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This paper analyzes the role of networks in the spatial diffusion of local economic shocks in Africa. We show that geographic connectivity, along with road and ethnic connectivity, are important for diffusing economic spillovers over longer distances. We then determine the key players, that is, which districts are key in propagating local economic shocks across Africa. Using these results, we conduct counterfactual policy exercises to evaluate the potential gains from policies that increase economic activity in specific districts or improve road connectivity between districts. [ABSTRACT FROM AUTHOR]

Most migration studies and theories focus on understanding the initial migration of people from their home country. Less attention has been paid to the factors influencing immigrants' preferences to either permanently settle in the host country, return to their home country or move onwards to another destination. Understanding the characteristics and motives of those who aspire to leave the host country is, however, valuable for both host and home countries to formulate appropriate and effective policies in order to retain their valued immigrants or citizens and foster their successful (re-)integration. This paper provides a comprehensive global analysis of the characteristics and circumstances that shape first-generation immigrants' aspirations to stay, return or migrate onwards, based on individual-level data from the Gallup World Polls across 138 countries worldwide between 2009 and 2016. Our study reveals that immigrants' stated preferences are strongly influenced by demographics, human and spiritual capital, as well as by soft factors, such as social ties and sociocultural integration, while economic factors have a more feeble influence. Changes in circumstances in the home and host countries are also important determinants of locational aspirations. Some interesting exceptions to our results stand out when we differentiate home and host countries by their economic development levels. [ABSTRACT FROM AUTHOR]

Abstract This paper contributes to the economic analysis of illicit activities and money laundering. First, it presents a theoretical model of long-run growth that explicitly considers illicit workers, activities, and income, alongside a licit private sector and a functioning government. Second, it generates estimates of the size of illicit income and provides simulated and econometric estimates of the volume of laundered assets in the Colombian economy. In the model, the licit sector operates in a perfectly competitive environment and produces a good through a standard neoclassical production function. The illicit sector operates in an imperfectly competitive environment and is composed of two different activities: The first activity produces an illicit good that nonetheless is valuable in the market (for example illegal drugs); the second does not add value to the economy but only redistributes wealth (for example robbery, kidnapping, and fraud). The paper provides a series of comparative statics exercises to assess the effects of changes in government efficiency, licit sector productivity, and the demand for illegal drugs. From the model, the analysis derives a set of estimable macroeconometric equations to measure the size of laundered assets in the Colombian economy in the period 1985–2013. The paper assembles a dataset whose key components are estimates of illicit income from drug trafficking and common crime. Illicit incomes increased drastically until 2001, reaching a peak of nearly 12% of gross domestic product and then decreasing to less than 2% by 2013. The decline not only overlaps with a period of high economic growth but also occurs after the implementation of Plan Colombia. The dataset is used to estimate the volume of laundered assets in the economy by applying the Kalman filter for the estimation of unobserved dynamic variables onto the derived macroeconometric equations from the model. The findings show that the volume of laundered assets increased from about 8% of gross domestic product in the mid-1980s to a peak of 14% by 2002, and declined to 8% in 2013. [ABSTRACT FROM AUTHOR]

This paper examines the long-term effects of historical institutions on modern economic development. The Ming Great Wall, built to prevent incursions from northern barbarian nomads, divided China, which encouraged institutionalized self-governance, from the patron-client model of the nomads who lacked a system of local government or a fiscal and legal system. By exploring this cutoff and using a geographical regression discontinuity design (GRDD) framework, we document that present-day economic development, as measured by nighttime light intensity, exhibits a discontinuity at the Great Wall. After considering other potential explanatory factors, we suggest that the differences in the administration established during the Ming dynasty might explain this discontinuity. The immediate impacts on the economic outcomes during the succeeding dynasty and the persistent differences in institutional development proxies, which serve as deep determinants of economic development, represent supplements to our findings. [ABSTRACT FROM AUTHOR]

One of the most powerful cultural transformations of the 20th century has been the dramatic expansion of Christianity outside of Europe. This unique historical process was facilitated by vast Christian missionary efforts. In this paper, we study the economic effects of Christian missions in Ghana. We rely on six distinct identification strategies that exploit exogenous variations in Christian missionary expansion from 1828 to 1932. We find no association between Christian missions, whether Protestant, Catholic, Presbyterian or Methodist, and local economic development, whether during contemporary or colonial times. However, some results suggest that Christian missions might have had a positive effect on human capital formation. There might thus be contexts in which missions promoted human capital accumulation without this necessarily translating into local economic development. [ABSTRACT FROM AUTHOR]

This paper investigates the relative importance of Islamic banks, alongside their conventional counterparts, in relation to banking and financial development and economic welfare. Using a sample of 22 Muslim countries, with dual-banking systems, during the period 1999–2011, this paper reports some significant positive relationship between the market share of Islamic banks and the development of financial intermediation, financial deepening and economic welfare, particularly in low income or predominantly Muslim countries, and countries with a comparatively higher uncertainty avoidance index. Additionally, the results reveal that a greater market share of Islamic banks is associated with higher efficiency of conventional banks. [ABSTRACT FROM AUTHOR]

• Nepotism modeled as evolving cultural norm with different nepotistic equilibria. • Nepotism discourages investments in human capital, harming economic growth. • In countries with higher perceived nepotism, students obtain lower test scores. • Model prediction robust to perceived corruption and economic activity. • Estimates robust to controlling for time-invariant factors in non-OECD sample. This paper suggests that nepotism affects economic development by hindering human capital development. In our dynamic general equilibrium model, individuals perceiving nepotistic labor markets experience a weaker economic motive to invest in human capital. Nepotism is explained as an evolving cultural norm with different nepotistic equilibria, which are relevant for economic development. We test the central prediction of the model by relating scores from the Programme for International Student Assessment (PISA) to an indicator for perceived nepotism at the country level. Our findings indicate a negative association between nepotism and human capital. Subsample analysis and fixed effects estimations further corroborate the incentive narrative. [ABSTRACT FROM AUTHOR]

In this paper, we explore why there are no examples of societies with low state capacity and high economic development. We argue that such an outcome is unlikely because of the nature of investments in state capacity. Societies that become rich in the absence of a strong state invite predation by societies that develop such states. Thus societies invest in state capacity, in part, to plunder other societies' wealth. Those investments are a form of rent-seeking. Potentially preyed-upon societies are forced to invest in state capacity in turn so as to deter potential attackers. This entails that as soon as a rent seeker enters the game, the likelihood of a low-capacity, high-development society surviving falls. This explains the historical lack of such societies. We thus interpret state capacity not as a causal condition for widespread economic prosperity, but a survivability condition for enjoying this prosperity. [ABSTRACT FROM AUTHOR]

• The Lower Canada rebellions of 1837–38, are used to show that the development of markets reduces the cost of rebelling. • Using data from the 1831 census, we show that the likelihood of rebellions increases with market development (proxied by absolute price difference between one area and the main Atlantic port cities of the colony). • The intensity of rebellions is also affected by the level of market development. • The development of markets appears to act in a manner similar to new information diffusion technologies with regards to helping coordinate rebellions. In 1837–38, the British colonies of Upper and Lower Canada rebelled. The rebellion was more virulent (and better organized) in Lower Canada. The rebellions were also concentrated in the richer areas of that colony. In this paper, we use the census of 1831 and databases of rebellious events to explain how the rebels managed to overcome the problem of collective action. We argue that the rich areas were more prone to rebellion because they were where markets were most developed. These well-developed markets allowed for cheaper coordination of seditious elements. We link our contribution to the literature on the collective action problem inherent to the organization of protests, uprisings and rebellions. [ABSTRACT FROM AUTHOR]

This paper investigates the impact of exogenous changes in the economic environment on individuals’ risk attitudes. We combine data on media coverage of economic news with information on the self-stated willingness to take risks from the German Socioeconomic Panel Study. The average daily frequency of economic news reports is measured for different time frames preceding the date of the risk attitude elicitation. We find that while a short term increase in good news is positively related to the willingness to take risks, the relation is negative if we consider a long term increase. An increase in negative economic news coverage is negatively related to individuals’ willingness to take risks, irrespective of the time frame. A positive (negative) correlation between bad (good) news coverage and individuals’ worries about the economic state suggests that changes in risk perception may partly mediate the relation between news coverage and risk attitudes. [ABSTRACT FROM AUTHOR]

This paper presents an optimal contracting theory of short-term firm behavior. Contracts inducing short-sighted managerial behavior arise as shareholders’ response to conflicting intergenerational managerial incentives. High-return projects may last longer than the tenure of managers who implement them. Consequently, inducing managers to act in the long-term interests of firms requires the alignment of incentives across multiple managers. Such action comes at greater costs than providing incentives for a single manager and leads to contracts that favor short-term behavior. Long-term firm value maximization is further impeded when only the quality of accepted projects–but not those of declined projects–is public. In that case, shareholders find it costly to induce long-term project selection among managers who can earn all information rents from short-term projects but must sacrifice information rents from long-term projects to future managers. [ABSTRACT FROM AUTHOR]

Striving for gender equality presents major challenges but the benefits are vast, ranging from reduced conflict, both within and between communities, to higher economic growth. Unfortunately, Israel’s gender wage gap remains one of the highest among developed countries, despite a growing reverse gender gap in educational attainment. Investigating the gender wage gap for the Jewish majority and for the Arab minority, we find evidence of gender segregation by industry and occupations in addition to a glass ceiling effect for Jewish and Arab women. Using data from the Israeli Household Income Survey and electoral data from the Israeli parliamentary elections (2009), this paper provides novel evidence of the role of voter preferences in explaining the persistence of gender pay gaps. Importantly, we find strong evidence of an association between a higher share of votes allocated to nationalist parties, in a given locality, and a larger, (adjusted), gender wage gap for both Jewish-Israelis and Arab-Israelis. [ABSTRACT FROM AUTHOR]

It is widely believed that individualistic societies, which emphasize personal freedom, award social status for accomplishment, and favor minimal government intervention, are more prone to higher levels of income inequality compared to more collectivist societies, which value conformity, loyalty, and tradition and favor more interventionist policies. The results in this paper, however, challenge this conventional view. Drawing on a rich literature in biology and evolutionary psychology, we test the provocative Parasite Stress Theory of Values, which suggests a possible link between the historical prevalence of infectious diseases, the cultural dimension of individualism–collectivism and differences in income inequality across countries. Specifically, in a two-stage least squares analysis, we use the historical prevalence of infectious diseases as an instrument for individualistic values, which, in the next stage, predict the level of income inequality, measured by the net GINI coefficient from the Standardized World Income Inequality Database (SWIID). Our findings suggest that societies with more individualistic values have significantly lower net income inequality. The results are robust even after controlling for a number of confounding factors such as economic development, legal origins, religion, human capital, other cultural values, economic institutions, and geographical controls. [ABSTRACT FROM AUTHOR]

A range of evidence exists demonstrating that social capital is associated with a number of important economic outcomes such as economic growth, trade and crime. A recent literature goes further to illustrate how historical events and variation can lead to the development of differing and consequential social norms. This paper examines the related questions of how persistent initial variations in social capital are, and the extent to which immigrant groups do or do not converge to the cultural and social norms of their recipient country by examining a unique and geographically concentrated immigration event in 16th century Italy. We demonstrate that despite the substantial time since migration these communities still display different behavior consistent with higher civic capital than other comparable Italian communities. Moreover, we demonstrate that this difference does not appear to have changed over the last 70 years. For instance, differences in voter turnout apparent in the late 1940s remain in the 21st century. This latter finding has implications for our view of the likelihood of assimilation of immigrant groups to local norms, particularly in cases of large-scale migration. [ABSTRACT FROM AUTHOR]

The evil eye belief is a widespread superstition according to which people can cause harm by a mere envious glance at coveted objects or their owners. This paper argues that such belief originated and persisted as a useful heuristic under conditions in which envy was likely to trigger destructive behavior and the avoidance of other people's envy, effectively prescribed by the evil eye belief, was a proper response to that threat. We hypothesize that in weakly institutionalized societies wealth differentiation and vulnerability of productive assets were the key factors enabling envy-induced destructive behavior and contributing to the emergence and spread of the evil eye belief as a cultural defense mechanism. Evidence from small-scale preindustrial societies shows that there is indeed a robust positive association between the incidence of the belief and measures of wealth inequality, controlling for potential confounding factors such as patterns of spatial and cross-cultural diffusion and various dimensions of early economic development. Furthermore, the evil eye belief is more prevalent in agro-pastoral societies that tend to sustain higher levels of inequality and where vulnerable material wealth plays a dominant role in the subsistence economy. [ABSTRACT FROM AUTHOR]

Abstract: This paper investigates whether the religious identity of state legislators in India influences development outcomes, both for citizens of their religious group and for the population as a whole. Using an instrumental variables approach derived from a regression discontinuity, we find that increasing the political representation of Muslims improves health and education outcomes in the district from which the legislator is elected. We find no evidence of religious favoritism: Muslim children do not benefit more from Muslim political representation than children from other religious groups. [Copyright &y& Elsevier]

Islamic finance is one of the most prominent phenomena over the last decade in the banking industry in the Middle-East and South-East Asia. In spite of the substantial size and growth of this segment recently, the role of Islamic banking in the economy is still heavily debated and very few empirical work is available. This paper studies the empirical impact of Islamic banking on banking sector development. It circumvents the lack of data through a newly constructed and comprehensive database, "IFIRST", covering Islamic commercial banks worldwide over the period 2000-2005. This database is, to our knowledge, unique in the industry. We find strong and consistent empirical evidence that the development of Islamic banking in Muslim countries leads to a higher banking sector development, as measured by the amount of private credit or bank deposits scaled to GDP. This effect occurs through the development of a new, Shariah-compliant, banking industry, which does not crowd out the conventional banking system. Additionally, we provide evidence that the Islamic banking sector acts as a complement to the conventional banking in Muslim countries, when both systems co-exist and the Islamic sector reaches a medium penetration in the total banking sector. [ABSTRACT FROM AUTHOR]