tura, and seminar participants for helpful comments. We thank Michele Cavallo and Andrew Ti±n for excellent research assistance. Giancarlo Corsetti acknowledges ¯nancial support from MURST. Paolo Pesenti thanks the University of Rome III for warm hospitality and support. paper tiger: a Chinese expression ¯rst used by Chairman Mao, a person, country, etc., that appears outwardly powerful or important but is actually weak or ine®ective (Oxford English Dictionary , 2nd edition).