political influence motives and the choice between tariffs and quotas abstract tariffs and quotas are not symmetric under a variety of circumstances this paper pursues the implications of one such circumstance domestic market power for the political choice of protectionist instrument in the context of a political support maximization model tariffs dominate quotas in the political model in the absence of revenue seeking motives in the presence of revenue seeking ambiguity arises but limits can be placed on the range of tariff or quota levels also some welfare implications emerge

on the efficiency of law a public choice perspective economists have not yet developed a comprehensive theoretical framework incorporating transaction cost economics within a public choice perspective for predicting when there will be an efficiency problem with the law transaction cost reasoning and the rent seeking insight have not been applied systematically in a dynamic institutional context to evaluate when the law will be used to increase or not minimize problems of bounded rationality and opportunism this paper takes a first step at identifying and remedying this deficiency the paper first provides a critical review of relevant theoretical contributions made by becker 1983 1985 posner 1977 priest 1977 rubin 1977 1982 williamson 1975 1985 and others we then show how analysis of the efficiency of law can be synthesized into a broader whole by incorporating transaction cost economics more fully into existing understanding of rentseeking in the political realm thus within the public choice paradigm this paper develops a deeper transaction cost analysis of the efficiency of law building on prior research by the authors crew and rowley 1988a 1988b twight 1983 1988 the paper identifies variables that position legal rules on a spectrum that ranges from those that are predominantly transaction cost

voter preferences and state regulation of smoking i introduction tobacco taxation and smoking restrictions are two areas of regulation for which states have maintained a high level of control relative to the federal government 1 given this flexibility states have established a wide range of restrictions on smoking in areas such as government workplaces restaurants bars shopping malls indoor arenas and hospitals 2 although most states restrict smoking in hospitals there is considerable variation among states in restrictions in other areas in the 1998 99 period of this study about two thirds of states restricted smoking in restaurants whereas only four states restricted smoking in bars what has led to variation in smoking restrictions across states in a democratic society one would expect voter preferences to play an instrumental role in determining which policies are enacted and which are not this article provides the first empirical exploration of whether state level smoking restrictions are consistent with preferences of the citizenry taking into account both voting behavior and the role of smoking status in influencing whether an individual votes specifically we examine whether voters preferences for smoking restrictions in restaurants bars malls indoor sporting events and hospitals are consistent with state level restrictions on smoking in each of these public areas 3 our research draws on public choice models of policy making by state and local governments voters preferences typically play a central role because voting affects legislators incentives to support regulations 4 public choice research also finds that nonvoter factors may influence state and local policy making 5 in the case of smoking regulations public health advocates or tobacco industry lobbyists might influence regulatory policies the specific building block of our analysis of state restrictions on smoking is information on individuals voting behavior which we link to their smoking status and preferences over smoking restrictions our analysis uses measures of political pressure that account for individual preferences as well as their voting behavior to examine the possible role of interest group pressures we also control for nonvoter influences on smoking regulation including the proportion of the state population who smoke measures of state ideology and size of the tobacco industry with the exception of smoking in bars there is majority support for smoking restrictions unsurprisingly smokers are less supportive of restrictions than are nonsmokers nonetheless even smokers demonstrate a high level of support for many restrictions smokers are also less likely to vote than are nonsmokers even after controlling for other demographic factors the lower voting rate diminishes voter opposition to antismoking regulation but is usually not critical in view of the substantial support that most smoking restrictions have among smokers the political pressure indices for restrictions on smoking in each public area are generally significantly related to the probability that a state restricts smoking in that public area the nonvoter factors such as the smoking rate in the state and tobacco s role in the state economy are rarely influential policy debates over the desirability of smoking restrictions emphasize possible health risks due to exposure to environmental tobacco smoke ets and effects on business profitability the primary argument for expanding smoking restrictions is to protect workers and customers from exposure to ets 6 as our results show voters are generally supportive of smoking restrictions in public areas which would thereby protect workers as well as themselves and other customers however there is a substantial controversy over the extent of health risks associated with exposure to ets the basis for the push by the u s occupational and safety health administration osha for increased smoking restrictions to protect workers is the highly controversial u

strategic extremism why republicans and democrats divide on religious values party platforms differ sharply from one another especially on issues with religious content such as abortion or gay marriage given the high return to attracting the median voter why do vote maximizing politicians take extreme positions in this paper we find that strategic extremism depends on an intensive margin where politicians want to induce their core constituents to vote or make donations and the ability to target political messages toward those core constituents our model predicts that the political relevance of religious issues is highest when around one half of the voting population attends church regularly using data from across the world and within the united states we indeed find a nonmonotonic relationship between religious extremism and religious attendance

the public s willingness to pay for securing a reliable natural gas supply in korea with the increasing importance of natural gas ng in the energy mix the search for a reliable liquefied ng lng supply has received great attention along with energy security in korea however the current level of lng supply reliability in korea is much lower than that in other industrialized countries in order to improve the reliability of the lng supply diverse policy measures are required which come at an additional cost paid by society this study aims to investigate the public s willingness to pay wtp for improving the reliability of the lng supply by increasing the lng storage rate from the current level 11 to 20 to this end the contingent valuation cv method is applied by using national survey data of 1000 households in particular this study employs a one and one half bound oohb dichotomous choice model combined with a spike model to address the responses from the cv survey with zero wtp the annual mean wtp is estimated to be krw 9641 usd 8 68 per household expanding the value to the national population provides a value of krw 169 43 billion usd 152 55 million the results indicate that people are willing to shoulder the burden of safeguarding a reliable supply of lng

promotion of the agricultural sector and political power in austria in most industrialized countries farmers as a small and well orgnized group are ableto influence government decisions to get rent creating proposals enacted two different viewsare presented to explain why the chicagoan view efficient redistribution hypothesis and the virginian view inefficient outcome of political bargaining a vertically structuredempirical model of the austrian farm sector is employed to test both hypotheses quantitativeresults of the welfare transfers from consumers taxpayers to farmers and agribusiness firmsare derived and the political weights of these groups are presented

quantitative restrictions and the welfare effects of capital inflows abstract this paper explores the welfare effects of capital inflows when some imports are subject to quantitative restrictions it is shown that in a heckscher ohlin model where all imports are restricted by quotas and some fraction of the initial domestic capital stock is foreign owned a capital inflow is welfare improving regardless of the ranking of sectoral factor intensities with sector specific capital stocks and both tariff ridden and quota restricted imports the consequences of direct foreign investment in any sector are uncertain and depend upon whether the two imports are compensated substitutes or complements as well as the characteristics of production

capital budgets borrowing rules and state capital spending abstract this paper compares the level and composition of government spending in u s states that maintain separate budgets for capital and operating expenditures with that in states that employ unified budgets it also investigates the effects of pay as you go financing rules for capital projects the empirical findings suggest that states with separate capital budgets spend more on public capital projects than comparable states with unified budgets there is no evidence that the presence or absence of a capital budget affects the level of non capital spending pay as you go requirements for financing capital projects are associated with lower levels of both capital and non capital spending

government policy and the firm s capital structure abstract the purpose of this paper is to examine the effects of commonly observed forms of government intervention on the firm s capital structure we show that since market claims against the firm are always properly priced the firm is forced to take market claimants interests into account on the other hand since government claims are usually not adjusted for risk the firm can take advantage of the government it does so by choosing strategies that extract maximum value minimum cost from these policies in particular the firm uses its capital capital structure to maximize the value of the policy thus leading to a determinate capital strucure

economic development institutional change and the political economy of agricultural protection an econometric study of belgium since the 19th century this empirical study uses 100 years of annual data on 11 agricultural commodities from belgium to measure the impact of structural changes coinciding with economic development and changes in political institutions on agricultural protection the analysis shows that changes in agricultural protection are caused by a combination of factors governments have increased protection and support to farmers when world market prices for their commodities fell and vice versa offsetting market effects on producer incomes other economic determinants were the share of the commodities in total consumer expenditures negative effect and in total output of the economy positive effect with belgium a small economy there was no impact of the trade position changes in political institutions have affected agricultural protection democratic reforms which induced a significant shift in the political balance towards agricultural interests such as the introduction of the one man one vote system led to an increase in agricultural protection the integration of belgian agricultural policies in the common agricultural policy in 1968 coincided with an increase in protection ceteris paribus both institutional factors related to changes in access to and information about the decision making at the eu level and structural changes in the agricultural and food economy may explain this effect

what drives volatility in natural gas prices abstract we examine the primary drivers of u s natural gas price volatility to do so we apply a structural heterogeneous autoregressive var shvar model accommodating structural breaks in both the coefficient and volatility to monthly time series data on natural gas supply demand and price between january 1978 and july 2018 we detect several structural changes in coefficients and shock volatility in the natural gas market our findings indicate that the response of natural gas prices differs significantly depending on the regime and type of shock in the natural gas market while demand shocks specific to the natural gas market are the primary drivers of natural gas price volatility structural supply shocks also play a significant role in explaining movements in natural gas prices our results suggest that failure to consider structural breaks in the coefficient and volatility may result in biased estimates and distorted impulse responses of the impact of shocks on natural gas price volatility

on the political economy of guest worker programs in agriculture guest workers have provided a source of agricultural labor supply in many countries recent legislative proposals on immigration reform in the united states have renewed discussions about the role of guest worker programs and highlighted the arguments for and against such programs even within the agricultural sector there has not been strong broad based support for an expansion in the number of guest workers a model is developed that considers competing interests between commodity groups horticulture crops and grain crops to explain this lack of support and then a series of simulations are conducted to highlight the possible economic effects of an expanded guest worker program results suggest that an increase in the labor supply would have much larger economic impacts for horticultural producers and firms in the supporting input markets furthermore under some conditions simulation outcomes show how an increase in the labor supply may lead to small revenue losses for both producers and input suppliers in grain markets

rent seeking and second best economics in recent years there has been increasing recognition in the economics literature that transfers far from being socially costless may involve intense resource using competition by potential recipients seeking to obtain a favorable share and also similar efforts by potential donors to avoid paying an unfavorable share of these transfers these activities have been traditionally termed as rent seeking though bhagwati 1982 has suggested the alternate name of directly unproductive profit seeking dup that economic rents may generate waste by attracting resources aimed at capturing these rents is by now well established in the economics literature for example the social cost of a monopoly is now recognized to consist not only of the traditional deadweight triangles but also of elements related to and in some cases equal to or exceeding the monopoly profit similarly the welfare costs of quotas or tariffs are now recognized to consist of a distortionary effect and an effect related to rents produced by these quotas or tariffs 1 clearly therefore the recognition of the importance of rent seeking has brought about a need to re evaluate the social costs of various distortions the focus in the rent seeking literature has so far been mainly in this direction and yet another no less important strand of thought which follows logically from the rent seeking literature is one related to socially optimal pricing rules for example if a monopoly s profits are converted into waste such waste is a cost which should figure in evaluating the appropriate pricing rule for other industries output such implications of rent seeking may be as important as the ones described above which are essentially descriptive the optimal pric

optimal policies and marketing board objectives abstract in this paper we examine optimal tax subsidy policies with export marketing boards that compete as oligopolists in world markets by taking a targeting approach to identifying optimal policies we are able to show how optimal policies vary with the objectives of board the nature of competition in world markets as well as assumptions about market segmentation and regulation in none of the cases examined does a marketing board without tax subsidy policy replicate the social optimum moreover we show that the policies necessary to attain the social optimum are quite different with the institutional variation considered arbitrage and regulation is the only case considered in which the optimal export policy is definitely a tax and in which the marketing board s objective does not affect policy

export subsidies as an outcome of the management labor conspiracy a mercantilistic trade policy is often introduced as a tool to generate more jobs in some key industries when employment in an export import industry is perceived to be low the government would be tempted to adopt measures of export promotion import protection to increase it by effectively guaranteeing employment however these policies would reduce incentives for the private sector to reach efficient labor contracts for example the labor union might refuse to sign a profit sharing contract with management and unilaterally demand high wages believing that the resulting loss in competitiveness would not affect the well being of its members since the government would protect the industry it is also conceivable that management and the labor union conspire to reach inefficient contracts so as to invite government intervention in certain cases trade policies only transfer income without any allocative effect this is not merely a theoretical curiosum free trade advocates have often pointed out that protectionist policies would have deleterious effects on the pattern of collective bargaining in the trade sensitive sectors this paper constructs simple models to illustrate this point for export subsidies and so it can be viewed as an addition to the literature that aims to bring attention to the pitfalls of the new mercantilism such as eaton and grossman 1986 dixit and grossman 1986 and horstman and markusen 1986 unlike these studies however the government policies considered here are reactive in the sense that the private sector moves first anticipating the government s response dixit and kyle 1985 carmichael

budgetary policy with unified and decentralized appropriations authority the divestiture of the house appropriations committee in the1880 s has received considerable attention of an empiricalnature this paper presents a formal model of legislativedecisionmaking using a common agency formulation to representinterest group lobbying of legislators this framework is usedto analyze the effects of decentralizing appropriationsauthority the conditions under which decentralization leadsto higher spending are characterized it is argued that theconventional view that divestiture caused higher levels ofspending only holds if decentralization created barriers tolobbying and political bargaining across different committees in addition the role of specialized committee knowledge isexamined

households willingness to pay for safeguarding security of natural gas supply in electricity generation abstract security of energy supply is a major issue for all eu member states due to europe s increasing dependence on imported fossil fuel sources and the continuous rise in energy demand the latter is of particular importance in electricity sector given the continuously increasing use of gas for electricity generation in order to properly tackle with the problem concerted actions are required by the eu member states in several levels i e legislative political etc nevertheless these actions will come at an additional cost paid by the society either through increased electricity bills or through public financing for energy security investments thus such policies should be justified on the basis of cost benefit analysis towards this direction it may be necessary to take into account non market costs and benefits i e the value that consumers place on interruptions avoided in order to explore households perceptions and willingness to pay for securing gas supply for electricity production an empirical study was conducted by means of the contingent valuation method the results indicate that consumers are willing to pay a premium on their electricity bills in order to internalize the external costs of electricity production in terms of energy security which are caused from imported fuels

pricing and regulating affect environmental ethics effluent charges and tradeable permits are economically efficient but rarely used a new explanation for this discrepancy is offered pricing may crowd out environmental ethics in the pricing and via spillovers also in non pricing sectors pricing may therefore increase pollution providing a reason why decision makers tend to reject environmental pricing five propositions showing the conditions for counterproductive effects are advanced they are consistent with available empirical evidence regulation by setting standards and subsidies damage environmental ethics less than pricing because pollution is condoned damaging environmental ethics may prevent political action in favor of the environment

smuggling around the world evidence from a structural equation model this article uses a multiple indicators multiple causes mimic model to analyse the determinants of smuggling the analysis reveals that higher corruption and a lower rule of law encourage smuggling tariffs and trade restrictions are important push factors while a higher black market premium bmp discourages smugglers based on the mimic estimates we calculate an index of smuggling which provides a ranking for 54 countries we find that smuggling is rampant in cameroon pakistan and kenya while it is least prevalent in switzerland finland and sweden

ideological conviction and persuasion in the rent seeking society abstract the paper develops a model of rent seeking in a democratic political context where voting as well as rent seeking matters in this context the paper demonstrates that voter ideology is a constraint on the rent seeking game as well as a possible avenue of rent seeking in a setting where there are both rent seeking and ideological interest groups rent seekers can free ride on the efforts of ideologues which tends to reduce rent seeking effort in a setting where complementary economic and ideological interest groups coordinate their efforts both rent seeking and ideological conflict tend to increase

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

voting and paying for public goods an application of the theory of the core abstract let any coalition with a majority of all voters have the power to choose the quantities of public goods under rule i a majority coalition bears a cost of its decision that is proportional to its size under rule ii it must bear the whole cost of its decision thus rule i imposes costs on minorities although they have no power to choose the quantities of public goods while rule ii allows goods to have some attributes of semiprivate goods it is shown that a nonempty core under rule i implies a nonempty core under rule ii but not conversely necessary and sufficient conditions in terms of the properties of the von neumann morgenstern characteristic function are given

the theory of economic regulation and public choice and the determinants of public sector bargaining legislation in this study we used the theory of economic regulation and public choice to derive a model to explain the pattern of public sector bargaining laws among the states we find this type of legislation is influenced by the following demand factors 1 the extent of public sector union membership which represents the interest group hypothesis has a positive influence on pro union legislation 2 the extent of employer opposition to unions as measured by unfair labor practice charges against employers in representation elections has a negative effect on bargaining laws 3 two taste variables the salaries of public employees and the percent of nonwhite employment in the state have a positive influence on these laws a result which will be surprising to many people is that the extent of private sector union membership has no significant influence on the passage of public sector bargaining legislation

the welfare effects of capital inflow in the presence of a tariff quota with revenue premium seeking abstract the paper re examines the impact of capital inflow on the welfare of a small host nation in the presence of a tariff quota with revenue premium seeking it is demonstrated that the welfare impact of capital inflow is neutral in the case of a tariff with revenue seeking but ambiguous in the case of a quota with premium seeking

optimal policies with strategic distortions abstract this paper analyzes the jointly optimal levels of a variety of policy instruments when markets are imperfectly competitive a targeting principle to identify optimal policies under imperfect competition is derived using the concept of a strategic distortion this allows us to interpret when trade policy is first best and links the literature on optimal policies with imperfect competition to the standard targeting literature we show that optimal tax subsidy policy depends crucially on the presence of other regulations and assumptions about market segmentation

rural urban wage differential rent seeking and a justification for free trade abstract in the well known model of rural urban wage differentials analyzed by e e hagen quart j econom 72 496 514 1958 among others free trade was shown to be inferior to autarky the present paper demonstrates that if rents implicit in the wage differential are dissipated via rent seeking activities the case for free trade can be fully restored the reason for the reversal of the orthodox policy intuition is that when rents are dissipated market prices adequately reflect social opportunity costs of production despite the presence of a wage distortion

the effect of natural gas shortages on the mexican economy abstract the mexican economy experienced a shortage of natural gas from the second quarter of 2012 through the second half of 2013 in order to deal with this problem the state owned national supplier of natural gas pemex implemented a system that restricts the amount of natural gas used by the manufacturing sector with this information we have constructed a shortage index that represents the percentage of natural gas restricted per month in each region we quantify the effect of natural gas shortages on the manufacturing sector and gdp using a panel data model with state and time fixed effects we estimate that the natural gas shortage reduced mexican gdp annual growth rate by 0 28 percentage points in the second quarter of 2013

rent seeking from a property rights perspective james buchanan 15 15 has suggested that rent seeking analysis can readily be incorporated within the property rights approach and as with public choice the theory of rent seeking can be interpreted as an appropriate extension yet no one has really explored rent seeking or revenue premium tariff or directly unproductive profit seeking from a property rights perspective buchanan 14 15 16 17 clearly indicated that property rights assignments actually underlie the rent seeking process and others have also recognized this 4 20 23 28 but there are further insights into the workings of the political economy which can be derived for instance lobbying activities with nonpecuniary goals clearly fit into the rent seeking framework when viewed through the property rights paradigm this contrasts strikingly with the perception of rent seeking held by some writers 9 10 11 12 13 furthermore a property rights approach to rent seeking provides predictions of a spiraling process of government growth since successful rent seeking by one interest group generally requires expansion of bureaucratic powers while at the same time creating incentives for the formation of additional rent seeking interest groups legislative responses to these new groups requires further expansion of the bureaucracy and creates incentives for more rent seeking so the growth process continues in this paper a brief summary of the conclusions of the rent seeking literature will be presented followed by an explanation of how the same conclusions have been deduced using the property rights paradigm various extensions of the rent seeking concept such as those alluded to above are then obtained by emphasizing a property rights approach following this the terms used to describe rent seeking e g directly unproductive profit seeking etc will be discussed to determine which if any is the most appropriate characterization of the phenomenon

the bias in favor of pro tariff lobbies abstract we show that the probability of success of the pro tariff lobby defined as a decreasing function of the ratio of consumer loss to producer gain rent generated by the tariff rises with the tariff under very general conditions this appears as an exception to becker s view that less distortionary measures tend to be adopted over their more distortionary counterparts we then provide a micro foundation for our probability definition using the imperfectly discriminating lobbying framework

demographic structure and the political economy of education subsidies this paper investigates the politico economic impact of a society s age structure on the extent of public funding of education education subsidies serve to internalize positive spillovers of human capital investment but redistribute resources from the working old to the non working young thus creating a conflict of interest between the two generations the political process is characterized by a representative democracy

union behavior industry rents and optimal policies abstract this paper examines the welfare gains from strategic industrial policy in the u s steel industry focusing on the role of capacity utilization and the potential gains from capturing labor rents with underutilized capacity strategic policies to capture labor rents lead to an endogenous response that diminishes their importance on the other hand reducing domestic labor market distortions results in welfare gains nearly as large as those from the optimal subsidy this suggests that the focus on labor rents as the subject of industrial policy is overstated at least in manufacturing industries such as integrated steel

random errors dirty information and politics rational voters assessments of candidates and policy proposals are unbiased but affected by random errors clean information decreases these errors while dirty information increases them in politics most voting procedures weigh random individual errors asymmetrically thus such errors do not counterbalance one another in the aggregate they systematically affect politics this illuminates the roles of political propaganda and interest groups it helps to explain various puzzles in public choice e g the frequent use of inefficient policy instruments institutional conditions are identified that shape the aggregate impact of individual errors and the politicians incentives to produce dirty information

unemployment and the labour management conspiracy we study a model in which management and a union bargain sequentially first choosing a rule that will later determine the level of employment and then choosing a wage the government then chooses an output or an employment subsidy an exogenous natural turnover rate in the unionized sector creates unemployment whenever the union wage exceeds the competitive wage government intervention can increase both the equilibrium amount of unemployment and worsen the intersectoral allocation of labour because of the induced change in the endogenous wage unemployment weakens but does not eliminate the possibility of a labour management conspiracy

tariffs subsidies and welfare with endogenous policy abstract it is a well established proposition of trade theory that in the absence of directly trade related distortions or policy goals subsidies are superior to tariffs for achieving any economic or non economic objective this paper shows that once the endogeneity of the distortion or non economic objective is allowed for the welfare ranking of various policies can be reversed the particular model analyzed is one where the level of non economic objectives that have to be fulfilled itself depends on the policy tools considered to fulfill them with this arises from the public good nature of tariffs compared to subsidies

the development of renewable energies and supply security a trade off analysis this paper analyzes the effects of the green transformation on the german electricity sector with respect to the energy political triangle it focuses on how the development of renewable energies will affect security of electricity supply in a cost benefit analysis the value of supply security is compared with its costs of provision more specifically the benefits of maintaining the present quality of electricity supply are the avoided social damages from electricity outages and are compared with the respective investment costs in the low and medium voltage distribution grid it is shown that the transformation process towards a green and decentralized production structure will be costly for society even though the costs can be reduced by different measures

the ex post impact of an energy tax on household energy demand this paper presents an econometric study dealing with household demand for energy in the netherlands the main objective of the paper is to present an estimation of the actual impact of an already implemented energy tax introduced in the netherlands in 1996 the approach differs from the existing literature in that 1 it uses panel data for the same period in which the tax was introduced and 2 it estimates a demand function that controls for a large set of variables such as outside temperature type of house and of house insulation household cooking behavior and an extensive number of durable goods and electrical appliances the study concludes that in the short term the energy tax had a small but significant impact on energy consumption in the netherlands concretely the yearly average demand reduction was of 8 for electricity and 4 4 for gas additionally the influence of variables other than price and income on household energy demand is discussed using this information the impact that the energy tax had on household energy use can be compared with the energy reduction that could have been achieved when using other policy instruments

an estimate of the value of lost load for ireland this paper estimates the value of short term lost load in the all island electricity market which includes the republic of ireland and northern ireland the value of lost load voll is the average willingness of electricity consumers to pay to avoid an additional period without power voll is also known as the value of security of electricity supply and is inferred using a production function approach detailed electricity use data for the republic of ireland allows us to estimate the value of lost load by time of day time of week and type of user we find that the value of lost load is highest in the residential sector in both the republic of ireland and northern ireland our results can be used to advise policy decisions in the case of supply outages and to encourage optimum supply security in the context of this study short term is taken to be a matter of hours rather than days or weeks

rent seeking market structure and growth we study the role of productive and unproductive entrepreneurship in economic growth in a setting where firms compete in both economic and political markets specifically firms compete for market share through cost reducing technological innovation and they vie for influence over government transfer policy through rent seeking activities we find that rent seeking affects growth in two ways it allows firms to ignore economic competition leading to less innovation and it alters the number of firms that are supported in equilibrium the former effect is negative while the latter is ambiguous we show how these effects depend on various characteristics of economic and political markets

a technique for indicating comparative and perdicting changes in trade ratios this paper estimates relative differences in factor prices and thus industry comparative cost differences between the united states and each of eight country groups by relating differences in factor use requirements and actual bilateral export import ratios across industries predictions concerning changes in industry export import ratios are also made and tested against actual subsequent changes by comparing these trade ratios with those expected on the basis of the estimated average differences in factor costs and assuming that adjustment lags are the major reason for the differences between these ratios

appropriation violent enforcement and transaction costs a critical survey this paper focuses on the extension of transaction costs to appropriative activity and coercive power in the property rights approach it has been argued that including the costs of appropriation and violent enforcement in transaction costs is based on the assumption that coaseian bargaining can be extended to any institutional scenario i e voluntary as well as coercive exchange however voluntary transactions cannot capture the logic of coercive power this means that the assumption of an efficient political market is not valid and that the political coase theorem lacks the logical consistency to provide a cornerstone for political theory

lobbying dup activities and welfare a response to tullock professor tullock 1981 in trying to understand the results in my 1981 paper on lobbying and welfare has raised issues that require further clarification and analysis for brevity s sake i shall concentrate here on the essentials leaving minor remarks of tullock s aside 1 the specific case of lobbying which i addressed originally was tariffseeking by pr otectionist lobbies so that the tariff would be endogenous i then showed that one could not argue in this instance that an exogenouslyspecified tariff at x was necessarily welfare superior to an endogenous tariff at x0 all other forms of lobbying were excluded of course 2 tullock argues that this result obtains because he and krueger 1974 think whereas i do not that tariff rcvcnucs can be wasted as it happens krueger 1974 made no such assumption she explicitly compared in her analysis of the specific cast of premium seeking for import quotas aircad in place quotas with such premium seeking with tariffs that had no corresponding revenue seeking or for that matter any waste resulting from the government directly expending the tariff revenue bhagwati and srinivasan 1980 were the first to introduce the revenue seeking concept and to argue that it was wholly inappropriate for krueger to compare tariffs and quotas on the assumption that the latter gave rise to fill premium seeking whereas the former gave rise to zero revenue seeking

transaction costs institutional design and the separation of powers abstract the internal organization of the government can be used as a constraint on the capture of political decision makers in a setting where multiple interest groups try to influence policy outcomes centralization i e the choice of a single agency dealing with all interest groups is costly because it induces a better coordination of their influences the choice of specialized agencies is better because it increases the overall transaction costs of capture making agencies more immune to capture by interest groups more generally we discuss how an institutional design relying on separation of powers among specialized agencies may improve policy outcomes

the economics of special interest politics the case of the tariff this paper investigates the interaction of politicians and special interest lobbies the goal is to model the equilibrium levels of redistributive policies such as taxes subsidies tariffs and regulatory decisions the model is applied throughout to the setting of tariffs by contributing to political campaigns special interest lobbies generate economic returns higher tariffs generate revenue for import competing industries through higher product prices higher milk support prices raise dairy farm income and so forth the lobby invests to maximize these net economic returns in evaluating their chances of election politicians weigh the favorable effects of special interest money against the unfavorable association with the lobby and the social cost of the redistributive policy section i explores the lobby s problem it describes a formalization of mancur olson s discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns section ii describes determination of the equilibrium tariff positions of each politician in a political campaign

self regulation taxation and public voluntary environmental agreements an increasingly popular instrument for solving environmental problems is the public voluntary agreement va in which government offers technical assistance and positive publicity to firms that reach certain environmental goals prior papers treat such agreements as a superior low cost instrument that can be used to preempt a threat of traditional inefficient regulation we present a more general model in which public vas may instead be weak tools used when political opposition makes environmental taxes infeasible we explore the conditions under which taxes public vas and unilateral industry actions are to be expected and the welfare implications of the various instruments notably we also show that welfare may be reduced by the introduction of public vas 2002 elsevier b v all rights reserved

factor proportions relative efficiency and developing countries trade abstract this study attempts to assess the extent to which ldc trade in manufactures can be explained by the factor proportions theory and the economies of scale account on the one hand and by commodity characteristics that affect relative efficiency on the other among the relative efficiency characterictics that affects trade patterns are r d intensity total factor productivity in the more developed countries factory size and some input output measures of the degree to which the industry interacts with the rest of the economy

regulation competition and liberalization in many countries throughout the world regulators are struggling to determine whether and how to introduce competition into regulated industries this essay examines the complexities involved in the liberalization process while stressing the importance of case specific analyses this essay distinguishes liberalization policies that generally are procompetitive from corresponding anticompetitive liberalization policies

explaining price policy bias in agriculture the calculus of support maximizing politicians a model is developed to explain observed patterns of policy intervention in agriculture we analyze the interaction between political support seeking politicians and supportsupplying citizens society consists of a rural and urban group we determine the effects on transfers of relative group size disparities in income endowments between groups and the deadweight loss of redistribution the framework advanced is an alternative to that of the interest group model and is used to explain for example why the export sectors in developing countries are taxed more and why the united kingdom is less adamant for higher price supports than germany

the microeconometric approach to modelling energy demand some results for uk households the paper is concerned with the empirical modeling of domestic demand for energy at the level of the individual household a model of household energy expenditures and energy using durable ownership is described estimation takes place using a pooled sample of households drawn from the repeated cross sections of the annual family expenditure survey fes price and income elasticities are found to be highly dependent on individual household characteristics type of house tenure energy using durable ownership and outside temperature finally the results are placed in a policy relevant context copyright 1991 by oxford university press

allocation of goods by lottery i introduction many goods such as hunting permits oil drilling leases cellular telephone licenses and rights to fishing berths as well as some buds such as the military draft jury duty and who is to be thrown overboard on a sinking life raft are or have been allocated by lotteries in neo classical welfare economics the random distribution of property rights does not affect allocative efficiency as long as transferability is allowed and the transactions costs are non prohibitive lottery allocations however are generally not transferable thus lottery allocations are inefficient since the goods are not ultimately allocated to the users who value them the most a number of authors such as aubert 1959 fienberg 1971 eckhoff 1989 and elster 1989 36 122 have argued that lotteries are chosen as the allocative instrument because it represents a fair or just means of allocating the goods rawls 1971 374 and eckhoff 1989 have noted that where it is impractical to divide the goods equally among those who desire them a lottery serves to satisfy both the requirement that the process be fair and that the allocation problem be resolved relatively costlessly elster 1989 113 however notes that lotteries are not the only fair allocation mechanism for example he points out that in jewish ethics the problem of allocating an indivisible good such as life saving resources is resolved by denying it to everyone even economists would probably prefer a lottery to this resolution the fairness hypothesis has a rich history in the old testament lotteries are deemed a fair way of allocating goods such as the inheritance of land numbers 33 54 lotteries are also used to allocate bads in perhaps the most famous biblical example of use of lots jonah was chosen by lot to be sacrificed to appease god who had brought a storm that threatened to wreck the ship the story goes that the lot selected jonah because he was shirking his duties elsewhere and should not have even been on the vessel jonah 1 6 1 notice that fair here is taken to mean just given this theological foundation it is not surprising that the lottery has seen frequent use in legal history as well one of the most interesting cases occurred in swedish and finnish trials in the 17th and 18th centuries in cases where a man was murdered by a mob lotteries were used to allocate punishment since the law required an eye for an eye no more and no less eckhoff says that if it was impossible to ascertain which of them had dealt the mortal blow the courts determined that one of the responsible parties be sentenced to death and that the person be selected by lottery 1989 19 a similar use of lotteries occurs in military history to deal with cases of mass desertion in roman armies every tenth man was executed decimated and the remainder pardoned in more modern times the lottery has been used in u s law 2 first of course is the use of a lottery to decide who shall sit on a jury a connection between fairness and lotteries however has also appeared in the common law in an 1842 case u s v holmes which has been discussed by fienberg 1971 eckhoff 1989 and elster 1989 a ship sank in a heavy storm and the lone surviving life raft was in grave danger of sinking the crew threw overboard fourteen male passengers in an effort to save the rest when back in port after being rescued a crewman named holmes the only crew member who had not disappeared upon arrival to port was brought to trial for the deaths of the passengers the court ruled that the non essential members of the crew should have been thrown overboard before any passengers and if that was not sufficient then passengers should have been selected by lot which is the fairest mode elster 1989 65 the fact that a human life presumably a large cost was at stake ex post did not affect the decision 3 the environmental economics literature contains a number of references to the social preferences for and benefits of lottery allocations

the influence on congress by the thrift industry abstract the investigation of the influential role of the thrift industry on congress as demonstrated by voting behavior on regulatory policy changes in the eighties is the focus of this study specifically we search for the degree to which the inadequately capitalized component of the thrift industry has captured the house of representatives we examine the influence on congress by the thrift industry using the votes by the house of representatives associated with three different legislative acts the garn st germain act the competitive equality banking act and the financial institutions reform recovery and enforcement act addressing the thrift crisis using a multi chotomous voting model we identify traditional public choice variables that could influence the probability of voting for legislation to capture the variation of the thrifts interests we consider a series of financial variables motivated by the thrift literature of failure prediction models these variables allow us to investigate the influences from the health of the congressional district s thrifts their asset composition characteristics and their reliance on regulatory forbearance

commodity trade and relative returns to factors of production in this paper a model that can be used to estimate relative factor price differences between pairs of countries is developed estimation requires observations of actual bilateral commodity trade flows and knowledge of input requirements for commodity production the linchpin here is the set of relative production cost differences which on the one hand determine trade flows and which in turn are a function of production requirements and relative factor returns the model is implemented to estimate relative factor returns between the united states and each of eight other countries several useful applications of the model are suggested

balancing environmental protection and energy production in the federal hydropower licensing process the u s federal energy regulatory commission ferc must balance environmental protection of riverine resources with the nation s growing demand for power production every time it issues a hydroelectric license this paper models the bureaucratic agency s decision making process in issuing these licenses data on nearly 500 hydro power licenses issued from 1983 to 2005 are utilized it is discovered that legislative and institutional constraints are by far the largest influences on ferc s regulatory decisions implying that if the current allocation of surface water in the united states is considered inefficient the most effective way to alter this allocation is by passing new legislation or by implementing institutional reform at ferc

interest group politics under majority rule abstract we develop a model of interest group politics in which the groups and coalitions that arise and the form of redistributive policies sought are jointly determined the model generates three key results first programs intended to reduce income inequality are more likely to involve direct payments than are programs that redistribute wealth across groups with similar incomes second nonequalizing redistribution is unlikely unless the various participants in the political process face significantly different political and economic costs of obtaining transfers third many policies that induce asymmetries among interest groups also impose significant deadweight costs stable nonequalizing redistribution will therefore tend to involve indirect and economically inefficient methods of transferring income

conceptual issues in the design of trade policy for industrialization abstract this paper considers the following question starting from first principles what kind of a case can be made for an industry oriented trade policy and what would such a policy look like the answer lies in an explicit consideration of specific market failures and externalities which in the absence of corrective policies may leave industry in command of a socially suboptimal share of the economy s resources the paper considers such market failures and the role that trade policy can play in addressing them special attention is paid to a the appropriate level of protection b price versus nonprice measures c the role of targeting selectivity and uniformity d the stability of incentives over time and e the qualitative aspects of trade regimes

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

studying the role of political competition in the evolution of government size over long horizons here we argue for the use of cointegration and error correction analysis to combine economic factors that are nonstationary with political factors that are stationary into an empirical model of the evolution of public policy over long periods the approach is applied to disentangle the contributions of economics and politics to the evolution of public expenditure by the government of canada over 130 years political competition emerges as the primary political factor affecting government size

the cost of natural gas shortages in ireland this paper investigates the economic implications of disruptions of one to ninety days to the supply of natural gas in ireland we assess the impact of a hypothetical gas supply disruption in both winter and summer in 2008 with observed market characteristics and in 2020 with projected market characteristics the cost of a natural gas outage includes the cost of natural gas being unavailable for heating and other purposes in the industrial and commercial sectors lost consumer surplus in the residential sector the cost of lost electricity in all sectors and lost vat on the sale of gas and electricity ireland generates much of its electricity from natural gas and the loss of this electricity accounts for the majority of the cost of a natural gas outage losing gas fired electricity would cost 0 1 1 0 billion euro per day depending on the time to the week the time of year and rationing industry should be rationed before households to minimise economic losses but current emergency protocols do the opposite if gas fired electricity is unavailable for three months the economic loss could be up to 80 billion euro about half of gross domestic product losing gas for heating too would add up to approximately 8 billion euro in economic losses we also discuss some options to increase ireland s security of supply and find that the cost is a small fraction of the avoided maximum damage

trade and capital account liberalization in a keynesian economy this paper analyzes the process of trade and capital account liberalization in a keynesian framework with unemployed resources previous studies on this subject have ignored the potential interactions between the liberalization process and the pre existing distortions in the economy this paper derives the optimal liberalization policy given the keynesian context and solves for explicit formulas for the import tariffs and the capital account tax in a two period general equilibrium model it is argued that a trade reform is likely to have recessionary effects in the short run if the capital account has already been liberalized

separating economic from political influences on government decisions abstract the public interest theory is a poor predictor of government decisions relative to interest group theories but a sophisticated public interest theory is a more serious alternative to the former testing the sophisticated theory s predictions is problematic however when public interest is coincident with an interest group s interests a four step method is developed that disentangles public interest and interest group interests by separating economic from political incentives applying the method to the national forest service decisions about wilderness designations indicates whether interest groups were successful in influencing allocation decisions and whether allocation decisions were in the public interest

distortion triggered lobbying and welfare a contribution to the theory of directly unproductive profit seeking activities abstract the paper considers the normative implications of lobbying for non exclusive income generated by an exogenously specified policy intervention such lobbying activities are a subset of what bhagwati has termed directly unproductive profit seeking dup activities it is demonstrated that the welfare effects of lobbying triggered by a policy distortion depend critically on whether the direct impact of the policy constraint is on price or an quantity it is also shown that several standard comparative static welfare analyses of alternative policy distorted states are significantly affected once the policy intervention is assumed to be continuously accompanied by lobbying for the associated non exclusive income

the political economy of farmland ownership regulations and land prices one of the most ubiquitous forms of agricultural regulation is a restriction on farmland ownership one canadian example of a farmland ownership restriction is the saskatchewan farm security act fsa passed in 1974 the purpose of this article is to explain using a political economy framework why the fsa was implemented and to estimate the effect of the fsa on saskatchewan farmland values a present value pv model is used to estimate the relationship between land values rents and the regulation the hausman endogeneity test reveals that the regulation variable is endogenous with the land price the sign of the regulation variable is negative which fits with the theory i e the more stringent the regulation the lower the land value we estimate that the regulation lowered saskatchewan farmland prices by an average of 4 to 34 us acre depending on whether ordinary least squares ols or two stage least squares tsls is employed in the estimation over the period of 1974 2001