Economics and International Affairs Blog

“As economists Mary Hallward-Driemeier and Lant Pritchett have noted, where the informal economy thrives and regulations are poorly enforced, the de jure regulations measured by the World Bank are often only tangentially related to the de facto processes that businesses encounter.”

Besley, Timothy. 2015. "Law, Regulation, and the Business Climate: The Nature and Influence of the World Bank Doing Business Project." Journal of Economic Perspectives, 29(3): 99-120.

http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.29.3.99

Hallward-Driemeier, Mary, and Lant Pritchett. 2015. "How Business Is Done in the Developing World: Deals versus Rules." Journal of Economic Perspectives, 29(3): 121-40.

http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.29.3.121

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Friday, November 2, 2018

Emerging Markets - Crisis and Political Change

Matt O'Brien notes:

https://www.washingtonpost.com/business/2018/11/02/democracy-is-danger-all-over-world-brazil-is-just-latest-example/

“Brazil’s economy has been going through a fairly standard emerging-markets crisis. It started in the early 2000s when the global commodity boom sent Brazil’s growth up so much that households began borrowing a lot more, and foreign money came pouring in to try to get a piece of the pie. This was good while it lasted, but the problem is that it didn’t last.

By 2014, all this had gone into reverse: Commodities had collapsed, consumers had slowed down their borrowing, and, in part because of the end of the U.S. Federal Reserve’s quantitative easing program, money that had gone to Brazil in search of higher returns now returned to the United States….

In normal times, this kind of economic failure would just be a political one for the party in power. It would lose the next election to its main rival. But these were not normal times. A pervasive corruption scandal at the state-owned oil company implicated not only the center-left Workers Party, but also the center-right Democratic Movement party. That meant there was an opening for someone to argue that it was time to throw all the bums out — and with a vigor that wasn’t necessarily compatible with democratic niceties”.

Update:
Populism's Common Denominator by Barry Eichengreen

https://www.project-syndicate.org/commentary/populism-common-denominator-political-corruption-by-barry-eichengreen-2018-11

Thursday, November 1, 2018

Talent and Performance

You’ve Become Rich. That Doesn’t Mean You’re Great at Everything.

https://www.nytimes.com/2018/10/26/business/youve-become-rich-that-doesnt-mean-youre-great-at-everything.html

Harvard’s Sendhil Mullainathan notes:

“Success and wealth that move from one arena to another often breed inefficiency.

The economists Alan Benson at the University of Minnesota, Danielle Li at the Massachusetts Institute of Technology and Kelly Shue at Yale illustrate the perils of a variant of this in the corporate world. Good salespeople are not necessarily good managers of sales-people. Yet the scholars find that firms pick their managers based simply on sales performance. The result is that successful salespeople are promoted — and turned into mediocre managers.”