fighting with one hand tied behind the back political budget cycles in the west german states theories of political budget cycles have been contested because scholars find that incumbents can manipulate deficits in the pre election period only if fiscal transparency is low i argue that these findings do not generally rule out the possibility of fiscal electioneering governments may increase spending on highly visible policies the composition of the budget serves as a second best strategy it increases political support without straining the budget balance an empirical analysis of the west german states reveals alternative electoral budget strategies and ultimately point to the importance of analyzing how governments choose between alternative fiscal instruments

disaggregating china s local political budget cycles righting the u abstract what impact does spending time horizon have on political budget cycles while traditional political budget cycles increase visible spending with immediate gains before political turnover i hypothesize that spending in categories with less immediate gains categories increases when opportunity costs are lower in this article i build on existing literature on budget cycles in both democracies and non democracies to disaggregate types of budget cycles those with long run versus short run benefits in china after central level reforms welfare targets with long run gains became visible to local leaders constituents the central leaders above them local leaders then had an incentive to provide welfare but only when it was the least costly in terms of opportunity costs using fixed effects models panel data from china s 333 municipalities for 1994 2012 i find welfare spending minimizes both relatively and absolutely around year three and maximizes at the beginning and end of a politician s tenure when opportunity costs and probability of political advancement are lowest these cycles are the most dramatic in western provinces where education is a particularly important tool for ideological spread health and social security spending also see expansion at the end of mayor s tenures although the cycles are less pronounced than in education spending this study expands the literature on political budget cycles by disaggregating government spending and considering the impact of timeliness on cycles

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

political business cycles 40 years after nordhaus the aim of this article is to survey the huge literature that has emerged in the last four decades following nordhaus s rev econ stud 42 2 169 190 1975 publication on political business cycles pbcs i first propose some developments in history of thought to examine the context in which this ground breaking contribution saw the light of the day i also present a simplified version of nordhaus s model to highlight his key results i detail some early critiques of this model and the fields of investigations to which they gave birth i then focus on the institutional context and examine its influence on pbcs the actual research agenda finally i derive some paths for future research

electoral competition and local government responsiveness in brazil summary the empirical literature on the effects of competition on the supply of public goods shows controversial results at the local level the main objective of this paper is to investigate this relationship in a federalist country brazil where the political system places few barriers to the entry of competitors and local governments have the independence to establish their own public policy we show that a higher effective number of candidates running for the executive branch increase the supply of local public goods the number of student enrollments teachers and free immunizations

the growth of public health expenditures in oecd countries do government ideology and electoral motives matter this paper empirically evaluates whether government ideology and electoral motives influenced the growth of public health expenditures in 18 oecd countries over the 1971 2004 period the results suggest that incumbents behaved opportunistically and increased the growth of public health expenditures in election years government ideology did not have an influence these findings indicate 1 the importance of public health in policy debates before elections and 2 the political pressure towards re organizing public health policy platforms especially in times of demographic change

opportunistic and partisan election cycles in brazil new evidence at the municipal level this article tests the hypothesis of opportunistic and partisan cycle models using a new large data set of brazilian municipalities over the 1989 2005 period the results show an increase in total and current expenditures and a decrease in municipal investments local tax revenues and budget surplus in election years they also show that partisan ideology exerts a relative influence on the performance of the local public accounts these results confirm that both opportunistic and partisan cycles have occurred in the management of the budgets of brazilian municipalities after the end of the military government

welfare improving competition for mobile capital abstract this paper constructs a model in which regions provide firms with a public input financed by taxes that residents choose to levy on capital and wage income self interested government officials face incentives to provide the public input because its positive impact on labor and capital productivity leads to larger tax bases the positive relation between tax revenue and the public input is strengthened if capital is mobile across regions government officials engage in expenditure competition leaving residents better off than they would be in the absence of capital mobility to further enhance public sector incentives residents may choose to tax capital income at a positive rate although investment is discouraged

equilibrium political budget cycles political business cycle theories generally rely on nominal rigidities and voter myopia this paper offers an equilibrium theory that preserves some basic insights from earlier models though with significant refinements the political budget cycle emphasized here is in fiscal policy rather than output and inflation it arises via a multidimensional signal process one can consider the welfare implications of proposals to mitigate the cycle and the effects of altering the electoral structure copyright 1990 by american economic association

on political business cycles with endogenous election dates abstract the pattern of policy generated cycles which result in the nordhaus model is examined under different hypotheses regarding election date determination

traders teachers and tyrants democracy globalization and public investment in education this article develops a model of the redistributive political economy of education spending focusing on the role of democracy and economic openness in determining the provision of education i argue that democratization should be associated with higher levels of public education spending lower private education spending and a shift from tertiary education spending toward primary education spending furthermore i argue that integration with the international economy should lead to higher public education spending conditioned on regime type and income and should push the balance between tertiary and primary education toward states particular comparative advantages these propositions are tested on a data set of more than one hundred states from 1960 to 2000 using a variety of panel data techniques including instruments for democracy the logic of the causal mechanism developed in the formal model is also tested on a number of case histories including the philippines which shows great variation in democracy and openness and india and malaysia which constitute unusual cases that lie off the diagonal of open democracies and autarkic autocracies the author would like to thank beth simmons torben iversen michael hiscox jeffry frieden jim alt teri caraway john freeman jane gingrich david samuels w phillips shively mark kayser john ahlquist and michael kellerman for highly useful comments and criticisms in addition i thank the current and past editors lou pauly emanuel adler david stasavage and lisa martin and three anonymous reviewers for their suggestions

political business cycles democratization and economic reform the case of africa abstract this paper presents cross country evidence that political business cycles are alive and well in the nascent democracies of the developing world africa provides fertile ground for the study of political business cycles this paper uncovers systematic electorally timed interventions in five monetary and four fiscal policy variables in a panel of african countries these findings are consistent with the predictions of rational opportunistic political business cycle theory if africa s increasingly frequent elections are associated with reversals of fiscal and monetary policy reform there is a potential conflict between political and economic reform

federalism and the soft budget constraint the government s incentives to bail out inefficient projects are determined by the trade off between political benefits and economic costs the latter depending on the decentralization of government two effects of federalism are derived first fiscal competition among local governments under factor mobility increases the opportunity costs of bailout and thus serves as a commitment device the competition effect second monetary centralization together with fiscal decentralization induces a conflict of interests and thus may harden budget constraints and reduce inflation the checks and balance effect the authors analysis is used to interpret china s recent experience of transition to a market economy copyright 1998 by american economic association

optimal control of a production inventory system with productreturns abstract we consider a production inventory system that consists of n stages each stage has a finite production capacity modelled by an exponential server the downstream stage faces a poisson demand each stage receives returns of products according to independent poisson processes that can be used to serve demand the problem is to control production to minimize discounted or average holding and backordering costs for the single stage problem n 1 we fully characterize the optimal policy we show that the optimal policy is base stock and we derive an explicit formula for the optimal base stock level for the general n stage problem we show that the optimal policy is characterized by state dependent base stock levels in a numerical study we investigate three heuristic policies the base stock policy the kanban policy and the fixed buffer policy the fixed buffer policy obtains poor results while the relative performances of base stock and kanban policies depend on bottlenecks we also show that returns have a non monotonic effect on average costs and strongly affect the performances of heuristics finally we observe that having returns at the upstream stage is preferable in some situations

top incomes in the long run of history a recent literature has constructed top income shares time series over the long run for more than twenty countries using income tax statistics top incomes represent a small share of the population but a very significant share of total income and total taxes paid hence aggregate economic growth per capita and gini inequality indexes are sensitive to excluding or including top incomes we discuss the estimation methods and issues that arise when constructing top income share series including income definition and comparability over time and across countries tax avoidance and tax evasion we provide a summary of the key empirical findings most countries experience a dramatic drop in top income shares in the first part of the twentieth century in general due to shocks to top capital incomes during the wars and depression shocks top income shares do not recover in the immediate postwar decades however over the last thirty years top income shares have increased substantially in english speaking countries and in india and china but not in continental european countries or japan this increase is due in part to an unprecedented surge in top wage incomes as a result wage income comprises a larger fraction of top incomes than in the past finally we discuss the theoretical and empirical models that have been proposed to account for the facts and the main questions that remain open

growth and inequality revisited the role of primary distribution of income a new approach for understanding today s economic and social crises this paper presents an innovative interpretative scheme of the relationship between economic growth and income inequality taking the primary distribution of income between profits and wages as the main explanatory variable for that purpose two lines of research are taken as a reference point first the bhaduri marglin model which explains growth in terms of the effect that factor shares have on aggregate demand and second recent empirical analyses that also use the functional distribution to explain the evolution of the top income shares and the gini index after reviewing the literature on the growth inequality relationship the paper identifies several relationships between primary and interpersonal distributions of income in each of the bhaduri marglin model s growth regimes it finds multiple causal relationships between growth and inequality as well as inequality and growth clarifying their implications for economic and social stability the paper offers final reflections on the way the scheme can further the understanding of current economic and social crises

optimal control of a two station tandem production inventory system a manufacturing facility consisting of two stations in tandem operates in a make to stock mode after production items are placed in a finished goods inventory that services an exogenous poisson demand demand that cannot be met from inventory is backordered each station is modeled as a queue with controllable production rate and exponential service times the problem is to control these rates to minimize inventory holding and backordering costs optimal controls are computed using dynamic programming and compared with the kanban basestock and buffer control mechanisms that have been proposed for manufacturing facilities conditions are found under which certain simple controls are optimal using stochastic coupling arguments insights are gained into when to hold work in process and finished goods inventory comparable to previous studies of production lines in make to order and unlimited demand environments

how closely do top income shares track other measures of inequality in recent years researchers have used taxation statistics to estimate the share of total income held by the richest groups such as the top 10 or the top 1 compiling a standardised top income shares dataset for 13 developed countries i find that there is a strong and significant relationship between top income shares and broader inequality measures such as the gini coefficient this suggests that panel data on top income shares may be a useful substitute for other measures of inequality over periods when alternative income distribution measures are of low quality or unavailable

electoral competition globalization and subnational education spending in mexico 1999 2004 this article examines the determinants of primary education spending among 29 mexican states from 1999 to 2004 there is wide variation in spending despite expectations of policy convergence due to market forces associated with globalization and in spite of the unique potential of education spending to complement economic strategies in achieving equitable growth this study exploits significant advantages of subnational analysis in exploring political and economic variables that have been useful in explaining spending levels cross nationally consistent with these studies this article shows that greater electoral competition leads to increased spending in contrast to other work however this study finds that exposure to the global economy has distinctly mixed effects on education spending these findings thus further highlight the positive returns to higher quality democracy while underscoring the need to examine the effects of many different aspects of globalization representing a wide variety of strategies employed by governments in engaging the international economy

unemployment and the real wage the economic basis for contesting political ideologies using the keynesian theory of effective demand this paper demonstrates how particular models such as that of cooperative capitalism enunciated by the left keynesian social democrats the marxian model of profit squeeze emphasizing distributive conflict and even the conservative model relying on supply side stimulus fit in as particular variants of a more general theoretical scheme through a reconstruction of the familiar is schedule the argument is weaved around the theme of the relations between unemployment and real wage in the context of both a closed and an open economy to explain the common macroeconomic basis of contesting ideologies copyright 1990 by oxford university press

technical note optimal product acquisition pricing and inventory management for systems with remanufacturing acquisition of used products cores is central to the success of remanufacturing programs for companies at the same time dynamic pricing strategies have been adopted in various industries to better balance supply and customer demand in this paper we study the integration of these two aspects of operations together with inventory management for a production remanufacturing firm we develop a periodic review single product inventory system with price dependent customer demand the product return in each period is random but can be actively controlled by the firm s acquisition effort the firm aims to maximize its total discounted profit over a finite planning horizon by implementing optimal production remanufacturing product acquisition and pricing strategies we first show that with an exogenous selling price the optimal production remanufacturing disposal policy is simple and characterized by three state independent parameters the optimal acquisition effort is decreasing in the aggregate inventory level of serviceable product and cores nevertheless when pricing is an endogenous decision we find that the optimal policy becomes much more complicated and its control parameters are state dependent the optimal selling price is decreasing whereas the optimal acquisition effort is increasing in the serviceable product inventory level and both decisions decrease with the aggregate inventory level

factor shares the principal problem of political economy this paper identifies three reasons for studying factor shares to make a link between incomes at the macroeconomic level national accounts and incomes at the level of the household to help understand inequality in the personal distribution of income and to address the concern of social justice with the fairness of different sources of income in each case i explore the implications and point to ways in which the analysis could be taken forward in a twenty first century treatment of the classical problem of political economy

electoral manipulation via voter friendly spending theory and evidence abstract we present a model of the political budget cycle in which incumbents try to influence voters by changing the composition of government spending rather than overall spending or revenues rational voters may support an incumbent who targets them with spending before the election even though such spending may be due to opportunistic manipulation because it may also reflect sincere preference of the incumbent for types of spending voters favor classifying expenditures into those which are likely targeted to voters and those that are not we provide evidence supporting our model in data on local public finances for all colombian municipalities our findings indicate both a pre electoral increase in targeted expenditures combined with a contraction of other types of expenditure and a voter response to targeting

the personal and the factor distributions of income in a cross section of countries abstract the shares of capital and labour in national income vary substantially both over time and across countries this paper shows that the factor distribution of income is an essential determinant of the personal distribution of income we use cross country and panel data for a group of developed and developing countries to show that a larger labour share is associated with a lower gini coefficient of personal incomes this effect is not only statistically significant but also economically important an increase in the labour share in mexico to that observed in the us would reduce the gini coefficient of the former by between two and five points

the simultaneous evolution of growth and inequality research on inequality and growth can be divided into two strands one deriving from kuznets and lewis has tried to identify a mechanistic relationship between growth or level of income and inequality the other has tried to find causal explanations of growth and inequality treating each independently in this paper we draw from both strands to test whether growth and inequality are the joint outcomes of other variables and processes we find that simultaneous examination of growth and inequality yields significantly different results and has different consequences for policy from previous independent studies the empirical literature on growth and inequality can be divided into two broad strands one following the pioneering work of kuznets and lewis is motivated by the pessimistic conjecture that the process of growth and development somehow requires increasing inequality at least in the early stages this has led to many efforts to identify a mechanical relationship between the level of development and inequality anand and kanbur 1993 or to determine whether faster growth requires higher or lower inequality the second strand has sought to identify the causal factors influencing the evolution of growth and inequality independently this research has looked either at growth for example barro and sala i martin 1995 or at inequality li et al 1997 but has not tried to identify those factors that might simultaneously influence both growth and inequality 2 thus the literature that looks simultaneously at growth and inequality descending most notably from kuznets 1955 relates them in a mechanistic manner that ignores or minimises the role of other causal factors including policy while the literature that incorporates other causal factors including policies looks independently at growth and inequality neither approach is particularly convincing from a theoretical standpoint the evolution of growth and inequality must surely be the outcome of similar processes in addition neither approach is particularly useful for the policy maker who needs to balance the impact of policies on both growth and distribution in this paper we investigate whether growth and inequality are simultaneously determined and if so whether or not they are subject to

federalism chinese style the political basis for economic success in china china s remarkable economic success rests on a foundation of political reform providing a considerable degree of credible commitment to markets this reform reflects a special type of institutionalized decentralization that the authors call federalism chinese style this form of decentralization has three consequences first it fosters competition not only in product markets but also among local governments for labor and foreign capital this competition in turn encourages local government experimentation and learning with new forms of enterprises regulation and economic relationships second it provides incentives for local governments to promote local economic prosperity finally it provides a significant amount of protection to local governments and their enterprises from political intrusion by the central government

searching for leviathan an empirical study in several papers and a recent book geoffrey brennan and james buchanan 1977 1978 1980 have put forth a striking and controversial view of the public sector drawing by analogy on the conventional theory of monopoly in the private sector they envision a monolithic government that systematically seeks to exploit its citizenry through the maximization of the tax revenues that it extracts from the economy from this perspective they develop a fiscal constitution whose central purpose is to constrain leviathan by limiting in various ways its access to tax and other fiscal instruments while the leviathan hypothesis has been the source of lively debate and a wide range of policy proposals it has not been the subject of much systematic empirical work or testing this is a matter of some importance since the policy implications of the leviathan view are disturbing to put it mildly in particular brennan and buchanan virtually stand on their heads many of the basic theorems in public finance for an efficient and equitable tax system if in fact the leviathan view is an inaccurate depiction of the functioning of the public sector the introduction of their policy proposals is likely to make a sorry mess of the fiscal system the leviathan model does however have some straightforward implications for observable fiscal behavior it is the purpose of this paper to examine one of these testable implications brennan and buchanan stress that fiscal decentralization is itself a powerful constraint on leviathan competition among governments in the context of the interjurisdictional mobility of persons in pursuit of fiscal gains can offer partial or possibly complete substitutes for explicit fiscal constraints on the taxing power 1980 p 184 such competition among governments in a federal system that places heavy reliance on local fiscal decisions will greatly limit the capacity of leviathan to channel resources into the public sector in short as indicated by the epigraph to this paper the leviathan model implies that other things equal the size of the public sector should vary inversely with the extent of fiscal decentralization 2

influence of dependency between demands and returns in a reverse logistics system we consider two reverse logistics systems where returned products are as good as new for the first system the product return flow is independent of the demand flow we prove that the optimal policy is of base stock type and we establish monotonicity results for the optimal base stock levels with respect to the system parameters arrival rate production rate return rate production cost lost sale cost return cost and holding cost we also provide an efficient algorithm to compute the optimal base stock level for the second system demands and returns are strongly correlated a satisfied demand induces a product return after a stochastic return lead time with a certain probability when the return lead time is null we extend the results obtained for the first system when the return lead time is positive the optimal control problem is more complex and we do not prove that the optimal policy is of base stock type however we provide a framework to analyse base stock policies finally we carry out a numerical study on many scenarios to investigate the impact of ignoring dependency between demands and returns we observe that ignoring this dependency yields to non negligible cost increase