Halvor Mehlum

• University of Oslo

This article presents a model describing a symbiotic relationship between criminals and a partnership of protection providers, called the Firm. The partners of the Firm earn profits as they have market power in the supply of protection. The Firm recruits its new partners among criminals. As a result, the prospect of graduating to the Firm adds an i...

For a developed market economy, the COVID-19 crisis is a new type of crisis, but such a crisis has parallels with economies at other times, and with crises in many places. We discuss some mechanisms from the traditional macro literature and from the literature on macroeconomics for developing countries. Phenomena such as bottlenecks, rationing, for...

We study the consequences of age-dependent preferences for economic growth and structural change in a two-sector model with overlapping generations and non-dimishing returns to capital. Savings and accumulation rates depend on the relative price of services consumed by old agents and on the intergenerational distribution of income. The feedback eff...

Based on Fieller’s method for the estimation of a confidence set for a ratio, I construct a polar plot of the test statistics for all angles associated with the ratio. This polar confidence plot clarifies and systematizes the inherent properties of the confidence set for ratios and, in particular, determines how the confidence set may be uninformat...

A theory of macroeconomic development based on the novel concept of savings multiplier is developed. Capital accumulation changes relative prices, amplifying incentives to save as the economy grows. The savings multiplier hinges on two mechanisms. First, accumulation raises wages and leads to redistribution from the consuming old to the saving youn...

We study the political economy of migration policies in the oil-rich and non-democratic Gulf countries where different economic groups have divergent preferences over the migration policy choices. We consider two policy dimensions: a) the number of migrants allowed into the country and b) whether to discourage remittances by migrants. The inflow of...

This article presents some of the main efficiency and fairness arguments in favor of open access publishing. It discusses how general open access could affect research and editorial practice. It ends with a discussion of the feasibility of open access and how a move to open access publishing could happen.

Norway is often referred to as the prime example of a country that has achieved high growth and low income inequality despite its vast natural resources. This contrasts sharply with many other resource abundant countries, which raises the questions why Norway has succeeded while many other resource abundant countries have not. That is the topic of...

We explore the implications of having a divided society where group leaders have motives for aggression towards other groups but where entrepreneurs have a desire for cooperation and peace. We assert that it is members of the elites who start conflicts and wage wars while the entrepreneurs undertake the type of economic activities that they find mo...

Here I revisit the so-called "island problem" in forensic statistics. The problem is how to properly update the probability of guilt when a suspect is found that has the same characteristics as a culprit. In particular, how should the search protocol be accounted for? I present the established results of the literature and extend them by considerin...

I derive the exact distribution of the exact determined instrumental variable estimator using a geometric approach. The approach provides a decomposition of the exact estimator. The results show that by geometric reasoning one may efficiently derive the distribution of the estimation error. The often striking non-normal shape of the instrumental va...

In a contest with positional dynamics between an incumbent and a challenger i) inequality of power may magnify conflicts, ii) more severe conflicts can go together with lower turnover of incumbents, and iii) power can be self defeating as cost advantages can reduce pay-offs. These three propositions of our paper are contrary to the implications of...

Schweigaard tiltr�dte sitt professorat knyttet til stats�konomi, statistikk og lovkyndighet ved Det juridiske fakultet i 1840 og holdt forelesninger i stats�konomi fra 1845 til 1869. Ved sin tiltredelse i 1840 hadde han allerede gjort seg sterkt bemerket som en kunnskapsrik �konom. Han hadde undervist i statistikk og stats�konomi ved universitetet...

utest provides the exact test of the presence of a U shaped (or inverse U shaped) relationship on an interval.

Non-linear relationships are common in economic theory, and such relationships are also frequently tested empirically. We argue that the usual test of non-linear relationships is flawed, and derive the appropriate test for a U shaped relationship. Our test gives the exact necessary and sufficient conditions for the test of a U shape in both finite...

The fight for power is not only over immediate rents, but also over advantageous positions in future power struggles. Such an incumbency edge may stem from the control of the army, the police and other instruments reserved for the government. When incumbency yields an extra fighting edge, current struggles may involve high stakes as a victory today...

Natural resource-abundant countries constitute both growth losers and growth winners, and the main difference between the success cases and the cases of failure lies in the quality of institutions. With grabber-friendly institutions more natural resources push aggregate income down, while with producer-friendly institutions more natural resources i...

We estimate the impact of poverty on crime in 19th century Bavaria, Germany. Rainfall is used as an instrumental variable for grain (rye) prices to address econometric identification problems in the existing literature. The rye price was a major determinant of living standards during this period. The rye price has a positive effect on property crim...

The fight for power is not only over immediate rents, but also over advantageous positions in future power struggles. When incumbency yields an extra fighting edge, current struggles involve high stakes as a victory today may guarantee the victory also tomorrow. Such an incumbency edge may stem from the control of the army, the police and other ins...

Countries rich in natural resources constitute both growth losers and growth winners. We claim that the main reason for these diverging experiences is differences in the quality of institutions. More natural resources push aggregate income down, when institutions are grabber friendly, while more resources raise income, when institutions are produce...

Poverty makes thieves and thieves hamper economic growth. We study these linkages in a model of modern sector job creation. Job creation has two effects. Higher labor demand tends to lower crime while higher output gives more to steal, tending to increase crime. At low levels of modernization the second effect dominates and, as a consequence, the m...

I show that in a Ramsey growth model, where the production function is of fixed proportions type and the utility function is CRRA, the saddle path is a closed form expression. The closed form expression greatly simplifies the analysis of how the labor productivity growth, the intertemporal rate of substitution, and the discount factor affect invest...

Unproductive enterprises that feed on productive businesses, are rampant in developing countries. A consequence of parasitic enterprises is that societies may be locked into a self enforcing configuration of beliefs and practices that result in persistent poverty. When entrepreneurs of both productive and parasitic enterprises are drawn from the sa...

I derive the exact small sample properties of the instrumental variables estimator using a trigonometric approach. The distribution for the estimation error is decomposed into a product of three components - each with an intuitive interpretation. This approach helps the discussion on what underlies the exact shape of the estimator’s distribution an...

Abstract The fight for power is not only over immediate rents, but also over advantageous positions in future power struggles. When incumbency yields an extra fighting edge, current,struggles,may,involve,high,stakes as a victory today,may,guarantee,the victory also tomorrow.,Such an incumbency,edge may,stem,from the control of the army, the police...

I derive an explicit solution for the saddle path in a Ramsey growth model. The existence of a closed form expression greatly simpliÞes the analysis of how the parameters of the utility function affects investments and growth.

When the state fails to supply basic security and protection of property, violent entrepreneurs not only seize the opportunity of plundering, but some also enter the protection business and provide protection against plunderers. This uncoordinated division of labor is advantageous for the entire group of violent entrepreneurs. Hence, in weak states...

In many developing and transition economies Mafia-like activities are rampant. Extortion and other forms of predation lower profitability in private businesses and distort investment incentives. Incorporated in a model of industrialization, bimodal club convergence may result. Economies may get stuck in a Predators' Club characterized by a vicious...

Destructive creativity implies that parasites become more efficient in rent extraction. We focus on destructive creativity in situations where parasites live on rents extracted from the producers. A higher parasitic strength implies that the waste associated with rent seeking increases, and in the long run erodes business productivity, implying tha...

In this note, I follow up Turner's (2002) discussion of the Collins Case. I derive some results, which correct an oversight in Turner's paper. The discussion illustrates the general point that it is important for the analysis of statistical data to know exactly how the data was collected.

Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effect...

In this note I bring a new aspect into the so called Island Problem. Given that only cases where there is a suspect reaches the court, what is the consequence for the probability of guilt? I find that it indeed matters for the results that court cases are selected in this way. The analysis illustrates the general point that the exact protocol by wh...

When the state fails to supply basic security and protection of property, violent entrepreneurs not only seize the opportunity of plundering, but some also enter the protection business and provide protection against plunderers. This uncoordinated division of labor is advantageous for the entire group of violent entrepreneurs. Hence, in weak states...

A CGE model for Zimbabwe has been used to analyse the short and medium-term dynamics following trade liberalisation. Special focus is on the investment response and on the possibility of reform reversal. When the reform is credible the export sector will invest, while investments will be withheld if reform is not credible. The strength of the inves...

Divided societies in the developing world experience wasteful struggles for power. We study the relationship between political stability and resources wasted in the struggle within a model of competitive power contests. The model of power contests is similar in structure to models describing oligopolistic market competition. This analogy helps us i...

An overlapping-generations model for rural to urban labor migration is developed. In the migration decision the potential migrants consider both the absolute income gain and the relative deprivation associated with moving to town. It is shown that the relative deprivation mechanism introduces a positive externality between generations of migrants t...

On the basis of liberalization experiences in many countries, there has been an increasing concern about the investment response to a process of liberalization, as summarized in, for example, Serven and Solimano (1993). Since the main reason governments embark on trade liberalization programs is to increase the productive capacity of the economy ov...

I consider fiscal reform and the consequences of expectations about reform cancellation. The reform implies reduced taxes and the laying off of employees in an inefficient public sector. If the resulting unemployment level declines sufficiently fast, the reform is completed. On the other hand, if high unemployment levels prevail for too long, the r...

Divided societies in the developing world experience wasteful struggle for power. We study the relationship between political stability and resources wasted in the struggle within a model of competitive power contests. When the incumbent has no extra edge over his challengers, social waste and political instability are two sides of the same thing....

An economic reform programme where inefficient public labour is laid off is considered. The immediate effect is a lowering of wages and increased profitability in the private modern sector. Over time, as capital accumulates in the modern sector, wages and production increases. Big bang reform generates a sharp transitory drop in wages while gradual...

We consider extortion gangs that are mafia-like in their protection of targets, but that are unlike the Mafia in their competition over targets. Does this type of organized crime pay? How are the returns to extortion affected by the number of competing extortionists and the violence they apply? Does the supply of extortions create the demand for pr...

,Halvor Mehlum (halvor. mehlum@econ. uio. no) University of Oslo, Department of Economics, P. O. Box 1095, Blindern N-0317 Oslo, Norway; Karl Moene (corresponding au-thor) (k. o. moene@econ. uio. no): University of Oslo, Department of Economics, P. O. Box 1095, Blindern N-0317 Oslo, Norway ; Ragnar Torvik (ragnar. torvik@svt. ntnu. no): Department...

A Ramsey model for a two-sector economy, comprising a labour intensive non-traded sector and a capital intensive traded sector, is used to analyse the transition following trade liberalization. Liberalization takes the form of removing a tariff wedge that benefited the non-traded sector. This increases overall productivity of capital in the short r...

Countries rich in natural resources constitute both growth losers and growth winners. We claim that the main reason for these diverging experiences is differences in the quality of institutions. More natural resources push aggregate income down, when institutions are grabber friendly, while more resources raise income, when institutions are produce...

I derive the exact distribution of the exact determined instrumental variables estimator using a trigonometric approach. The distribution for the estimation error is decomposed into a product of three components - each with an intuitive interpret- ation. This approach helps the discussion on what underlies the exact shape of the estimator's distrib...

Following up a 50 year old suggestion due to Solow, I show that by including a Ramsey consumer in the Harrod-Domar model, the knife-edge problem is solved. More surprisingly, however, the derived saddle path happens to be a closed form expression. The existence of a closed form expression greatly simplifies the analysis of how the parameters of the...

We explore the implications of having a divided society where group leaders have motives for aggression towards other groups but where entrepreneurs have a desire for cooperation and peace. We assert that it is members of the elites who start conflicts and wage wars while the entrepreneurs undertake the type of economic activities that they find mo...

In spite of long years of high regime stability with a weak opposition and a dominant non-contested ruler, several authoritarian regimes are now dissolving. We show that in contests with incumbent-challenger turnover i) inequality of power may magnify conflicts, ii) more severe conflicts can go together with lower turnover of incumbents, and iii) p...