Many reinsurance companies have, in the past decade, increased their foreign direct investment and acquired other companies in part because of the belief that only very large players will have the cost advantages necessary to remain competitive in global markets. Since the strategic decision to expand activities in several foreign markets is implemented at the group level, the focus of this paper is to examine data available on the internationalization process of the world’s largest reinsurance consolidated groups.
By examining the distribution of the total net premiums written by the largest reinsurance groups in the world, this paper documents several dimensions of the change in market concentration: the trend in concentration in the world's largest groups, and the relative position of these groups by countries. It also examines the geographic distribution of the world’s largest reinsurance groups and the factors explaining their preferred locations of activities. Finally, the paper examines the relationship between geographical diversification and the performance for the world’s largest reinsurance groups. It is verified that the form and nature of the relationship between international diversification and performance follow an S-shaped curve with increased diversification of the largest reinsurance groups.

Social and cultural determinants of economic institutions and outcomes have come to the forefront of economic research. We introduce religiosity, measured as the share for which religion is important in daily life, to explain institutional quality in the form of property rights and the rule of law. Previous studies have only measured the impact of membership shares of different religions, with mixed results. We find, in a cross-country regression analysis comprising up to 112 countries, that religiosity is negatively related to our institutional outcome variables. This only holds in democracies (not autocracies), which suggests that religiosity affects the way institutions work through the political process. Individual religions are not related to our measure of institutional
quality.

In a neglected work of 1964, Kuznets summarized some of the emerging results of his monumental work on Modern Economic Growth (MEG) and used them to speculate on diversity, interdependence, war, conflict, and cooperation among nations. It was an unusual Kuznets study ‐ speculative rather than precise and quantitative.
The tone and the approach clearly reflect the deep impact that must have left on Kuznets the horrors of the Second World War and the palpable threats of oppression and aggression of communist totalitarianism. No one was more appreciative than Kuznets of the benefits brought about by MEG but he was also keenly aware of its potential for destruction. In these essays he appears cautiously pessimistic reflecting on communism threat to world peace and stability and on the limited spread of the process of Modern Economic Growth with the resulting increased divide among rich and poor nations.
In this paper I summarize some of Kuznets’ arguments in his 1964 lectures highlighting the political and economic environment at the time he was writing and how it had evolved. I then try to update the analysis taking into account the changes in the geopolitical environment over the last 50 years, primarily the end of the Cold War, the spread of globalization, and the rise of China and other Asian economies.
In a final section I review various projections of expected changes in the global economy to 2050 and the main challenges such changes pose for conflict and cooperation.

Institutions matter: they affect individual action, influence cooperation and are crucial in making the difference between wealth and poverty, growth and stagnation. Yet, the explanatory power of modern institutional economics has not been exceedingly satisfactory. This paper criticizes the mainstream institutional view and maintains that its key weakness consists in its consequentialist nature. In contrast with the traditional perspective, therefore, we suggest a theory of institutional dynamics based on the notions of justice, social and procedural legitimacy and fairness. In particular, we put forward a stylized model of society, which includes two groups of individuals: the socialists and the libertarians. We discuss under which conditions they are likely to cooperate, when instability emerges and when demand for institutional change builds up. Finally, we draw on these insights in order to articulate a new research agenda for institutional economics.

The paper investigates the mechanisms of induced innovation in the renewable energy industry in Italy. Descriptive analysis reveals a decoupling of innovation and production: significant RES-related innovation in Northern Italy, high levels of renewable energy production in Southern Italy. A panel analysis from 1997 to 2007 for the 20 Italian regions reveals that renewable-specific local public R&D expenditure is the main determinant of the renewable energy patenting pattern. Local financial incentives play a
significant, but less important role. The wind and solar sources depend more on local public intervention than other RES such as biomass. The development of RES innovation activities appears to depend also on the political orientation of regional councils, thus confirming prior research on the role of social acceptance and political support in the development of RES.

The idea of multiple-self models in economics is that individual identity is the equilibrium result of the strategic interaction between sub-personal selves. These models fill the gap of standard rational choice theory in explaining inter-temporal inconsistency of choices. This modelling procedure requires an extension of revealed preference theory to the sub-personal level. This extension is grounded in the assumption that sub-personal selves are economic agents to whom analytical tools of microeconomics apply. I claim that this assumption is false and entails the empirical methodology of functional localization that fails to provide robust results.

The CAPM implies that investors require equity risk premia when choosing risky investments and therefore demand higher returns to equity invested if higher risk is present. This should apply to investments in independent enterprises and multi-national enterprises alike. This hypothesis is investigated by analyzing a panel of 407,000 European firms for the years 1985 to 2010. When income is set in relation to invested capital, risk measured by earnings volatility emerges as the most important stable determinant of income. Results indicate that both MNEs and independent firms regularly account for risk as a major determinant of income when pricing international goods and services. Hence international taxation rules for multi-national enterprises should account for risk premia in transfer prices and resulting profits.

McCloskey criticizes Samuelsonian economists for representing human beings in their models by a character she dubs Max U. Max U, she argues, lacks all virtues except for Prudence. The paper explores whether the identity between Max U and Prudence is tenable and whether Samuelsonian economics can be interpreted as a study of Prudence. I juxtapose Max U to the concept of Prudence as it appears in Adam Smith’s Theory of Moral Sentiments (TMS). The reason is twofold: 1) McCloskey assumes stability in the meaning of Prudence from Aristotle to Samuelson and hence any concept of Prudence would work 2) TMS occupies a prominent position in her argument. I attempt to show that utility maximization is a process distinct from practical reasoning underlying the virtue of Prudence and Samuelsonian economics can therefore not be interpreted as a study of Prudence.

The present paper analyses Luigi Einaudi’s role as opinion maker in the early decades of the twentieth century, when he was the leading columnist on economic issues at the Corriere della Sera. It focuses on the scope and limits of his efforts to broaden the consensus among the Italian public opinion on the principles of free competition, fiscal restraint and monetary stability. To this end, it investigates Einaudi’s journalistic style, his following among the public, his influence on the political elite and his views concerning the role of the economist in society. Further sections analyse the main issues tackled by Einaudi in his articles in the Corriere before World War I and the work of propaganda he enacted during the war in order to convince the Italian households to reduce consumption and to subscribe Treasury bills. A final section deals with the “reconstruction programme” devised by Einaudi after the war, his efforts to promote this programme in the Corriere and his defeat with the beginning of the fascist regime in 1925. We conclude that Einaudi’s work as journalist, albeit very influential, is not immune from inconsistencies. As a matter of fact, his efforts to promote economic liberalism were bound to be frustrated - at least in the short run - by the myths spread by the socialists on the one hand and by the nationalists and fascists on the other.

Longevity risk transfer is a popular choice for annuity providers such as pension funds. This paper formalizes the trade-off between the cost and the risk relief of such choice, when the annuity provider uses value-at-risk to assess risk. Using first-order approximations we show that, if the transfer is fairly priced and the aim of the fund is to maximize returns, the funds' alternatives can be represented in the plane expected return-VaR. We build a risk-return frontier, along which the optimal transfer choices of the fund are located and calibrated it to the 2010 UK annuity and bond market.

Severe limitations on antitrust enforcement officials’ knowledge and the potential impact of ill-advised investigations and prosecutions on markets suggest that officials should exercise extraordinary caution in enforcement of restraints on single-firm conduct. Although it is common to depict antitrust enforcement as protecting market competition while other forms of regulation are seen as intrusions (justifiable or not) into market operation, antitrust enforcement has characteristics and risks similar to other forms of regulation. Government antitrust enforcement can be especially problematic, as it requires discretionary selection among an extraordinary range of possible targets, imposes significant burdens on companies that are under investigation or subject to suit, invites efforts by individual firms to motivate officials to deploy resources against rivals, and can seriously disrupt competition among firms. Antitrust authorities need to exercise special care in making enforcement decisions respecting conduct of individual dominant firms in high-technology industries, where antitrust enforcers’ abilities to understand and predict industry evolution are most limited and where enforcement actions are most likely to rest on debatable predicates about the effects of specific conduct. This article examines government enforcement decisions respecting four prior targets and draws lessons for enforcement going forward.

In the developing world, kidnapping is relatively common, and a market for kidnap insurance has arisen in response. We provide a model that allows us to analyze how kidnap insurance will affect the interaction between the kidnapper and the victim’s family when both are self-interested and have complete knowledge. We find that a market for kidnap insurance can be supported because it benefits a risk averse family, as long as the introduction of insurance does not increase the risk of kidnapping too much. Families should fully insure if purchasing insurance does not increase the probability of kidnapping, and partially insure otherwise. Kidnapping insurance allows families to redeem hostages from kidnappers who are more willing to kill, which will reduce the number of kidnapping fatalities as long as the insurance does not increase the risk of kidnapping too much.

This paper examines the impact of trade and political institutions on environmental quality in Africa and explores whether political institutions matter to the trade-environment relationship. We use data from a large group of African countries, covering the period 1990-2008 and two indicators of environmental quality: net forest depletion and CO2 emissions. The results from GMM-SYS estimates suggest that political institutions influence the relationship between trade and environmental quality only in the case of CO2 emissions. Interestingly, we find that polity has a U relationship with net forest depletion. In addition, the results are in favor of an environmental Kuznets curve in the case of pollution (CO2 emissions) but not in the case of net forest depletion (deforestation). We discuss the policy implications of these findings.

David Hume’s theory of law and justice is a central element of his moral philosophy. Hume’s theory of the mind leads to a theory of undesigned social order based on fundamental laws of justice that arise insensibly through experience. The need to secure private property and its free exchange by the performance of promises is the original cause of the emergence of the rules of justice. Hume argues that the moral duty of obedience to authority arises from the need to maintain the rules of justice and that a ruler who violates or fails to uphold justice forfeits the right of allegiance. This paper analyses Hume’s theory and argues that it is epistemologically superior to natural rights theory and provides a powerful justification of property rights and contractual freedom that remains valid today.