Daniel Lederman

INEQUALITY AND VIOLENT CRIME

We investigate the robustness and causality of the link between income inequality and violent crime across countries. First, we study the correlation between the Gini index and homicide and robbery rates within and between countries. Second, we examine the partial correlation by considering other crime determinants. Third, we control for the endogeneity of inequality by isolating its exogenous impact on these crime rates. Fourth, we control for measurement error in crime rates by modeling it as both unobserved country effects and random noise. Finally, we examine the robustness of this partial correlation to alternative measures of inequality. The panel data consist of nonoverlapping 5‐year averages for 39 countries during 1965–95 for homicides and 37 countries during 1970–94 for robberies. Crime rates and inequality are positively correlated within countries and, particularly, between countries, and this correlation reflects causation from inequality to crime rates, even after controlling for other crime determinants.

Natural Resources : Neither Curse nor Destiny

This volume studies the role of natural resources in development and economic diversification. It brings together a variety of analytical perspectives, ranging from econometric analyses of economic growth to historical studies of successful development experiences in countries with abundant natural resources. This book addresses two key questions for policy makers in natural resource-rich regions such as Latin America: First, is natural resource wealth an asset or a liability for development and, if potentially the former, how can its contribution be enhanced? And second, can countries rich in natural resources efficiently diversify toward manufacturing or service-sector exports?

Trade structure and growth

Lederman and Maloney examine the empirical relationships between trade structure and economic growth, particularly the influence of natural resource abundance, export concentration, and intra-industry trade. They test the robustness of these relationships across proxies, control variables, and estimation techniques. The authors find trade variables to be important determinants of growth, especially natural resource abundance and export concentration. In contrast with much of the recent literature, natural resource abundance appears to have a positive effect on growth, whereas export concentration hampers growth, even after controlling for physical and human capital accumulation, among other factors.

Violent Crime: Does Social Capital Matter?*

This paper examines empirically the effect of some commonly used indicators of social capital, such as the prevalence of trust on community members and the participation in voluntary secular and religious organizations, on the incidence of violent crimes. This is a cross-country study whose basic sample consists of 39 developed and developing countries and whose dependent variable is the national intentional homicide rate. The paper identifies and deals with three challenges in the empirical estimation of the effect of social capital on the incidence of violent crimes. The omittedvariable problem is dealt with by including income inequality and economic growth as additional determinants of a country’s violent crime rate. The joint endogeneity (or reverse-causation) problem is accounted for by using instrumental variables for social capital in the crime regression. The specificity problem, that is the potentially opposite effects of group-specific and society-wide social capital, is noted and addressed only indirectly by emphasizing the results applied to the social capital indicators that have application for society as a whole. The main result of the paper is that only the component of social capital measured by trust on community members has the effect of reducing the incidence of violent crimes. The results regarding measures of other indicators of social capital are rather unclear. This may be due to a combination of limited samples, inability to fully control for reverse causation, and most likely, the opposite effects that society-wide and group-specific social capital may have on violent crime. ∗ Lederman and Menendez are economists with the Office of the Chief Economist for Latin America and the Caribbean of the World Bank. Loayza is a senior economist with the research department of the Central Bank of Chile, and he is currently on leave from the Development Economics Research Group of the World Bank. The opinions expressed herein should not be attributed to the World Bank. The authors are grateful to Ed Glaeser, Jeff Grogger, Gale Johnson, Sanjay Marwah, Steve Messner, Nicholas Sambanis, and an anonymous referee for invaluable comments and suggestions. The authors are responsible for any remaining errors.

R&D and Development

This paper employs a new global panel data set on innovation related variables to examine patterns of R&D investment across the development process. We find that R&D effort measured as a share of GDP rises with development at an increasing rate, but that several countries have experienced extraordinary “take offs†relative to the median tendency. Our estimates of the rates of return to R&D suggest that these efforts are justified. Moreover, the returns to R&D appear higher for developing countries. Differences in financial depth, protection of intellectual property rights, government capacity to mobilize resources, and the quality of research institutions appear as the main reasons that developing countries invest less despite higher returns. Finally, natural resource abundant countries show higher returns to R&D although lower overall investment.

In search of the Missing Resource Curse

The debate over the curse of natural resources has haunted developing countries for decades if not centuries. A review of existing empirical evidence suggests that the curse remains elusive. The fragile negative effect of natural resources on economic growth might be due to international heterogeneity in the effects of natural resources on economic growth, to the use of weak indicators of natural resources that might be unrelated to relative natural-resource endowments, or to the inability of econometric analysis based on international data to capture historical processes. This paper defends an empirical proxy for relative abundance of natural resources, which is based on standard growth theory. In turn, various econometric estimations are hopelessly deployed in the search for the missing resource curse. Some evidence suggests that natural resources might have large positive effects whose true magnitude remains unknown due to unresolved econometric issues.

Crime and Victimization: An Economic Perspective

The recent upward trend in crime rates of developing countries has spurred widespread public concern about personal and proprietary insecurity. In some countries, the questions of crime, violence, and victimization are attracting more attention from academics and policy makers than traditional economic problems. The objective of this paper is to examine the main issues related to crime and victimization from an economic perspective. For this purpose the paper combines a review of the main results established in the literature with original research on the causes of crime and the risk factors of victimization. The first section provides a review of the estimates of the costs of crime, the main theoretical and empirical research on its causes, and the relative advantages of official and survey data on crime. The second section presents original work on the main causes of violent crime from a cross-country perspective. The empirical work starts with a basic model of the economic determinants of homicide and robbery rates. In turn, this empirical model is extended along five dimensions: 1) deterrence factors, 2) illegal drug-related activities, 3) demographic issues, 4) income and ethnic polarization, and 5) social capital. The third section reviews recent case studies of Latin American cities that rely on survey data to assess the empirical determinants of the probability of victimization. These studies focus on three types of risk factors: 1) individual characteristics, 2) household characteristics, and 3) community characteristics. The main conclusions from the previous sections are summarized in section four.

Beyond the city : the rural contribution to development

Beyond the City evaluates the contribution of rural development and policies to growth, poverty alleviation, and environmental degradation in the rest of the economy, as well as in the rural space. This title brings together new theoretical and empirical treatments of the links between rural and national development. New findings and are combined with existing literature to enhance our understanding of the how rural economic activities contribute to various aspects of national development. The study is based on original research funded by the World Banks Office of the Chief Economist for Latin America and the Caribbean. Of particular relevance is the interaction between agricultural and territorial development issues. The empirical findings also make substantial contributions to the debate over the appropriate design of public policies aiming to enhance the rural contribution to national development, including economic growth, poverty reduction, environmental sustainability, and macroeconomic stability.

Export Promotion Agencies: What Works and What Doesn't

The number of national export promotion agencies (EPAs) has tripled over the past two decades. While more countries have made them part of their national export strategy, studies have criticized their efficiency in developing countries (Hogan, Keesing, and Singer 1991). Partly in reaction to these critiques, EPAs have been retooled (see International Trade Centre, ITC, 1998 or 2000, for example). This paper studies the impact of existing EPAs and their strategies based on a new data set covering 104 industrial and developing countries. Results suggest that on average they have a strong and statistically significant impact on exports. For each

Agriculture and National Welfare Around the World: Causality and International Heterogeneity Since 1960

1 of export promotion, the paper estimates a