Ifo Institute for Economic Research

We introduce the revised version of the KOF Globalisation Index, a composite index measuring globalization for every country in the world along the economic, social and political dimension. The original index was introduced by Dreher (Applied Economics, 38(10):1091–1110, 2006) and updated in Dreher et al. (2008). This second revision of the index distinguishes between de facto and de jure measures along the different dimensions of globalization. We also disentangle trade and financial globalization within the economic dimension of globalization and use time-varying weighting of the variables. The new index is based on 43 instead of 23 variables in the previous version. Following Dreher (Applied Economics, 38(10):1091–1110, 2006), we use the new index to examine the effect of globalization on economic growth. The results suggest that de facto and de jure globalization influence economic growth differently. Future research should use the new KOF Globalisation Index to re-examine other important consequences of globalization and why globalization was proceeding rapidly in some countries, such as South Korea, but less so in others. The KOF Globalisation Index can be downloaded from http://www.kof.ethz.ch/globalisation/ .

We estimate the effect of broadband infrastructure, which enables high-speed internet, on economic growth in the panel of OECD countries in 1996-2007. Our instrumental-variable model derives its non-linear first stage from a logistic diffusion model where pre-existing voice-telephony and cable-TV networks predict maximum broadband penetration. We find that a 10 percentage-point increase in broadband penetration raises annual per-capita growth by 0.9-1.5 percentage points. Results are robust to country and year fixed effects and controlling for linear second-stage effects of our instruments. We verify that our instruments predict broadband penetration but not diffusion of contemporaneous technologies like mobile telephony and computers.

Max Weber attributed the higher economic prosperity of Protestant regions to a Protestant work ethic. We provide an alternative theory: Protestant economies prospered because instruction in reading the Bible generated the human capital crucial to economic prosperity. We test the theory using county-level data from late-nineteenth-century Prussia, exploiting the initial concentric dispersion of the Reformation to use distance to Wittenberg as an instrument for Protestantism. We find that Protestantism indeed led to higher economic prosperity, but also to better education. Our results are consistent with Protestants' higher literacy accounting for most of the gap in economic prosperity. * The idea that the rise of Protestantism may have fostered human capital accumulation in Europe stems from our discussions with Paul E.

Even though some countries track students into differing‐ability schools by age 10, others keep their entire secondary‐school system comprehensive. To estimate the effects of such institutional differences in the face of country heterogeneity, we employ an international differences‐in‐differences approach. We identify tracking effects by comparing differences in outcome between primary and secondary school across tracked and non‐tracked systems. Six international student assessments provide eight pairs of achievement contrasts for between 18 and 26 cross‐country comparisons. The results suggest that early tracking increases educational inequality. While less clear, there is also a tendency for early tracking to reduce mean performance.

Laboratory experiments are a widely used methodology for advancing causal knowledge in the physical and life sciences. With the exception of psychology, the adoption of laboratory experiments has been much slower in the social sciences, although during the past two decades the use of lab experiments has accelerated. Nonetheless, there remains considerable resistance among social scientists who argue that lab experiments lack "realism" and generalizability. In this article, we discuss the advantages and limitations of laboratory social science experiments by comparing them to research based on nonexperimental data and to field experiments. We argue that many recent objections against lab experiments are misguided and that even more lab experiments should be conducted.

The countries that have ratified the Kyoto Protocol have pledged to limit global warming by reducing the demand for fossil fuels. But what about supply? If suppliers do not react, demand reductions by a subset of countries are ineffective. They simply depress the world price of carbon and induce the environmental sinners to consume what the Kyoto countries have economized on. Even worse, if suppliers feel threatened by a gradual greening of economic policies in the Kyoto countries that would damage their future prices; they will extract their stocks more rapidly, thus accelerating global warming. The paper discusses the remaining policy options against global warming from an intertemporal supply-side perspective.

This paper uses survey expectations data to construct empirical proxies for time-varying business-level uncertainty. Access to the micro data from the German IFO Business Climate Survey permits construction of uncertainty measures based on both ex ante disagreement and ex post forecast errors. Ex ante disagreement is strongly correlated with dispersion in ex post forecast errors. Surprise movements in either measure lead to significant reductions in production that abate fairly quickly. We extend our analysis to US data, measuring uncertainty with forecast disagreement from the Business Outlook Survey. Surprise increases in forecast dispersion lead to more persistent reductions in production than in the German data. (JEL C53, C83, D81, E23, E27, E32, E37)

The role of improved schooling, a central part of most development strategies, has become controversial because expansion of school attainment has not guaranteed improved economic conditions. This paper reviews the role of education in promoting economic well-being, with a particular focus on the role of educational quality. It concludes that there is strong evidence that the cognitive skills of the population -rather than mere school attainment -are powerfully related to individual earnings, to the distribution of income, and to economic growth. New empirical results show the importance of both minimal and high level skills, the complementarity of skills and the quality of economic institutions, and the robustness of the relationship between skills and growth. International comparisons incorporating expanded data on cognitive skills reveal much larger skill deficits in developing countries than generally derived from just school enrollment and attainment. The magnitude of change needed makes clear that closing the economic gap with developed countries will require major structural changes in schooling institutions.

What explains the range of situations in which individuals cooperate? This paper studies a model where individuals respond to incentives but are also influenced by norms of good conduct inherited from earlier generations. Parents rationally choose what values to transmit to their offspring, and this choice is influenced by the spatial patterns of external enforcement and of likely future transactions. The equilibrium displays strategic complementarities between values and current behavior, which reinforce the effects of changes in the external environment. Values evolve gradually over time, and if the quality of legal enforcement is chosen under majority rule, there is path dependence: adverse initial conditions may lead to a unique equilibrium where legal enforcement remains weak and individual values discourage cooperation.

The authors examine survival rates of entrepreneurial enterprises and their growth, conditional on surviving. Their focus is on whether liquidity constraints increase the likelihood of entrepreneurial failure. The empirical strategy is based on the following logic: If entrepreneurs cannot borrow to attain their profit-maximizing levels of capital, then entrepreneurs with substantial personal financial resources will be more successful than those without. The authors examine the behavior of a group of sole proprietors who received substantial inheritances. The results are consistent with the notion that liquidity constraints exert a noticeable influence on the viability of entrepreneurial enterprises. Copyright 1994 by University of Chicago Press.

Abstract This paper estimates the effects of family background, resources and institutions on mathematics and science performance using an international database of more than 260,000 students from 39 countries which includes extensive background information at the student, teacher, school and system level. The student‐level estimations show that international differences in student performance cannot be attributed to resource differences but are considerably related to institutional differences. Among the many institutions which combine to yield major positive effects on student performance are centralized examinations and control mechanisms, school autonomy in personnel and process decisions, individual teacher influence over teaching methods, limits to teacher unions’ influence on curriculum scope, scrutiny of students’ achievement and competition from private schools.

Abstract Introduction Evidence-based recommendations are needed to guide the acute management of the bleeding trauma patient, which when implemented may improve patient outcomes. Methods The multidisciplinary Task Force for Advanced Bleeding Care in Trauma was formed in 2005 with the aim of developing a guideline for the management of bleeding following severe injury. This document presents an updated version of the guideline published by the group in 2007. Recommendations were formulated using a nominal group process, the Grading of Recommendations Assessment, Development and Evaluation (GRADE) hierarchy of evidence and based on a systematic review of published literature. Results Key changes encompassed in this version of the guideline include new recommendations on coagulation support and monitoring and the appropriate use of local haemostatic measures, tourniquets, calcium and desmopressin in the bleeding trauma patient. The remaining recommendations have been reevaluated and graded based on literature published since the last edition of the guideline. Consideration was also given to changes in clinical practice that have taken place during this time period as a result of both new evidence and changes in the general availability of relevant agents and technologies. Conclusions This guideline provides an evidence-based multidisciplinary approach to the management of critically injured bleeding trauma patients.

This article reviews the economic impacts of climate change and the policy implications of the results. Current estimates indicate that climate change will likely have a limited impact on the economy and human welfare in the twenty-first century. In fact, the initial impacts of climate change may well be positive. However, in the long run the negative impacts dominate the positive ones. Negative impacts will be substantially greater in poorer, hotter, and lower-lying countries. Poverty reduction complements greenhouse gas emissions reduction as a means to reduce climate change impacts. Although climate change may affect the growth rate of the global economy and may trap more people in poverty, quantification of these impacts remains difficult. The optimal carbon tax in the near term is somewhere between a few tens and a few hundreds of dollars per ton of carbon.

This paper investigates the question of whether corruption might ‘grease the wheels’ of an economy. We investigate whether and to what extent the impact of regulations on entrepreneurship is dependent on corruption. We first test whether regulations robustly deter firm entry into markets. Our results show that the existence of a larger number of procedures required to start a business, as well as larger minimum capital requirements are detrimental to entrepreneurship. Second, we test whether corruption reduces the negative impact of regulations on entrepreneurship in highly regulated economies. Our empirical analysis, covering a maximum of 43 countries over the 2003–2005 period, shows that corruption facilitates firm entry in highly regulated economies. For example, the ‘greasing’ effect of corruption kicks in at around 50 days required to start a new business. Our results thus provide support for the ‘grease the wheels’ hypothesis.

Policy debates about the balance of vocational and general education programs focus on the school-to-work transition. But with rapid technological change, gains in youth employment from vocational education may be offset by less adaptability and thus diminished employment later in life. To test our main hypothesis that any relative labor-market advantage of vocational education decreases with age, we employ a difference-in-differences approach that compares employment rates across different ages for people with general and vocational education. Using micro data for 18 countries from the International Adult Literacy Survey, we find strong support for the existence of such a trade-off, which is most pronounced in countries emphasizing apprenticeship programs. Results are robust to accounting for ability patterns and to propensity-score matching.

This paper analyzes the influence of the shadow economy on corruption and vice versa. We hypothesize that corruption and the shadow economy are substitutes in high income countries while they are complements in low income countries. The hypotheses are tested for a cross-section of 98 countries. Our results show that there is no robust relationship between corruption and the size of the shadow economy when perceptions-based indices of corruption are used. Employing an index of corruption based on a structural model, however, corruption and the shadow economy are complements in countries with low income, but not in high income countries.

Considerable controversy surrounds the impact of schools and teachers on the achievement of students. This paper disentangles the separate factors influencing achievement with special attention given to the role of teacher differences and other aspects of schools. Unique matched panel data from the Harvard/UTD Texas Schools Project permit distinguishing between total effects and the impact of specific, measured components of teachers and schools. While schools are seen to have powerful effects on achievement differences, these effects appear to derive most importantly from variations in teacher quality. A lower bound suggests that variations in teacher quality account for at least 7« percent of the total variation in student achievement, and there are reasons to believe that the true percentage is considerably larger. The subsequent analysis estimates educational production functions based on models of achievement growth with individual fixed effects. It identifies a few systematic factors a negative impact of initial years of teaching and a positive effect of smaller class sizes for low income children in earlier grades but these effects are very small relative to the effects of overall teacher quality differences.

We study risk attitudes, ambiguity attitudes, and time preferences of 661 children and adolescents, aged ten to eighteen years, in an incentivized experiment and relate experimental choices to field behavior. Experimental measures of impatience are found to be significant predictors of health-related field behavior, saving decisions, and conduct at school. In particular, more impatient children and adolescents are more likely to spend money on alcohol and cigarettes, have a higher body mass index, are less likely to save money, and show worse conduct at school. Experimental measures for risk and ambiguity attitudes are only weak predictors of field behavior.

Haplotypes consisting of alleles at a short tandem repeat polymorphism (STRP) and an Alu deletion polymorphism at the CD4 locus on chromosome 12 were analyzed in more than 1600 individuals sampled from 42 geographically dispersed populations (13 African, 2 Middle Eastern, 7 European, 9 Asian, 3 Pacific, and 8 Amerindian). Sub-Saharan African populations had more haplotypes and exhibited more variability in frequencies of haplotypes than the Northeast African or non-African populations. The Alu deletion was nearly always associated with a single STRP allele in non-African and Northeast African populations but was associated with a wide range of STRP alleles in the sub-Saharan African populations. This global pattern of haplotype variation and linkage disequilibrium suggests a common and recent African origin for all non-African human populations.

Much of education policy focuses on improving teacher quality, but most policies lack strong research support.We use student achievement gains to estimate teacher value-added, our measure of teacher quality.The analysis reveals substantial variation in the quality of instruction, most of which occurs within rather than between schools.Although teacher quality appears to be unrelated to advanced degrees or certification, experience does matter but only in the first year of teaching.We also find that good teachers tend to be effective with all student ability levels but that there is a positive value of matching students and teachers by race.In the second part of the analysis, we show that teachers staying in our sample of urban schools tend to be as good as or better than those who exit.Thus, the main cost of large turnover is the introduction of more first year teachers.Finally, there is little or no evidence that districts that offer higher salaries and have better working conditions attract the higher quality teachers among those who depart the central city district.The overall results have a variety of direct policy implications for the design of school accountability and the compensation of teachers.