No abstract

Since Abu Bakr al-Baghdadi announced in April 2013 the formation of the new Islamic polity, the Islamic State of Iraq and Syria (ISIS), it has slowly become the epitome of terror. Certain acts of violence and atrocities committed by ISIS create the impression that it is acting out of blind, destructive religious fanaticism. In contrast, this article argues that this perception is but media-driven speculation. Instead of being religious zealots, ordering the purposeless killing of infidels, ISIS’ actions are governed by a strong rationale and a clear aim, namely the creation of a state, moreover one that extends beyond the traditional constitutive elements of statehood. In particular, ISIS’ rationality serves the purpose of consolidating an Islamic State in the Middle Eastern region, and beyond, under a Caliphate with a claim to universal governance and jurisdiction. This article illustrates the mechanisms which ISIS uses to achieve its aim of establishing an extended state, and it elaborates on the impact of actions and policies against ISIS on the basis of an evolutionary game theoretic model. [JEL codes: C73, D74, F51]

The correlation between democracy and income inequality, as well as the direction of causation is still debated. In this paper, we conduct a dynamic panel data analysis for all 34 Organisation for Economic Co-operation and Development member states over the period 1960–2012 and illustrate a nonmonotonic relationship between inequality and democracy, as well as test the direction of causation by employing a noncausal homogeneity test in a panel Granger framework and the Dumitrescu and Hurlin noncausal heterogeneity test. We provide an explanation for the inverted U-shaped relation. In addition, we illustrate individual regression results for 12 exemplary Organisation for Economic Co-operation and Development countries and provide a concise illustration of the economic and political changes to which countries have been subjected while elaborating the effect of the underlying policies on democracy and income equality.

We study the interplay between the decision of firms to innovate and human capital. Based on a dynamic evolutionary model, we show that in the presence of a high stock of human capital, an advanced economy can remain caught in an “innovation trap”. Following the literature on endogenous growth, R&D investments and human capital are modeled as strategic complements. Skilled workers increase productivity and enjoy a wage premium if they are employed in the R&D sector, while they receive the same wage as unskilled workers if they are employed in the production sector. We model the evolutionary dynamics of the share of innovative firms and human capital to determine the conditions under which an economy converges to a high, low or mixed state of innovation.

In recent years, a growing literature emerged studying the role of identity in economics. Yet, mainstream economists and other social scientists still eye identity economics with suspicion. This article illustrates the underlying assumptions of identity economics, gaps in the literature, as well as existing tools and research in other domains of economic theory that help to close these gaps, while demonstrating that identity economics is able to provide sophisticated approaches and additional findings that support transdisciplinary research on the topic. In order to demonstrate how these tools can be used to study the complex social systems in which identity, preferences, and institutions co‐evolve, I develop a number of simple analytical models and elaborate on their implications, while keeping technicalities to a minimum. In addition, I show how findings in behavioural economics apply to identity economics and prove insightful for our understanding of the complex interdependencies between identity and group formation.