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We construct a model of revolution and transition to democracy under individualistic and collectivist cultures. The main result is that, despite facing potentially more challenging collective action problems, countries with individualistic cultures are more likely to end up adopting democracy earlier than countries with collectivist cultures. Our empirical analysis suggests a strong and robust association between individualistic cultures and average polity scores and durations of democracy, even after controlling for other determinants of democracy emphasized in the literature. We provide evidence that countries with collectivist cultures also are more likely to experience autocratic breakdowns and transitions from autocracy to autocracy.

"This paper considers a moments based non-linear estimator that is root-T consistent and uniformly asymptotically normal irrespective of the degree of persistence of the forcing process. These properties hold for linear autoregressive models, linear predictive regressions, as well as certain non-linear dynamic models. Asymptotic normality is obtained because the moments are chosen so that the objective function is uniformly bounded in probability and that a central limit theorem can be applied.Critical values from the normal distribution can be used irrespective of the treatment of the deterministic terms. Simulations show that the estimates are precise, and the t-test has good size in the parameter region where the least squares estimates usually yield distorted inference"--National Bureau of Economic Research web site

"Dynamic Stochastic General Equilibrium (DSGE) models are often solved and estimated under specific assumptions as to whether the exogenous variables are difference or trend stationary. However, even mild departures of the data generating process from these assumptions can severely bias the estimates of the model parameters. This paper proposes new estimators that do not require researchers to take a stand on whether shocks have permanent or transitory effects. These procedures have two key features. First, the same filter is applied to both the data and the model variables. Second, the filtered variables are stationary when evaluated at the true parameter vector. The estimators are approximately normally distributed not only when the shocks are mildly persistent, but also when they have near or exact unit roots. Simulations show that these robust estimators perform well especially when the shocks are highly persistent yet stationary. In such cases, linear detrending and first differencing are shown to yield biased or imprecise estimates"--National Bureau of Economic Research web site

"This paper develops a model where firms make state-dependent decisions on both pricing and acquisition of information. It is shown that when information is not perfect, menu costs combined with the aggregate price level serving as an endogenous public signal generate rigidity in price setting even when there is no real rigidity. Specifically, firms reveal their information to other firms by changing their prices. Because the cost of changing price is borne by a firm but the benefit from better information goes to other firms, firms have an incentive to postpone price changes until more information is revealed by other firms via the price level. The information externality and menu costs reinforce each other in delaying price adjustment. As a result, the response of inflation to nominal shocks is both sluggish and hump-shaped. The model can also qualitatively capture a number of stylized facts about price setting at the micro level and inflation at the macro level"--National Bureau of Economic Research web site

At the firm level, revenue and costs are well measured but prices and quantities are not. This paper shows that because of these data limitations estimates of returns to scale at the firm level are for the revenue function, not production function. Given this observation, the paper argues that, under weak assumptions, micro-level estimates of returns to scale are often inconsistent with profit maximization or imply implausibly large profits. The puzzle arises because popular estimators ignore heterogeneity and endogeneity in factor/product prices, assume perfect elasticity of factor supply curves or neglect the restrictions imposed by profit maximization (cost minimization) so that estimators are inconsistent or poorly identified. The paper argues that simple structural estimators can address these problems. Specifically, the paper proposes a full-information estimator that models the cost and the revenue functions simultaneously and accounts for unobserved heterogeneity in productivity and factor prices symmetrically. The strength of the proposed estimator is illustrated by Monte Carlo simulations and an empirical application. Finally, the paper discusses a number of implications of estimating revenue functions rather than production functions and demonstrates that the profit share in revenue is a robust non-parametric economic diagnostic for estimates of returns to scale. -- Production function ; identification ; returns to scale ; covariance structures

"Using micro-level data, we examine the effects of Russia's 2001 flat rate income tax reform on consumption, income, and tax evasion. We use the gap between household expenditures and reported earnings as a proxy for tax evasion with data from a household panel for 1998-2004. Utilizing difference-in-difference and regression-discontinuity-type approaches, we find that large and significant changes in tax evasion following the flat tax reform are associated with changes in voluntary compliance and cannot be explained by changes in tax enforcement policies. We also find the productivity response of taxpayers to the flat tax reform is small relative to the tax evasion response. Finally, we develop a feasible framework to assess the deadweight loss from personal income tax in the presence of tax evasion based on the consumption response to tax changes. We show that because of the strong tax evasion response the efficiency gain from the Russian flat tax reform is at least 30% smaller than the gain implied by conventional approaches"--National Bureau of Economic Research web site

"This paper reexamines the evidence on the border effect, the finding that the border drives a wedge between domestic and foreign prices. We argue that the border effect can be inflated by the volatility and persistence of the nominal exchange rate and by the cross-country heterogeneity in the distribution of within-country price differentials. We develop a simple framework to separate the border effect from these confounding factors. Using price data from Engel and Rogers (1996) and Parsley and Wei (2001), we show that after controlling for the confounding factors the border effect between the U.S. and Canada and the U.S. and Japan is negligible"--National Bureau of Economic Research web site

This paper develops a partial equilibrium model to account for stylized facts about the behavior of oligarchs, politically and economically strong conglomerates in transition and developing countries. The model predicts that oligarchs are more likely than other owners to invest in productivity enhancing projects and to vertically integrate firms to capture the gains from possible synergies and, thus, oligarchs can be productive. Using a unique dataset comprising almost 2,000 Ukrainian open joint stock companies, the paper tests empirical implications of the model. In contrast to commonly held views, econometric results suggest that, after controlling for endogeneity of ownership, oligarchs can improve the performance of the firms they own relative to other firms. -- Oligarch ; transition ; firm performance ; property rights ; treatment effect

We construct a model of revolution and transition to democracy under individualistic and collectivist cultures. The main result is that, despite facing potentially more challenging collective action problems, countries with individualistic cultures are more likely to end up adopting democracy earlier than countries with collectivist cultures. Our empirical analysis suggests a strong and robust association between individualistic cultures and average polity scores and durations of democracy, even after controlling for other determinants of democracy emphasized in the literature. We provide evidence that countries with collectivist cultures also are more likely to experience autocratic breakdowns and transitions from autocracy to autocracy.