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This study investigates the existence of political rents in bank lending, using a comprehensive loan-level data set of the universe of commercial loans in Mexico from 2003 to 2012. Identification relies on changes in the state of origin of a senate committee chairman as a source of exogenous variation in firms' political relationship. The study finds that banks offer favorable loan terms to politically connected firms with larger loan quantities, lower loan spreads, longer maturities, and lower collateral requirements. Furthermore, political loans exhibit higher default rates. To isolate the bank supply channel, a rich set of fixed-effects is included with various specifications. The favorable lending increases with the strength of a firm's political connection, varies gradually along the political cycle, and is mainly offered by large and domestic banks. Consistent with the quid pro quo hypothesis, the study finds that banks that extend political loans receive significantly more government borrowings with better credit quality. The study also shows that the greater credit supply due to political connection leads to a large and significant increase in firm-level employment and assets. The study provides estimates of the total social cost of political lending and net revenue for banks that are engaged in rent provision activity. Finally, a series of robustness tests are performed to rule out alternative mechanisms and explanations.

Access to Finance. --- Bank Lending. --- Bankruptcy and Resolution of Financial Distress. --- Banks and Banking Reform. --- Debt Markets. --- Finance and Financial Sector Development. --- Political Economy. --- Privatization. --- Rent Seeking.

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A government desiring support for its policy reform program, without coercion, behaves as if it faces a political constraint. Citizen support depends on the estimate, by at least some minimum proportion of the population, that the program will succeed and the outcome will be in their individual self-interest. Government behavior has implications for the program, whose contents constitute the set of signals used by citizens to estimate the probability that the program will succeed. The government uses various devices to mobilize support for its program. An informed expert could design a program acceptable to both the government and the citizens.

Demography --- Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior --- Positive Analysis of Policy-Making and Implementation --- Fiscal and Monetary Policy in Development --- Demographic Economics: General --- Population & demography --- Population and demographics --- Population

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This paper provides an analytical discussion of several interconnected resource allocation problems from under-pricing of electricity used by farmers for groundwater extraction. In these situations, groundwater extraction is inefficiently high even without electricity under-pricing. Moreover, part of the electric power supply intended for farmers is often diverted to other unauthorized uses (notably illicit consumption). The paper demonstrates that unless non-price electricity rationing imposes severe constraints on demand, the range of resource allocation problems includes insufficient incentives to provide high-level service by the power utility, insufficient incentives for farmers to install and operate efficient equipment, and losses due to political "rent seeking" activities to influence water allocations. It also shows that diversion of electricity to illicit uses can increase overall economic efficiency when this leads to less electricity use by farmers, thus somewhat ameliorating the problem of excessive groundwater extraction as well as the inefficiencies related to under-pricing of electricity. Systemic reforms for overcoming these problems may face severe political obstacles.

Agricultural water use --- Economic Theory & Research --- Electric Power --- Electricity subsidies --- Energy --- Energy Production and Transportation --- Environment --- Groundwater extraction --- Macroeconomics and Economic Growth --- Rent seeking --- Wastewater Treatment --- Water allocation inefficiencies --- Water and Industry

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This paper contributes to the research on the macroeconomic origins of conflict. Based on a sample of 133 low- and middle-income countries over a 30-year period, it analyses to what extent changes in a country’s commodity terms-of-trade (ToT) can explain an increase in the incidence and intensity of conflicts through their effect on aggregate income. While the evidence from previous studies on the link between macroeconomic conditions and conflict is rather inconclusive, we find a significant relationship. Our baseline model finds that a negative commodity ToT shock leads to an increase in the number of conflict events and fatalities. Moreover, the effect plays out over several years albeit with decreasing strength after the second year; and its magnitude is twice as large for Low-Income Countries and Fragile and Conflict-affected States when compared with the sample average. In addition, our results show that macroeconomic shocks are creating more violence in countries with higher inequality and in cases where fiscal policy faces relatively stronger constraints on financing a response to the initial shock to incomes. Our results are robust to a number of plausible variations in model specification. The paper’s results, in conjunction with previous studies that emphasize the economic cost of conflicts, suggest the presence of a fragility trap—a vicious cycle of worsening economic conditions and deteriorating conflicts. Effective policies and well-tailored external financial support could be expected to help countries address this challenge.

Macroeconomics --- Economics: General --- Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior --- Conflict --- Conflict Resolution --- Alliances --- Macroeconomic Analyses of Economic Development --- Economic & financial crises & disasters --- Economics of specific sectors --- Currency crises --- Informal sector --- Economics

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Economic history --- Rent (Economic theory) --- Histoire économique --- Rente (Théorie économique) --- Islam --- Iran --- Economic conditions --- Conditions économiques --- 321.62 --- 330.50 --- 331.32 --- IR / Iran --- Economic rent --- Ground-rent --- Economics --- Land use --- Rent seeking --- Dictatuur. Despotisme --- Economische en sociale stelsels: algemeenheden. --- Structuur van de economie --- Economic policy. --- Economische en sociale stelsels: algemeenheden