The four papers in this thesis contribute to two interrelated research areas. The first two papers aim to determine which conditions in developing countries help to enable economic and political stability. The last two papers look at the consequences for the industrialized world as an ever higher share of developing countries are able to lift themselves on a trajectory of development and economic growth. Path-breaking works by North and Thomas (1976) and Acemoglu, Johnson, and Robinson (2001) show that social and political institutions are a prerequisite for economic development. However, sophisticated institutions that favor investment in broad education and infrastructure are based on the absence of violence and civil conflict. This is especially true in Sub Saharan Africa (SSA), where civil conflicts are seen as a thread to the recent economic and political progress. The first paper in this thesis contributes to the literature on the factors that drive civil conflict. Such factors include GDP per capita and ethnic fractionalization, which have been established as quite stable predictors of civil conflict. In turn, my approach builds on the work of Goldstone (1991) who stresses the importance—from a historical perspective—of youth population fluctuations in the context of civil conflict and rebellion. Especially, the still prevailing agriculturally dominated societies in SSA face difficulties when confronted with youth bulges. When exceptional large youth cohorts hit the agricultural labor market, which even today employs two thirds of the labor force in these countries, the excess labor supply cannot be absorbed. This results in declining economic perspectives and marginalization for parts of the youth population. Since outside options are bleak for the male youth population in times of a youth bulge, the recruitment costs for insurgencies decline. I show that this effect is substantial. Increasing male youth population aged 15 to 19 increases the risk of the onset of civil conflict. The paper also identifies factors that hamper such a youth bulge effect. Higher agricultural income increases the economic perspectives for youth which makes recruitment more difficult and hence mitigates the risk of conflict. The second paper (with Stefan Csordás) asks how exogenous forces influence political institutions within developing countries. In particular, we find that political stability in one country helps to improve political institutions in the neighbor countries. However, the results also outline the danger of regional instability. Second, the paper identifies foreign aid as a tool to stabilize democratic institutions in developing countries. In turn, we were not able to identify a significant relationship between trade and democracy. In the second part of the thesis the emphasis lies on potential feedback effects from political and economic development of (former) developing countries on industrialized countries. The third paper is on the transition from private to state-owned oil dominance that has taken place in 1970s. It shows that as oil rich developing countries develop institutional and technical capacities they are able to transfer oil production towards their state-owned oil firms. The theoretical part of the paper highlights that private international oil firms produce at their capacity limit which allows for a constant international oil price path. However, oil production under state regime differs significantly, because state-owned firms generate a Hotelling rent. Hence, the shift from private towards state-owned oil production generates an eventually increasing oil price path. This is confirmed in the empirical part of the paper. The last paper (with Matthias Flückiger) explores how the increasing export competition through Chinese manufacturing products affects the industrialized European countries. Thus, as Chinese economic institutions develop—and given the vast labor pool and investments—it is to be expected that equilibrium effects on world markets arise. In contrast to previous studies we focus on the export competition, since Europe is far more open to trade—compared, e.g., to the United States— and export industries have been shown to have a significant impact on industrial specific variables (Melitz 2003) and economies. Our results show that, in fact, Chinese export competition lead to a decrease of European exports and that this in turn has adverse effects on the industry level. As the export sector declines, employment as well as firm size decreases. Thus, labor reallocation takes place. We do not, however, observe wage effects, which is in line with the wage rigidities observed in Europe. Furthermore, we are able to show that regions which are more affect by Chinese export competition—through their industries —suffer from economic decline and labor reallocation towards the service sector. This short introduction shows that the four papers are quite different from a thematic point of view and follow quite different research ideas. They can, however, be seen as different facets of the recent economic progress which has been made in many parts of the world. The heterogeneity in my research areas also depict one of the main hurdles to overcome while writing this thesis. That is to separate and to focus on promising and feasible research ideas. Furthermore, it shows the difficulty to condensate and to improve an idea in such a way that a plausible and convincing argument emerges.weiterlesen