Christa N. Brunnschweiler

Finance for Renewable Energy: An Empirical Analysis of Developing and Transition Economies

This paper examines the role of the financial sector in renewable energy (RE) development. Although RE can bring socio-economic and environmental benefits, its implementation faces a number of obstacles, especially in non-OECD countries. One of these obstacles is financing: underdeveloped financial sectors are unable to efficiently channel loans to RE producers. The influence of financial sector development on the use of renewable energy resources is conformed in panel data estimations on up to 119 non-OECD countries for 1980-2006. Financial intermediation, in particular commercial banking, has a significant positive effect on the amount of RE produced, and the impact is especially large when we consider non-hydropower RE such as wind, solar, geothermal, and biomass. There is also evidence that the adoption of the Kyoto Protocol has had a significant positive impact on the development of the RE sector.

Oil and Growth in Transition Countries

This paper examines the impact of oil on economic growth in transition economies of the former Soviet Union (FSU) and Central and Eastern Europe (CEE). We use oil production and reserves data in a series of panel estimations to show that oil has had strong and robust positive growth effects between 1990-2006. This is confirmed when we consider the different oil ownership structures. Additionally, we find that privatization levels have had positive growth effects, while privatization speed has had negative effects on growth.

Did History Breed Inequality? Colonial Factor Endowments and Modern Income Distribution

We explore the relation between historical population density in former colonies and modern income distribution. A theoretical model highlights the potentially opposing effects of native population density on incentives for colonists to conquer or settle in new territories. While an abundant supply of native labor is an “asset” that drives up land rents, it is also a “liability” that makes land acquisition by colonists more difficult and reduces returns to peacable migration. Conflicts over land, sowing the seeds for inequality by creating a landed elite living off rents, are especially likely to emerge for intermediate native population densities. Results are confirmed by detailed empirical tests highlighting the curvilinear relationship between native population density and modern income inequality. Finally, using population density as an instrument for inequality in the former colonies, we demonstrate that there is no causal relationship running from income distribution to economic growth.

Financing the Alternative: Renewable Energy in Developing and Transition Countries

This paper examines the determinants of credit allocation to renewable energy firms in developing and transition countries. Using a simple en- dogenous growth model, we show that the development of the renewable energy sector, i.e. the diversification of renewable energy resources used in primary energy production, depends on the quality of financial intermedia- tion, debtor information costs to banks, and financing needs of renewable energy firms. Policies should aim at increasing financial sector perfor- mance through better institutional frameworks and improving financing conditions for new energy firms. The empirical analysis confirms the pos- itive effect of financial intermediary development on the renewable energy sector.

Economic Backwardness and Social Tension

We propose that relative economic backwardness contributes to the build-up of social tension and the incidence of both nonviolent and violent forms of opposition to the current political regime. We take inspiration from Gerschenkrons (1962) essay on economic backwardness and more recent findings on international comparisons and status-seeking to develop a testable hypothesis. We use information on a large number of countries and years from a new dataset on episodes of organized mass movements and find that greater economic backwardness is indeed consistently linked to a higher probability of seeing both violent and nonviolent forms of civil unrest. IV estimations using three different instruments, including distance to either London or Washington, D.C., and mailing speeds and telegram charges around 1900, suggest that this relationship is causal.

Wealth creation, wealth dilution and population dynamics

Wealth creation driven by R&D investment and wealth dilution caused by disconnected generations interact with households’ fertility decisions, delivering a theory of sustained endogenous output growth with a constant endogenous population level in the long run. Unlike traditional theories, our model fully abstracts from Malthusian mechanisms and provides a demography-based view of the long run where the ratios of key macroeconomic variables ñ consumption, labor incomes and financial assets - are determined by demography and preferences, not by technology. Calibrating the model parameters on OECD data, we show that negative demographic shocks induced by barriers to immigration or increased reproduction costs may raise growth in the very long run, but reduce the welfare of a long sequence of generations by causing permanent reductions in the mass of firms and in labor income shares, as well as prolonged stagnation during the transition.

Income and Armed Civil Conflict: An Instrumental Variables Approach

Abstract The large empirical conflict literature has established that there is a strong negative link between economic variables and the onset of an armed civil conflict. However, it has been difficult to demonstrate a clear causality between poor economic performance and increased risk of conflict because of potential endogeneity issues, especially for large country samples. Most existing studies that analyse the causal links focus on the effects of economic growth on conflict, even though conventional conflict studies find the strongest relationship for income levels. In this article, we use three new exogenous instruments for income per capita, based on historical data for mailing times, telegram charges and urbanization rates. Using instrumental variables methods and global panel data for the period 1946–2014, we show that the negative effect of income per capita on the probability of conflict onset is consistently strong and larger than in conventional estimations using pooled ordinary least square regressions.

Rebellion Against Reason? A Study of Expressive Choice and Strikes

In this paper we challenge the conventional view that strikes are caused by asymmetric information regarding firm profitability such that union members are uninformed. Instead, we build an expressive model of strikes where the perception of unfairness provides the expressive benefit of voting for a strike. The model predicts that larger union size increases both wage offers and the incidence of strikes. Furthermore, while asymmetric information is still important in causing strikes, we find that it is the employer who is not fully informed about the level of emotionality within the union, thereby contributing to strike incidence. An empirical test using UK data provides support for the predictions. In particular, union size has a positive effect on the incidence of strikes and other industrial actions even when asymmetric information regarding profitability is controlled for.

International partnerships, foreign control and income levels: theory and evidence

We analyze the effects of different regimes of control rights over critical resources on the total domestic income of open economies. Considering home control, foreign control, and international partnerships in a theoretical model with incomplete contracts and more productive foreign technologies, we show that (i) partnerships can be jointly optimal, (ii) foreign control is never optimal, (iii) assigning complete residual rights to foreign firms reduces domestic income via a Dutch-Disease mechanism. Empirical evidence using a new dataset on petroleum ownership structures for up to 68 countries between 1867-2008 shows that (i) international partnerships tend to generate higher domestic income than foreign control, and (ii) partnership and foreign control are linked to high or intermediate relative profitability of the domestic resource endowment, whereas home control is associated with low relative profitability.