dynamic banking a reconsideration financially intermediated and stock market consumption investment allocations with and without governmental interventions are compared in a welfare sense in overlapping generation economies with and without shocks to agents intertemporal preferences we first show that in economies with preference shocks governmental interventions subject to the same information requirements as those imposed on financial intermediaries lead to stock market allocations that are not inferior to those attained under financial intermediation second we argue that the necessary interventions are qualitatively no different from those required to implement stationary optimal allocations in olg models without shocks to agents intertemporal consumption preferences

democracy creeping socialism and ideological socialism in rent seeking societies rent seeking societies suffer from a serious distortion of incentives incentives to engage in distributional struggles to seek contrived transfers are strong but incentives to engage in productive work are too weak stagnation and some unemployment should be expected long lasting democracies within unchanged borders create a permissive environment for rent seeking the provision of rents very much depends on government the stronger the governmental involvement in the economy the higher social security spending the more rents the government is likely to generate therefore creeping socialism understood as increased government control of the economy should reinforce the rent seeking society and the corresponding negative effects on growth and employment whether such creeping socialism is backed by ideological socialism or not should make little difference for growth or employment these ideas have been tested and partially supported by a 19 nation sample of industrial democracies using data from the sixties and seventies by and large the rent seeking approach is fairly successful in explaining national differences in economic growth rates but receives ambiguous support or less for unemployment olson s 1982 1983 proposition about the negative impact of long lasting democracy within unchanged borders on economic growth is much better supported than the growth retarding effects of government revenues or social security spending are

liberty and development a further empirical perspective this paper uses the wright ratings of economic freedom to investigate the relationship between economic freedom and economic development for most countries in the world this rela tionship is apparently strong and direct for such economic freedoms as freedom of property and freedom of movement but inverse for freedom of association these findings appear to be indepen dent of the type of economic system or civil liberties as measured by the gastil ratings which have their own important effects on economic development

the public economy and economic growth in western market economies this essay analyzes the impact of two welfare states one for households and the other forfirms on economic growth in twelve advanced market economies between 1962 and 1983 we find that both welfare states contain stimulative and depressing forms of spending transfers in support of household income stimulate growth while public production of goods and services largely consumed by households depresses growth transfers to firms may have a predominantly negative impact on growth while military spending has a stimulative impact on the economy we also find that increasing household tax burdens a correlate of postwar welfare state expansion slows economic growth national debates about economic growth have increasingly been structured as zero sum choices between the welfare state for households and economic growth this reasoning neglects the potentially stimulative components of the welfare state for households and ignores the potentially negative impact of the welfare state forfirms

inflation and social consensus in the seventies it is widely believed that the two oil price shocks of the i 970s played a major role in the increase in inflation in industrial countries while this hypothesis is consistent with the timing of changes in inflation at the global level it seems to break down when applied to individual countries cross sectionally for example over the period i973 9 switzerland had an average inflation rate of 4 7 while in neighbouring italy inflation averaged i5 6 over the same period furthermore inflation in the pre opec period i97i 2 was actually higher in switzerland than in italy it seems that a supply shock explanation of inflation in the seventies also requires an explanation of why different countries responded so differently to a similar set of shocks at the world level the purpose of this paper is to offer such an explanation and to test the hypothesis with a cross sectional equation accounting for differences in average inflation rates over the period i973 9 in eighteen oecd countries this time period includes the year of the first opec shock i 973 and the following six years up to the time of the second opec shock the hypothesis to be tested is set in the framework of a model similar to that of brunner et al i 980 the key features of the brunner model are that the adjustment of real wage expectations is subject to lags and that labour supply is positively related to the difference between the perceived real wage and the expected or target real wage given these two assumptions a negative supply shock gives rise to a period of stagflation whose intensity will be greater the slower is the speed of adjustment of real wage expectations the model of this paper extends the brunner model in three ways first across countries the speed of adjustment of real wage expectations or targets is assumed to depend positively on the degree of social consensus as proxied negatively by an indicator of average long run strike activity second the model allows for the possibility of inflation inertia or systematically incorrect inflation expectations as well as a sluggish adjustment of real wage expectations third the model incorporates the hypothesis that money supply growth will vary across countries according to variations in inflationary pressures as perceived by governments the first section of the paper provides a discussion of the rationale for the key proposition regarding strikes and social consensus as well as a brief discussion of the role of wage bargaining institutions section ii develops a theoretical model which yields a reduced form cross sectional equation relating the average i 973 9

climate policy and energy intensive manufacturing a comprehensive analysis of the effectiveness of cost mitigation provisions in the american energy and security act of 2009 abstract in response to the ongoing climate policy debates this study examines the cost impacts of carbon pricing legislation on selected us energy intensive manufacturing industries specifically it evaluates output based rebate measures and the border adjustment provision specified in the bill and tests the effectiveness of cost containment features of the policy such as the international offsets under various market assumptions results of the examination confirm that in all policy cases or industries the output based rebates would effectively mitigate the manufacturers carbon pricing costs in the short to medium term however as the rebates decline after 2020 especially in a case where low carbon electricity generation or international offsets are not readily available or implemented these industries would suffer greater declines in profitability at the same time the study s findings were mixed concerning the effectiveness of the border adjustment measure in reducing cost impacts after 2020 while border adjustments could reduce costs to us manufacturing sectors at least temporarily they could create problems for domestic downstream producers and exports under cost pass along conditions however at best the output based rebates international offset and border adjustment and measures primarily buy time for manufacturers the only long term solution is for eite industries to invest in energy saving and next generation low carbon technologies

the economics of worldwide stagflation the last fifteen years have witnessed dramatic changes in economics not only in the manner in which the economics profession views economics but also in the manner in which the general public views economics and economists by the late 1960 s there had emerged more or less a consensus macroeconomic framework that is an agreed upon structure to be used to study economic problems at the aggregate level robert solow stated as quoted in leijonhufvud 1968

interest groups and economic performance some new evidence mancur olson s theory of the decline of nations is path breaking in political economics it has been tested cross sectionally in numerous empirical studies we survey the existing results briefly with a special focus on studies using the number of lobbies as an exogenous variable using data from the period 1973 2006 we then present the field s first time series analysis of the effects of the number of interest groups on the german lobby list and macroeconomic performance gauged in terms of economic growth and inflation the number of interest groups as a proxy for their influence is shown to have an important impact on macro variables interest group activity significantly leads to a decline in the growth rate and a rise in the inflation rate

determinants of interest group formation it is widely recognized that interest groups affect both microeconomic and macroeconomic outcomes however few researchers have attempted to discern empirically the factors that contribute to interest group activity this paper provides a test of several theories of group formation in a panel setting a nation s stability socioeconomic development political system size and diversity all appear to contribute to interest group formation as predicted by theory

natural versus manufactured capital win lose or win win a case study of the finnish pulp and paper industry abstract the effect of investments on environmental variables has been discussed through the win win rhetoric specifically in micro level analysis on the macro level the win win rhetoric has been replaced by the arguments for and against the substitutability of natural and manufactured capital here these two concepts belonging to different levels of analysis are linked by looking at the environmental and economic effects of chosen investment strategies in a traditionally capital intensive industry over time the paper shows that rather than generalise the existence of win win situations or the substitutability of capital these positions are determined by purely situational factors as a result in the assessment of substitutability the specific operating context of the industry needs to be taken into account this implies also that environmental policy needs to be designed to be adaptive and responsive to those situational factors to create beneficial outcomes for the economy and for the environment

the impact of taxes on growth and distribution in developed capitalist countries a cross national study has the scope of public planning in contemporary capitalist economies promoted or hindered economic growth and income distribution we explore this question by assessing the impact of various mechanisms for raising government revenues on investment growth and income distribution in 22 developed market economy countries the article considers whether growth and distribution are affected differently by governments relative reliance on personal and corporate income taxes social security contributions property taxes and sales and value added taxes or by the relative progressivity of tax mechanisms our findings lend support to the assertion that fiscal instruments especially personal income taxes can be used successfully to achieve greater income equality on the other hand these findings run counter to the conventional notion that an automatic trade off exists between an active public sector and a dynamic expanding economy although there is surely some tension between the economic goals of growth and equality it is not at all clear that they are necessarily incompatible or that government can contribute only to the latter

corporatism in decline an empirical analysis of the impact of corporatism on macroeconomic performance and industrial disputes in 18 industrialized democracies during the 1970s and early 1980s most studies on corporatism indicated that corporatist policies led to lower unemployment and inflation and higher economic growth rates in the mid and late 1980s however voices claiming that corporatism is in decline became more and more frequent although hardly any empirical examinations were undertaken the purpose of this study is to estimate empirically the influence of corporatist arrangements on macroeconomic performance and industrial disputes in the 1980s as compared with the 1970s and 1960s this pooled time series cross sectional analysis provides evidence that corporatist policies have not lost their capacity to achieve the desired macroeconomic goals in the 1980s in addition corporatism significantly reduces the number of working days lost however no evidence was found that corporatism leads to increased economic growth there is evidence that economic growth is adversely affected by government outlays

distributional coalitions state strength and economic growth toward a comprehensive theory of economic development high performing economies in the asia pacific region together with only mediocre economic development in latin america prompts the question of what explains differential economic growth rates among developing countries combining a statist perspective with olson s theory of interest group formation this research hypothesizes that nations with weak distributional coalitions will more likely experience high growth and state intervention will be effective using a longitudinal research design this secondary analysis involves a comparative and interactive examination of eight asian pacific and twelve latin american countries by considering the role of the state in interaction with distributional coalitions in society the results indicate that approximately two thirds of the variance in national economic growth is explained

interest groups and investment a further test of the olson hypothesis mancur olson s institutional sclerosishypothesis may be evident in the effects ofinterest groups on investment in physicalcapital to test this proposition we usecross sectional data on 42 countries forwhich information on the number of interestgroups is available to estimate the effectof those groups on the share of gdp thatgoes into physical investment the resultsindicate that interest groups have adifferent effect on physical investment inoecd and non oecd countries in the oecdcountries we find support for thehypothesis that interest groups harminvestment in physical capital indeveloping countries interest groupseither have no effect on physicalinvestment or they have a slight beneficialimpact

government expenditure and economic growth in the developed countries 1952 76 in the past decade or more the pace of economic growth has slowed considerably and the share of government expenditure in national product has increased considerably the average annual growth rate of per capita gdp for the 16 most important developed market economies was 6 3 from 1955 73 and 2 0 from 1973 79 the average share of government in gdp went from 27 in 1955 to 34 in 1970 to 43 in 1979 2 the simple correlation proves nothing but it suggests the growth of government might be one of the causes of the slowdown many economists have theorized that government production is staticly less efficient than private sector production with competitive markets see

government partisanship labor organization and macroeconomic performance governments of the left and right have distinct partisan economic policies and objectives that they would prefer to pursue their propensity to do so however is constrained by their desire for reelection we argue that the ability of governments to further their partisan interests and preside over reelectable macroeconomic outcomes simultaneously is dependent on the organization of the domestic economy particularly the labor movement we hypothesize that there are two different paths to desirable macroeconomic performance in countries with densely and centrally organized labor movements leftist governments can promote economic growth and reduce inflation and unemployment conversely in countries with weak labor movements rightist governments can pursue their partisan preferred macroeconomic strategies and achieve similarly beneficial macroeconomic outcomes performance will be poorer in other cases these hypotheses are supported by analysis of pooled annual time series data for 16 advanced industrial democracies between 1967 and 1984

consensus versus majoritarian democracy political institutions and their impact on macroeconomic performance and industrial disputes this article argues that consensual political institutions as operationalized by lijphart and crepaz 1991 have significantly favorable effects on unemployment inflation and the number of working days lost whereas economic growth remains unaffected although this finding is consistent with olson s theoretical concept of encompassing organizations this study shows that olson s empirical operationalization is flawed strong two party westminster systems based on single member district electoral rules and single party bare majority cabinets do not perform as well as weak multiparty coalition governments with proportional representation as an electoral rule an empirical measure of encompassing organizations is introduced termed popular cabinet support a cross sectional time series panel study of 162 elections 18 countries and 9 elections per country n 162 provides strong evidence that governments with consensual inclusive and accommodative constitutional structures and wider popu

government special interest groups and economic growth in descending order of robustness and strength the four major conclusions are i the experience of industrial countries in the postwar period indicates that a large welfare state has been associated with a high rate of economic growth ii the olson thesis that powerful special interest groups impede growth receives empirical support iii the relation between growth and the welfare state is non linear with increases in the size of the welfare state beyond some critical level one sixth of gdp according to our estimates resulting in reductions rather than increases in the growth rates and iv the strength of the growth promoting properties of the welfare state is positively related to the strength of special interest groups as proxied by the proportion of the work force unionized one possible interpretation of these results runs as follows a large welfare state may retard economic growth by reducing the incentives to work to save to move and to change on the other hand in a situation where special interest groups have aquired significant power to block change if they so desire the welfare state which offers assistance to those who are the victims of change may play a growth enhancing role in reducing the incentive to block change the fourth conclusion just stated supports this view the welfare state may also foster economic growth through favourable effects on social consensus political stability and labour management relations the results suggest that the growth promoting forces predominate as long as the welfare state is not too large but beyond a certain point which corresponds more or less to the median situation among developed countries today the growth retarding elements come to the fore

barriers within firms to energy efficient investments abstract many investments in energy efficiency fail to be made despite their apparent profitability internal hurdle rates are often set at levels higher than the cost of capital to the firm reasons for these practices include bounded rationality principal agent problems and moral hazard the policy implication is that government can simultaneously improve overall energy efficiency and increase private sector productivity by providing informational and organizational services that go beyond the traditional regulatory framework

emerging carbon constraints for corporate risk management abstract while discussions about global sustainability challenges abound the financial risks that they incur albeit important have received less attention we suggest that corporate risk assessments should include sustainability related aspects especially with relation to the natural environment and encompass the flux of critical materials within a company s value chain such a comprehensive risk assessment takes into account input as well as output related factors with this paper we focus on the flux of carbon and define carbon constraints that emerge due to the disposition of fossil fuels in the input dimension and due to direct and indirect climate change effects in the output dimension we review the literature regarding the financial consequences of carbon constraints on the macroeconomic sector and company level we conclude that a financial consequences seem to be asymmetrically distributed between and within sectors b the individual risk exposure of companies depends on the intensity of and dependency on carbon based materials and energy and c financial markets have only started to incorporate these aspects in their valuations this paper ends with recommendations on how to incorporate our results in an integrated carbon risk management framework

employment and other macroeconomic benefits of an innovation led climate strategy for the united states abstract climate protection policy and its analysis are pursued in the context of other societal goals among them the maintenance of economic growth and high employment too often however analysis of energy and climate policy does not realistically reflect technological conditions and the dynamics of technological change this tendency unnecessarily associates the decline in energy consumption or carbon emissions with the decline in national economic output or income but there is ample prima facie evidence to the contrary just as in the 19th century when the perceived need to reduce labor inputs as part of the production process spurred labor saving technological progress now the need to reduce energy and pollution costs could spur innovation and diffusion of efficient and clean energy technologies this in turn can increase overall growth in economic productivity energy technology analysts have identified many such existing and near term commercial technologies as well as innovations that can be foreseen beyond the immediate technological horizon which would become widely used if policies were developed to overcome market and institutional barriers this paper presents a macroeconomic analysis for a set of policies that would induce the adoption of more efficient and low carbon technologies and finds that overall employment and economic output could be increased by small amounts while significantly reducing carbon emissions

determinants of the increase in the number of interest groups in western democracies theoretical considerations and evidence from 21 oecd countries mancur olson s theory of institutionalsclerosis is based on the notion that thenumber of interest groups within a countryincreases with the duration of itspolitical stability the following paperargues that the increase in the number ofinterest groups over time could also be aconcomitant of economic development theoretically both explanations provetenable an empirical cross sectionalregression analysis using data from 21oecd countries finds no evidence for asignificant impact of the duration ofpolitical stability on the number ofinterest groups a significantly positiveeffect is however reported for the degreeof economic development

growth and the welfare state in the eu a causality analysis in this paper we test for causality between gdp growth andsocial protection expenditure in the european union to that end we apply hsiao s 1981 sequential procedure to data for twelveeu countries along the 1970 1994 period our results suggestthat for belgium germany ireland luxembourg the netherlands portugal and spain causality runs only from social protectiongrowth to gdp growth while for denmark france greece italy and the united kingdom no causality is found between socialprotection growth and gdp growth

the rise and decline of nations economic growth stagflation and social rigidities the years since world war ii have seen rapid shifts in the relative positions of different countries and regions leading political economist mancur olson offers a new and compelling theory to explain these shifts in fortune and then tests his theory against evidence from many periods of history and many parts of the world

differentiating mixed member electoral systems mixed member majoritarian and mixed member proportional systems and government expenditures the increasing use of mixed member electoral systems has led to an explosion of research attempting to specify their effects yet there has been no work on the economic policy effects of such systems even though this has been a significant subject of debate for scholars analyzing other electoral systems an analysis of mixed member system policy effects is problematic given the wide variation in institutional rules among different systems this article attempts to determine whether the institutional differences between mixed member majoritarian mmm and mixed member proportional mmp systems lead to differences in policy outputs the political economy literature finds that government expenditures are positively correlated with electoral system proportionality our statistical analysis of government expenditures in 17 mixed member systems between 1990 and 2000 shows that mmp systems which are more proportional than mmm systems are correlated with higher levels of government spending thus the mmm mmp

trade and the variety of democratic institutions students of comparative politics have long acknowledged the importance of such institutional factors as electoral systems parliamentary versus presidential rule and the strength of parties but they have either regarded the institutions as given or have explained them entirely in domestic terms associating proportional representation for example with the intensity of social cleavages in economically advanced democracies however these institutional aspects can be plausibly linked to dependence on trade proportional representation the parliamentary system strong parties and large electoral districts have survival value for developed democracies exposed to trade that the recently revived agitation for proportional representation in the united kingdom has been cast explicitly in terms of economic necessity and dependence on trade adds force to this argument and suggests the need for further historical research on other cases of institutional adaptation and change

when are banks better than markets comment on zimper 2013 zimper 2013 claims that in the basic diamond dybvig model trade in a competitive asset market can implement the first best i show that the argument of zimper is incorrect as it stands zimper derives his result assuming that the consumers choose investment levels that are individually suboptimal the corrected argument shows that laissez faire markets do not provide any liquidity insurance however if consumers can trade in markets in the banking economy banks do not provide any insurance either whether or not banks are better than markets therefore crucially depends on the extent of trading restrictions

the size of government in majoritarian and consensus democracies this article looks at the effect of democratic institutions on the size of government with the help of the ordinary least squares regression analysis of data from the organization for economic cooperation and development oecd countries from 1974 to 1995 the study provides considerable evidence that the variance in the type of democracy measured by the lijphart index of majoritarian consensus political institutions has a systematic effect on the variance in the size of government measured both by total government outlays as well as total government revenue as a percentage of gross domestic product the article further argues that such institutional effects on the size of government are strengthened by partisan politics more specifically the analysis demonstrates the presence of the multiplicative interaction effect of the mutually reinforcing nature between the institutional structure and partisan composition of government in their association with the size of government

government size and economic growth a new framework and some evidence from cross section and time series data a study of the impact of government size on economic performance and growth is important theoretically one point of view suggests that a larger government size is likely to be detrimental to efficiency and economic growth because for example i government operations are often conducted inefficiently ii the regulatory process imposes excessive burdens and costs on the economic system and iii many of government s fiscal and monetary policies tend to distort economic incentives and lower the productivity of the system at the other extreme one can identify some points of view that assign to the government a critical role in the process of economic development and could argue that a larger government size is likely to be a more powerful engine of economic development there are several arguments on which the latter point of view is based these include besides others i role of the government in harmonizing conflicts between private and social interests ii prevention of exploitation of the country by foreigners and iii securing an increase in productive investment and providing a socially optimal direction for growth and development

model unvertainty political learning and institutions a broader view on mancur olson s theory of institutional sclerosis in his rise and decline of nations mancur olson argues that politically stable countries suffer from declining growth rates caused by the growing influence of distributional coalitions that accumulate over time the empirical literature supports the notion of a negative relationship between a country s duration of political stability and its growth rates but finds only weak support for a negative influence of distributional coalitions on growth this paper sketches a simple model of party competition under model uncertainty which may explain this mixed empirical picture it shows that politically stable democracies are less well equipped to adjust to shifts in their economic environment than democracies with a shorter history of political stability in a further step the paper relates the major theme of this theory and olson s theory to the more recent literature on institutions and growth directions for further research are discussed

consistent estimates of the impact of special interest groups on economic growth empirical studies designed to testolson s 1982 theory of institutional sclerosis aretypically forced to rely upon proxies to measure theability of special interest groups to engage inredistributive activities which in turn areexpected to hinder economic growth this note showsthat reliance on proxies biases the estimates towardzero here instrumental variable routines areutilized which increase the estimated impact ofspecial interests on the economy

economic instruments for environmental regulation our knowledge about economic incentive approaches to pollution control has grown rapidly in the two decades in which they have received serious analytical attention not only have the theoretical models become more focused and the empirical work more detailed but we have now had over a decade of experience with emissions trading in the u s and emission charges in europe as the world community becomes increasingly conscious of both the need to tighten environmental controls and the local economic perils associated with tighter controls in a highly competitive global marketplace it seems a propitious time to stand back and to organize what we have learned about this practical and promising approach to pollution control that may be especially relevant to current circumstances this paper draws upon economic theory empirical studies and actual experience with implementation to provide a brief overview of some of the major lessons we have learned about two economic incentive approaches emissions tradi copyright 1990 by oxford university press

banking and insurance abstract this paper studies the economic role of financial institutions in economies where agents incomes are subject to privately observable idiosyncratic random events the information structure precludes conventional insurance arrangements however a financial institution perhaps best viewed as a savings bank can provide partial insurance by generating a time pattern of deposit returns that redistributes wealth from agents with high incomes to those with low incomes resulting in a level of expected utility higher than that achievable in simple security markets insurance is incomplete because the bank faces a tradeoff between provision of insurance and maintenance of private incentives

a welfare analysis of the diamond dybvig model i show how to design a welfare improving tax system for a diamond dybvig dd related economy in addition to its relevance to the dd literature the paper constructs a nice example for a pareto improving intervention when markets are incomplete and provides a welfare analysis of the market for liquidity

inflation drag or taxation in drag responsible for the rising share of government in australian gdp i am sure that these results will be by no means the last word possible many other influences have been neglected nonetheless they are quite striking and appear to indicate that price level effects inflation have been a major if not the major influence in terms of raising the shares of government revenue and expenditure in gdp over the period 1949 50 to 1987 88 in australia this inflation drag which is really taxation in drag has only been able to operate because of a combination of a highly progressive personal taxation system and the absence for most of this period of any inflation indexation of the tax system i postulate that the primary cause is a high demand from certain segments of the community and special interest groups for greater government outlays and transfer payments however these demands may not in themselves be enough to achieve the objectives of these groups unless combined with rational voter ignorance about the real price to be paid for these activities in terms of higher taxes and future taxes to pay the accumulated deficits a high inflation rate makes it possible for real government expenditures to rise greatly while at the same time the government announces notional tax cuts which may be incorrectly perceived by voters as real tax cuts particularly since the early to middle 1970s australian governments have not had to rely on announcing tax increases to finance rapidly growing real levels of expenditure this has lowered the perceived cost of these programs and facilitated the rapidly rising share of government revenue and expenditure in gdp a sign of some voter disenchantment with ever rising expenditure shares has come in the last year or two as the hawke keating government has been successful in actually slightly lowering the expenditure share one obvious reform which would force governments to be more honest with voters is complete inflation indexation of tax brackets and capital income however as the experimentation with inflation indexation by the fraser government showed no government is likely to voluntarily persist with even partial let alone complete tax indexation to introduce and maintain such a measure some sort of tax constitution as explored by brennan and buchanan 1980 1985 may be desirable since the likelihood of achieving such reform via a constitutional referendum seems remote a promising alternative is the various flat tax proposals such as the hall and rabushka 1985 scheme any scheme which brings average and marginal tax rates into greater equality not only forces politicians to be more honest and open about the consequences of expenditure increases but it also unequivocally improves the efficiency of the tax system via the lowering of work disincentive effects swan 1982 1984 and the excess burden of taxation for a given overall government tax take there cannot be any aggregate income effect offsetting the favourable substitution effect from lowering marginal tax rates when the average level of taxes is raised there is a potential role for income effects since individuals who have been made worse off by tax increases may be motivated to work more to maintain their income higher government expenditure does not necessarily provide higher benefits from public goods to offset lower personal after tax income it is interesting that supporters of big government such as wilenski 1986 30 should use the income effect argument to claim that the effect of taxes on work incentives is an empirical matter since he is in effect conceding that the higher government expenditure which results from higher taxes does not necessarily compensate taxpayers for the burden of these higher taxes i e that the income effect exists and is unfavourable a more fundamental line of attack on the rational ignorance of voters which may be the root cause of many weaknesses displayed by so called democratic governments has only been hinted at here such fundamental reforms may involve the institution of well informed middle persons between voters and governments fostered by revolutionary proposals such as markets in votes and payments for votes instead of the present penalties for failing to vote

government expenditure and economic growth a cross country study this paper examines the relationship between the share of government consumption expenditure in gdp and the rate of growth of real per capita gdp the work of the u n international comparison project has recently made available new estimates for over 100 countries of both per capita gdp and the share of government consumption these new estimates are based on direct price comparisons rather than exchange rate conversions as a result the statistics for different countries are more comparable and cross country studies will be more reliable

impacts of market based climate change policies on the us pulp and paper industry abstract much of the policy debates on climate issues have centered on the optimal level and timing of policy interventions that cost effectively reduce greenhouse gas emissions we briefly review the range of policy issues in our paper and assess the impact that climate change policies may have on energy use and carbon emissions in the us pulp and paper industry we then present results from time series based analyses of changes in technologies and fuel mix and compare the results with engineering based technology analyses of us pulp and paper production for a copy of the model and software send e mail to mruth bu edu projections based on information for eight paper and paperboard categories are presented for the years 1995 2020 the findings indicate that under a wide range of specifications and policy assumptions carbon emissions from fossil fuel use per ton of product are likely to decline when combined with investment incentives an additional cost effective reduction in carbon emissions per ton of product will be realized however expected increases in output from the industry are likely to be higher than the reductions in energy and carbon intensities the policy implications of these findings are discussed

do large cabinets favor large governments evidence on the fiscal commons problem for swiss cantons abstract the fiscal commons problem is one of the most prominent explanations of excessive spending in political economics for a panel of the 26 swiss cantons over the 1980 1998 periods this paper explores the role of fragmented governments on fiscal policy outcomes we distinguish between two variants of fragmented governments cabinet size and coalition size in addition we analyze whether constitutional rules for executive and legislature as well as formal fiscal restraints shape the size of government and how different rules interact with fragmentation the results indicate that the number of ministers in the cabinet is positively associated with the size of government while fiscal referendums effectively restrict the size of government there is also evidence that fiscal referendums relax the fiscal commons problem to some extent

the implications of institutional design for macroeconomic performance reassessing the claims of consensus democracy the choice between a proportional representation pr or plurality based electoral system is commonly assumed to involve a trade off the former is assumed to provide fairer representation but at a

an examination of the factors affecting the formation of interest groups in oecd countries perhaps the best way to summarize the empirical results is to classify the hypotheses into three groups those which can be readily accepted because they are supported in all tests those which can be readily rejected because no test results support them and those upon which one should remain agnostic because the test results are not consistent in the first group are population pop decentralization of government dcnt and length of time of modernization date one can state quite confidently that these three variables are determinants of interest group activity in the second group are the variables measuring characteristics of the political system poly dem1 dem2 pfrc one can with ease reject the hypotheses to which these variables are relevant there is a large group of variables which stand in the middle group however for these variables there are gradations of success in the tests the variables on socioeconomic development inc agri news and number of industries and political subdivisions nind regp are only significant in the one variable tests especially important is their failure to obtain the correct signs in the tests reported in table 3 the variables on ethnic fractionalization efrc and olson s hypothesis on destruction of groups ndfo have the correct signs in table 3 and are significant in table 1 thus it is more difficult to reject efrc and ndfo as determinants of interest group activity than inc nind and regp finally it should be mentioned that once appropriate simultaneous equations techniques are applied government size is no longer supported as a significant variable this paper will conclude with comments of a more conjectural nature on the implications of the results in the case of three specific variables first the results on hypothesis 3 suggest that population affects the number of interest groups independently of indirect effects through other variables this direct effect occurs because groups become proportionately smaller and more homogeneous as population increases hence one can expect the political economy of larger countries to be significantly different from that of smaller countries the results suggest that larger countries will have a denser array of interest groups and that these groups because of their homogeneity will find it easier to decide on and pursue policies in the narrow interests of their members secondly the results support olson s claim that there will be a gradual accumulation of interest groups in developed democracies given that olson attributes to interest groups a large role in determining the economic fortunes of a country the fact that his accumulation hypothesis is supported is a result of some significance finally if one accepts the two stage least squares results it has been shown that changes in government size do not induce changes in interest group activity an important conclusion can be reached when this result is taken in combination with the results of other studies which show that interest groups induce changes in the size of government mccormick and tollison 1981 and mueller and murrell 1983 these results do not support the capture theory of government that governmental institutions are created perhaps in the public interest and then dominated by interest groups rather the results support the theory that the institutions themselves are the creatures of interest group activity

explaining the rain the rise and decline of nations after 25 years in the quarter century since the publication of mancur olson s rise and decline of nations a large literature has evolved testing the central hypothesis regarding olson s thesis on institutional sclerosis these tests have taken the form of both econometric regression analysis involving a sample of various nations and detailed narrative case studies of specific nations tests have appeared in both economics and political science journals as well as in collected volumes and independent books performed primarily by authors from america and europe a review of over 50 separate works reveals that on the whole the theory of institutional sclerosis is generally but certainly not universally supported no systematic bias in favor of or opposition to olson is found to have arisen on the basis of methodology publication outlet or authorship location