Thomas Bassetti

Education and Poverty in a Solow Growth Model

This engaging book contains a set of original contributions to the much-debated issues of long-run economic growth in relation to institutional and social progress.

Virtual Water Trade: The Implications of Capital Scarcity

The original idea behind the virtual water (VW) concept is that water-abundant countries will become producers of water-intensive goods and consequently net exporters of water, and this will alleviate the initial unequal distribution of hydric resources. We criticize this optimistic view by introducing empirical evidence that is consistent with the Heckscher-Ohlin model of international trade. We find that, though virtual water exports are increasing in the combined availability of water and arable land when comparing countries with a similar level of available water-land resources, those with higher (lower) levels of physical-human capital tend to be net importers (exporters) of water. This result relies on the intuition that high levels of capital accumulation lead water to become a relatively scarce factor in developed countries. Thus, while more developed countries shift away from agriculture, less developed countries that lack sufficient capital do not have this option and end up using water resources even if they are not abundant. Such a trade pattern could create immediate economic benefits for less developed countries, but also exerts pressure on their water resources. Therefore, prioritizing economic development in countries that have limited water availability, may be crucial to avoid excessive usage and depletion of global water resources.

ELECTORAL CONTRIBUTIONS AND THE COST OF UNPOPULARITY: ELECTORAL CONTRIBUTIONS AND UNPOPULARITY

When considering contributions to electoral campaigns in the U.S., the data reveals that total contributions within industries tend to vary signifcantly over time. To explain this evidence, we present a model in which interest groups finance politicians that require funding for campaign advertising in exchange for policy favors. Our model predicts that interest groups related to industries that experience a rise (decline) in popularity will reduce (increase) the amount of resources devoted to campaign financing. Intuitively, an industry that suffers from a loss of popularity will face greater costs of obtaining policy favors, since it must provide candidates with greater contributions for campaign advertising, in order to compensate for its decline in reputation. The empirical analysis, based on U.S. House elections between 2000 and 2004, strongly supports this finding.

Electoral Contributions and the Cost of Unpopularity

When considering electoral campaigns, those candidates that receive contributions from relatively unpopular industries should be regarded less favorably by voters that have information on the sources of funding. To offset this unpopularity effect, politicians may either demand more money for campaign advertising from these industries in order to persuade less informed voters, or shy away from unpopular contributors to avoid losing the support of the informed electorate. Our model predicts that the first effect dominates, and that interest groups related to industries that experience a rise (decline) in unpopularity will increase (decrease) the amount of resources devoted to campaign financing. By using a set of alternative identification strategies to assess the impact of unpopularity on contributions for U.S. House elections, we provide robust evidence in favor of our predictions.

Behavioral Differences in Violence: The Case of Intra-Group Differences of Paramilitaries and Guerrillas in Colombia

In most empirical studies on civil wars, causes and determinants of conflict have been hitherto explored assuming that actors involved were either unitary or stable. However, if this intra-group homogeneity assumption does not hold, empirical econometric estimates may be biased and policy prescriptions are less reliable. We use Fixed Effects Finite Mixture Model (FE-FMM) approach to address this issue. This methodology provides a natural representation of heterogeneity when data originate from different latent classes and the affiliation is unknown. It allows to identify sub-populations within a population as well as the determinants of their behaviors. By combining various data sources for the period 2000-2005, we apply this new technique to the Colombian conflict. Our results confirm a behavioral heterogeneity in guerrilla’s armed groups and their distinct economic correlates so showing that different patterns of behavior exist. By contrast paramilitaries behave as a rather homogenous group.

Deep Pockets, Extreme Preferences: Explaining Persistent Differences in Electoral Contributions Across Industries

When considering contributions to electoral campaigns in the U.S., a puzzling regularity is that some industries tend to spend significantly more than others. To explain this evidence, we present a simple theoretical model in which interest groups finance politicians that require funding for campaign advertising in exchange for policy favors. Our model predicts that interest groups with more extreme preferences will devote a greater amount of resources to campaign financing. The empirical evidence, based on data from the U.S. House elections between 2000 and 2004, strongly supports this finding.

Human Capital, International Trade and Technology Diffusion

This paper investigates the role played by trade openness in the process of international technology diffusion. Starting from the model provided by Benhabib and Spiegel (2005), here we show that the impact of trade openness on productivity growth is nonlinear. In particular, we will see how for low levels of trade openness a trade liberalization policy will reduce the rate of technology growth. On the other hand, we will see that the same policy will increase the rate of technology growth in more open economies. Therefore, our conclusion is that the lack of evidence in favour of a strong link between trade and productivity growth is due to the use of linear methods instead of nonlinear regression techniques.