Nabamita Dutta

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.

The Impact of Foreign Direct Investment on Press Freedom

In our paper we establish foreign direct investment (FDI) as a major determinant of media freedom. Global integration can strengthen the media sector financially, make it technologically enhanced and can also improve the economic environment as a whole. This, in turn, would work towards the enhancement of media freedom. The sample includes high, middle and low income economies. Using a panel of 115 countries over a period of 20 years, our results reveal that FDI is an absolute necessity for a free and efficient media. The results are robust to various alternate specifications and inclusion of additional control variables.

Gender‐Specific Human Capital, Openness and Growth: Exploring the Linkages for South Asia

Using data covering 1970–2008 for South Asia, this study investigates the influence of human capital disaggregated by gender, on economic growth. We use an extended version of the Solow growth model with per capita gross domestic product (GDP) a function of the key variables, viz. physical capital accumulation, human capital accumulation, trade openness and capital flows, fiscal policy and financial development. The key contribution of this study is to show that openness when interacted with the human capital stock disaggregated by gender, has differential impacts on economic growth. While the positive impact of male secondary schooling captures the direct skill effect relative to primary schooling, the marginal influence of female primary/secondary schooling fails to show a positive impact on growth at higher levels of openness. An implication stemming from this study is that educational opportunities for females at the secondary level should be increased for South Asia.

Do Potential Skilled Emigrants Care about Political Stability at Home

In this paper, we consider the role of political stability in the source country as a potential reason for skilled emigration. We control for all prospective source country characteristics, and yet skilled emigration is seen to be driven by a relatively better situation of political stability in the home country. Our research clearly shows that government stability, socioeconomic conditions, investment profiles, democratic accountability, internal conflict, and ethnic tensions in source nations have significant impacts on the rate of skilled emigration for a sample of developed and developing countries. The results retain robustness even for a subset of only developing nations.

Entrepreneurship and Political Risk

Purpose - – Previous literature has clearly demonstrated the need for sound government policies or “institutions” to promote and support entrepreneurship in a country. The purpose of this paper is to explore the role of one such institution – political stability – in boosting entrepreneurial endeavors. A politically stable nation will have lower risk and transaction/contracting costs, and higher levels of government transparency, predictability, and accountability. Thus, the paper should expect that with greater political stability there should be a greater degree of entrepreneurial activity. Design/methodology/approach - – Using dynamic panel estimators (System GMM estimators) and considering multiple proxies of political risk, our results confirm this hypothesis. Such estimators handle challenges associated with panel data efficiently. Findings - – The papers results show that greater political stability for a country does indeed lead to an increased rate of entrepreneurship and wealth creation. Originality/value - – Entrepreneurship is critical to the process of economic growth and development. To prosper, countries must unleash the creative talents of their citizens through the decentralized process of formal private sector entrepreneurship. New legal businesses create jobs, opportunities, wealth, and goods and services that make a nation grow. Sadly in many nations, this process is stifled and poverty is the result. While previous research has examined which types of specific policies matter for promoting entrepreneurship, the paper considers the different question of how the stability of political institutions impacts the rate of entrepreneurship.

Does fiscal decentralization result in a better business climate

Previous literature generally finds that greater fiscal decentralization is associated with faster economic growth, improved government performance and stronger constraints on the Leviathan behaviour of governments. Because economic growth critically depends on the presence of good government policies and institutions, the likely but untested link between these strands of literature is that greater decentralization probably improves growth because it results in government policies more conducive to entrepreneurship and business success. We test (and confirm) this hypothesis using several business climate measures for the US states.

What Attracts Foreign Direct Investment: A Closer Look

It is rational to assume that minimal trade barriers (tariffs and quotas), a bigger trade sector, lower interest rate regulations, freer international capital market, lower credit and labour market regulations will make investment in a country more lucrative for foreign investors. We confirm this and show the prevalence of non-linearity in the relationships.

Trade Openness and Labor Force Participation in Africa: The Role of Political Institutions*

Trade liberalization is usually expected to lead to greater economic activity including higher labor force participation rates. Using data from forty‐eight Sub‐Saharan African countries over the period 1985–2012, we explore the impact of trade openness on labor force participation rates (LFPR), and examine how political institutions such as democracy, political rights, and civil liberties can play a role in driving this relationship in the above group of low‐income countries. The estimated marginal impact of openness on LFPR shows that LFPR is increasing with the level of institutional quality. In particular, political institutions are critical in enhancing the benefit from openness. Our conclusions are similar for male and female participation rates although the magnitudes of the former are higher, thus confirming that improving institutions can generate greater labor market benefits from trade in poor countries.

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.

The right to be free: Is media freedom good news for women's rights?

Using an extensive dataset covering 187 countries during 1993–2011, this paper explores the impact of media freedom from government control on womens rights. To measure womens rights, we consider economic, political and social rights that capture the extent of governments respect for these rights at country level over time. A free press improves governments accountability to the society and leads to better governance. In the context of womens rights, a free press can enhance positive rights by helping women raise voices and gain recognition, and thereby making the government create a more conducive environment for womens empowerment. Further, higher press freedom can reduce the infringement of negative rights by calling for greater public accountability. Yet, a free media, while necessary, may not be sufficient in enhancing such rights, and other institutional factors related to a countrys development might be essential to reap the benefit of a free media. Our estimated marginal impacts show that greater access of media (in the form of internet and mobile users) and countries with greater democratic capital enhance the impact of media freedom on womens economic and social rights, with little effect on political rights.