Charles A. Register

Traffic Fatalities and Public Sector Corruption

Traffic accidents result in 1 million deaths annually worldwide, though the burden is disproportionately felt in poorer countries. Typically, fatality rates from disease and accidents fall as countries develop. Traffic deaths, however, regularly increase with income, at least up to a threshold level, before declining. While we confirm this by analyzing 1,356 country-year observations between 1982 and 2000, our purpose is to consider the role played by public sector corruption in determining traffic fatalities. We find that such corruption, independent of income, plays a significant role in the epidemics of traffic fatalities that are common in relatively poor countries.

The Ill Effects of Public Sector Corruption in the Water and Sanitation Sector

In general, given a particular set of institutions, the greater a county’s per capita income, the more extensive will be its provision of goods and services that require concerted public action. We contend that one of the most important aspects of institutions in this regard is public sector corruption. We test this contention by analyzing 85 countries observed in 1990, 1995, 2000, and 2004—the only years for which data on improved drinking water and adequate sanitation are available. The models point to statistically significant, negative relations between corruption and access to both improved drinking water and adequate sanitation. (JEL D31, H41, P16)

Traffic Fatalities: Does Income Inequality Create an Externality?

Responsible for 20 million severe injuries and/or deaths annually, few epidemics receive less attention than traffic accidents. Going beyond confirming an inverted U-shaped relationship between mean income and fatalities, we show theoretically that income inequality can positively affect fatalities in two ways. Each operates through heterogeneity between road users, and while the direct effect can be expected to evaporate with rising income, the indirect effect may prove to be an externality in that the relationship remains regardless of the level of income. Our model is supported by evidence from 79 countries between 1970 and 2000.

Natural Disasters and Foreign Direct Investment

The world’s population has witnessed the concurrence of two powerful global trends: an unprecedented growth in foreign direct investment (FDI) and an increase in natural disasters. Since investment decisions are based on an evaluation of expected risks and returns, we consider whether FDI decisions are influenced by natural disasters. We do so by considering the relation between FDI in 94 countries between 1984 and 2004 and the number of disasters striking those countries. Across a variety of empirical tests that control for two-way fixed effects we find natural disasters to be negatively and statistically significantly associated with a country’s FDI. (JEL Q54)

From Cholera Outbreaks to Pandemics: The Role of Poverty and Inequality

Cholera and other diarrheal diseases are the second leading cause of death among the poor globally. The tragedy of this statistic is that it need not be the case. Unlike many afflictions, the impact of cholera can be greatly reduced, if not eliminated, through the provision of clean water services. This begs the question of why such provision is absent in much of the world. It is our contention that the provision of clean water services is an increasing function of both a countrys level of income and income equality. We test these hypotheses by analyzing 1,032 annual observations arising from 55 relatively poor countries between the years 1980 and 2002. In the primary part of the analysis, we find that providing clean water is, as predicted, an increasing function of income and equality. Following this, and consistent with the existing epidemiological research on cholera, we find that both the numbers of cases and deaths resulting from a given cholera outbreak are strongly and negatively related to the provision of clean water.

S&L Performance Persistence, Moral Hazard and Market Discipline

While prior research finds evidence of significant performance persistence in banking, the issue of the determinants of such persistence has rarely been examined. In light of a liberalized thrift takeover market, this study tests for persistence and then attempts to identify its determinants for U.S. thrifts operating during 1989 to 1994. A moral hazard hypothesis for losing persistence is examined, as well as the effectiveness of the takeover market in disciplining persistent losers. Results indicate significant performance persistence, with firms in the sample 16 times more likely to remain in an initial position as a winner, or loser, than to switch. Consistent with moral hazard, persistent losers exhibit low charter values and greater risk‐taking behavior, with the opposite relations for persistent winners. Finally, and perhaps most importantly, persistent losers generally had a significantly higher probability of subsequent takeover, indicating the effectiveness of the takeover market in disciplining poor performers.

Public Sector Corruption and Natural Hazards

Public sector corruption has been shown to increase death rates and damages from natural disasters. We consider whether natural hazards can lead to rising levels of public sector corruption. This might seem unlikely since natural hazards are predetermined, naturally occurring events. However, when the distinction between hazards and disasters is considered, it becomes clear that corruption may well increase the likelihood that any new hazard will become a disaster, increasing the existing level of corruption within a given country. Based on standard estimation techniques, we find a statistically significant, positive relation between predetermined natural hazards and public sector corruption.

Cost Inefficiency and the Holding of Non-traditional Assets by Solvent Stock Thrifts

In contrast to greater restrictions on thrifts nontraditional assets under FIRREA, Congress is considering new legislation forcing thrifts to convert to banks. Hence, the efficiency implications of product diversification for thrifts is an important issue. We examine the relation between thrifts movement into nontraditional assets and the operating inefficiency of adequately capitalized stock thrifts in 1988 and 1994. We estimate inefficiency scores for individual thrifts for each respective year using a stochastic cost frontier methodology. In a second step, we regress these scores against measures for movement into nontraditional assets. We find a significant fall in inefficiency with a rise in holdings of both traditional and nontraditional assets. Our results suggest that greater diversification privileges for thrifts should be beneficial to the health of the industry.

The high cost of low quality infrastructure when natural disasters strike

There is clear evidence embedded in the geological record of natural disasters such as volcanic activity, earthquakes, floods, hurricanes and the like striking earth for many millennia. Interestingly and for as yet unknown reasons, there has been a fourfold increase in such disasters over the last four decades. While the reason or reasons for this spike is yet to be understand (randomness, long-term trends or perhaps global warming), it has led to a great deal of research into the relationships between natural disasters and socio-economic factors. While many could be listed, research into whether disasters spawn public sector corruption, how effective mitigation actions such as tidal buoys and seismographs can prove to be, whether institutions such as property rights play a role in determining a disaster’s devastation and the impact of disasters on differing country’s economic growth serve as good examples. We add to this literature by considering the seemingly obvious relationship between the quality of a country’s infrastructure and deaths due to disasters which to date has not been tested as there has been no consistent, cross-country measure of infrastructure quality. To be sure, our expectation is that quality infrastructure mitigates disasters but it is this missing link in the research that we seek to fill. To provide a direct test of the importance of infrastructure, we consider 126 countries that experienced at least one natural disaster during the period 2005-2012. The data on disasters is taken from the EM-DAT archive, collected and maintained by the non-profit institution Centre for Research on the Epidemiology of Disasters (CRED). The uniqueness of the analysis is made possible by the use of the only consistent, cross-country measure of infrastructure quality recently made available by the World Economic Forum’s annual Global Competitiveness Report. Given that the key dependent variable throughout is a count of deaths, the empirical analyses are based on a series of Negative Binomial panel models. As expected, we find consistent, negative and strong statistically significant relationships between a country’s infrastructure quality and deaths due to disasters. Thus, the results suggest that when decision-making takes place within a country with respect to how its resources will be spent, investments in high-quality infrastructure will certainly yield positive returns when disasters strike. Similarly, governmental and non-governmental agencies that provide development assistance would well serve developing countries through loans and grants designed to provide funding for the development of high-quality infrastructure.

Ethnic tensions and social infrastructure

Ethnic tensions may restrict economic growth through a number of infrastructure channels. We extend this literature by (1) using a broad measure of ethnic tensions, (2) considering a variety of measures of social infrastructure for a panel of 87 countries across 16 years and (3) explicitly addressing the endogeneity of ethnic tensions. We find ethnic tensions significantly retard the formation of social infrastructure and, by extension, impose an unnecessary cap on growth and development. As such, governments would well-serve the interests of their populaces by enacting policies, conducting politics and carrying out their daily functions in ways that serve to dampen ethnic tensions, rather than the reverse, which too often seems the case.