This paper analyzes which of various plausible determinants are significantly related to an index of "perceived corruption" compiled from business risk surveys for the mid-1990s. Using 2SLS to reduce problems of endogeneity and a variation of Leamer's "extreme bounds analysis" to test for robustness, it finds three factors robustly significant. Countries that were more economically developed and those which are former British colonies were rated "less corrupt". Those which have a federal structure were "more corrupt". Daniel Treisman Assistant Professor Department of Political Science University of California, Los Angeles 4289 Bunche Hall LA CA 90095-1472 Treisman@polisci.ucla.edu First Draft September 1997 Revised April 1998 ####

This paper draws on data developed and is closely related to work in progress with David Laitin, whom I thank for many helpful comments and discussions

This paper examines average annual inflation rates in a panel of 87 countries in the 1970s and 80s. It finds a sharp divergence between developed countries---where decentralization correlates with lower inflation---and developing countries---where it correlates with higher inflation. Empirical analysis suggests that decentralization helps preserve central bank independence in OECD countries, while in non-OECD countries it increases pressures on the government to overspend and get the central bank to monetize the deficit. In developing countries, decentralization of tax authority also seems to reduce imports, thus reducing the political cost to central government of inflationinduced currency depreciation. Daniel Treisman Assistant Professor Department of Political Science University of California, Los Angeles 4289 Bunche Hall Los Angeles, CA 90095-1472 Treisman@polisci.ucla.edu June 1998 Draft. Comments Welcome. I. INTRODUCTION Do political and fiscal decentralization make it easier or more difficult to control inflation? A policymaker faced with this question might be excused for feeling some confusion. While the pros and cons of decentralization are vigorously debated in countries around the world, little is known conclusively about its relationship to stable prices. Opposite arguments exist, based on different theoretical premises, supported by different empirical examples, and implying opposite predictions.

This paper was written while Charlotte Opal was a summer intern at the World Bank We are grateful to Vernon Henderson for the use of his data base and for his suggestions; to Bill Easterly and the participants of the macro brownbag lunch seminar at the World Bank for their comments; and to Christine Kessides for her support and interest. All remaining errors are ours. This research was supported by the Transport, Water, and Urban Division of the World Bank. 1

leader in the field of global modeling. He is the principle author of the book Ending Hunger and has written numerous works on global interdependence. Global Interdependence: A Fact of Life Most human beings have never heard of global models, let alone seen one. But periodically, major catastrophes, made vivid by media attention, remind us that we are small, fragile elements in a tightly linked, interdependent system – 1986 provided two examples. A chemical fire and spill in Basel, Switzerland poisoned 185 miles of the Rhine River, destroyed ten years of ecological restorative work, and threatened public water supplies. The long-term consequences are a matter of debate and speculation. A nuclear reactor explosion at Chernobyl produced measurable increases in radiation in far distant places. In the immediate region of the reactor, agricultural fields were contaminated. In some European countries, crops were contaminated and precautionary measures were initiated. The long-term consequences of this even are also a matter of

An influential conventional wisdom holds that civil wars proliferated rapidly with the end of the Cold War and that the root cause of many or most of these has been ethnic nationalism. We show that the current prevalence of internal war is mainly the result of a steady accumulation of protracted conflicts since the 50s and 60s rather than a sudden change associated with a new, post-Cold War international system. We also find that after controlling for per capita income, more ethnically or religiously diverse countries have been no more likely to experience significant civil violence in this period. We argue for understanding civil war in this period in terms of insurgency or rural guerrilla warfare, a particular form of military practice that can be harnessed to diverse political agendas, including but not limited to ethnic nationalism. The factors that explain which countries have been at risk for civil war are not their ethnic or religious characteristics but rather the conditions that favor insurgency. These include poverty, which marks financially and bureaucratically weak states and also favors rebel recruitment, political instability, rough terrain, and large populations.

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The period since World War Two has been marked by a great deal of civil war. Most of these civil wars have been ethnic civil wars. This paper presents a one shot game of ethnic conflict. The government is endowed with goods that it distributes among ethnic groups. The government is initially controlled by one of the groups and other factions can expend resources to fight for control of the government. I show that the incidence of war is higher in more ethnically fragmented countries. I discuss external interventions to decrease the incidence of civil war. I show that military aid to the government can decrease conflict while economic aid can increase conflict. I thank V.V. Chari, Michele Boldrin, Larry Jones, and Ross Levine for their encouragement and