD countries.

The introduction of ‘new' aid modalities - and in particular general budget support - has increased the interest in the relationship between corruption and aid modalities. This U4 Issue reviews the information that theory and empirical studies provide on the prevalence of corruption in relation to various aid modalities, the degrees to which corruption distorts the developmental impact of different aid modalities, and whether aid modalities affect the governance environment and corruption in a country differently. It concludes that the choice of aid modality will not affect aid allocation nor accountability in countries with relatively low levels of aid, regardless of the level of corruption. With high aid dependency, however, donors have some more control over aid allocation with project than with budget support. Where this is the case, and corruption is high, there are strong reasons for not choosing budget support as an aid modality.

Natural resources often provide fertile ground for corruption. Since a substantial number of partner countries in development cooperation are richly endowed with natural resources, these contexts pose a particular challenge for effective donor action. The risk of corruption cuts across natural resource sectors - from non-renewable resources such as oil, gas, minerals and metals, to renewable resources such as forests, fisheries and land. There are, however, important variations in the challenges presented by these sectors and the manner in which corruption in relation to them can be addressed.

Corruption is a huge problem in many developing countries rich in oil and other natural resources, and is central in explaining why these countries perform badly in terms of socio-economic development. Transparency reform has recently been viewed as a key factor in addressing corruption and other resource-curse related problems. But what role does transparency actually play in tackling corruption in oil rich countries?

Norske bedrifter opererer i en rekke utviklingsland, hvor problemer med fattigdom, dårlig styresett og brudd på menneskerettigheter ofte er store. Når man går inn i denne typen land, stilles man overfor store utfordringer knyttet til bedrifters samfunnsansvar. I møtet med denne typen utfordringer, har mange norske bedrifter etter hvert satt i gang ulike typer aktiviteter knyttet til samfunnsansvar, eller CSR (corporate social responsibility). Denne rapporten ser nærmere på norske bedrifters CSR-aktiviteter i fire utvalgte utviklingsland; Angola, Kina, Nepal og Brasil. Rapporten viser at norske bedrifter har en lang rekke CSR aktiviteter i de fire utvalgte landene. På tross av mange velmenende tiltak, addresserer bedriftene i liten grad sentrale utfordringer i hvert av landene, slik som styresett-problematikk i Angola eller menneskerettigheter i Kina. Det er også et betydelig forbedringspotensiale i måten bedriftenes CSR-aktiviteter velges ut og drives på. Utviklingseffekten bedriftene mener deres CSR-aktiviteter har, er stort sett udokumenterte, og det er lite fokus på å dokumentere denne. Det gjøres lite eksplisitt behovsvurdering som grunnlag for bedriftenes CSR aktiviteter. Selv om de fleste bedriftene ser ut til å ha etablert systemer eller prosedyrer for kontakt med målgruppen for CSR tiltakene, varierer disse mye i omfang, grad av systematikk, og utforming. Bedriftene forholder seg i liten grad til nasjonale myndigheter og deres planer for utvikling. Vanlige forslag for å forbedre bedriftenes CSR-aktiviter, er å legge til rette for kunnskapsoverføring om utviklingsspørsmål til bedrifter, samarbeid eller koordinering mellom bedrifter og andre utviklingsaktører, eller utarbeidelse av frivillige internasjonale standarder. Det er imidlertid lite trolig at svakhetene ved bedrifters CSR aktiviteter utelukkende skyldes manglende kapasitet eller evne blant bedriftene, slik denne typen tiltak forutsetter. Mye av det fokuset selskaper har i sitt CSR arbeid skyldes at de i utgangspunktet ikke er ment å bidra til utvikling, men heller til å forbedre bedriftens lønnsomhet. Det er med andre ord ikke evnen det står på, men viljen til å gjennomføre tiltak som retter seg først og fremst mot samfunnets interesser. Skal man få selskaper til å opptre bedre i utviklingsland, må man gjøre det i deres interesse å forbedre sin aktivitet innen CSR området. Man må altså gi selskapene incentiver til å opptre på en måte som bidrar til utvikling. Dette innebærer at man eksempelvis bør bruke statens eiermakt og innkjøpsmakt, og på andre måter påvirke bedriftenes økonomiske rammevilkår, for å drive frem mer ansvarlige bedrifter.

Petroleum-related aid programmes and projects are a key part of donor activities in oil-rich developing countries. This U4 Issue explores the petroleum-related activities of three bilateral donors: Norad, CIDA and USAID. While governance issues are beginning to receive more attention in these types of programmes, they still form a minor part of programme activities. The petroleum-related aid activities of the donors in question address the issue of corruption only to a limited extent. Given the commercial and political interests of donor countries, questions about the integrity and credibility of these types of programmes can be raised. Moreover, the narrow, sector focus of these programmes makes it unlikely that they will produce the institutional changes needed to lift the ‘resource curse'.

Corruption is bad for donor business. Corruption reduces popular support for aid in donor countries. However, aid agencies should pay attention to corruption because it is the right thing to do, rather than just the smart thing to do. Donor anti-corruption policies require a strong grounding in ethics. Corruption produces bad development outcomes. This is the reasoning largely underlying donor anti-corruption efforts. The focus on consequences of corruption makes donor anticorruptionefforts vulnerable to interpretation and manipulation, resulting in inconsistent, time-varying and fi ckle policies to combat corruption. An alternative would be to base anticorruption policies on duty-based ethics, where corruption is wrong in and of itself. This brief examines consequentialist and duty-based arguments against corruption. It also examines the claim that "corruption is acceptable where it is commonly practiced."

Human rights imply duties. The question is, duties for whom? Without a welldefined scheme for assigning duties correlative to human rights, these rights remain illusory. This paper develops core elements of a general scheme of duty assignment, and studies the implications for corporations. A key distinction in such an assignment is between unconditional and conditional duties. Unconditional duties apply to every agent regardless of the conduct of others. Conditional duties reflect a division of moral labour where different tasks are assigned to specific agents, whose default activates back-up duties of other agents. Corporations face unconditional duties to not directly violate the rights of others, and not undermine the division of moral labour through practices such as tax evasion or corruption. Being unconditional, these duties cannot be deviated from by reference to the misconduct of competitors. In addition, corporate conditional duties to protect, promote or fulfil rights can be activated if the state and other designated duty-bearers fail to discharge their duties.

Two types of models are dominant in the current resource curse literature. One type of model studies the selection of entrepreneurs into rent-seeking versus productive activities. The other type analyzes the use of patronage by politicians seeking re-election. The policy implications of the two models are quite different. The first model suggests that institutions governing the private sector ought to be improved. The second that institutions governing the public sector should be emphasized. This paper empirically tests the impact of the private versus public sector institutions on the resource curse, using cross-country data from Sachs and Warner (1997a) and Polity IV. The main result is that only improved private sector institutions ameliorate the resource curse.

The question of corporate responsibility in poor and undemocratic countries, has been addressed by a CMI strategic institute programme (SIP) entitled "Business ethics for multinational corporations in developing countries". The programme, which has run from 2004 to 2006, has resulted in several international publications, and garnered significant media attention. This brief relates the major results of the programme. Three perspectives on business ethics The programme distinguishes between three different perspectives on business ethics: The normative perspective asks what corporations ought to do, what responsibilites do corporations have and to whom The instrumental perspective studies what responsibilities are profitable and in the interest of firms to pursue, and how firms can be given incentives to fulfil their other responsibilities The descriptive perspective asks what firms actually do in the area of business ethics The programme has obtained important results for all three perspectives, which are highlighted in turn below.

Corruption is a huge problem in many developing countries that are rich in oil and other natural resources. It is central in explaining why resource rich countries perform badly in terms of socio-economic development. Transparency has recently been viewed as a key factor in reducing corruption and other dysfunctions in natural resource rich countries. This U4 Issue addresses the relationship between transparency and corruption, with an emphasis on oil rich countries. In particular, it focuses on some of the main corruption related problems caused by limited access to information, using the case of Angola. It also focuses on the approach of current transparency initiatives, such as the Extractive Industries Transparency Initiative (EITI).

Though corporate social responsibility (CSR) is on the agenda of most major corporations, corporate executives still largely support the view that corporations should maximize the returns to their owners. There are two lines of defence for this position. One is the Friedmanian view that maximizing owner returns is the corporate social responsibility of corporations. The other is a position voiced by many executives, that CSR and profits go together. This paper argues that the first position is ethically untenable, while the latter is not supported by empirical evidence. The implication is that there may be good reason for firms to deviate from a maxim of profit maximization.

A frequently used argument for fiscal decentralisation is that it increases accountability in the spending and raising of public funds, by moving government closer to the people. At the same time, there are concerns that fiscal decentralisation in practice may lead to a decentralisation of corruption. This issue paper summarises available evidence on fiscal decentralisation and corruption. It starts off with a discussion of issues and proceeds to look at policy implications.

This paper analyses the business environment for micro enterprises in Tanzania based on survey data. The primary objective of the study is to identify major constraints facing the firms’ business operations. Taxation, corruption, and regulations in the form of licences and permits, are found to be the most important constraints on business operations. Reported constraints vary according to firm characteristics such as age, location, education and gender of the owner. Contrary to previous studies and current policies, financial constraints and property rights are not perceived as important constraints.