Fernando Arteaga, Desiree Desierto, Mark Koyama, 04 December 2020

When the galleon San José sank in a typhoon in 1694, it was carrying a cargo worth 2% of the GDP of the entire Spanish empire. Fernando Arteaga, Desiree Desierto and Mark Koyama tell Tim Phillips about how bribes sank Spanish treasure ships.

Fernando Arteaga, Desiree Desierto, Mark Koyama, 25 October 2020

The Spanish Crown had a monopoly on the trade route between Manila and Mexico for more than 250 years. The ships that sailed this route were “the richest ships in all the oceans”, but much of the wealth sank at sea and remain undiscovered. This column uses a newly constructed dataset of all of the ships that travelled the route to show how monopoly rents that allowed widespread bribe-taking would have led to overloading and late ship departure, thereby increasing the probability of shipwreck. Not only were late and overloaded ships more likely to experience shipwrecks or to return to port, but the effect is stronger for galleons carrying more valuable, higher-rent cargo. This sheds new light on the costs of rent-seeking in European colonial empires.

Maurizio Bussolo, Francesca de Nicola, Ugo Panizza, Richard Varghese, 28 February 2020

Firms can use political connections to gain an unfair advantage in resource allocation, such as easier access to credit. This column examines around 460,000 firms from six central and eastern European economies and shows that political connections ease credit constraints, distort capital allocation, and may have large welfare costs. Connected firms do not always borrow to invest and, when they do invest, they are likely to misallocate capital.

Thorvaldur Gylfason, Per Wijkman, 06 February 2017

There is a cross-country relationship between economic performance and both economic and political diversification. This column presents global evidence that between 1962 and 2012, both types of diversification were closely related to economic performance. This period included the spread of democracy, the global liberalisation of trade, and the termination of the Cold War. The recent retreat of democracy, the popular reaction to trade liberalisation in key countries, and a new cold war appear likely to reduce economic efficiency and growth. 

Nauro Campos, 13 June 2014

The 2014 FIFA World Cup is upon us. This column argues that there will be plenty of partying, but also plenty of protests fuelled by the gross mismanagement and limited economic benefits from hosting the Cup. Stadia may be ready, but much planned infrastructure has already been abandoned. Indeed, rent-seeking may be one reason nations bid for the Cup. Since the returns to transportation infrastructure are higher in poor countries, the international community should work to stamp out corruption so that poor countries can continue to host mega-events like the World Cup.

Dierk Herzer, Peter Nunnenkamp, 01 April 2012

The longstanding debate on aid effectiveness has failed to produce conclusive evidence that aid promotes economic growth. This sad result of 40 years of research still leaves some hope. This column argues that foreign aid could help improve economic conditions of the poorest population segments and narrow income gaps. However, the data seems to indicate aid has actually widened the gap between the rich and the poor.

Federico Cingano, Paolo Pinotti, 17 August 2009

Rent-seeking by politicians and firms likely distorts the allocation of public resources. This column shows that, in Italy, when politicians appointed with the majority coalition are directly involved in the economic activity of private firms, those firms’ profits increase by 5% on average. The increase can be as high 20% in markets highly dependent on public demand, implying a significant welfare loss.

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