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Micro-insurance: the next revolution?

The most recent reminder of nature’s vast power came in 1998 when Hurricane Mitch sat over Nicaragua for ten days. Three thousand people are reported to have died, and twenty percent of the population suffered directly. Even today, four years later, the hurricane is cited to explain disrepair and dislocation. While Mitch was particularly devastating, hurricanes course through the Caribbean with regularity. Nevertheless, most citizens and businesses cannot buy insurance against weather-related risks; as in much of the developing world, insurance markets are thin and public responses are limited. Health insurance, life insurance, property insurance – all are unobtainable for average citizens in most of the world, and this is doubly so for the poorest. Below, I describe why this is so, and how new ideas can change things . . . 
Jonathan Morduch, Public Policy and Economics, NYU

The Paradox of "Warlord" Democracy: A Theoretical Investigation

Political theorists from Machiavelli to Huntington have denied the possibility of popular government arising out of the chaos of civil war, instead prescribing an intermediate stage of one- man rule by a Prince, Leviathan or a military dictator. Based on recent empirical evidence of post civil war democratization in El Salvador, Mozambique and elsewhere, I show that democracy can arise directly from anarchy. Predatory warring factions choose the citizenry and democratic procedures over a Leviathan when (1) their economic interests depend on productive investment by the citizens; (2) citizens' political preferences ensure that power allocation will be less biased under democracy than under a Leviathan; and (3) there is an external agency (e.g. the United Nations) that mediates and supervises joint disarmament and state-building. Ultimately, I discuss the implications of this argument for the basic intuitions of classical political theory and contemporary social theory regarding democratization and authoritarianism . . . 
Leonard antchekon

Economic Shocks and Civil Conflict: An Instrumental Variables Approach

Estimating the impact of economic conditions on the likelihood of civil conflict is difficult because of endogeneity and omitted variable bias. We use rainfall variation as an instrumental variable for economic growth in 41 African countries during 1981–99. Growth is strongly negatively related to civil conflict: a negative growth shock of five percentage points increases the likelihood of conflict by one-half the following year. We attempt to rule out other channels through which rainfall may affect conflict. Surprisingly, the impact of growth shocks on conflict is not significantly different in richer, more democratic, or more ethnically diverse countries . . . 

Resource Wealth and Political Regimes in Africa

Political economists point to the levels of economic development, poverty, and income inequality as the most important determinants of political regimes. The authors present empirical evidence suggesting a robust and negative correlation between the presence of a sizable natural resource sector and the level of democracy in Africa. They argue that resource abundance not only is an important determinant of democratic transition but also partially determines the success of democratic consolidation in Africa. The results illuminate the fact that post–Cold War democratic reforms have been successful only in resource-poor countries such as Benin, Mali, and Madagascar. The authors argue that resource-rich countries such as Nigeria and Gabon can become democratic only if they introduce strong mechanisms of vertical and horizontal accountability within the state.
Leonard antchekon and Nathan Jensen

What Can the Rule of Law Variable Tell us About Rule of Law Reforms?

In 2001 per capita income in Haiti was $480, the infant mortality rate was seventy-nine per 1000 live births and the illiteracy rate (age fifteen and over) hovered around fifty percent. By comparison, in the United States, less than two hours flying time away, the per capita in- come was $34,280, the infant mortality rate was seven per 1000 live births, and the illiteracy rate was negligible. Understanding the reasons why these sorts of disparities in important measures of development arise and persist is one of the greatest challenges in all of the social sciences . . . 
Kevin Davis

The Product Cycle and Inequality

This paper models the product cycle and explains how it relates to world inequality. In the model, both phenomena arise because skilled people have a comparative advantage in making high-tech products. The model can explain up to a 10:1 income differential between people and up to a 7:1 differential between countries. Tariff policies and intellectual-property protection have a much larger effect here than in some other models . . . 
Boyan Jovanovic, NYU

New data, new doubts: A Comment on Burnside and Dollar’s 'Aid, Policies, and Growth'

The Burnside and Dollar (2000) finding that aid raises growth in a good policy environment has had an important influence on policy and academic debates. We conduct a data gathering exercise that updates their data from 1970–93 to 1970– 97, as well as filling in missing data for the original period 1970–93. We find that the BD finding is not robust to the use of this additional data . . .