AbstractUpon implementing the Compact of Free Association between the United States and the Federated States of Micronesia, the US Congress unilaterally stripped tax and trade provisions that would have encouraged investment in the Federated States of Micronesia. I quantify what was lost to the Federated States of Micronesia by arguing that the provisions would have made the Federated States of Micronesia an explicitly sanctioned tax haven through empirical estimates of the impact of tax havens on growth and a comparison of performance of similarly situated entities, the American Samoa and Commonwealth of the Northern Mariana Islands, which did have preferential access to the US market. The estimates suggest that the Federated States of Micronesia lost from $700 million to over $1 billion in gross domestic product from 1986 to 2001.
Numerous parts of the developing world are afflicted by pollution and poison from both man-made and natural sources. Efforts to mitigate these environmental contaminants are often inherently political, and it is difficult to discern if those efforts reach all intended beneficiaries. We argue that as spatial precision increases, it is likely that donors lose control of foreign aid. Using geo-spatial data, we find evidence in Bangladesh that efforts to mitigate groundwater arsenic are generally directed to broad areas with higher levels of contamination. However, within those areas, we find that mitigation measures supported by foreign aid only reduce arsenic when they are located near (politically important) exporting firms. We argue that this supports a political economy rationale wherein donors may be able to target their assistance at a mezzo level, while powerful socio-economic interests are able to capture and direct resources at a micro level, potentially exacerbating intra-country inequality.