Persistence of religious states

State history, state capacity, state religion, state regulation of religion

The relationship between state and religion has deep roots in history, being recognised as one of the oldest alliances, or antagonists, known to mankind. Recent evidence suggests that a wall of separation between the two have become widespread. Yet, among our sample of 147 countries, 56 had state religion in 2000. This paper offers an inquiry into why—despite modernity, diversity, etc.—religious states persist in some countries, and not in others, to the present. Our work establishes two reasons. First, a state may act as an ‘institutional carrier’ of the history of being a religious state, which we see as a necessary condition. Second, a state may act as an ‘institutional barrier’ to the potential discontinuity of this history, which we view as a sufficient condition. Our analysis construes these ‘carrier’ and ‘barrier’ functions of a state as producing a reinforcement bias and we operationalise them by exploiting cross-national disparities in the stock of state history. Consistent with this understanding that longer state history upholds the persistence of religious states, we obtain a remarkably robust positive link between our indicators of state history and religious states, even after controlling for a broad set of probable confounders (e.g., legal origins, colonial heritage, geographic controls, continent dummies, and measures of economic development, political ideology and religious heterogeneity). Finally, by highlighting the significant role of historical processes in determining the formation and persistence of religious states, our results also underline state history to be a prototypical source of cross-national differences in other proxies for socio-institutional qualities.

Current version

Life may be unfair, but do democracies make it any less burdensome?

The Journal of Economic Inequality, R&R

Using a large panel of countries, this paper studies whether, or not, democracies can disproportionately produce better economic outcomes for the poor than non-democracies. To deal with the endogeneity of democracy and inequality, a regional democratisation wave is used to isolate the exogenous variation in country-level democracy. Our main finding is that the exogenous component of democracy significantly and robustly decreased inequality, after controlling for key inequality determinants. We identify that two potential mechanisms through which democracy affects inequality are structural transformation and middle-class bias channels.

Current version

Global shocks in the US economy: Effects on output and real exchange rate (with David Meenagh and Patrick Minford)

This paper studies the effects of global shocks, relative to domestic shocks (productivity, mark-up, and demand shocks), in accounting for US business cycle fluctuations. We do this by developing and estimating a two-sector open economy dynamic stochastic general equilibrium model that features several real frictions and structural shocks. The central finding from the estimated model is that global shocks are the main driver of movements in many US macroeconomic aggregates. Particularly, we find that they explain around 40% of the variations in our main variables of interest—output and real exchange rate. This important quantitative contribution is achieved by using indirect inference estimation techniques to test the model. We identify exogenous world demand, oil price shocks, preference for exported energy-intensive goods, and the price of imported energy-intensive goods as the global shocks most prominent in causing the largest variations in economic outcomes. By contrast, foreign interest rates and preference for aggregate exported goods are found to be bystanders.

Current version

Democracy and the poor reassessed

By using life expectancy as our core indicator of a country's health status, this paper empirically reassesses the political foundations of human biological development. Our overarching question is: does democracy drive the health of nations? To investigate this, we use both the level and change measures of democracy in our regressions. Our overriding discovery can be summarised as follows: accounting for the various country and time features, a one standard deviation increase in the level of democracy is associated with a 0.11 standard deviation increase in life expectancy. This is an increase in life expectancy of around 5 years for a country initially with a mean life expectancy of 54 years. These results are robust to employing alternative model specifications, to using different subsamples of the data, and to alternative estimation techniques. We, therefore, conclude that the material role of democratic institutions in promoting human welfare is of first-order relevance.

Current version

How resilient is the U.S. economy to foreign disturbances?

We assess the relative importance of domestic and foreign disturbances in explaining fluctuations in key macroeconomic variables and find that both types of shocks are equally important. We reach this conclusion within a constructed two-sector open economy DSGE model context, where we isolate the relative contributions of each group of disturbances to post-WWII U.S. business cycles. Our approach is to apply indirect inference method to test the model’s fit against a four-equation VAR(1) of output, real exchange rate, energy use and consumption. Our main result is that foreign disturbances are pivotal to driving movements in these home variables; accounting for 38% of the variability in aggregate output, 73% of the variation in the real exchange rate, 45% of the variance of energy use, and 84% of the volatility of consumption. Further, foreign disturbances are also identified to be crucial for some other home macroeconomic variables, explaining larger fractions in changes to investment, labour hours, and real interest rate. However, the U.S. economy appears to be resilient to foreign disturbances with respect to certain macroeconomic variables; in particular, exports, imports, real wages, and domestic absorption.

Current version