Claudia R. Williamson

Rhetoric versus Reality: The Best and Worst of Aid Agency Practices

Foreign aid critics, supporters, recipients, and donors have produced eloquent rhetoric on the need for better aid practices— has this translated into reality? This paper attempts to monitor the best and worst of aid practices among bilateral, multilateral, and UN agencies. We create aid practice measures based on aid transparency, specialization, selectivity, ineffective aid channels, and overhead costs. We rate donor agencies from best to worst on aid practices. We find that the UK does well among bilateral agencies, the US is below average, and Scandinavian donors do surprisingly poorly. The biggest difference is between the UN agencies, who mostly rank in the bottom half of donors, and everyone else. Average performance of all agencies on transparency, fragmentation, and selectivity is still very poor. The paper also assesses trends in best practices over time—we find modest improvement in transparency and more in moving away from ineffective channels. However, we find no evidence of improvements (and partial evidence of worsening) in specialization, fragmentation, and selectivity, despite escalating rhetoric to the contrary.

Securing Private Property: Formal versus Informal Institutions

Property rights are one of the most fundamental and highly robust institutions supporting economic performance. However, the channels through which property rights are achieved are not adequately identified. This paper is a first step toward unbundling the black box of property rights into a formal and an informal component. We empirically determine the significance of both informal and formal rules in securing property rights. We find that when both components are included in the analysis, the impact of formal constraints is greatly diminished, while informal constraints are highly significant in explaining the security of property. These results are robust to a variety of model specifications, multiple instrumental variables, and a range of control variables.

The Amplification Effect: Foreign Aid's Impact on Political Institutions

How does foreign aid affect recipient countries’ political institutions? Two competing hypotheses offer contradictory predictions. The first sees aid, when delivered correctly, as an important means of making dictatorial recipient countries more democratic. The second sees aid as a corrosive force on recipient countries’ political institutions that makes them more dictatorial. This paper offers a third hypothesis about how aid affects recipients’ political institutions that we call the “amplification effect.” We argue that foreign aid has neither the power to make dictatorships more democratic nor to make democracies more dictatorial. It only amplifies recipients’ existing political institutions. We investigate this hypothesis using panel data for 124 countries between 1960 and 2009. Our findings support the amplification effect. Aid strengthens democracy in already democratic countries and dictatorship in already dictatorial regimes. It doesn’t alter the trajectory of recipients’ political institutions.

Unveiling de Soto's mystery: property rights, capital formation, and development

Hernando de Soto attributes the poor economic performance of developing countries to insecure property rights. When property rights are not well-defined individuals do not have the incentives to invest in capital, and assets cannot be used as collateral, hindering capital formation and economic growth. This paper tests de Sotos hypothesis empirically by examining how the security of property rights impacts wealth, collateral, and capital formation across nations. Using several different measures and model specifications, we find support for de Sotos conjecture. Our results suggest that better defined property rights would result in substantial improvements in capital formation and economic growth in developing countries.

Cultural Context: Explaining the Productivity of Capitalism

Does capitalism perform better when embedded in certain cultures? Given the wide range of economic outcomes, we address potential causes for the effectiveness or ineffectiveness of institutional constraints. This paper argues that culture matters for the success of capitalist institutions, specifically economic freedom. We claim that different cultures may raise or lower the productivity of economic institutions by either constraining or supporting these rules. We analyze this relationship empirically by examining how the interaction between economic freedom and culture affects economic growth. Our results suggest that culture does, indeed, enhance the effectiveness of capitalism and its subsequent impact on growth.

Culture and the Regulation of Entry

Does culture affect the manner in which a society regulates the entry of new firms? Our results suggest it does. We find more individualistic countries regulate entry more lightly. We investigate how culture matters presenting evidence of significant interactions between individualism and formal legal and political institutions. Individualism has a greater impact on entry regulation in societies with democratic political institutions or a common law tradition. This outcome is consistent with the idea that culture influences social preference for regulation, and political and legal institutions determine the degree to which those preferences are expressed as policy outcomes.

The relationship between income, economic freedom, and BMI

OBJECTIVES What explains increases in BMI (and obesity) over time and across countries? Although many microeconomic forces are likely explanations, increasingly scholars are arguing that macroeconomic forces such as market liberalism and globalization are root causes of the obesity epidemic. The purpose of this paper is to examine the impact of economic freedom on obesity conditional on the level of income and other factors. STUDY DESIGN We use an unbalanced pooled cross section of up to 135 countries for 1995 and 2000-2009. METHODS Our statistical model specifications include pooled OLS and fixed effects. RESULTS First, we find that controlling for fixed effects siphons off much of the relationship previously documented between economic freedom and BMI. Second, economic freedom is associated with slightly higher BMIs but only for men in developing nations. Lastly, we show that economic freedom increases life expectancy for both men and women in developing countries. CONCLUSION Therefore, policies aimed at reducing obesity that limit economic liberalism may come at the expense of life expectancy in the developing world.

Trade openness and cultural creative destruction

Purpose - This paper seeks to analyze empirically the net effect of trade openness on “economic culture”, measured by indicators of trust, respect, level of self-determination, and obedience. Openness to international trade means that societies are more likely to be exposed to alternative attitudes, beliefs, ideas, and values leading to a Schumpeterian process of creative destruction whereby culture is destroyed on some margins and enhanced on others. Design/methodology/approach - Using data on trade openness from Quinn and Sachs and Warner, the paper empirically evaluates the impact of trade openness on economic culture. The papers measure of culture is taken from Tabellini and Williamson and Kerekes, where data from the World Values Survey is aggregated to create a culture variable. The paper isolates the impact of trade policies on economic culture through a variety of empirical strategies including both panel and cross sectional analysis. Findings - The central finding of the study is that a societys openness to international trade generates, on net, positive effects on economic culture. The more open a country is to trade, the more likely it is to possess culture conducive to economic interaction and entrepreneurship. Originality/value - This paper contributes to the existing literature by studying the impact of trade openness on culture. While previous studies have asked “Does culture affect economic outcomes?”, this paper explores the answer to the related question, “How does openness to trade affect culture?”.

Can foreign aid free the press

Can foreign aid help free the press? Aid may boost press freedom by incentivizing government to reduce media regulations and provide financial support for infrastructure. Alternatively, foreign aid may prevent press freedom by expanding the role of the state and promoting government over private enterprises. We contend that the magnitude of foreign aids influence is conditional on the existence of democratic checks. Using panel data from 1994 to 2010, we find evidence suggesting that aid significantly increases press freedom in democracies but insignificantly relates to press freedom in autocracies. Collectively, the results suggest that a standard deviation increase in aid to a country at the mean level of democracy increases press freedom by approximately a 1/20th standard deviation. Overall, the findings suggest that donors should be cautious as most aid recipients are not democratic and aid leads to only relatively small marginal improvements in press freedom.

Discovering law: Hayekian competition in medieval Iceland

The general consensus is that some minimal government is needed to provide law and enforce rules. However, between 930 and 1262, the Icelandic Commonwealth functioned without a central government, relying instead on market mechanisms and private institutions. An elaborate legal system developed that guided social interaction and coordinated conflict resolution. This article utilises Hayek’s theory of competition as a discovery process to examine the emergence of law in medieval Iceland. Founded on private property and competition, the legal structure in medieval Iceland promoted discovery of law and resulted in the relative impartiality of judgments.