Romain Wacziarg

Openness, Country Size and Government

This paper shows that smaller countries have a larger share of public consumption in GDP, and are also more open to trade. These empirical observations are consistent with recent theoretical models explaining country formation and break up, and may account for the observed positive empirical relationship between trade openness and government size.

How democracy affects growth

This paper introduces a new methodology to examine the empirical relationship between democracy and economic growth. Democratic institutions are assumed to a!ect growth through a series of channels. We specify and estimate a full system of equations determining growth and the channel variables. Results suggest that democracy fosters growth by improving the accumulation of human capital and, less robustly, by lowering income inequality. On the other hand, democracy hinders growth by reducing the rate of physical capital accumulation and, less robustly, by raising the ratio of government consumption to GDP. Once all of these indirect e!ects are accounted for, the overall e!ect of democracy on economic growth is moderately negative. Our results indicate that democratic institutions are responsive to the demands of the poor by expanding access to education and lowering income inequality, but do so at the expense of physical capital accumulation. 2001Elsevier Science B.V. All rights reserved. JEL classixcation: O40; C30; E60

Do Democratic Transitions Produce Bad Economic Outcomes

Several influential commentators have suggested recently that democratization in developing countries produces political instability, ethnic conflict, and poor economic outcomes. For instance, Robert D. Kaplan (2000) states that “If a society is not in reasonable health, democracy can be not only risky but disastrous” (p. 62). Fareed Zakaria (2003) points out that “although democracy has in many ways opened up African politics and brought people liberty, it has also produced a degree of chaos and instability that has actually made corruption and lawlessness worse in many countries.” Amy Chua (2003) argues that: “... in the numerous countries around the world with a market-dominant minority, ... [a]dding democracy to markets has been a recipe for insability, upheaval, and ethnic conflagration.” (p. 124).

Trade, Growth, and the Size of Countries

Normally, economists take the size of countries as an exogenous variable which does need to be explained. Nevertheless, the borders of countries and therefore their size change, partially in response to economic factors such as the pattern of international trade. Conversely, the size of countries influences their economic performance and their preferences for international economic policies - for instance smaller countries have a greater stake in maintaining free trade. In this paper we review the theory and the evidence concerning a growing body of research that has considered both the impact of market size on growth and the endogenous determination of country size. We show that our understanding of economic performance and of the history of international economic integration can be greatly improved by bringing the issue of country size at the forefront of the analysis of growth.

Trade liberalization and intersectoral labor movements

This paper examines the impact of trade liberalization episodes on movements of labor across sectors. The aim is to assess empirically whether increased trade openness leads to increased structural change and, if so, to what extent. Results for a set of 25 liberalization episodes suggest weakly negative effects of liberalization on the extent of intersectoral labor shifts at the economy-wide 1-digit level of disaggregation. We do uncover increased sectoral change after liberalization at the 3-digit level within manufacturing, although the estimated effects are statistically weak and small in magnitude. The effects of liberalization on labor shifts differ across individual countries, in a way related to the scope and depth of reforms.

The First Law of Petropolitics

We examine empirically the relationship between crude oil prices and the ebb and flow of democratic institutions, in order to test the hypothesis that high oil prices undermine democracy and sustain autocracy. We use a variety of time series and panel data methods over a wide range of country subsamples and time periods, finding strictly no evidence in favour of this so‐called ‘First Law of Petropolitics’ (Friedman 2006).

War and relatedness

We find that more closely related populations are more prone to engage in international conflict with each other. We provide an economic interpretation based on two connected mechanisms. First, more closely related groups share more similar preferences over rival goods and are thus more likely to fight over them. Second, rulers have stronger incentives to conquer populations more similar to their own, to minimize postconflict heterogeneity in preferences over government types and policies. We find support for these mechanisms using evidence on international conflicts over natural endowments and on territorial changes, including decolonization.

Chapter 23 – Trade, Growth and the Size of Countries

Normally, economists take the size of countries as an exogenous variable. Nevertheless, the borders of countries and their size change, partially in response to economic factors such as the pattern of international trade. Conversely, the size of countries influences their economic performance and their preferences for international economic policies – for instance smaller countries have a greater stake in maintaining free trade. In this paper, we review the theory and evidence concerning a growing body of research that considers both the impact of market size on growth and the endogenous determination of country size. We argue that our understanding of economic performance and of the history of international economic integration can be greatly improved by bringing the issue of country size at the forefront of the analysis of growth.

Trade Liberalization and Intersectoral Labor Movements

This paper examines the impact of trade liberalization episodes on movements of labor across sectors. The aim is to assess empirically whether increased trade openness leads to increased structural change, and if so to what extent. Results for a set of 25 liberalization episodes suggest weakly negative effects of liberalization on the extent of intersectoral labor shifts at the economy-wide 1-digit level of disaggregation. We do uncover increased sectoral change after liberalization at the 3-digit level within manufacturing, although the estimated effects are statistically weak and small in magnitude. The effects of liberalization on labor shifts differ across individual countries, in a way related to the scope and depth of reforms as well as the extent of job protection regulations.

Small States, Big Pork

Using data on authorizations from the 2005 Highway Bill, we show that the legislative allocation of pork barrel spending by U.S. state (measured by the value of transportation earmarks per capita) greatly favors smaller states. We exploit the difference between two versions of the bill: the version that was passed by the House and the compromise version passed in conference committee. Our empirical results provide strong evidence in favor of theories of legislative malapportionment.