Download Economics development and natural resources 1. Demographic

Economics development and natural resources
1. Demographic transition in resource rich countries: a bonus or a curse?
(forthcoming in World Development)
This study argues that resource wealth is a key factor for understanding income effects of
demographic transition. We develop a simple model highlighting how the income effect of
increased labor supply may depend on resource rents, and provide empirical evidence that
support the theoretical predictions. Using panel data covering the period from 1982–2006 for
more than 120 countries, we find a negative interaction effect between resource wealth and
demographic transition on national income. Moreover, the negative interaction effect does not
depend on institutional quality, and is found also across different samples.
2. Resource curse and power balance: evidence from oil rich countries. World
Development 40, 1308–1316. (Joint with Bjorvatn and Schneider), 2012.
We examine the role of political fractionalization in understanding the “resource curse”.
Using panel data for 30 oil-rich countries, we find that the income effect of resource rents is
moderated by the political power balance. With a strong government, resource wealth can
generate growth even in an environment of poorly developed institutions, while adding oil
revenues to a weak government may have damaging effects on the economy. These results
have important implications for the economic prospects of the oil-rich countries in the Middle
East, which are currently undergoing profound political changes.
3. Resource curse and power balance: evidence from Iran (Joint with Bjorvatn and
Schneider) revise & resubmit to Review of Middle East Economics and Finance,
2012.
Empirical research shows that natural resources have a detrimental effect on economic
growth, a phenomenon known as the “resource curse”. Competition between influence groups
for access to the resource rents, that is, rent-seeking, is often blamed for this curse. In this
paper we dig deeper into the link between political competition and the resource curse by
studying the case of Iran from 1960-2007. We present a theoretical model demonstrating how
the effect of rents on the economy depends on the balance of political power. The model
shows that an increase in rents may lead to a sharp reduction in income when the distribution
of power between influence groups is relatively balanced. The empirical evidence confirms
the predictions of the model.
4. Natural resources and internal conflicts - how decentralization lifts the curse
(Joint with Lessman and Markwardt), 2012, under progress.
We study how the natural resource endowments affect risk of internal conflicts and how this
effect depends on decentralization levels in a political system. Resource rents, especially
lootable resources such as oil, finance conflicts, creating strong separatist movements. Our
main hypothesis is that increasing the levels of political decentralization can limit the
destructive effect of the natural resource rents on internal conflicts. We use cross-country and
panel data covering the period from 1984–2004 from more than 80 countries to test this
hypothesis. Our estimates confirm that the relationship between the natural resource rents and
risk of internal conflict is dependent on the levels of decentralization. Our results hold when
1 we control for the effects of other determinants of conflict, time varying common shocks,
country-fixed effects and various additional covariates.
5. Oil may buy peace: role of balance of political power (Joint with Bjorvatn), 2012,
under progress.
We study the oil rents-internal stability relationship, taking into account the role of political
power factionalism. Using panel data for more than 120 countries from 1984-2009, our results
show that oil rents can bring political stability but this stability effect is significantly depends
on the degree of political power balance. The positive stability effect of oil rents reduces at
higher levels of political factionalism and lack of dominant political group.
6. Can education save democracy from oil rents? (Joint with Al Dakak), 2012,
under progress.
While a limited number of oil rich economies enjoy adequate levels of democracy, most
others suffer from limited political openness. In this study, we aim to investigate the possible
explanation for this contrasting observation. Our main hypothesis is that higher levels of
education can reduce the negative effect of oil rents on democratic institutions. Our panel data
analysis of more than 60 countries from 1961-2010 shows that level of education matters for
the final effect of oil on democracy. This finding is highly significant for the secondary
education, controlling for other main determinants of political institutional quality and
country and time fixed effects.
Economics development and shadow economy
7. Shadow economy trends in Iran: A Comparative Study Using Amos and Lisrel
(in Farsi, joint with Nasrollahi and Talei). Quarterly Journal of the Economic
Research 12, 61-92.
We estimate the size of shadow economy in Iran from 1975-2007.
8. Pollution, shadow economy and corruption: theory and evidence (joint with
Thum and Biswas). Ecological Economics 75, 114–125, 2012.
We study how the shadow economy affects pollution and how this effect depends on
corruption levels in public administration. Production in the shadow economy allows firms to
avoid environmental regulation policies; a large informal sector may be accompanied by
higher pollution levels. Our theoretical model predicts that controlling the levels of corruption
can limit the effect of the shadow economy on pollution. We use panel data covering the
period from 1999 to 2005 in more than 100 countries to test this theoretical prediction. Our
estimates confirm that the relationship between the shadow economy and the levels of
pollution are dependent on the levels of corruption. Our results hold when we control for the
effects of other determinants of pollution, time varying common shocks, country-fixed effects
and various additional covariates.
2 9. Smuggling around the World: Evidence from Structural Equation Modeling
(joint with Buehn). Applied Economics 44 (23), 3047-3064, 2012
This article uses a Multiple Indicators Multiple Causes (MIMIC) model to analyse the
determinants of smuggling. The analysis reveals that higher corruption and a lower rule of law
encourage smuggling. Tariffs and trade restrictions are important push factors, while a higher
Black Market Premium (BMP) discourages smugglers. Based on the MIMIC estimates, we
calculate an index of smuggling which provides a ranking for 54 countries. We find that
smuggling is rampant in Cameroon, Pakistan and Kenya while it is least prevalent in
Switzerland, Finland and Sweden.
10. Illegal Trade in the Iranian Economy: Evidence from Structural Equation
Model. European Journal of Political Economy 25(4), 489-507.
This study investigates the causes and consequences of import and export smuggling and
estimates its relative size in Iran from 1970 to 2002. Multiple Indicators–Multiple Causes
(MIMIC) modeling and trade misinvoicing are used to compute the latent variable of
smuggling. The results indicate that the penalty rate for smuggling and the quality of
economic and political institutions reduce smuggling, while tariffs and black market premia
increase the incentives for illegal trade. More trade openness is associated with greater illegal
trade in the case of Iran. On average, smuggling in Iran has been approximately 13% of total
trade.
11. Dark side of trade in Iran. In: Storti, C.C., de Grauwe, P. (Eds), Illicit Trade and
Globalisation, MIT Press, Cambridge, MA.
As international trade has expanded dramatically in the postwar period--an expansion
accelerated by the opening of China, Russia, India, and Eastern Europe--illicit international
trade has grown in tandem with it. This volume uses the economist’s toolkit to examine the
economic, political, and social problems resulting from such illicit activities as illegal drug
trade, smuggling, and organized crime. The contributors consider several aspects of the illegal
drug market, including the sometimes puzzling relationships among purity, price, and risk; the
effect of globalization on the heroin and cocaine markets, examined both through
mathematical models and with empirical data from the U.K; the spread of khat, a
psychoactive drug imported legally to the U.K. as a vegetable; and the economic effect of the
“war on drugs” on producer and consumer countries. Other chapters examine the hidden
financial flows of organized crime, patterns of smuggling in international trade, Iran’s illicit
trading activity, and the impact of mafia-like crime on foreign direct investment in Italy.
12. Does the Shadow Economy Bring Political Stability? (Joint with Badreldin),
under progress, 2012.
In this research, we intend to investigate the relation between the size of activities in the
shadow economy and political (in) stability.
13. Impact of education on the shadow economy: Institutions matter (Joint with
Andreas Buehn), 2012.
Our paper aims to answer the question whether education and its interplay with a society’s
institutions are important elements explaining the dynamics of participation in the shadow
3 economy. Through its positive effect on income returns, education should reduce the
incentives to participate in the shadow economy, as taking on an official, well-paid job
becomes more rewarding, hence attractive. This may be referred to as the human capital effect
of education. At the same time though, education contributes to the formation of values and
helps people to understand the importance of paying taxes. Higher morale sentiments should
reinforce the reluctance to enter the shadow economy. If institutions are however severely
deprived, education may be less effective a mechanism to reduce shadow economy
participation. We call this the normative effect. Using panel data for more than 80 countries
between 1999 and 2007, the empirical analysis presented in this paper tests the relationship
between the shadow economy and education, taking into account the impact of institutions
and controlling for other important factors such as the tax burden.
14. Does real estate transparency matter for foreign real estate investments? (joint
with Gholipour Fereidouni), 2012. The purpose of this paper is to examine the impact of real estate transparency (RET) on
foreign real estate investments (FREI). Most of the previous studies have argued that the free
flow of information and the fair and consistent application of local property laws could attract
greater amounts of FREI. Using observations from 32 countries covering 2004, 2006, 2008
and 2010 and applying fixed-effect and the generalized method of moments (GMM)
techniques, our empirical results reveal that RET is not a major determinant of FREI.
However, we find that the effect of RET on FREI is dependent on its interaction with the level
of income implying that the higher the level of income in the host country, the higher the
effect of RET on FREI. Finally, the results show that foreign direct investment (FDI) in other
sector, market size and property prices are important determinants of FREI.
Economics development and oil shocks
15. Oil revenues shocks and government spending behavior in Iran. Energy
Economics 33 (6), 1055-1069, 2011.
Oil revenues play an important role in the political economy of Iran. On average, 60% of the
Iranian government revenues and 90% of export revenues originate from oil and gas
resources. Current international sanctions on Iran have mainly targeted the oil production
capacity of Iran and its exports to the global markets. In this study, we analyze the dynamic
effects of oil shocks on different categories of the Iranian government expenditures from 1959
to 2007, using impulse response functions (IRF) and variance decomposition analysis (VDC)
techniques. The main results show that Iran's military and security expenditures significantly
respond to a shock in oil revenues (or oil prices), while social spending components do not
show significant reactions to such shocks.
16. The Effects of Oil Price Shocks on the Iranian Economy (Joint with Markwardt).
Energy Economics 31(1), 134-151.
The Iranian economy is highly vulnerable to oil price fluctuations. This paper analyzes the
dynamic relationship between oil price shocks and major macroeconomic variables in Iran by
applying a VAR approach. The study points out the asymmetric effects of oil price shocks; for
4 instance, positive as well as negative oil price shocks significantly increase inflation. We find
a strong positive relationship between positive oil price changes and industrial output growth.
Unexpectedly, we can only identify a marginal impact of oil price fluctuations on real
government expenditures. Furthermore, we observe the ”Dutch Disease” syndrome through
significant real effective exchange rate appreciation.
17. Does the Iranian oil supply matter for the oil prices? (Joint with Raesian), under
progress, 2012.
There is an increasing tension between the Iranian Government and the west on an
increasingly likely European oil embargo and the Iranian threat to close the Strait of Hormuz.
The main question is: What will happen to the international oil prices in the case of shocks in
the flow of Iranian oil to the international markets? In this study, we analyze the dynamic
relationship between the Iranian oil supply and international oil prices from January 1973 to
September 2011, using a modified version of the Granger causality test introduced by Toda
and Yamamoto (1995). Our results show that there is no Granger causality between the
Iranian oil production and international oil prices. Historical data on the Iranian oil production
do not provide any useful information to explain the current and future values of international
oil prices. Thus, global oil prices do not follow shocks in the Iranian oil production.
Economics development and military spending
18. Military spending and economic growth: The case of Iran. Defence and Peace
Economics (forthcoming: http://dx.doi.org/10.1080/10242694.2012.723160).
Over the last decade, the Iranian Government budget on military has been higher than the
average of the world. The current increasing international sanctions aim to reduce the military
capabilities and capacities of the Iranian Government. We analyze the response of the Iranian
economy to shocks in its military budget from 1959 to 2007, using impulse response
functions and variance decomposition analysis. The Granger causality results show that there
is unidirectional causality from the military spending growth rate to the economic growth rate.
The response of income growth to increasing shocks in the military budget is positive and
statistically significant.
Economics development and environment
19. Hold your breath: a new index of air quality (Joint with Buehn) (Revise &
Resubmit to Energy Economics), 2012.
Environmental quality and climate change have long attracted attention in policy debates.
Recently, air quality has emerged on the policy agenda. We calculate a new index of air
quality using CO2 and SO2 emissions per capita as indicators and provide a ranking for 122
countries from 1985 to 2005. The empirical analysis supports the EKC hypothesis and shows
a significant influence of determinants such as energy efficiency, industrial production,
electricity produced from coal sources, and urbanization on air quality. According to our
index, Luxemburg, Norway, Iceland, Switzerland, and Japan are among the top 5 countries in
terms of air quality performance. The Democratic Republic of Congo, Eritrea, Ethiopia, Togo,
and Nepal performed worst in 2005
5 20. Pollution, economic development and democracy: evidence from the MENA
countries (joint with Markwardt). (MAGKS Paper No. 27-2012, Marburg)
The Middle East and North Africa (MENA) countries are among the world's top emitters of
CO2 and SO2 in per capita terms. The objective of this paper is to analyze whether investing
in the democratic development of these countries is an effective tool to make the economic
growth in this region more environmentally compatible. Arguing on the basis of the
Environmental Kuznets Curve hypothesis and using panel data on the income-emissiondemocracy nexus, we find evidence that improvements in the democratic development of the
MENA countries help to mitigate environmental problems. Our results clearly show, that the
quality of democratic institutions has a greater influence on local environmental problems
than on global environmental issues in the MENA region.
Economics development: others
21. Education spending and productivity in Iran: where have all the education
expenditures gone? ERF conference paper .No. ERF17AC_055., 2011
22. Macroeconomic of populism in Iran. MPRA Paper No. 15546, Munich, 2009
23. Cement industry in Iran (in Persian). Bourse Financial & Economical Monthly
Magazin (Mahname Bours), No. 49, 23-29. , 2005.
24. Economic evaluation of the Caspian Oil transit to International markets (in
Persian). Quarterly Energy Economics Review (Faslnameh Motaleate Eghtesad
Energy), First year, 3-24, 2004.
25. Opportunities for Iran commodity transit routes after the Iraqi war (in Persian).
Political & Economical Ettelat Journal. No.9-10, 224-229, 2003.
26. Economics of oil pipelines in the Caspian Sea region (in English), Energy
Economics (Eghtessad-e-Energy) 2 (47), April 2003. ISSN: 1563-1133, 2003
27. Iranian options most economically viable for exporting Caspian Sea Oil. Oil &
Gas Journal 101 (11), 22-26. ISSN (printed): 0030-1388, 2003
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