politics growth and inequality in rural china does it pay to join the party abstract economic reform is often constrained because rank and file bureaucrats responsible for implementation have vested interests that oppose change drawing on an unusual longitudinal survey data set for a representative rural county in northern china we show an alternative positive scenario consistent with the presence of an implicit performance based incentive contract that ties the household incomes of local officials to market liberalization increases in consumer demand and the provision of local public goods the mechanisms appear to be tolerated as the fruits of growth are shared fairly equitably thus allowing implementation of a politically and economically self reinforcing reform process

de facto exchange rate regimes and currency crises are pegged regimes with capital account liberalization really more prone to speculative attacks abstract this paper empirically examines whether de facto exchange rate regimes affect the occurrence of currency crises in 84 countries over the 1980 2001 period by using the probit model we employ the de facto classification of reinhart and rogoff 2004 that allows us to estimate the impact of relatively long lived exchange rate regimes on currency crises with much greater precision we find that pegged regimes significantly decrease the likelihood of currency crises compared with floating regimes by using the combined data of exchange rate regimes and the existence of capital controls we also find interesting evidence that pegged regimes with capital account liberalization significantly lower the likelihood of currency crises compared with other regimes these results are robust to a wide variety of samples and models from the standpoint of the macroeconomic policy trilemma we can conjecture that pegged regimes with capital account liberalization are substantially less prone to speculative attacks because they can enhance greater credibility in their currencies by abandoning monetary policy autonomy

how does political connection affect firm financial distress and resolution in china we examine the impact of political connections on firm performance financial distress and its resolution in china a country where government influence over stock markets has been demonstrated to

the value of local political capital in transition china abstract this paper documents stock market responses to the arrest of shanghai s top leader by the chinese central government in september 2006 the effects of personal level and organizational level connections to the local state are found to be negative and insignificant respectively on cumulative abnormal returns cars furthermore companies having both personal and organizational political ties experienced the most adverse market reaction

crises and exchange rate regimes time to break down the bipolar view we revisit the link between crises and exchange rate regimes err using a panel of 90 developed and developing countries over the period 1980 2009 we find that corner err are not more prone to crises compared to intermediate err this finding holds for different types of crises banking currency and debt and is robust to a wide set of alternative specifications consequently we clearly break down the traditional bipolar view countries that aim at preventing crisis episodes should focus less on the choice of the err and instead implement sound structural macroeconomic policies

an economic model of representative democracy this paper develops an approach to the study of democratic policy making where politicians are selected by the people from those citizens who present themselves as candidates for public office the approach has a number of attractive features first it is a conceptualization of a pure form of representative democracy in which government is by as well as of the people second the model is analytically tractable being able to handle multidimensional issue and policy spaces very naturally third it provides a vehicle for answering normative questions about the performance of representative democracy

the choice of equity selling mechanisms abstract this paper examines the impact of information asymmetry and monitoring of managers on the choice between public offerings and private placements three key findings emerge first private placement firms have higher information asymmetry than public offering firms second private placement investors do not engage in more monitoring than public offering investors finally discounts for private placements sold to managers are higher than discounts for private placements in which managers do not participate the final two findings cast doubts on the widely held view that private placements are motivated by a demand for enhanced monitoring

interfirm relationships and informal credit in vietnam trading relations in vietnam s emerging private sector are shaped by two market frictions the difficulty of locating trading partners and the absence of legal enforcement of contracts examining relational contracting we find that a firm trusts its customer enough to offer credit when the customer finds it hard to locate an alternative supplier a longer duration of trading relationship is associated with larger credit as is prior information gathering customers identified through business networks receive more credit these network effects are enduring suggesting that networks are used to sanction defaulting customers

international financial contagion in currency crises abstract this paper examines the role of financial linkages especially through a common creditor in the propagation of emerging market crises during the 1990s using panel probit regressions on 41 emerging market countries it finds that financial linkages played a significant role in the spread of the mexican asian and russian crises the significance of financial linkages emerges after controlling for the role of domestic and external fundamentals trade spillovers and financial weaknesses in the affected countries a strong financial linkage to the crisis country of origin not only substantially raises the probability of contagion but also helps to explain the observed regional concentration of currency crises

the multitask theory of state enterprise reform empirical evidence from china the degree of state ownership remains significant in the chinese economy despite more than two decades of economic reform since 1979 most of the remaining state owned enterprises soes are money losing and the few exceptional ones tend to be sheltered by government protection in selected industries yet china has been enjoying one of the most spectacular growth experiences in world history and much of the growth is driven by non state owned enterprises non soes given the poor financial performance of soes the co existence of state ownership and non state ownership in china is a puzzling phenomenon does state ownership exist solely for the benefit of politicians or has state ownership played any role in china s spectacular growth is there any rationale behind china s gradual and selective approach towards privatizing its soes what types of soes does the chinese government choose to privatize what are the consequences of privatization in this paper we offer a multitask theory of soe reform in the context of china which has predictions about the types of soes to be chosen for privatization and the results of privatization we then present empirical evidence supporting the basic premise of the theory and its predictions

competition policy for elections do campaign contribution limits matter this paper examines whether campaign contribution restrictions have consequences for election outcomes states are a natural laboratory to examine this issue we analyze elections to assemblies from 1980 to 2001 and determine whether candidates vote shares are altered by changes in state campaign contribution restrictions we find that limits on giving narrow the margin of victory of the winning candidate limits lead to closer elections for future incumbents but have less effect on the margin of victory of incumbents who passed the campaign finance legislation we also find some evidence that contribution limits increase the number of candidates in the race

fiscal policy and financial market movements abstract this paper estimates fiscal policy reaction function in order to investigate the links between financial market movements and fiscal policy outcomes an increase in asset prices affects in a positive and significant manner primary balances with the response reflecting both an increase in government revenues and a fall in government spending the most important impact on fiscal balances is due to changes in residential property prices changes in equity and commercial property prices are also important determinants of fiscal balances our findings suggest that the steepening of the slope of the yield curve contributes to expenditure based fiscal discipline

why do firms hide bribes and unofficial activity after communism abstract our survey of private manufacturing firms finds the size of hidden unofficial activity to be much larger in russia and ukraine than in poland slovakia and romania a comparison of cross country averages shows that managers in russia and ukraine face higher effective tax rates worse bureaucratic corruption greater incidence of mafia protection and have less faith in the court system our firm level regressions for the three eastern european countries find that bureaucratic corruption is significantly associated with hiding output

the effect of patient cost sharing on utilization health and risk protection abstract this paper exploits a sharp reduction in patient cost sharing at age 70 in japan using a regression discontinuity design to examine its effect on utilization health and financial risk arising from out of pocket expenditures due to the national policy cost sharing is 60 80 percent lower at age 70 than at age 69 i find that both outpatient and inpatient care are price sensitive among the elderly while i find little impact on mortality and other health outcomes the results show that reduced cost sharing is associated with lower out of pocket expenditures especially at the right tail of the distribution jel g22 i11 i12 i13 i18 j14

international financial crises causes prevention and cures dale jorgenson has bestowed a great honor and no small challenge by inviting me to give this lecture a great honor because of the distinguished list of economists who have preceded me a challenge because of the standard they have set and because there is no greater challenge for any economist than providing a coherent account of significant events to his scientific peers i am sometimes asked by friends about the differences between academic life and life as a public official there are many two stand out first as an academic the gravest sin one can commit is to sign one s name to something one did not write as a public official it is a mark of effectiveness to do so as often as possible second as an academic if a problem is too hard and does not admit of a satisfactory solution there is an obvious response work on a different problem that is not a luxury that one has in government i have been reminded of this often in recent years as we have grappled with financial crises in a number of what had previously been considered emerging markets with unrestrained futures anyone who doubts the social importance of what economists do should consider the debates surrounding these crises hundreds of millions of people who expected rapidly rising standards of living have seen their living standards fall hundreds of thousands if not millions of children have been forced to drop out of school and go to work hundreds of billions of dollars of apparent wealth has been lost the stability of large nations as nations has been called into question and the united states has made its largest nonmilitary foreign policyrelated financial commitments since the marshall plan almost all the issues involved in understanding preventing and mitigating these crises are the stuff of economics courses and research fixed versus flexible exchange rates moral hazard and multiple equilibria speculation and liquidity fiscal and monetary policies regulation and competition what economists think say and do has profound implications for the lives of literally billions of their fellow citizens whether it is discussing the role of derivatives in signaling exchange rate commitments with chinese premier zhu rongji or discussing an nber working paper on inflation targeting with the brazilian central bank governor arminio fraga or discussing alternative approaches to bankruptcy law with indonesia s economic team or optimal debt durations with the mexican authorities i am consistently struck by the impact of the kind of research discussed at the aea meetings the future well being of the world s people in large part will depend on how the ongoing process of global integration works out this is a strong statement but one that is supported by the global economy s post world war i failure and its post world war ii success central to global integration is financial integration the flow of funds and of capital across international borders and as the events of the late 1920 s and early 1930 s remind us central to global disintegration can be international financial breakdowns today i want to reflect on the issue of global financial integration in light of the dramatic and largely unpredicted events of recent years it is perhaps a good time for reflection there has been enough repair that priority can shift from u s department of the treasury 1500 pennsylvania avenue washington dc 20005 this lecture reflects many things i have learned from experiences i have shared with colleagues in the united states government and governments around the world i thank brad delong marty feldstein stephanie flanders ken rogoff andrei shleifer and ted truman for useful comments and suggestions i am especially grateful to nouriel roubini and stephanie flanders for valuable discussions and assistance in the preparation of this lecture the usual disclaimer applies

the modern history of exchange rate arrangements a reinterpretation we develop a novel system of reclassifying historical exchange rate regimes one key difference between our study and previous classifications is that we employ monthly data on market determined parallel exchange rates going back to 1946 for 153 countries our approach differs from the imf official classification which we show to be only a little better than random it also differs radically from all previous attempts at historical reclassification our classification points to a rethinking of economic performance under alternative exchange rate regimes indeed the breakup of bretton woods had less impact on exchange rate regimes than is popularly believed

credibility and policy convergence in a two party system with rational voters the traditional approach to modeling political parties behavior based upon the contribution of anthony downs 1957 assumes that the parties unique objective is to win elections thus they maximize their popularity the crucial implication of this assumption for a two party system is that if the two parties have the same information about voters preferences full convergence of policies results from electoral competition this is the crucial implication of the median voter theorem more generally it may be argued that different parties are motivated differently because they represent different constituencies parties may not care only about winning elections per se but also about the quality of the policies resulting from an election in this case the candidates of the two parties view winning an election not only as a goal per se but also as a means of implementing a better policy for their respective constituencies this paper shows that electoral competitions imply dynamic inconsistency if the voters are modeled as rational and forwardlooking agents and parties do not care exclusively about being elected but also about which policy to implement once elected the dynamic inconsistency arises as follows the parties have an incentive to announce convergent platforms to increase their chances of election however if the elected party is not committed to its electoral platform it has an incentive to follow its most preferred policy rather than the policy announced in its platform if voters are rational they account for this incentive thus in general in a one shot electoral game the only timeconsistent equilibrium is one in which no convergence is possible the two parties follow their most preferred policies and the voters rationally expect this outcome full convergence of parties platforms results only as a limiting case when the parties are completely indifferent with respect to the quality of the policies resulting from the election thus these results differ from the existing literature on ideologically motivated politicians for instance donald wittman 1977 1983 randall calvert 1985 which implicitly assumes the possibility of binding commitments to electoral platforms complete or partial policy convergence can be the outcome of political competition if the interaction between the parties and the voters is modeled as an infinitely repeated game in fact if the candidates have concave objective functions the welfare maximizing policy rule implies a complete convergence of parties policies however this cooperative and agreed upon policy may or may not be sustainable as a subgame perfect equilibrium depending on parameter values in particular it depends on the discount rates of the two parties the degree of polarization of their preferences and the relative popu graduate school of industrial administration carnegie mellon university pittsburgh pa 15213 and national bureau of economic research cambridge ma 02138 this paper is based upon a chapter of my unpublished doctoral dissertation at harvard university i am greatly indebted to jeffrey sachs for directing my attention toward these issues and for many conversations i also wish to thank andrew abel dilip abreu olivier blanchard ramon caminal andrew caplin alex cukierman morris fiorina benjamin friedman herschel grossman howard rosenthal and the referees for very useful comments the responsibilitv af anv n mtnkieis af calrirp nfnlv mine the result of policy convergence in a two party system is more general than the median voter theorem for discussions of convergence results not at the median see john ledyard 1984 peter coughlin 1984 coughlin and shmuel nitzan 1981 melvin hinich 1977 for earlier work on spatial competition see richard mckelvey 1975 hinich ledyard and peter ordeshook 1972 1973 and the references quoted therein the present paper focuses on the result of convergence rather than on the median voter theorem per se

the mirage of fixed exchange rates this paper discusses the profound difficulties of maintaining fixed exchange rates in a world of expanding global capital markets contrary to popular wisdom industrialized country monetary authorities easily have the resources to defend exchange parities against virtually any private speculative attack but if their commitment to use those resources lacks credibility with markets the costs to the broader economy of defending an exchange rate peg can be very high the dynamic interplay between credibility and commitment is illustrated by the 1992 swedish and british crises and the 1994 95 mexican collapse we also discuss the small number of successful fixers

classifying exchange rate regimes deeds vs words abstract most of the empirical literature on exchange rate regimes uses the imf de jure classification based on the regime announced by the governments despite the recognized inconsistencies between reported and actual policies in many cases to address this problem we construct a de facto classification based on data on exchange rates and international reserves from all imf reporting countries over the period 1974 2000 which we believe provides a meaningful alternative for future empirical work on the topic the classification sheds new light on several stylized facts previously reported in the literature in particular we find that the de facto pegs have remained stable throughout the last decade although an increasing number of them shy away from an explicit commitment to a fixed regime hidden pegs we confirm the hollowing out hypothesis but show that it does not apply to countries with limited access to capital markets we also find that pure floats are associated with only relatively minor nominal exchange rate volatility and that the recent increase in the number of de jure floats goes hand in hand with an increase in the number of de facto dirty floats fear of floating

the financial and operating performance of newly privatized firms an international empirical analysis this study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990 our results document strong performance improvements achieved surprisingly without sacrificing employment security specifically after being privatized firms increase real sales become more profitable increase their capital investment spending improve their operating efficiency and increase their work forces furthermore these companies significantly lower their debt levels and increase dividend payout finally we document significant changes in the size and composition of corporate boards of directors after privatization the last fifteen years have witnessed a significant global shift away from state socialism towards entrepreneurial capitalism one of the most important and visible aspects of this trend has been the enthusiasm with which governments of all political persuasions have sold their state owned enterprises soes to private investors in hopes that the generally unsatisfactory economic performance of these firms can be improved by the discipline of private ownership this denationalization process given its current title of privatization by the conservative government of margaret thatcher in

a theory of market transition from redistribution to markets in state socialism state socialist redistributive economies are characterized by the allocation and distribution of goods through central planning this paper develops a theory of market transition which argues that in reforming socialist economies the transition from redistributive to market coordination shifts sources of power and privilege to favor direct producers relative to redistributors the shit improves incentives for direct producers stimulates the growth of private markets and provides to entrepreneurs an alternative path for socioeconomic mobility a set of hypotheses test the market transition theory with householdand village level data

the private returns to public office we study the wealth accumulation of indian state politicians using public disclosures required of all candidates the annual asset growth of winners is 3 5 percent higher than that of runners up a difference that holds also in a set of close elections the relative asset growth of winners is greater in more corrupt states and for those holding ministerial positions these results are consistent with a rent seeking explanation for the relatively high rate of growth in winners assets

capital controls and exchange rate instability in developing economies abstract a large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability this paper investigates whether legal restrictions on international capital flows are associated with greater currency stability we employ a comprehensive panel data set of 69 developing economies over the 1975 1997 period identifying 160 currency crises we control for macroeconomic political and institutional characteristics that influence the probability of a currency crisis employ alternative measures of restrictions on international payments and account for possible joint causality between the likelihood of a currency attack and the imposition of capital controls we find evidence that restrictions on capital flows do not effectively insulate economies from currency problems rather countries with less restrictive capital controls and more liberalized regimes appear to be less prone to speculative attacks

exchange rate regime durability and performance in developing versus advanced economies abstract drawing on new data and advances in exchange rate regimes classification we find that countries appear to benefit by having increasingly flexible exchange rate systems as they become richer and more financially developed for developing countries with little exposure to international capital markets pegs are notable for their durability and relatively low inflation in contrast for advanced economies floats are distinctly more durable and also appear to be associated with higher growth for emerging markets our results parallel the baxter and stockman classic exchange regime neutrality result though pegs are the least durable and expose countries to higher risk of crisis

state ownership and market liberalization evidence from china s domestic m a market abstract we study how state ownership affects the post merger performance of chinese acquirers and find that state owned acquirers soes experience a significantly larger long term performance improvement following mergers compared to their non state owned nsoe counterparts when partitioning the sample period into acquisitions made prior to and following china s split share reform of 2005 we find that the post merger performance improvement of soe acquirers is largely attributed to the post reform period in which controlling shareholders converted their non tradable shares into tradable status our results are consistent with the interpretation that state intervention in the form of capital market liberalization and alleviation of governance problems combined with political connections and privileged access to financing may have a positive effect on m a performance that outweighs the inefficiency cost of state ownership in china

the benefits of privatization evidence from mexico critics of privatization often argue that its benefits come at a high cost to society the authors test the validity of this criticism for mexico s privatization program one of the world s largest case by case programs assessing the performance of newly privatized firms in such areas as profitability and efficiency they find that these firms quickly close the gap with their peers in the private sector their findings suggest that the firms profit gains come from productivity gains 52 percent layoffs 33 percent and higher prices 15 percent

contagion as a domino effect in global stock markets this paper shows that stock market contagion occurs as a domino effect where confined local crashes evolve into more widespread crashes using a novel framework based on ordered logit regressions we model the occurrence of local regional and global crashes as a function of their past occurrences and financial variables we find significant evidence that global crashes do not occur abruptly but are preceded by local and regional crashes besides this form of contagion interdependence shows up by the effect of interest rates bond returns and stock market volatility on crash probabilities when it comes to forecasting global crashes our model outperforms a binomial model for global crashes only

does having a cadre parent pay evidence from the first job offers of chinese college graduates abstract we estimate the wage premium associated with having a cadre parent in china using a recent survey of college graduates carried out by the authors the wage premium of having a cadre parent is 15 and this premium cannot be explained by other observables such as college entrance exam scores quality of colleges and majors a full set of college human capital attributes and job characteristics these results suggest that the remaining premium could be the true wage premium of having a cadre parent

state owned and privately owned firms an empirical analysis of profitability leverage and labor intensity for some it is an article of faith that governmentowned firms must be less efficient or at least less profitable than privately owned firms maxim boycko et al 1996 argue that politicians cause government owned firms to employ excess labor inputs anne o krueger 1990 suggests that such firms may be pressured to hire politically connected people rather than those best qualified to perform desired tasks more generally government owned firms are thought to forgo maximum profit in the pursuit of social and political objectives such as wealth redistribution in addition the residual cash flow claims of these firms are not readily transferable like the shares of a private corporation this impairs residual claimant incentives to monitor managers and ultimately degrades firm performance as a consequence one expects government owned firms to be technically less efficient and therefore less profitable than private firms the implication is that in competitive markets without significant externalities private ownership is the superior organizational form the view that government firms are inherently less efficient than private ones however remains controversial among economists john vickers and george yarrow 1991 among others point out that agency problems arise in private firms as well as public ones in most large private corporations managers own little of the stock because monitoring managers is costly a divergence arises between their objectives and those of private shareholders private shareholders typically hold a small stake in any one firm and it may not pay any shareholder to bear the cost of monitoring management it follows from this discussion that whether government firms are more or less efficient than private firms is primarily an empirical issue to date the body of empirical evidence is mixed in this paper we report further empirical evidence on the relative efficiency of public and private enterprises we build on previous work by studying larger samples over longer time periods and by allowing for additional factors that influence firm performance in particular our analysis controls for time series variation in the general level of economic activity that may otherwise confound performance comparisons between government and private firms 2 we approach the issue in two different ways first using accounting numbers we conduct a large sample cross sectional comparison of government owned and privately owned corporations this comparison is similar in design to that of boardman and vining 1989 but our sample is three times the size of theirs and includes three

property rights and finance which is the tighter constraint on private sector investment weak property rights or limited access to external finance from a survey of new firms in post communist countries we find that weak property rights discourage firms from reinvesting their profits even when bank loans are available where property rights are relatively strong firms reinvest their profits where they are relatively weak entrepreneurs do not want to invest from retained earnings

gubernatorial midterm slumps this article studies gubernatorial midterm slumps in u s state legislative elections we employ a regression discontinuity design which allows us to rule out the hypothesis that the midterm slump simply reflects a type of reversion to the mean generated by simple partisan swings or the withdrawal of gubernatorial coattails or anticipatory balancing our results show that the party of the governor experiences an average seat share loss of about 3 5 percentage points we also find evidence suggesting that a large share of the variation in gubernatorial midterm slumps can be accounted for by 1 crude partisan balancing and 2 referendums on state economic performance with approximately equal weight given to each

effects of financial liberalisation and political connection on listed chinese firms financing constraints this paper examines the impact of recent financial liberalization in china on the financing constraints of publicly listed chinese firms with and without politically connected ceo chairman two continuous indices are used to measure the evolution and intensity of financial reforms a financial liberalization index and a capital control index the results indicate that while firms without politically connected ceo chairman face significant financing constraints and politically connected firms do not financial liberalization has reduced the constraints for the former similarly lower capital control in china s equity market lessens credit constraints for non connected firms no statistically significant impact is detected with regards to firms that have ceo chairman with powerful political background

profiting from government stakes in a command economy evidence from chinese asset sales abstract we examine the market response to an unexpected announcement of the sale of government owned shares in china in contrast to earlier work we find a negative effect of government ownership on returns at the announcement date and a symmetric positive effect from the policy s cancellation we suggest that this results from the absence of a chinese political transition to accompany economic reforms so that the benefits of political ties outweigh the efficiency costs of government shareholdings companies managed by former government officials have positive abnormal returns suggesting that personal ties can substitute for government ownership as a source of connections

recovery from a currency crisis some stylized facts abstract using a comprehensive data set of over 100 developing countries this paper examines how economies recover from a currency crisis some of the regularities found are listed below first it takes less than 3 years for the gdp growth rate to fully recover its tranquil period average the level of gdp however remains permanently below its initial trend suggesting that the shocks underlying a crisis are persistent second the credit crunch problem lasts much longer than the reduction in the gdp growth rate third the pre crisis credit expansion and reserve inadequacy which have been widely recognized as the main causes of a crisis also are closely related to the extent of the post crisis recession fourth crisis episodes that are caused mainly by illiquidity rather than by insolvency tend to exhibit a sharp recovery

policy preferences and policy change dynamic responsiveness in the american states 1936 2014 using eight decades of data we examine the magnitude mechanisms and moderators of dynamic responsiveness in the american states we show that on both economic and especially social issues the liberalism of state publics predicts future change in state policy liberalism dynamic responsiveness is gradual however large policy shifts are the result of the cumulation of incremental responsiveness over many years partisan control of government appears to mediate only a fraction of responsiveness suggesting that contrary to conventional wisdom responsiveness occurs in large part through the adaptation of incumbent officials dynamic responsiveness has increased over time but does not seem to be influenced by institutions such as direct democracy or campaign finance regulations we conclude that our findings though in some respects normatively ambiguous on the whole paint a reassuring portrait of statehouse democracy

currency crises capital account liberalization and selection bias are countries with unregulated capital flows more vulnerable to currency crises efforts to answer this question properly must control for self selection bias since countries with liberalized capital accounts may also have more sound economic policies and institutions that make them less likely to experience crises we employ a matching and propensity score methodology to address this issue in a panel analysis of developing countries our results suggest that after controlling for sample selection bias countries with liberalized capital accounts experience a lower likelihood of currency crises that is when two countries have the same likelihood of allowing free movement of capital based on historical evidence and a very similar set of economic and political characteristics and one country imposes controls and the other does not the country without controls has a lower likelihood of experiencing a currency crisis this result is at odds with the conventional wisdom and suggests that the benefits of capital market liberalization for external stability are substantial

distinguished lecture on economics in government exchange rate regimes is the bipolar view correct the choice of appropriate exchange rate regime which for economies with access to international capital markets increasingly means a move away from the middle ground of pegged but adjustable fixed exchange rates towards the two corner regimes of either flexible exchange rates or a fixed exchange rate supported if necessary by a commitment to give up altogether an independent monetary policy lawrence h summers 2000 p 8

do lenders favor politically connected firms rent provision in an emerging financial market corruption by the politically connected is often blamed for economic ills particularly in less developed economies using a loan level data set of more than 90 000 rms that represents the universe of corporate lending in pakistan between 1996 and 2002 we investigate rents to politically connected rms in banking classifying a rm as political if its director participates in an election we examine the extent nature and economic costs of political rent provision we nd that political rms borrow 45 percent more and have 50 percent higher default rates such preferential treatment occurs exclusively in government banks private banks provide no

the mortality cost of political connections we study the relationship between the political connections of chinese firms and workplace fatalities in our preferred specification we find that the worker death rate for connected companies is two to three times that of unconnected firms depending on the sample employed a pattern that holds for within firm estimations the connections mortality relationship is attenuated in provinces where safety regulators promotion is contingent on meeting safety targets in the absence of fatalities connected firms receive fewer reports of major violations for safety compliance whereas in years of fatal accidents the rate of reported violations is identical moreover fatal accidents produce negative returns at connected companies and are associated with the subsequent departure of well connected executives these results provide suggestive evidence that connections enable firms to avoid potentially costly compliance measures rather than using connections to avoid regulatory response after accidents occur our findings emphasize the social costs of political connections and suggest that appropriate regulatory incentives may be useful in mitigating these costs

the first shall be last entrepreneurship and communist cadres in the transition from socialism this article reviews the sociological literature on the transition from socialism to capitalism it distinguishes between the erosion and transition phases and between traditional and corporate segments in the emerging private sector panel survey data from hungary show that during the transition ex communist cadres maintain their advantageous position and do especially well in the more dynamic corporate segment they are successful because human capital is important in both capitalism and socialism and because the cadres are able to convert past political power to economic advantage contrary to the findings of studies based only on agriculture the transition increases income inequalities

participation and investment decisions in a retirement plan the influence of colleagues choices abstract this paper investigates whether peer effects play an important role in retirement savings decisions we use individual data from employees of a large university to study whether individual decisions to enroll in a tax deferred account plan sponsored by the university and the choice of the mutual fund vendor for people who choose to enroll are affected by the decisions of other employees in the same department to overcome the identification problems we divide the departments into sub groups along gender status age and tenure lines and we instrument the average participation of each peer group by the salary or tenure structure in this group our results suggest that peer effects may be an important determinant of savings decisions

taking time seriously dramatic world change has stimulated interest in research questions about the dynamics of politics we have seen increases in the number of time series data sets and the length of typical time series but three shortcomings are prevalent in published time series analysis first analysts often estimate models without testing restrictions implied by their specification second researchers link the theoretical concept of equilibrium with cointegration and error correction models third analysts often do a poor job of interpreting results the consequences include weak connections between theory and tests biased estimates and incorrect inferences we outline techniques for estimating linear dynamic regressions with stationary data and weakly exogenous regressors we recommend analysts 1 start with general dynamic models and test restrictions before adopting a particular specification and 2 use the wide array of information available from dynamic specifications we illustrate this strategy with data on congressional approval and tax rates across oecd countries

partial privatization and firm performance most privatization programs begin with a period of partial privatization in which only non controlling shares of firms are sold on the stock market since management control is not transferred to private owners it is widely contended that partial privatization has little impact this perspective ignores the role that the stock market can play in monitoring and rewarding managerial performance even when the government remains the controlling owner using data on indian state owned enterprises we find that partial privatization has a positive impact on profitability productivity and investment widespread privatization in recent decades has generated a large empirical literature concerning the effect of ownership on firm performance most studies find that privatization has a positive impact on the profitability and efficiency of firms see megginson and netter 2001 for a recent survey 1 the firms in these studies have had a majority of their assets privatized and control rights have been transferred from the government to private owners surprisingly little is known about the effect of partial privatization where the government remains the controlling owner this paper seeks to address this gap in the literature by investigating whether the performance of state owned enterprises in india is affected by the sale of non controlling equity stakes on the stock market

red tape and corruption abstract we study the emergence and interaction of red tape and corruption in a principal bureaucrat agent hierarchy the principal is to provide the agent with a unit of a good that involves externalities so that market mechanisms fail to achieve first best red tape produces information but is costly to the agent and is administered by a corrupt bureaucrat first the bureaucrat may extort bribes from the agent in exchange for reducing the amount of red tape second the bureaucrat may take bribes to conceal the information produced through red tape even though the former kind of corruption tends to reduce red tape we show that the equilibrium level of red tape is above the social optimum

do voters affect or elect policies evidence from the u s house there are two fundamentally different views of the role of elections in policy formation in one view voters can affect candidates policy choices competition for votes induces politicians to move toward the center in this view elections have the effect of bringing about some degree of policy compromise in the alternative view voters merely elect policies politicians cannot make credible promises to moderate their policies and elections are merely a means to decide which one of two opposing policy views will be implemented we assess which of these contrasting perspectives is more empirically relevant for the u s house focusing on elections decided by a narrow margin allows us to generate quasi experimental estimates of the impact of a randomized change in electoral strength on subsequent representatives roll call voting records we find that voters merely elect policies the degree of electoral strength has no effect on a legislator s voting behavior for example a large exogenous increase in electoral strength for the democratic party in a district does not result in shifting both parties nominees to the left politicians inability to credibly commit to a compromise appears to dominate any competition induced convergence in policy

what drives climate policy adoption in the u s states abstract climate advocates increasingly view state policy as a crucial tool to reduce greenhouse gas emissions in the u s however the literature lacks systematic empirical analysis of which when and why states adopt policies mitigating climate change while traditional climate federalism highlights the co benefits to climate policies in driving subnational policy decisions more recent work emphasizes the powerful role of partisan control of office i collect and analyze panel data measuring the strength of state policy from 2007 to 2014 in four areas renewable portfolio standards distributed generation energy efficiency and severance taxes on oil and gas extraction while renewable portfolio standards and distributed generation policies were driven primarily by democratic partisanship in state electorates energy efficiency policies were less responsive to democratic partisanship but marginally responsive to unified democratic control of state government finally these political factors did not measurably influence state severance taxes

political connections ownership structure and private equity placement decision evidence from chinese listed firms in contrast with many other countries chinese listed firms must obtain approval to make private equity placements peps from the chinese security regulatory commission csrc a state bureau that regulates capital market financing we analyse the role of political connection pc and ownership structures when accessing private equity pe market while investigating the mechanisms through which political ties operate within the regulatory process of peps the findings suggest that pcs do not contribute to the firm s decision to apply for peps but firms with state ownership demonstrate a higher propensity to apply for peps pc and state ownership appear to help firms to obtain approval from the csrc and these firms are treated more favourably than their rivals without such connections politically connected firms spend less time in managing bureaucracy but pc and state ownership negatively affect proceeds from the pe market in china firms with politically connected directors with professional busines

the dynamics of state policy liberalism 1936 2014 applying a dynamic latent variable model to data on 148 policies collected over eight decades 1936 2014 we produce the first yearly measure of the policy liberalism of u s states our dynamic measure of state policy liberalism marks an important advance over existing measures almost all of which are purely cross sectional and thus cannot be used to study policy change we find that in the aggregate the policy liberalism of u s states steadily increased between the 1930s and 1970s and then largely plateaued the policy liberalism of most states has remained stable in relative terms though several states have shifted considerably over time we also find surprisingly little evidence of multidimensionality in state policy outputs our new estimates of state policy liberalism have broad application to the study of political development representation accountability and other important issues in political science abstract from author

the intergenerational effects of political influence evidence from china this paper considers the effects of fathers political influence on their offspring s labour market outcomes in china political influence refers to the ability to convert political power into econ

how do senators vote disentangling the role of voter preferences party affiliation and senate ideology this paper develops a methodology for consistently estimating the relative weights in senator utility functions despite the fact that senator ideologies are unobserved the empirical results suggest that voter preferences are assigned only one quarter of the weight in senator utility functions the national party line also has some influence but the senator s own ideology is the primary determinant of roll call voting patterns these results cast doubt on the empirical relevance of the median voter theorem estimation of the model requires only roll call voting data making it widely applicable copyright 1996 by american economic association

spatial voting in the 2004 presidential election the theory of spatial voting has played a large role in the development of important results across many areas of political science directly testing the foundational assumptions of spatial voting theory however has not been possible with existing data using a novel survey design this article obtains estimates of voter ideology on the same scale as candidate positions the results of this scaling demonstrate that voters possess meaningful ideologies and furthermore that these beliefs are strongly related to the sorts of policy proposals considered in congress these ideology estimates are then used to uncover the actual relationships between ideology and vote choice for citizens of various types in the 2004 presidential election although the choices of independent voters are shown to be largely consistent with the assumptions of spatial voting theory the decision rules used by partisans differ strongly from what unbiased spatial voting would imply although partisans do converge toward the behavior of independents and hence toward the assumptions of spatial voting theory as information levels increase we see that even highly informed partisans show significant differences from what would be implied by unbiased spatial voting theory

the financial and operating performance of newly privatized firms evidence from developing countries this paper examines the change in the financial and operating performance of 79 companies from 21 developing countries that experienced full or partial privatization during the period from 1980 to 1992 we use accounting performance measures adjusted for market effects in addition to unadjusted accounting performance measures both unadjusted and market adjusted results show significant increases in profitability operating efficiency capital investment spending output employment level and dividends we also find a decline in leverage following privatization but this change is significant only for unadjusted leverage ratios our results are generally robust when we partition our data into various subsamples

elite opportunity in transitional economies command economies gave communist era elites administrative control and material privilege but severely restricted money income and private wealth markets and privatization have injected new value into public assets and create unprecedented opportunities for elite insiders these opportunities depend on the extent of regime change and barriers to asset appropriation regime change varies from the survival of the entire party hierarchy to its rapid collapse and defeat in competitive elections barriers to asset appropriation vary with the extent pace and form of privatization and the concentration and liquidity of assets different combinations of such circumstances jointly affect the extent to which prior elites obtain ownership or control of privatized assets use political office to extract larger incomes move into salaried elite occupations or fall out of the elite altogether regime change and barriers to asset appropriation affect change at the national level but outcomes vary across economic sectors because of characteristics of organizations elite positions and assets this elementary theory serves to integrate varied findings from recent research on central europe china and russia and yields predictions for other regions

event studies in economics and finance the event study is an important research tool in economics and finance the goal of an event study is to measure the effects of an economic event on the value of firms event study methods exploit the fact that given rationality in the marketplace the effects of an event will be reflected immediately in security prices thus the impact can be measured by examining security prices surrounding the event in this paper event study methods are described including some of the potential complications an example is included to illustrate the approach

productivity growth and firm ownership an analytical and empirical investigation we focus on the effect of state versus private ownership on the rates of firm specific productivity growth and cost decline by developing a model of endogenous firm specific productivity growth and testing its implications against panel data on 23 international airlines of varying levels of state ownership over the period 1973 83 our model and empirical results show that state ownership can lower the long run annual rate of productivity growth or cost decline but not necessarily their levels in the short run observed level differences in productive efficiency across private and state owned firms may thus be a function of the age distribution of the firms being compared these results appear to be independent of whether the firms operate under apparently more or less competitive or regulated markets and whether they differ in production scales the analysis offers new insights concerning the recent trend toward privatizing state owned enterprises that has been observed in many countries

corporate environmental initiatives in the chinese context performance implications and contextual factors although a number of studies have been conducted on the relationship between environmental management and firm performance most of them are conducted in the western context due to the unique social and economic environments in china the performance implications of environmental management might be quite different in the chinese context we examine the impact of corporate environmental initiatives ceis on the market value of firms in china we find that in contrast to the findings in the western context chinese investors react negatively to cei announcements the negative reaction is more significant when the announcements are related to processes rather than products and for state owned enterprises rather than privately owned corporations however there is no difference whether the cei is self declared or third party endorsed overall our research indicates that chinese investors consider ceis to be in conflict with shareholder interest in particular ceis in state owned enterprises might be considered by investors as signals that firms need to sacrifice profits to shoulder more social responsibility

representation in municipal government municipal governments play a vital role in american democracy as well as in governments around the world despite this little is known about the degree to which cities are responsive to the views of their citizens in the past the unavailability of data on the policy preferences of citizens at the municipal level has limited scholars ability to study the responsiveness of municipal government we overcome this problem by using recent advances in opinion estimation to measure the mean policy conservatism in every u s city and town with a population above 20 000 people despite the supposition in the literature that municipal politics are non ideological we find that the policies enacted by cities across a range of policy areas correspond with the liberal conservative positions of their citizens on national policy issues in addition we consider the influence of institutions such as the presence of an elected mayor the popular initiative partisan elections term limits and at large elections our results show that these institutions have little consistent impact on policy responsiveness in municipal government these results demonstrate a robust role for citizen policy preferences in determining municipal policy outcomes but cast doubt on the hypothesis that simple institutional reforms enhance responsiveness in municipal governments

the impact of nearly universal insurance coverage on health care utilization evidence from medicare the onset of medicare eligibility at age 65 leads to sharp changes in the health insurance coverage of the u s population these changes lead to increases in the use of medical services with a pattern of gains across socioeconomic groups that varies by type of service while routine doctor visits increase more for groups that previously lacked insurance hospital admissions for relatively expensive procedures like bypass surgery and joint replacement increase more for previously insured groups that are more likely to have supplementary coverage after 65 reflecting the relative generosity of their combined insurance package under medicare

why do entrepreneurs enter politics evidence from china this article examines the determinants of the entrepreneur s political participation by employing a unique matched firm institution data set from china we find that the likelihood of an entrepreneur s participation can be explained by the underdevelopment of markets and market supporting institutions according to our estimates the probability of entering politics decreases by 8 20 from the mean when the institutional indices improve by one standard deviation our findings support the view that the institutional environment shapes the private entrepreneur s motivation to participate in politics they also provide an example of how private entrepreneurs respond to state market failure in developing and transition countries jel g1 h00 o10 p2 p3