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We study the relation between nuclear family ties and corruption. Our theoretical model shows that the population share of people who desire close ties with their families (i.e. the extensive margin) has an ambiguous effect on the level of corruption, due to the presence of conflicting mechanisms. However, the strength of this desire among people who want close family ties (i.e. the intensive margin) has an unambiguously negative effect on corruption. The latter outcome finds support from our empirical analysis: Using micro-level data, we show that, in contrast to conventional wisdom and cross-country reflections, stronger family ties are negatively correlated with a broad set of activities that measure corruption.

This research explores the presence of the income–pollution relationship in a dynamic two-country setting. We argue that the initial conditions of an economy, as described by its initial stock of physical capital, its total factor productivity, and the degree of environmental awareness, are critical determinants of the income–pollution paths. More importantly, these initial conditions have a more pronounced effect in a world where economies interact with one another and transboundary and global pollutants are affecting more than one country. We show that, in the presence of pollution externalities between two countries, the income–pollution paths these countries follow depend on the stage of development of each country, on their relative and absolute productivities, on the degree of environmental awareness and on the transboundary nature of the pollutants. In a two-country setting with pollution externalities, even more complex patterns may arise compared to single country models, thereby confirming the nonlinear effect of growth on environmental outcomes. It is shown that even small asymmetries span income–pollution relationships that are significantly different than the prescribed inverted U-shaped patterns.

This research empirically establishes and interprets the hypothesis that the relationship between population aging and inventive activity is hump-shaped. We estimate a reduced form, hump-shaped relationship in a panel of 33 OECD countries over the period 1960–2012, as well as in a panel of 248 NUTS 2 regions in Europe over the period 2001–2012. The increasing part of the hump may be associated with various channels including the acknowledgement that population aging requires inventive activity to guarantee current and future standards of living, or the observation that older educated workers are more innovative than their young peers. The decreasing part may reflect the tendency of aging societies to lose dynamism and the willingness to take risks.

How do environmental factors affect financial decision-making? Using plausibly exogenous variation in exposure to fluctuations in temperature over a sample of individuals between 2004 and 2018 across 28 European countries and Israel, we estimate the causal effect of a marginal change in temperature on financial investments and its interaction with individual personality characteristics. We find that a 10\% increase in temperature is associated with a 0.1 percentage point (pp) rise in the probability that an optimist invests in bonds, a 0.12 pp decline in the probability for stocks, and a 0.11 pp rise in mutual funds. However, among pessimists, we find null effects. We find similar results when we focus on the intensive margin of investment as well. Our results are identified of within-person variation after controlling for all shocks that are common within a country and year, thereby purging variation in time-varying country policies and macroeconomic conditions. These results are unique to optimists versus pessimists, rather than general happiness or interest. Furthermore, the variation in optimism is largely driven by attitudes about risk, rather than attitudes about trust. Our results are consistent with behavioral finance models where expectations moderate the transmission of shocks onto financial decision-making.

The aim of the paper is to propose the construction of an index that captures the economic complexity of cities over the globe, as well as to explore whether it is a good predictor for a range of city-level economic outcomes. This index aspires to mitigate data scarcity for cities and to provide policy makers with the tools for monitoring the evolving role of cities in the global economy. Analytically, we implement the economic complexity methodology on data for the ownership, location and economic activities of the world’s 3,000 largest firms and their subsidiaries to propose a new indicator that quantifies the network of the largest cities worldwide and the economic activities of their globalized firms. We first show that complex cities are the highly diversified cities that host non-ubiquitous economic activities of firms with global presence. Then, in a sample of EU cities, we show that complex cities tend to be more prosperous, have higher population, and are associated with more jobs, human capital, innovation, technology and transport infrastructure. Last, using OLS methodology and accounting for several other confounders, we show that a higher ECI, at the city level, enhances the resilience of cities to negative economic shocks, i.e., their ability to bounce back after a shock. Specifically, we find that the expected increase of the ratio of employment in 2012 over 2006 is 0.01 (mean: 0.992; standard deviation: 0.081) when the ECI increases by 1 unit (mean: 0.371; standard deviation: 1.094), i.e., a satisfactory pace of recovery, in terms of employment. The ability to diversify in the presence of a shock, the reallocation of factors of production to other sectors and the ability to extract rents associated with those diversified activities, uncovers the mechanics of the ECI index.

We analyse a monetary growth model where entrepreneurs borrow funds to invest in projects that produce capital goods. In addition to their varying pecuniary returns, different projects also vary with respect to the status they confer to the entrepreneurs who operate them. We show that (i) social status increases the growth rate, but this effect is mitigated by a social norm that inversely links overall levels of employment in the high-return project with the status conferred to it; (ii) the combined effect of social status and inflation is a source of transitional dynamics in an environment where such dynamics would not emerge if considerations of occupational prestige were absent; (iii) when the social norm affects social status, the economy's dynamics may be manifested in the form of endogenous volatility; (iv) the presence and characteristics of social status can generate a negative correlation between volatility and growth.

This paper establishes economic complexity as a powerful predictor of environmental attitudes. While the economic complexity index (ECI) has been associated with a series of economic outcomes, yet there has not been a link in the literature between ECI and environmental attitudes. This research pushes forward the hypothesis that economic complexity shapes cultural values and beliefs. The research method used is a multilevel empirical analysis that associates aggregate values of the ECI, at the country level, with individual responses related to attitudes towards the environment. Our findings suggest that a marginal increase of the ECI, increases by 0.191 the probability to be a member of environmental organisations and an increase by 0.259 in the probability to engage in voluntary work for the environment. To further reinforce our findings by ensuring identification we replicate the benchmark analysis using as a proxy of a country&rsquo, s level of economic complexity, the average ECI of the neighbouring countries (weighted by population and/or volume of trade). With a similar intention, i.e., to mitigate endogeneity concerns as well as to further frame our findings as &ldquo, the cultural implications of ECI&rdquo, we replicate our analysis with a sample of second generation immigrants. The immigrant analysis, suggests that the level of economic complexity of the parents&rsquo, country of origin, has a long-lasting effect on second generation immigrants&rsquo, attitudes related to the environment. Because humankind&rsquo, s attitudes and actions are of key importance for a sustainable future, a better understanding as to what drives environmental attitudes appears critical both for researchers and policy makers.

The objective of this study consists in analyzing the determinants of the internal mobility of refugees in Turkey. We track down this mobility relying on geolocalized mobile phone calls data and bring these measures to a micro-founded gravity model in order to estimate the main drivers of refugee mobility across 26 regions in 2017. Our results show that the movements of refugees are sensitive to income differentials and contribute therefore to a more efficient allocation of labor across space. Comparing these findings with those of individuals with a non-refugee status, we find that refugees are more sensitive to variations of income at origin and to distance, while less responsive to changes in income at destination. These findings are robust to the way mobility is inferred from phone data and to the choice of the geographical unit of investigation. Further, we provide evidence against some alternative explanations of mobility such as the propensity to leave refugee camps, transit through Turkey, social magnet effects and sensitivity to agricultural business cycles.

This article examines whether the decade preceding the financial crisis fuelled a culture of political resentment in Greece, and the role of religion in this development. To this end, it explores e...

This paper establishes that in the presence of corruption, the implementation of technologically advanced environmental policies may result in lower environmental quality. In corrupt countries, politicians may allocate a large fraction of public funds to environmental projects with the intention of increasing their ability to extract rents, rather than improving environmental quality. This has both a direct and an indirect negative effect on environmental quality. First, due to extensive rent-seeking, the effectiveness of environmental projects is disproportional to the amount of public funds allocated to them. Second, citizens who observe the poor outcomes of environmental projects are more prone to tax evasion, which results in reduced public funds. A vicious circle of extensive tax evasion and rent-seeking activities thus emerges, which has a detrimental effect on environmental quality. Anecdotal evidence from a number of corrupt countries shows little or no improvement in environmental quality, despite the implementation of technologically advanced environmental projects.

Backed by strong empirical results, obtained from several different specification and sensitivity analyses, this paper contends that countries with high-intellectual quotient populations produce and export more sophisticated/complex products. This result is further reinforced by the quality of democracy.

Our research report employs the D4R data and combines it with several other sources to study one of the multiple aspects of integration of refugees, namely the mobility of refugees across provinces in Turkey. In particular, we employ a standard gravity model to empirically estimate a series of determinants of refugee movements. These include the standard determinants such as province characteristics, distances across provinces, levels of income, network effects as well as some refugee-specific determinants such as the presence of refugee camps and the intensity of phone call interaction among refugees. Importantly, we explore the effect of certain categories of news events, notably protests, violence, and asylum grants. Considering news as an indicator of policy implemented at the provincial level, we gain a better understanding as to how policy can facilitate refugee mobility and thus enhance integration. To benchmark our findings, we estimate the same model for the mobility of individuals with a non-refugee status.

This research advances the hypothesis that natural land productivity in the past, and its effect on the desirable level of cooperation in the agricultural sector, had a persistent effect on the evolution of social capital, the process of industrialization and comparative economic development across the globe. Exploiting exogenous sources of variations in land productivity across (a) countries; (b) individuals within a country, (c) migrants of different ancestry within a country, and (d) individuals residing in regions within a country, the research establishes that lower level of land productivity in the past is associated with more intense cooperation and higher levels of contemporary social capital and development.

This paper investigates the hypothesis that individual environmental attitudes are partly determined by a cultural component. Our analysis tackles this issue both theoretically and empirically. In the theoretical section of the paper, we describe a model of intergenerational transmission of cultural traits. In the empirical section, we use survey data from the European Values Study, to empirically identify this cultural component in environmental attitudes. We use a comparative approach that exploits variations associated with European migration flows. Our findings suggest that culture has a persistent and statistically significant impact on the environmental values of migrants: differences in environmental attitudes among migrants can be traced back to social values that persist in their countries of origin. We also show that environmental attitudes are resilient to incentives derived from the external environment: environmental conditions migrants have been exposed to in their countries of origin do not have a significant impact on their preferences when living in the host country. Our empirical findings are robust to a number of alternative assumptions and present interesting dimensions of heterogeneity concerning the cultural transmission process. These results imply that in the presence of multiple environmental problems that require collective action, comprehending the driving forces behind the formation of an environmental culture is critical to effective policy formation.

We provide empirical support and a theoretical explanation for the vicious circle of political corruption and tax evasion in which countries often fall into. We address this issue in the context of a model with two distinct groups of agents: citizens and politicians. Citizens decide the fraction of their income for which they evade taxes. Politicians decide the fraction of the public budget that they peculate. We show that multiple self-fulfilling equilibria with different levels of corruption can emerge based on the existence of strategic complementarities, indicating that corruption may corrupt. Furthermore, we find that standard deterrence policies cannot eliminate multiplicity. Instead, policies that impose a strong moral cost on tax evaders and corrupt politicians can lead to a unique equilibrium. Preliminary Version

How does policy affect innovation and the digital economy? We revisit how standard product market regulation affects innovation and develop a novel framework for thinking about digital regulation. Using new establishment-level micro-data across 12 countries between 1998 and 2012, this paper first estimates the effect of competition policy on innovation. We find that a standard deviation rise in standardized index of product market regulation is associated with a 1.029% decline in innovation activities. These declines are a result of product market regulation on the incentives to invest in in-house R&D and make the appropriate capital acquisitions, as well as of the effects of regulation on the cost of innovation activities. We then theorize on the effect of digital regulation on innovation and we empirically test our hypothesis using a sub-sample of the years in our analysis. We find that “protective regulation”, i.e., regulation that creates predictability and scope for markets to work, confers a positive effect on innovation, while “restrictive regulation”, i.e., regulation that endeavors to spell out negative behaviors, confers a negative effect on innovation. We also find that the digital regulation results are more sensitive to the content of regulation. We attribute this ambiguity to the fact that markers require an enhanced level of trust to be operative.

This research explores whether religiosity has a persistent effect on economic outcomes. We follow a three-step analysis. First, we use a sample of migrants in the United States to establish that religiosity in the country of origin has a lasting effect on the religiosity of migrants. Second, by exploiting variation in the inherited component of religiosity of migrants and controlling only for a baseline set of controls, we uncover a causal link between several aspects of religiosity and income level. The empirical findings of the second step suggest that i) church attendance has a positive impact on income; and ii) stronger faith is associated with a higher income. Finally, we augment the set of controls included in the measure of inherited religiosity in order to capture the effects of social capital, education, and of traits conducive to income growth. When controlling for social capital, the effect of religious attendance on economic outcomes vanishes, and when controlling for the presence of traits conducive to growth, the effect of intensity of faith vanishes as well. We therefore conclude that when properly accounting for unobservables, religiosity does not affect per capita income.

This research empirically establishes and theoretically motivates the hypothesis that population aging has a hump-shaped effect on inventive activity. We estimate this hump-shaped relationship in a panel of 33 OECD countries over the period 1960-2012. The increasing part of the hump captures the awareness that population aging requires inventive activity to guarantee current and future standards of living. The decreasing part reflects the tendency of aging societies to lose dynamism and the willingness to take risks. Policy-wise our analysis suggests that raising the awareness of individuals about the consequences of population aging may facilitate the adoption of strategies and policies encouraging inventive activity and economic growth.

We provide empirical support and a theoretical explanation for the vicious circle of political corruption and tax evasion in which countries often fall into. We address this issue in the context of a model with two distinct groups of agents: citizens and politicians. Citizens decide the fraction of their income for which they evade taxes. Politicians decide the fraction of the public budget that they peculate. We show that multiple self-fulfilling equilibria with different levels of corruption can emerge based on the existence of strategic complementarities, indicating that “corruption” may corrupt. Furthermore, we find that standard deterrence policies cannot eliminate the multiplicity of equilibria. Instead, policies that impose a strong moral cost on tax evaders and corrupt politicians can lead to a unique equilibrium.

The paper introduces an additional channel via which corruption may adversely affect environmental quality. It is argued that, in the presence of corruption, politicians may allocate a large fraction of public funds to environmental projects aiming not at improving environmental quality, but rather at increasing their ability to extract rents. This type of behavior has a direct and an indirect effect on environmental quality. First, due to extensive rent-seeking, the effectiveness of environmental projects is disproportional to the amount of public funds allocated to them. Second, citizens who observe the poor outcome of environmental projects, increase tax evasion thus reducing public funds. A vicious circle of extensive tax evasion and rent seeking activities emerges, that has a detrimental effect on envi- ronmental quality. Anecdotal evidence from a number of countries that experience high levels of corruption shows little or no improvements in environmental quality despite the implementation of environmental projects. In line with our theoretical findings, this ineffectiveness of the environmental policy is present even when the technology involved is advanced.

This research argues that in highly unequal societies, a rent-seeking and self-maximizing dictator may be supported by a fraction of the population, despite the absence of special benefits to these societal groups. Importantly, it is the stakes of the dictator in the economy, in the form of capital ownership, that drive the support of individuals. In highly unequal societies ruled by a capital-rich dictator endowed with the power to tax and appropriate at will, the elites will support dictatorial policies given that they can generate higher growth rates than the ones obtained under democracy. This support arises unconditionally to special benefits to the elites and despite the total absence of checks and balances on the dictator.

This research advances the hypothesis that reversal of fortunes in the process of economic develop- ment can be traced to the effect of natural land productivity on the desirable level of cooperation in the agricultural sector. In early stages of development, unfavorable land endowment enhanced the economic incentive for cooperation in the creation of agricultural infrastructure that could mitigate the adverse effect of the natural environment. Nevertheless, despite the beneficial effects of cooperation on the intensive margin of agriculture, low land productivity countries lagged behind during the agricultural stage of development. However, as cooperation, and its persistent effect on social capital, have become increasingly important in the process of industrialization, the transition from agriculture to industry among unfavorable land endowment economies was expedited, permitting those economies that lagged behind in the agricultural stage of development, to overtake the high land productivity economies in the industrial stage of development. Exploiting exogenous sources of variations in land productivity across countries the research further explores the testable predictions of the theory. It establishes that: (i) reversal of fortunes in the process of development can be traced to variation in natural land productivity across countries. Economies characterized by favorable land endowment dominated the world economy in the agricultural stage of development but were overtaken in the process of industrialization; (ii) lower level of land productivity in the past is associated with higher levels of contemporary social capital; (iii) cooperation, as reflected by agricultural infrastructure, emerged primarily in places were land was not highly productive and collective action could have diminished the adverse effects of the environment and enhance agricultural output.

We construct an overlapping generations model in which agents live through two periods; childhood and adulthood. Each agent makes choices only as an adult, based on her utility that depends on her own consumption and the human capital and environmental quality endowed to her offspring. Entering adulthood, agents choose randomly between two occupations: citizens and politicians. Citizens are the only producers of a single good and choose the proportion of their income to declare to the tax authorities. Politicians decide upon the allocation of the tax revenue between environmental protection and education activities, taking as given the rates of peculation in each activity. In this context, two self-fulfilling stable equilibria can emerge, one associated with high and another with low corruption. Corrupted politicians induce high levels of tax evasion, reducing total public funds and thus environmental protection activities. This result is in accordance with existing empirical evidence and implies that environmental policies may fail in corrupt countries where they are used as means of supporting rent seeking activities instead of protecting the environment. A higher level political authority could intervene and force the low corruption equilibrium by choosing the appropriate tax rate and, through institutional changes, the rates of peculation.

This paper characterizes analytically the saving rate in the Ramsey-Cass-Koopmans model with a general production function when there exists both exogenous and endogenous growth. It points out conditions involving the share of capital and the elasticities of factor and intertemporal substitution under which the saving rate path to its steady-state value exhibits overshooting, undershooting, or is monotonic. Simulations illustrate these interesting dynamics. The paper also identiΒ es the general class of production functions that render the saving rate constant along the entire transition path and hence make the Ramsey-Cass-Koopmans model isomorphic to that of Solow-Swan. Macroeconomic Dynamics

We correct an intermediate mistake in Barelli and Pessoa [Barelli P. and Pessoa S. de A., 2003, “Inada conditions imply that production function must be asymptotically Cobb–Douglas,” Economics Letters 81, 361–363] and show that the main result is still valid. We also show that Barelli and Pessoa wrongly identified the class of functions with elasticity of substitution asymptotically equal to one as the Cobb–Douglas class.