the developmental effect of state alcohol prohibitions at the turn of the twentieth century john p lennon treasurer of the american federation of labor says that seventy percent of the drink bill of the united states is contributed by the american laboring man this means that liquor money is usually bread money meat money shoe money and money that ought to go for clothing american issue maryland edition june 12 1909 as cited in odegard 1928 i introduction work by economists provides considerable evidence consistent with the fetal origins hypothesis that various chronic health outcomes are prompted by an adverse in utero environment e g banerjee et al 2010 deschenes et al 2009 1 while the outcomes and conditions vary across studies the underlying findings emphasize the risks associated with negative exposures during this critical development period most studies in the fetal origins literature exploit the variation afforded by temporary adverse in utero shocks e g famines and focus on early life outcomes e g low birth weight however recent research in this area examines the effects in adulthood of positive in utero and childhood exposures for example hoynes schanzenbach and almond 2012 find that the beneficial effects of food stamp access in utero and during childhood persist into adulthood suggesting the potential for positive and sustained environmental changes during gestation and in early childhood to have long lasting impacts 2 results from bleakley 2007 suggest higher adult incomes among cohorts in the american south with more childhood exposure to hookworm eradication efforts 3 we contribute to this growing literature by exploiting the quasi randomization of alcohol consumption created by state level alcohol prohibition laws passed in the united states in the early part of the twentieth century we argue that such laws represented a positive shock to individuals who were in utero or who were young children around the times of the laws adoption using a large dataset of world war ii enlistees we examine the long term effects of these state prohibition laws on adult educational attainment obesity and height although we do not observe alcohol consumption and hence our results provide intent to treat estimates our design avoids the reporting problems associated with using more recent data on alcohol use we find small but statistically significant effects which do not appear to be the result of pre existing trends for two of the three outcome variables ii background reduced consumption of alcohol could lead to improved outcomes for those individuals in utero or in early childhood during this period through two channels first reduced alcohol consumption by the household members who likely consumed the most alcohol during this period namely men may have shifted resources to other members of the household namely women and children second reduced consumption by pregnant women themselves would reduce fetal exposure to alcohol we provide some historical evidence on the potential relevance of these mechanisms in the context of state level alcohol prohibitions a intrahousehold shift in resources to women and young children liquor traffic as the enemy of the home was a favorite theme of the anti saloon league and other temperance organizations of the time odegard 1928 42 4 the suggestive titles of pamphlets distributed by such organizations included better babies unborn children why babies die and boys worth more than taxes the obvious intention of such propaganda was to convey the message that the saloon culture and the alcohol consumption that came with it resulted in adverse outcomes for children and families that would be reversed under prohibition determining whether or not this reversal materialized is difficult given the lack of historical consumption data state level data on alcohol consumption are not available for this period however national data on consumption and other measures that are likely to be associated with consumption provide some evidence to suggest lower alcohol consumption in the period during which many states adopted alcohol prohibition laws

the long run fisher relation in canada in this paper the existing fisher equation research is extended to time series on the canadian nominal interest rate and inflation to test the validity of the fisher hypothesis and related hypotheses the evidence suggests a significant long run equilibrium between nominal rates and inflation in canada but that this relationship has not been completely stable over the last three decades

political and institutional determinants of fiscal policy in the european community in recent theoretical and empirical research the variation in political and institutional arrangements which may affect the process of national policy formation is examined in order to explain cross country differences with respect to fiscal policies pursued in this paper we build upon this literature and examine whether and how cross country differences in debt accumulation and public sector size of member countries of the european community during the 1980s can be explained we conclude that the growth of government debt is positively related to the frequency of government changes and negatively to sound budgetary procedures in countries with left wing governments the growth of the share of government spending in total output generally tends to be higher

do elections affect the composition of fiscal policy in developed established democracies this paper investigates the impact of elections on the level and composition of fiscal instruments using a sample of 19 high income oecd democracies during the period 1972 1999 we find that elections shift public spending towards current expenditures at the cost of public investment although we find no evidence for an electoral cycle for government deficit and overall expenditures we find a negative effect of elections on revenue attributed to a fall in direct taxation our results apply for predetermined electoral periods while endogenous elections seem to increase deficit and leave the composition of fiscal policy unaffected

partisan politics and privatization in oecd countries many scholars have argued that partisan differences have disappeared since the 1980s because of the ever increasing economic globalization and the deepening of european integration using a new primary data set on public ownership that contains detailed information on privatization in 20 countries between 1980 and 2007 we test these claims empirically in relation to state ownership we pay special attention to the question of whether changes in the international political economy notably globalization and different aspects of european integration condition partisan politics our empirical findings suggest that political parties have continued to significantly shape national privatization trajectories in line with the classic partisan hypothesis while partisan differences are somewhat reduced by the liberalizing and market building efforts of the european union globalization does not condition partisan effects moreover the run up to the european monetary union even seems to have reinforced partisan

partisan influence on the local tax burden in the netherlands this paper analyses the role of partisan politics in determiningthe local tax burden property taxes are the most important revenuesource which municipalities in the netherlands can decide uponthemselves using a new data set on dutch local property taxes in1996 it is concluded that municipalities with a council dominatedby left wing parties have a higher tax burden we also find thatlarger coalitions have lower levels of taxation finally taxexporting increases tax rates

retrospectives irving fisher s appreciation and interest 1896 and the fisher relation irving fisher s monograph appreciation and interest 1896 proposed his famous equation showing expected inflation as the difference between nominal interest and real interest rates in addition he drew attention to insightful remarks and numerical examples scattered through the earlier literature and he derived results ranging from the uncovered interest arbitrage parity condition between currencies to the expectations theory of the term structure of interest rates

government spending and budget deficits in the industrial economies fiscal policy nouriel roubini and jeffrey sachs this paper examines the evolution of the size of government and of budget deficits in oecd economies we highlight the rapid increase in government spending in the 1970s the sharp rise in budget deficits and public debt after 1973 and the reversal in these trends in the 1980s the increase in the size of government was associated in part with the slowdown in growth after 1973 but also reflected gradual adjustment of the ratio of spending to output towards a long run target which depends on political and institutional characteristics of the economy the political orientation of the government the degree of wage indexation and the degree of stability of the political system such factors also explain the size of budget deficits when faced with an adverse shock subsequent deficit reduction requires a measure of political consensus we note that such consensus is hard to achieve in multi party coalitions in consequence countries with such a political structure tended in consequence countries with such a political structure tended toin consequence countries with such a political structure tended to experience much more rapid increases in their debt gnp ratios

edmund phelps macroeconomist and social scientist edmund phelps helped change the way we think about macroeconomic theory and policy by introducing imperfect information and costly communication into the theory and deriving their implications for the dynamics of inflation and unemployment phelps treated macroeconomics as a social science whose subject matter is not just the choices people make but how people interact in groups his pioneering efforts in developing a formal theory of the coordination mechanisms governing interactions led the way to a new kind of macroeconomics one that was based on the interplay between the actions and expectations of individual actors instead of being based on postulated relationships between macro aggregates mainstream macroeconomics today projects a view of the economy that differs in important respects from phelps s original vision whereas he portrayed economic interactions as being problematical and uncertain leading to outcomes that intelligent people can adapt to but not anticipate much of macroeconomics now is about the representative agent content to interact with only himself and nature or perhaps at arm s length with the market through an unspecified agency that calculates equilibrium prices and executes preharmonized transactions and people are typically portrayed now as understanding completely up to stochastic error with known distribution all economic forces indeed phelps himself has changed his view on the significance of imperfect anticipation having adopted a structural approach to unemployment that attaches only momentary importance to disappointed expectations as a driving force even so macroeconomics today has a connection with microeconomic reasoning that it never did before phelps and a handful of others transformed the subject and many of the concepts that phelps himself introduced while making these contributions in the 1960s and 1970s remain in

a partisan model of government expenditure partisan models of budget politics largely concentrate on the size of government budget deficits and debt but most theories have little to say as to what the effect of party politics on both the size and the composition of budgets is this paper seeks to extend previous literature in two directions first a model of spending preferences is developed that relates actors preferred level and allocation of expenditure to electoral gains from fiscal policies second changes in both total expenditure and the expenditure mix of two budget categories are analyzed for the effect of parties spending preferences as stated in their election manifestos using data on 19 oecd countries from 1971 to 1999 the paper finds support for general partisan hypothesis the results suggest that the actual spending preferences of parties matter whereas they do not indicate that parties of the left consistently differ from parties of the right in their spending behavior

electoral competition and the growth of public spending in 13 industrial democracies 1950 to 1983 this article examines a theoretically important issue that has received surprisingly little attention whether the process of democratic competition for public office has fueled the growth of domestic spending in the capitalist democracies since world war ii probably because it is difficult to measure electoral competition in multiparty systems existing comparative studies of public spending either ignore this question or use dubious measures of electoral competition this study presents and tests some conceptually more appealing measures of competition the results show a strong robust relationship between improved indicators of electoral competition and the growth of domestic spending from 1950 to 1973 and 1973 to 1983 the study concludes by analyzing the implications of the findings for economic performance in the capitalist democracies and for the democratic management of fiscal policy

internationalization institutions and political change many analysts associate internationalization of markets with wide ranging changes in domestic politics an open polity approach shows how extant domestic institutions mediate in this relationship between internationally induced changes in domestic actors policy preferences on the one hand and national policy and institutional outcomes on the other the nature of labor unions and formal political institutions often results in political outcomes that differ significantly from those that would ensue if outcomes simply mirrored preference changes in addition while existing institutions may sometimes constrain governments from pursuing policies that would improve long term economic performance governments will often fail to change these institutions because of short term political considerations

irving fisher and the fisher relation setting the record straight william j crowder 1997 1124 1127 states that the fisher hypothesis represents one of the oldest and most basic equilibrium relationships in financial economics the fisher equation encapsulates the simple relationship hypothesized to exist between nominal interest rates and expected inflation first delineated by irving fisher 1930 whose name has been associated with the equation ever since crowder s first sentence is indisputable the other sentence quoted presents a belief that seems almost universal in the literature on the fisher relation as distinct from the history of economic thought literature about irving fisher it credits fisher with one of the few innovations in the area for which he does not deserve and did not claim credit neglects what he did contribute on related topics and views the theory of interest 1930 as his first presentation of the relationship a third of a century later than his classic reformulation of the relation the celebrated equation which appears in fisher s american economic association monograph appreciation and interest 1896 and in an appendix to his the rate of interest 1907 does not appear in the theory of interest where the treatment of the relation in chapters 2 and 19 is verbal supplemented with diagrams but no equation in appreciation and interest 1896 fisher drew attention to statements by william douglass john stuart mill alfred marshall jacob de haas and john bates clark of how expected inflation or deflation affects nominal interest and he made no claim to originality on the point writing at the end of a thirty year period of declining prices fisher referred in his title to appreciation of the purchasing power of money rather than to depreciation fisher was the first to write down the relation as an equation but not the first to articulate the relation while endorsing

wage inequality and varieties of capitalism this article draws on a new data set that enables the authors to compare the distribution of income from employment across oecd countries specifically the article conducts a pooled cross sectional time series analysis of the determinants of wage inequality in sixteen countries from 1973 to 1995 the analysis shows that varieties of capitalism matter the authors find that the qualities that distinguish social market economies from liberal market economies shape the way political and institutional variables influence wage inequality of particular interest to political scientists is the finding that the wage distributive effects of government partisanship are contingent on institutional context union density emerges in the analysis as the single most important factor influencing wage inequality in both institutional contexts

do the personal characteristics of finance ministers affect changes in public debt using a unique dataset of the personal characteristics of national finance ministers in western europe 1980 2010 i show that a finance minister s experience affects the national debt to gdp ratio the increase in the debt to gdp ratio is smaller if the finance minister stays in office for an additional year this result is robust to the inclusion of the personal characteristics of prime ministers and a measure of political stability however the magnitude of the effect is sensitive to how finance ministers are selected in the econometric model when more than one minister holds office during a particular year the estimation of interaction terms further reveals that experience particularly matters in election years or in times of negative gdp growth because an experienced finance minister has the power to restrict the usual increase in the debt to gdp ratio in contrast a finance minister s educational background and ideological leaning have no significant impact on the debt to gdp ratio

alcohol availability and crime evidence from census tract data 1 introduction this article uses census tract data from the city of detroit and a reduced form crime equation to investigate the effects of alcohol availability on crime a fact of urban life in the united states is high crime rates rates that differ across neighborhoods in cities and easy availability of alcohol a disproportionately large number of crimes are committed by people who have just consumed alcohol cook and moore 1993a the homicide rate among youths in poor inner cities where alcohol consumption tends to be high is four times as high as the national average among all youths fbi 1996 parker 1993 reports that all things equal homicides are higher in high alcohol consumption neighborhoods than in low alcohol consumption neighborhoods according to the national institute of criminal justice statistics 40 of all violent crime victimization 40 of all fatal motor vehicle accidents and 67 of all domestic violence in 1995 were alcohol related in addition 40 of all violent offenders in jail reported using alcohol just before committing the crime greenfeld 1998 similarly a disproportionately large share of crimes in the united kingdom occurs in or near pubs during peak hours of operation hutchinson henderson and davis 1995 besides being perpetrators a large number of victims of crime had used alcohol at the time of their victimization in this study i use the term commission of crime more broadly to include perpetrators as well as the victims of crime in spite of these statistics easy availability of alcohol and its use continue to be part of the american culture a harris poll reports that 38 of adult males think they drink too much but will not change their behavior and 28 of high school students think that adults should be able to drink all the alcohol they want fbi 1996 however a recent study conducted by the university of michigan for the national institute of drug abuse found that over 80 of americans disapprove of youth drinking university of michigan institute for social research 1998 in spite of these statistics linking alcohol to crime with the exception of the relationship between alcohol control policy and drunk driving economists have not investigated the effects of alcohol availability on crime rates generally given the high correlation between alcohol availability and crime dilulio 1995 suggests using zoning laws to decrease alcohol availability as a means of decreasing crime it is not clear whether there is a causal relationship between alcohol availability and crime rates does alcohol availability increase crime if increased alcohol availability leads to increased crime what is the mechanism through which alcohol availability affects crime while answers to these questions may be important for policy formulation and implementation my concern is with the investigation of the effects of alcohol availability on crime rates if alcohol availability increases crime rates it may be possible to formulate alcohol control policies that also depress crime while there are few theoretical models that link alcohol availability to specific crimes empirical studies of the effects of geographical availability of alcohol on crime rates generally are few and far between in the economics literature more empirical studies could help establish the link that has been made between alcohol control policies and crime results of studies investigating the connection between alcohol availability and crime have implications for further research and policy for example if alcohol availability increases crime rates then decreasing alcohol availability may decrease crime and improve social welfare if there is a positive link between alcohol availability and crime rates then alcohol availability should be included in the supply of offense equation as an added explanatory variable there is therefore the need to better understand the relationship between the geographical availability of alcohol and crime rates in the economics of crime literature

exchange rate predictability the main goal of this article is to provide an answer to the question does anything forecast exchange rates and if so which variables it is well known that exchange rate fluctuations are very difficult to predict using economic models and that a random walk forecasts exchange rates better than any economic model the meese and rogoff puzzle however the recent literature has identified a series of fundamentals methodologies that claim to have resolved the puzzle this article provides a critical review of the recent literature on exchange rate forecasting and illustrates the new methodologies and fundamentals that have been recently proposed in an up to date thorough empirical analysis overall our analysis of the literature and the data suggests that the answer to the question are exchange rates predictable is it depends on the choice of predictor forecast horizon sample period model and forecast evaluation method predictability is most apparent when one or more of the following hold the predictors are taylor rule or net foreign assets the model is linear and a small number of parameters are estimated the toughest benchmark is the random walk without drift

did early twentieth century alcohol prohibition affect mortality we investigate the contemporaneous mortality consequences of alcohol prohibition laws introduced in america between 1900 and 1920 we improve on existing studies by constructing a time varying measure of prohibition at the state level that corrects for the timing of prohibition enforcement and accounts for the presence of dry counties using summary indices that aggregate alcohol related mortality due to disease and poor decisions we find that prohibition significantly reduced mortality rates these findings are corroborated with an area level analysis that exploits data on deaths in urban areas that were wet prior to statewide or federal prohibition and nonurban areas that were partially dry jel i18 n4 k2

reduction stasis and expansion of budgets in advanced democracies this article investigates changes within national budget by examining actors behavioral predilections and the institutional constraints under which they operate the article presents three theoret

politics institutions and welfare spending in industrialized democracies 1960 82 electoral turnout as well as left and center governments increase welfare effort that the welfare efforts of governments led by particular types of parties show significant differences and vary notably with the strength of oppositional and junior coalitional parties and that relatively neocorporatist centralized and traditionalistic polities are high on welfare effort overall our findings suggest that contrary to many claims both partisan and nonpartisan facets of democratic politics and political institutions shape contemporary social welfare effort

a test of prohibition s effect on alcohol production and consumption using crop yields the effect of alcohol prohibition in the united states has been the subject of continuing debate due to a lack of data one question that remains unanswered is the effect prohibition had on the actual production of alcohol this article attempts to answer this question by estimating prohibition s impact on the yields of grains that constitute the principal inputs in alcohol production using a variety of data sources and exploiting the variation in timing of state prohibition law adoption we estimate the effect of prohibition on several measures of crop production our preferred identification strategy compares contiguous counties in states with differing prohibition laws our findings suggest that state prohibition laws decreased the production of barley and may have increased the production of corn using these estimates we calculate that prohibition decreased alcohol production and by extension consumption by at least 18 gallons per adult per year

long run impacts of childhood access to the safety net a growing economics literature establishes a causal link between in utero shocks and health and human capital in adulthood most studies rely on extreme negative shocks such as famine and pandemics we are the first to examine the impact of a positive and policy driven change in economic resources available in utero and during childhood in particular we focus on the introduction of a key element of the u s safety net the food stamp program which was rolled out across counties in the u s between 1961 and 1975 we use the panel study of income dynamics to assemble unique data linking family background and county of residence in early childhood to adult health and economic outcomes the identification comes from variation across counties and over birth cohorts in availability of the food stamp program our findings indicate that the food stamp program has effects decades after initial exposure specifically access to food stamps in childhood leads to a significant reduction in the incidence of metabolic syndrome obesity high blood pressure and diabetes and for women an increase in economic self sufficiency overall our results suggest substantial internal and external benefits of the safety net that have not previously been quantified

is german domestic social policy politically controversial this paper investigates empirically the influence of government ideology on social policy using german data examining the funding and the benefits of social security and public healthcare policy my results suggest that policies implemented by governments dominated by left and rightwing parties were similar over the 1951 2007 period leftwing governments however spent more in the 1970s and rightwing governments did so after german reunification in 1990 since policy convergence encourages new parties to enter the political arena and party platforms on social policy matters are likely to undergo further changes in light of demographic change the observed pattern may thus be a transitory phenomenon

buying out the state a comparative perspective on the privatization of infrastructures the article describes the retreat of the state from public infrastructures in advanced industrial countries and tests the power of theoretical approaches to explain this reform process the authors data show changes in state ownership in formerly public monopoly enterprises in telecommunications electricity and aviation sectors of 26 countries between 1970 and 2000 combining various analytical techniques the authors use partial order scalogram analysis to visualize the similarity of institutional structures and country specific development trajectories by pooled time series regression they show that only the liberalization of capital markets has a significant effect on infrastructure privatization the effects of party ideology veto players or corporatist interest group systems are rather insignificant over the whole period however by an innovative use of yearly ordinary least squares regressions they show that governmental ideology holds great predictive power for privatization in the 1980s bu

ideology and the size of us state government this paper theorizes that the impact of ideology on the size of us state governments increases with state income this idea is tested using state level ideology data derived from the voting behavior of state congressional representatives empirically the interaction of ideology and mean income is a key determinant of state government size at 1960s levels of income the impact of ideology is negligible at 1997 levels of income a one standard deviation move towards the left of the ideology spectrum increases state government size by about half a standard deviation estimated income elasticities differentiated by state and time are found to be increasing with ideology and diminishing with income as predicted by the theory

partisan politics and public finance changes in public spending in the industrialized democracies 1955 1989 this paper evaluates the role that partisan politics plays in altering public spending levels the analysis covers over three decades of data on the developments of the public sectors in 16 oecd countries the results of the analysis lend firm support to the partisan politics model of special note is the distinction between the electorate and the government ideological preferences and the dominant role that the former plays the results also suggest contrary to conventional wisdom that partisan political influences have not been eliminated with the tightening of linkages to the international economy

explaining the growth of government in sweden a disequilibrium approach previous studies aimed at explaining the growth of government in a particular country have failed to distinguish between explanatory variables acting on the supply and demand side respectively alternatively they have tested one explanation at a time implying explanatory equations that are misspecified in addition no allowance has been made for the fact that the interaction between supply and demand can hardly be assumed to be a self equilibrating process where the price of public goods and services adjusts to equate the two instead a framework of disequilibrium seems more appropriate for the analysis of the growth of government

interest groups and the size of government the results of the previous section estimates of a three equation model from 23 observations must obviously be regarded as tentative the consistent positive relationship between number of interest groups and size of government observed with changing sets of included independent variables changing samples of nations and treating the number of interest groups as either exogenous or codetermined does imply rather unequivocally that interest groups are able to influence public policies in such a manner as to lead to increased government size beyond helping to reinforce this conclusion the results of the previous section should be regarded as first steps in the development of a model of the polity that can explain participation in the political process by interest groups and citizens as well as the size of government

political responses to interdependence what s left for the left heightened economic interdependence in recent years is commonly argued to have generated great pressures for convergence in economic policies across the advanced industrial democracies interdependence has clearly had a great impact on the types of economic policies that governments can pursue they have been unable to pursue independent fiscal and monetary policies since the mid 1970s furthermore all governments have been forced to attempt to promote the competitiveness of national goods and services in world markets and to increase the speed and efficiency with which national producers adjust to changes in global markets there are however different policies consistent with these goals statistical analyses of economic policies since the mid 1970s show that governments of the left and the right continue to be able to enact distinctive supply side policies that promote competitiveness and flexible adjustment and simultaneously further their partisan objectives

i discovered the peso problem irving fisher and the uip puzzle abstract irving fisher was the first economist to posit what has come to be known as uncovered interest parity relation he was also the first to offer a peso problem type explanation for important episodes in which it was violated after reviewing his theoretical and empirical work on this subject we go on to reexamine both his data and several other bodies two consisting of multi country panel data and a third consisting of a two century long time series for the united states and the united kingdom we find evidence in these data of the important role played by episodic phenomena in disturbing the uip relation like fisher we find that the influence of such phenomena dissipates over time over the long term these errors prove to be less important and uip receives empirical support