Abstract:
Arguably, the Commonwealth of Independent States (CIS) countries are not
as integrated into the world markets as the EU countries or South-East
Asian countries. Trade flows of the CIS countries are not well
diversified both in terms of trading partners as well as in terms of
composition of exports. In order to compare the degree of export
diversification of the CIS countries relative to other countries, I
employ the gravity model that proved to be very successful in explaining
geographical patterns of trade across countries. The gravity equation is
estimated "out-of-sample," meaning that I do not include data on trade
flows of the CIS countries in the sample while calculating parameters of
the gravity equation. Egger (2002) argued forcefully that "in-sample"
estimation of the trade potential based on deviation of residuals from
the linear prediction is incorrect because large deviations of residuals
in the gravity equation based on the "in-sample" method is not the
evidence of large deviation of trade from its potential but rather the
indicator of the model misspecification. In addition, I explicitly deal
with the problem of zero trade flows which becomes more severe at higher
levels of disaggregation such as at the level of sectors of economy and
account for heterogeneity of firms at the industry level.
Keywords: gravity model, trade potential, out-of-sample predictions
JEL Classifications: F12, F14, F17
Spatial HAC Estimator: Analysis of Convergence of European Regions
Abstract:
This paper
applies a non-parametric heteroscedasticity and autocorrelation consistent (HAC)
estimator of error terms in the context of the spatial autoregressive model
of GDP per capita convergence of European regions at NUTS 2 level. By
introducing the spatial dimension, it looks how the equilibrium distribution
of GDP per capita of EU regions evolves both in time and space dimensions.
Results demonstrate that the global spatial spillovers of growth rates make
an important contribution to the process of convergence by reinforcing
economic growth of neighboring regions. Results are even more pronounced
when the convergence in wage per worker is considered.
The choice of kernel functions does not significantly effect estimation of
the variance-covariance matrix while the choice of the bandwidth parameter
is quite important. Finally, results are sensitive to the weighting matrix
specification and further research is needed to give a more rigorous
justification for the selection of the weighting matrix.
Keywords: convergence, spatial econometrics, regional economics, EU
JEL Classifications: C1, R1
Spatial Spillovers in the Development of Institutions with Harry H. Kelejian, and
Peter Murrell
Abstract
We examine spatial spillovers between countries relating to the development of their institutions. Our dependent variables are three measures of institutions which relate to politics, law, and administration. The major explanatory variable on which we focus is a spatial lag of the dependent variable, that is the level of institutions in bordering countries. We also consider long-term determinants of institutions that have been previously examined in the literature, such as legal origin, religious groupings, ethnolinguistic fractionalization, resource base, and initial level of GDP per capita. Our framework of analysis is a spatial panel data model. Because of missing observations, our panel data set is not balanced, which causes special problems in estimating spatial models. These problems are explicitly recognized in our estimation procedure. Our results show that spill-over effects between countries are statistically significant and economically important. We provide evidence of the importance of spatial spillovers.
Keywords: institutions, spatial econometrics, governance, neighborhood effects, spatial spillovers
JEL Classifications: C5, O1, O5,
P5
Regional governance infrastructure: the positive externality on the
inflow of foreign direct investment (job market paper)
A standard neoclassical
model of growth predicts convergence of income levels across countries and geographical
regions. Recent empirical evidence, however, has shown that the gap between
rich and poor countries has increased over the last thirty years. One of the
key regularities that are at odds with the neoclassical theory is the lack of
capital flows from rich to poor countries. Two competing, but not mutually
exclusive theories that explain this regularity are new economic geography and
institutional economics. The first theory emphasizes the importance of
increasing returns and agglomeration to explain the divergence in economic
development across different geographical regions. The second theory stresses
the crucial role of good institutions that generate economic growth and improve
investment climate inside the country.
To investigate the role of
institutions and geography on economic development, we look at inflows of
foreign direct investment (FDI) in 24 transition countries from 1993 to 2003.
We set up an econometric panel data model that takes into account spatial
spillovers and spatially correlated error terms and estimated the model by
applying a recently developed generalized method of moment (GMM) three-stage
procedure.
Our results show that
the regional quality of institutions is an important factor that explains
variations in FDI inflows. The positive effect of good regional governance
dominates the effect of better developed regional markets. The effect of
regional governance is both statistically significant and of the same order of
magnitude as the effect of good governance inside the country. We also have
found some evidence that EU membership and high oil and gas resources are
important determinants of FDI inflows in transition countries.
The three-point-for-win rule in
soccer: are there incentives for match fixing?
In the middle of the 90's the European soccer body UEFA urged National Soccer
Federations to award three points for a win in a match instead of two points,
as under previous regulations. Soon, the new system was universally adopted by
all countries. The purpose of this change was to discourage playing for a tie,
since ties receive only one point each, and to encourage a more attractive,
attacking style of play. While there is some evidence of success, the effects
are not as big as was probably expected. The potential danger of the new rule
is that it penalizes "quality" tied games and encourages teams to
collude in order to maximize the expected number of points per game. This
problem is especially relevant if teams can strategically interact during long
tournaments, potentially leading to corruption and point trading. There is also
evidence that the change in rules had heterogeneous effects on top clubs and
lesser clubs. While top clubs began attacking more, lesser clubs emphasized defense
even after the change in rules.
We develop a game theoretic model of strategic interactions between teams in a
tournament that predicts that lesser clubs are more likely to collude if the
probability of a draw is high or the expected punishment of being caught is
low. We further test predictions of the model using a data set of soccer games
in the
Keywords: game theory, sports economics, corruption,
institutional economics
Poverty Effects of Russia's WTO
Accession: Modeling 'Real' Households and Endogenous Productivity Effects with T. Rutherford and D. Tarr, and
O. Shepotylo, World Bank Policy Research Working Paper No. 3473
The Impact on Russia of WTO Accession and the Doha Agenda: the importance of liberalization of barriers agains foreing direct investmentin services for growth and poverty reduction with T. Rutherford and D. Tarr, and O. Shepotylo, World Bank Policy Research Working Paper No. 3725
"The Structure of Import Tariffs in the Russian Federation: 2001-05" (June 1, 2007) with David Tarr World Bank Policy Research Working Paper No. 4265