We show that the recent rise in Afghan opium production is caused by violent conflicts. Violence destroys roads and irrigation, crucial to alternative crops, and weakens local incentives to rebuild infrastructure and enforce law and order. Exploiting a unique data set, we show that Western...

In many countries extreme poverty is unnecessary. Yet it persists. We propose a simple index, denoted the Miser index, to measure the extent to which societies have poverty in the midst of affluence. It builds on the generalized Lorenz curve, but can also be seen as a measure of polarization...

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?...

The complementarity between wage setting and welfare spending can explain how almost equally rich countries differ in economic and social equality among their citizens. More wage equality increases the welfare generosity via political competition in elections. A more generous welfare state fuels...

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...

Unproductive enterprises that feed on productive businesses, are rampant in developing countries. These parasitic enterprises take divergent forms, some headed by violent bandits and brutal mafia bosses, others by organized middlemen or smart political insiders. All of them seem to have the...

A dynamic macroeconomic model is used to analyze the interaction between economic growth, labor demand and crime. Due to endogenous crime, the model exhibits increasing returns to aggregate capital at certain development levels. At other development levels, however, there are decreasing returns...

Social democracy, it is often said, is nice but pricey. Whatever its merits in the rich countries of Western Europe, social democracy is frequently dismissed as an infeasible model for developing countries. Based on generosity towards the poor and protection against market competition, the...

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...