Jo Thori Lind

With or without U? The appropriate test for a U shaped relationship

Non-linear relationships are common in economic theory, and such relationships are also frequently tested empirically. We argue that the usual test of non-linear relationships is flawed, and derive the appropriate test for a U shaped relationship. Our test gives the exact necessary and sufficient conditions for the test of a U shape in both finite samples and for a large class of models.

Fractionalization and Inter-Group Differences

Fractionalization has been shown to have a detrimental effect on growth, public goods provision, and redistribution. The conventional measure of fractionalization is the Herfindahl index, which calculates the probability that two persons drawn at random belong to different groups. This measure implicitly assumes that all groups are equally distant. In this paper, I argue that a more appropriate measure of fractionalization should take into account that some groups are more different than others, so we need a measure of groups distance. We should then measure fractionalization as the average distance between every citizen, or equivalently the average distance between groups weighted by group size. I present a simple method to estimate these distances from opinion survey data by regressing stated opinions on indicator variables from group and a set of control variables. The coefficients on the group variables can then be interpreted as measures of distance. Finally, I apply the method to US data and show that we get more reasonable measures of fractionalization.

Opium for the Masses? Conflict-Induced Narcotics Production in Afghanistan

We show that the recent rise in Afghan opium production is caused by violent conflicts. Violence destroys roads and irrigation, crucial to alternative crops, and weakens local incentives to rebuild infrastructure and enforce law and order. Exploiting a unique data set, we show that Western hostile casualties, our proxy for conflict, have strong impact on subsequent local opium production. This proxy is shown to be exogenous to opium. We exploit the discontinuity at the end of the planting season: Conflicts have strong effects before and no effect after planting, assuring causality. Effects are strongest where government law enforcement is weak.

Sustaining cooperation through self-sorting: The good, the bad, and the conditional

In four public-good game experiments, we study self-sorting as a means to facilitate cooperation in groups. When individuals can choose to join groups precommitted to charity, such groups sustain cooperation toward the group’s local public good. By eliciting subjects’ conditional contribution profiles, we find that subjects who prefer the charity groups have higher average conditional contribution levels but do not differ with respect to the slope of their profiles. The majority of subjects in both group types are conditional cooperators whose willingness to contribute is stimulated by generous group members but undermined by free-riders. Charity groups thus seem better able to sustain cooperation because they attract a greater number of more generous individuals, triggering generous responses by conditional cooperators.

Knowledge is Power: A Theory of Information, Income and Welfare Spending

No voters cast their votes based on perfect information, but better educated and richer voters are on average better informed than others. We develop a model where the voting mistakes resulting from low political knowledge reduce the weight of poor voters, and cause parties to choose political platforms that are better aligned with the preferences of rich voters. In US election survey data, we find that income is more important in affecting voting behavior for more informed voters than for less informed voters, as predicted by the model. Further, in a panel of US states we find that when there is a strong correlation between income and political information, Congress representatives vote more conservatively, which is also in line with our theory.