the death and rebirth of a party system peru 1978 2001 this article evaluates structural institutional and actor centered explanations of the collapse of the peruvian party system around 1990 and its surprising partial recovery in 2001 it begins by describing the changes in the dependent variable the emergence collapse and partial resurrection of the 1980s peruvian party system the next section examines the argument that the large size and rapid growth of the informal sector undermined the party system and led to its collapse the author shows that the evidence does not support this argument the article then examines changes in the electoral system the author demonstrates that contrary to theoretical expectations the changes in the electoral system do not correlate with the observed changes in the party system the final section shows that performance failure by political elites including corruption in government was more important than social cleavages or electoral institutions in the collapse and partial recovery of the party system

reducing bureaucratic corruption interdisciplinary perspectives on what works abstract this article offers the first comprehensive review of the interdisciplinary state of knowledge regarding anti corruption policies with a particular focus on reducing corruption among civil servants drawing on the work of economists political scientists sociologists and anthropologists we examine seven policy categories 1 rewards and penalties 2 monitoring 3 restructuring bureaucracies 4 screening and recruiting 5 anti corruption agencies 6 educational campaigns and 7 international agreements notably rigorous empirical evaluation is lacking for the majority of commonly prescribed anti corruption policies nevertheless we find growing evidence of the effectiveness of policies based on monitoring including anti corruption audits and e governance in addition adequate civil service wages seem to be a necessary but insufficient condition for control of corruption an emerging skepticism regarding the effectiveness of anti corruption agencies also is apparent in the literature we conclude with broader lessons drawn from our review such as the recognition that when corruption is a systemic problem it cannot be treated in the long term with individual level solutions

decentralization and corruption evidence from u s federal transfer programs while some recent evidence suggests that more decentralization is associated with reduced corruption no empirical work has examined whether different types of decentraliz ation have differential effects on corruption the theoretical literature has emphasized that expenditure decentralization will only be effective if accompanied by the devolution of rev enue generation to local governments in this paper we examine this hypothesis empirically by studying the mismatch between revenue generation and expenditure in u s states larger federal transfers are associated with higher rates of conviction for abuse of public office supporting the theory that soft budget constraints created by federal transfers are potentially problematic

does competition for capital discipline governments decentralization globalization and public policy competition among countries or regions within them to attract mobile capital is often thought to discipline their governments motivating them to invest more in infrastructure reduce waste and corruption and spend less on non productive public goods the result should be convergence on business friendly policies we argue that this requires an assumption units start out very similar that is often unrealistic if units are heterogeneous in natural resources geographical location inherited human capital or infrastructure capital mobility often weakens discipline on the poorlyendowed units this may help explain disappointing results of liberalizing capital flows within russia and sub saharan africa jel f36 h73 h87

a statistical model for condorcet efficiency based on simulation under spatial model assumptions this essay evaluates six single winner multicandidate electoral systems with respect to their tendency to choose condorcet candidates to this end i calibrate a logistic multiple regression model from monte carlo simulations based on a multivariate normal spatial model in which i vary the number of candidates number of dimensions correlation structure and relative dispersion of candidates and voters i investigate additional spatial model variations by comparing further simulation results with predictions of the basic statistical model the results suggest that for many electoral systems condorcet efficiency would increase with perceptual uncertainty of candidates positions and would be low in a polarized society of the voting systems studied approval voting and the coombs systems appear least sensitive to variations in assumptions

reassessment of the tiebout model abstract the tiebout model has been the reference point for the classical approach to fiscal federalism its emphasis on mobility benefit taxation and the advantages of fiscal competition have informed fiscal federalism since the seminal contributions of musgrave and oates this paper reviews the influence that the tiebout model has had on fiscal federalism and argues that while its insights remain relevant for local government it is far from compelling as a positive description of or a normative prescription for fiscal federalism at the state level some aspects of alternative approaches are presented which lead to different perspectives than tiebout inspired ones

corruption in america abstract we use a data set of federal corruption convictions in the u s to investigate the causes and consequences of corruption more educated states and to a smaller degree richer states have less corruption this relationship holds even when we use historical factors like congregationalism in 1890 as an instrument for the level of schooling today the level of corruption is also correlated with the level of income inequality and racial fractionalization and uncorrelated with the size of government there is a weak negative relationship between corruption and economic development in a state these results echo the cross country findings and support the view that the correlation between development and good political outcomes occurs because education improves political institutions

one size fits all decentralization corruption and the monitoring of bureaucrats summary the majority of theoretical and empirical studies on the relationship between decentralization and corruption argue that the devolution of power might be a feasible instrument for use in keeping corruption at bay we argue that this result crucially depends on the effectiveness of monitoring bureaucrats behavior the benefits of decentralization only occur if there is a supervisory body such as a free press which is often lacking in a substantial number of countries using cross country data we analyze the relationship between decentralization and corruption taking different degrees of the freedom of the press into account our main finding is that decentralization counteracts corruption in countries with high degrees of freedom of the press whereas countries without effective monitoring suffer from decentralization our policy implication is that a free press is a necessary pre condition for successful decentralization programs

spatial equilibrium with entry this paper examines spatial equilibrium in political competition when established parties choose their platforms competitively while rationally anticipating entry of a vote maximizing third party the resulting equilibrium is substantially different from the hotelling median equilibrium established parties are spatially separated and third parties will generally lose the election this provides one theoretical explanation for the stability of two party systems namely that non cooperative behavior between established parties can effectively prevent third parties from winning

does tax competition tame the leviathan abstract we study the impact of tax competition on equilibrium taxes and welfare focusing on the jurisdictional fragmentation of federations in a representative agent model of fiscal federalism fragmentation among jurisdictions with benevolent tax setting authorities unambiguously reduces welfare if however tax setting authorities pursue revenue maximization fragmentation by pushing down equilibrium tax rates may under certain conditions increase citizen welfare we exploit the highly decentralized and heterogeneous swiss fiscal system as a laboratory for the estimation of these effects while for purely direct democratic jurisdictions which we associate with relatively benevolent tax setting we find that tax rates increase in fragmentation fragmentation has a moderating effect on the tax rates of jurisdictions with some degree of delegated government our results thereby support the view that tax competition can be second best welfare improving by constraining the scope for public sector revenue maximization

a theory of interregional tax competition a general equilibrium model is constructed to study tax competition where local governments compete for capital by holding down property tax rates and public expenditure levels an exact definition of tax competition is provided and both the existence and nonexistence of tax competition are shown to be theoretically possible it is argued however that tax competition must occur under empirically reasonable conditions inefficiency in public production is also explicitly modeled the amount of capital used to produce a given level of public service output is shown to be greater than that which is required to minimize costs evaluated at the prices facing private firms

an empirical example of the condorcet paradox of voting in a large electorate social choice theory suggests that the occurrence of cyclical collective preferences should be a widespread phenomenon especially in large groups of decision makers however empirical research has so far failed to produce evidence of the existence of many real world examples of such and none in large electorates this paper demonstrates the existence of a real cyclical majority in a poll of danish voters preferred prime minister using pair wise comparisons this result is compared with those of a similar poll but by using different voting methods each resulting in different choices the example demonstrates the empirical reality of cyclical collective preferences and the importance of the choice of institutions

vertical externalities in cigarette taxation do tax revenues go up in smoke abstract in federal systems where tax bases are joint property the tax policy of one level of government affects the tax base of the other this paper examines the interdependence of us federal and state cigarette tax rates our results suggest that states may reduce their cigarette tax rate by as much as 48 cents per dollar increase in the federal tax rate thus a federal tax hike may reduce the amount of generated state tax revenues both directly the overall tax rate rises and the state tax base declines and indirectly the state tax rate declines

a theory of strategic voting in runoff elections abstract this paper analyzes the properties of runoff electoral systems when voters are strategic a model of three candidate runoff elections is presented and two new features are included the risk of upset victory in the second round is endogenous and many types of runoff systems are considered three main results emerge first runoff elections produce equilibria in which only two candidates receive a positive fraction of the votes second a sincere voting equilibrium does not always exist finally runoff systems with a threshold below 50 percent produce an ortega effect that may lead to the systematic victory of the condorcet loser jel c72 d72

party politics governors and economic policy in this article we evaluate the role of elections in governors state tax policy making does it matter for state taxes whether the governor is a democrat or republican and whether she is eligible for re election or faces a binding term limit using a regression discontinuity design and a panel of u s states we find that the manner in which governors of different parties implement different tax policies turns crucially on the incumbent s eligibility for re election re electable democratic governors increase income taxes relative to similarly situated republicans yielding divergence between party policy positions however governors facing a binding term limit exhibit the reverse policy difference resulting in a movement of policy back together

a modified ghg intensity indicator toward a sustainable global economy based on a carbon border tax and emissions trading abstract it will be difficult to gain the agreement of all the actors on any proposal for climate change management if universality and fairness are not considered in this work a universal measure of emissions to be applied at the international level is proposed based on a modification of the greenhouse gas intensity ghg int measure it is hoped that the generality and low administrative cost of this measure which we call the modified greenhouse gas intensity measure mghg int will eliminate any need to classify nations the core of the mghg int is what we call the ihdi adjusted gross domestic product idhigdp based on the inequality adjusted human development index ihdi the idhigdp makes it possible to propose universal measures such as mghg int we also propose a carbon border tax applicable at national borders based on mghg int and idhigdp this carbon tax is supported by a proposed global emissions trading system ets the proposed carbon tax is analyzed in a short term scenario where it is shown that it can result in a significant reduction in global emissions while keeping the economy growing at a positive rate in addition to annual ghg emissions cumulative ghg emissions over two decades are considered with almost the same results

competition among officials and the abuse of power traditional economic theory suggests that competition among officials providing government goods tends to reduce corruption however empirical evidence does not yet support this view in this paper i show that a corrupt and powerful central authority can use competition among officials to amass resources for itself while competition reduces corruption at the lower level of government corruption at the higher level of government is increased to avoid widespread theft from the central authority competing officials are monitored more intensively than a monopolist hence even though competition among officials generates more consumer surplus it may reduce welfare

casinos and political corruption in the united states a granger causality analysis the commercial casino industry experienced an unprecedented expansion in the united states during the 1990s as the industry has grown so has the anecdotal evidence that links the casino industry with political corruption however there have been no empirical analyses of the issue we use state level panel data from 1985 2000 to posit a granger causality analysis of the relationship between corruption convictions of state public officials and the predicted adoptions of casinos at the state level we find evidence that predicted casino adoptions granger cause corruption convictions this finding is suggestive of a scenario of regulatory capture and may help explain why state level gaming regulatory agencies have a history of softening gaming regulations after the initial introduction of casinos our study provides the first empirical evidence linking casinos to political corruption

border adjustments supplementing nationally determined carbon pricing as agreed on in the paris agreement each country determines its own contribution to combat climate change on a voluntary basis there is no mechanism to force a country to comply with its own nationally determined contributions this bottom up approach builds on unilateral actions and yields a kind of carbon pricing which is not necessarily identical across countries as a consequence these nationally determined climate policies have drawbacks in terms of carbon leakage and loss of competitiveness for firms producing in high carbon price countries to reduce these negative effects border adjustments bas may be appropriate subsequent to more stringent environmental regulation we model a three stage game involving carbon price competition in the first stage the introduction of bas in the second stage and oligopolistic competition between firms in the third stage strategic trade theory suggests that the qualitative results about the optimal ba policy may vary with the underlying type of competition namely bertrand and cournot competition however our results are similar for both types of competition we conclude that bas are suitable for supporting a more stringent environmental policy moreover we find that anticipation of the implementation of bas in the second stage yields higher average carbon prices in the first stage since high carbon price countries increase their carbon prices whereas the other countries partially offset

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

plurality and runoff systems and numbers of candidates although political scientists have in the last few decades learned much about the abstract properties of multicandidate electoral systems we have accumulated little theoretical knowledge on the ways in which strategic behavior of voters and candidates changes when we move from one voting system to another this essay has illustrated how the relative desirability of voting systems can change when the number of candidates usually considered fixed in such comparisons is taken as endogenous to the voting system in force at the time our main conclusion is therefore that the method of voting must be understood in relation to the total electoral system it is not enough to analyze properties of voting systems in the abstract but also in terms of the interactions that voting systems have with political groups and the constitutional setting

the hotelling downs model with runoff voting we consider the hotelling downs model with n 2 oce seeking candidates and runo voting we show that nash equilibria in pure strategies always exist and that there are typically multiple equilibria both convergent all candidates are located at the median and divergent candidates locate at distinct positions though only divergent equilibria are robust to free entry moreover two policy equilibria exist under any distribution of voters ideal policies while equilibria with more than two policies exist generically but under restrictive conditions that we characterize

capital income and profit taxation with foreign ownership of firms abstract this paper establishes optimal rules for capital income and profits taxation in the open economy with or without foreign ownership of domestic firms we show that if there are constraints on the feasibility of profits taxation both saving and investment taxes generally enter the optimal tax package if instead profits can be fully taxed then source based investment taxes vanish if domestic firms are in part owned by foreigners then source based investment taxes can be used to shift income away from these to domestic citizens and they may even be used to finance lump sum transfers to domestic residents

choosing a runoff election threshold this paper investigates when a runoff election is desirable and when a plurality result is good enough a runoff election increases the likelihood that the condorcet winner will be elected but also entails additional costs the metric for determining whether a runoff election is desirable will be the probability that the winner of the plurality election would win an ensuing runoff statistical models of voter behavior are developed that estimate this probability which are verified with runoff election data from united states elections the models allow governments to make more informed choices in creating rules to decide when to hold runoff elections

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

on the empirical relevance of condorcet s paradox condorcet s paradox occurs when there is no alternative that beats every other alternative by majority the paradox may pose real problems to democratic decision making such as decision deadlocks and democratic paralysis however its relevance has been discussed again and again since the celebrated works of arrow social choice and individual values 1963 and black the theory of committees and elections 1958 the discussion varies from one extreme to the other from very relevant to practically irrelevant this paper tries to bring more clarity to the discussion by reviewing the literature on the empirical relevance of condorcet s paradox since a definition of the paradox for even numbers of voters and alternatives and for weak voter preferences is missing in the literature we first define the paradox clearly and simply then three topics are investigated namely domain conditions culture and the likelihood of the paradox and the empirical detection of the paradox domain conditions express regularities in voter preference profiles that prevent the paradox frequent observations of these domain conditions would make condorcet s paradox empirically less important cultures define probability distributions over the set of voter preferences observation of cultures might be a first step to indicate the relevance of the paradox the empirical detection of the paradox speaks for itself we will try to identify the number of observations of the paradox so far the overall conclusion is that the empirical relevance of condorcet s paradox is still unsettled

promoting democracy in fragile states field experimental evidence from liberia summary we use a cluster randomized field experiment to study two strategies to promote free democratic expression among rural voters in liberia s 2011 general election the context is one of a fragile state in which destructive legacies of liberia s 1989 2003 civil war continue to dominate people s lives a nine month civic education intervention administered by liberian civil society organization partners provided training on election procedures and a forum for monthly discussion of governance issues a nine month security committee intervention administered in partnership with the united nations peacekeeping mission in liberia provided a forum for villagers and international peacekeepers to discuss security threats and develop violence early warning and reaction procedures with the aim of improving citizens perceptions of security during the election we evaluate these programs effects on actual voter behavior in addition to surveyed attitudes we find that civic education increased enthusiasm for electoral participation produced a coordinated shift from parochial to national candidates and increased willingness to report on manipulation a program combining the two interventions had similar effects the security committees produced a modest reduction in parochial voting the policy implications are that third party actors can play a productive role in helping to overcome barriers to information voter coordination and security

isolated capital cities accountability and corruption evidence from us states we show that isolated capital cities are robustly associated with greater levels of corruption across us states in line with the view that this isolation reduces accountability we then provide direct evidence that the spatial distribution of population relative to the capital affects different accountability mechanisms newspapers cover state politics more when readers are closer to the capital voters who live far from the capital are less knowledgeable and interested in state politics and they turn out less in state elections we also find that isolated capitals are associated with more money in state level campaigns and worse public good provision jel d72 d73 h41 h83 k42 r23

interjurisdictional capital mobility fiscal externality and a corrective subsidy abstract recent studies emphasize that local property taxation may result in inefficiently small amounts of local public spending this paper shows that the inefficiency can be traced to a fiscal externality when one jurisdiction increases its taxes it causes a flow of capital to other jurisdictions that increases their tax revenues the inefficiency can be corrected with a subsidy that internalizes the externality key empirical parameters determining the magnitude of the externality are identified illustrative calculations indicate that subsidy rates on the order of 40 might be required to achieve efficiency

border carbon adjustments addressing emissions embodied in trade approximately one fourth of global emissions are embodied in international trade and a significant portion flows from non carbon priced to carbon priced economies border carbon adjustments bcas figure prominently as instruments to address concerns arising from unilateral climate policy estimating the volume of emissions that could be potentially taxed under a bca scheme has received little attention until now this paper examines how a number of issues involved in the implementation of bcas can affect their ability to cover emissions embodied in trade and thus address carbon leakage these issues range from ensuring compliance with trade provisions and assumptions on the carbon intensity of imports to determining which countries are included and whether intermediate and final demand are considered here we show that the volume of co2 captured by a scheme that involved all annex b countries could be significantly reduced due to these issues particularly by trade provisions such as the principle of best available technology bat as a consequence the tariff burdens faced by non annex b parties could dwindle considerably these findings have important policy implications as they question the effectiveness and practicalities of bcas to reduce carbon leakage and alleviate competitiveness concerns adding further arguments against their implementation

on the economic incentives for taking bribes this paper presents an empirical analysis of the factors affecting bribe taking by public officials factors influencing the acceptance of bribes include the probability of being convicted severity of punishment government salary relative to private sector income the demonstration effect and the unemployment rate our results indicate that higher probability of being convicted discourages the acceptance of bribes as does more severe punishment low relative earnings high unemployment and the demonstration effect of aggregate advertising all lead to increased bribe taking

an assessment of voting system simulations in applying the results of the social choice theory to voting procedures the question arises as to how often the various anomalies can be expected to occur computer simulations and probability modelling are common approaches to address this problem this article is an attempt to find out the robustness of the so called impartial culture assumption for this purpose first a major perturbation of the impartial culture assumption is considered and thereafter we focus on a few minor modifications of the assumption

is consumption growth consistent with intertemporal optimization evidence from the consumer expenditure survey in this paper we show that some of the predictions of models of consumer intertemporal optimization are in line with the patterns of nondurable expenditure observed in u s household level data we propose a flexible specification of preferences that allows multiple commodities and yields empirically tractable equations we estimate preference parameters using the only u s micro data set with complete consumption information we show that previous rejections can be explained by the simplifying assumptions made in previous studies we also show that results obtained using good consumption or aggregate data can be misleading

tax competition and leviathan abstract attitudes towards downward pressure on tax rates from international tax competition depend on attitudes towards government this paper synthesises the two extremes which as in other areas of public finance have dominated the debate typically being presented as stark alternatives the view of government as a leviathan from which tax competition emerges as a useful constraint on policy makers and the view of government as a benevolent maximiser of their citizens welfare from which it emerges as a source of inefficiency conditions are derived under which when policy makers are neither entirely benevolent nor wholly self serving tax coordination benefits the representative citizen

the political economy of tax coordination as a bargaining game between bureaucrats and politicians in the public finance literature the view prevails that taxcompetition among countries gives rise to an underprovision ofpublic goods and that coordinated tax increases are thereforedesirable public choice arguments in contrast suggest thattax coordination may not be in the interest of thetaxpayers citizens because imperfections of the politicalprocess political distortions may lead to a waste of taxmoney according to this view tax competition is a desirablecheck on the power to tax whereas tax coordination would onlyrelax the budget constraint of an inefficient public sector the present paper integrates the underprovision argument andthe public choice view into a common theoretical framework the government is assumed to consist of politicians andbureaucrats with diverging interests fiscal policy ismodelled as the outcome of a bargaining game between thebureaucrats and the politicians it turns out that coordinatedtax increases always raise the provision of public goods butalso increase the cost of political distortions the effect onthe welfare of the representative citizen may be positive ofnegative depending in particular on the distribution ofbargaining power between bureaucrats and politicians

condorcet winners and the paradox of voting probability calculations for weak preference orders choice literature given this problem social choice theorists have attempted to estimate the probability of condorcet winners given certain empirical or theoretical conditions we shall estimate the probabilities of condorcet winners and intransitive aggregate orders for various numbers of individuals with strong or weak preference orders across various numbers of alternatives we find using computer simulation a stark contrast between these estimates assuming strong individual preferences and the estimates allowing for individuals indifference between pairs of alternatives in contrast to earlier work which depends on the strong preference assumption we suggest that the problem is most acute for small committee decision making and least acute for mass elections with few alternatives

the relationship between corruption and income inequality in u s states evidence from a panel cointegration and error correction model we investigate the causality between corruption and income inequality within a multivariate framework using a panel data set of all 50 u s states over the period 1980 to 2004 the heterogeneous panel cointegration test by pedroni oxf bull econ stat 61 653 670 1999 econom theory 20 597 627 2004 indicates that in the long run corruption and the unemployment rate have a positive and statistically significant impact on income inequality while a negative impact is found for real personal income per capita education and unionization rate the granger causality results associated with a panel vector error correction model indicate both short run and long run bidirectional causality between corruption and income inequality

electoral competition with entry under non majoritarian run off rules abstract i study electoral competition between established parties under threat of entry by a challenger under non majoritarian run off elections in contrast with classical majoritarian run off elections i show how non majoritarian rules can facilitate two party systems including those in which the established parties deter the challenger s entry by adopting differentiated platforms i also show that non majoritarian run off rules may facilitate entry deterrence by established parties in settings where a plurality rule cannot my results provide a striking counterpoint to a conventional wisdom embodied most notably in duverger s hypothesis that associates run off rules with multi party systems finally they provide a theoretical foundation for patterns of electoral competition observed in countries using non majoritarian rules that contradict this conventional wisdom

fiscal restraints and voter welfare this paper explores the logic of fiscal restraints in a political agency model with both moral hazard and adverse selection the role of the political process is both to discipline incumbents who may act against the public interest and to sort in those politicians who are most likely act in voters interests we use the model to examine the optimality of inefficient taxation limits on the size of government increasing transparency and yardstick competition some conclusions are surprising for example we show that some forms of fiscal restraint can only be desirable when incumbents are sufficiently likely to be benevolent

international tax coordination regionalism versus globalism tax competition for mobile capital can undermine the attempts of governments to redistribute income from rich to poor i study whether international tax coordination can alleviate this problem using a general equilibrium model synthesizing recent contributions to the tax competition literature the model highlights the crucial distinction between global tax coordination and regional coordination with high capital mobility between the tax union and the rest of the world the welfare gain from regional capital income tax coordination is only a small fraction of the gain from global coordination even if the tax union is large relative to the world economy

party control of state government and the distribution of public expenditures this paper examines the effects of party control of state governments on the distribution of intergovernmental transfers across counties from 1957 to 1997 we find that the governing parties skew the distribution of funds in favor of areas that provide them with the strongest electoral support this is borne out in two ways i counties that traditionally give the highest vote share to the governing party receive larger shares of state transfers to local governments ii when control of the state government changes the distribution of funds shifts in the direction of the new governing party we find only weak evidence that parties reward electorally pivotal counties or counties in electorally pivotal legislative districts finally we find that increased spending in a county increases voter turnout in subsequent elections this suggests that parties have an electoral incentive to skew the distribution of funds to influence future election results and the mechanism through which this works is mobilization rather than conversion of voters in a fixed electorate

packing a punch political action committees and corruption political action committees pacs are unique and prominent players in american politics yet formal research on some aspects of pacs is lacking using us data over the period 1970 to 2009 this research demonstrates that the growth in pacs is positively associated with greater corruption a 10 increase in the number of pacs per capita would increase corruption by about 8 upon disaggregation corporate pacs rather than labour pacs are positively associated with corruption the effects of economic prosperity government size and population on us corruption are generally in line with the literature

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

domestic policies national sovereignty and international economic institutions to what extent must nations cede control over their economic and social policies if global efe ciency is to be achieved in an interdependent world this question is at the center of the debate over the future role of the wto formerly gatt in the realm of labor and environmental standards in this paper we establish that the market access focus of current wto rules is well equipped to handle the problems associated with choices over labor and environmental standards in principle with relatively modest changes that grant governments more sovereignty not less these rules can deliver globally efe cient outcomes i introduction to what extent must nations cede control over their economic and social policies if global efe ciency is to be achieved in an interdependent world at a broad level this question probes the limits of any international economic institution whether geared toward real or e nancial concerns that is designed to promote global efe ciency while respecting national sovereignty naturally the answer depends upon the particular problem that the institution is meant to solve in other words the answer depends upon the inefe ciency that would arise under unilateral policy choices at a more specie c level this question is at the center of the debate concerning the appropriate scope of the world trade organization wto formerly gatt recently member countries have considered ways to broaden the wto s orientation beyond conventional trade policy measures to include labor and environmental standards there are now initiatives to introduce the issue of labor standards directly onto the negotiating agenda of the wto with the purpose of creating a wto social clause the social clause would specify a set of minimum international labor standards and then permit restrictions to be placed against imports from countries not complying with these minimum standards with regard to environmental policies a wto committee on trade and environment has been established to identify the relationships between trade and environmental measures and to

environmental policy in majoritarian systems abstract this paper sheds new light on the determination of environmental tax policies in majoritarian federal electoral systems such as the u s and derives implications for the environmental federalism debate on whether the national or local government should have authority over environmental taxes in the absence of majority bias the socially preferred policy would be federal district level taxation which accounts both for cross boundary pollution and differences in industry concentration across districts in majoritarian systems however where the legislature consists of geographically distinct electoral districts the majority party at the national or state level favors home districts depending on the location of polluting industries and the associated damages the majority party may therefore impose sub optimally high or low pollution taxes due to a majority bias majority bias can influence the social welfare ranking of alternative environmental tax policies in some cases majority bias may make decentralized or federal uniform taxation the preferred solution

decentralization and corruption evidence across countries the relationship between decentralization of government activities and the extent of rent extraction by private parties is an important element in the recent debate on institutional design the theoretical literature makes ambiguous predictions about this relationship and it has remained virtually unexamined by empiricists the authors make a first attempt at examining the issue empirically by looking at the cross country relationship between fiscal decentralization and corruption as measured by a number of different indices their estimates suggest that fiscal decentralization in government spending is significantly associated with lower corruption moreover they find that the origin of a country s legal system for example civil versus common legal code performs extremely well as an instrument for decentralization the estimated relationship between decentralization when so instrumented and corruption is even stronger the evidence suggests a number of interesting areas for future work including investigating whether there are specific services for which decentralized provision has a particularly strong impact on political rent extraction and understanding the channels through which decentralization succeeds in keeping corruption in check

pigou tiebout property taxation and the underprovision of local public goods abstract pigou s proposition that the use of distorting taxes rather than neutral head taxes reduces public service levels is examined in this paper a simple model with a national system of competing local governments is utilized to demonstrate that the use of a distorting property tax on mobile capital decreases the level of residential public services the case where public services are an intermediate producer good is also considered

issues in the design of environmental excise taxes t ax law has long had environmental consequences although the consequences have often been unintended for example tax provisions passed to assist the timber industry in the 1920s permitted expensing of the costs of reforestation and planting rather than having to depreciate them over a period of time along with capital gains treatment for harvested timber provisions which may have encouraged a more rapid harvest of domestic timberland percentage depletion allowances to assist the oil industry a deduction based on a percentage of the value of oil sold rather than the taxpayer s basis in the oil which became part of the internal revenue code in 1926 arguably have led to exploitation of oil and mineral deposits at a rate greater than the socially optimal rate similarly the purpose of the federal motor fuels tax when expanded in 1956 was to fund highway construction although now it is common to regard it as at least potentially an environmental tax aimed at addressing the externalities caused by automobile use of course these tax provisions were not motivated by environmental concerns the 1970s began to see efforts at environmental tax policy although at the time the focus of the policies more often was energy conservation rather than reduction in pollution between 1978 and 1986 congress provided tax credits for residential energy conservation expenditures in 1978 congress enacted the gas guzzler excise tax an excise tax that varies with the environmental protection agency s fuel economy rating of automobiles it remains in force today congress also made available tax exempt bond finance for pollution control equipment between 1978 and 1986

why so much stability one of duncan black s 1958 more important contributions was a classically simple proof that with complex issues and majority voting a stable outcome is unlikely this very simple proof that there would normally be no motion which can get a majority against all others and hence that any possible outcome is dominated by another has been elaborated and made more precise by later work without most improbable conditions endless cycling would be expected this is particularly true when logrolling is present as it normally is if we look at the real world however we observe not only is there no endless cycling but acts are passed with reasonable dispatch and then remain unchanged for very long periods of time thus theory and reality seem to be not only out of contact but actually in sharp conflict it is the purpose of this article to demonstrate that our existing theory when properly looked at does indeed imply a relatively stable outcome to voting in some cases however this stability will not be a true equilibrium because a random member of a large set will be chosen and then that random outcome will be left unchanged for long periods of time it does not dominate all other outcomes but is retained merely because of its particular history there are already several possible explanations for the observed stability in the literature we will take them up as they become relevant to the general line of reasoning i should however warn the reader that my own previous work including joint work with buchanan will play a major role here this may simply reflect egotism but i think that some of the early work which is now partially forgotten can provide solutions for more modern problems much recent public choice work has involved spatial models and these models frequently ignore logrolling the reason presumably is that it is very hard to put logrolling in a two dimensional diagram we shall begin considering such special models and assume that the issues are the sort that does not lead to logrolling and then turn to more complex logrolling problems with respect to the first situation in which logrolling does not occur there is already one possible explanation for the observed stability in the literature

tax evasion tax competition and the gains from nondiscrimination the case of interest taxation in europe this paper uses a game tlieoredc approach to analyse the taxadon of interest income in europe in the presence of tax evasion the model allows tis to assess the success of various reform proposals we argue tbat the tax treatment of nonresidents interest income plays a crucial role when decisions on discriminatio n and on withholding tax rates are made noncooperadvely the outcome is similar to a prisoners dilemma all countries discriminate but in equilihrium internationally mobile portfolio capital evades taxation successfully in contrast if all governments did not discriminate tax competition leads to less tax evasion the integration of capital markets in europe has hrought various benefits at the same time however governments struggle to contain tax evasion international capital flight as an attempt to evade taxes is particularly relevant in the area of taxation of interest income banking secrecy laws in some eu countries and low tax rates in small countries like luxembourg which hoost its role as financial centre have led to the effective elimination ofthe taxation of interest income for some investors the economist speaks not surprisingly about the disappearing taxpayer may 31 1997 several proposals have been made in order to overcome this situation the european commission supports the introduction of a minimum tax rate and or the status of a community resident under the concept of a community resident a country s tax on interest income is independent of the residence of the investor practically realising the source principle by contrast a proposal of the oecd 1977 argues in favour of a maximum withholding tax rate on interest income none of these proposals has been unanimously accepted since gains and losses from non coordinated policies differ greatly across member states the main beneficiary of the present situation is luxembourg which attracts large amounts of foreign capital in particular from germany the united kingdom opposes any coordination for political reasons and because tax coordination may also threaten london s role as the leading financial centre in europe in contrast germany sticks to its traditional bank secrecy law which enables resident investors to evade german taxation by investing abroad

the welfare effects of tax competition reconsidered politicians and political institutions the views on the welfare effects of tax competition differ widely some see the fiscal externalities as the cause for underprovision of public goods while others see tax competition as the means of reducing government inefficiencies using a comparative politics approach we show that tax competition among presidential congressional democracies is typically welfare improving while harmful among parliamentary democracies if under the latter public goods are sufficiently valued the results hold when politicians seek re election because of exogenous benefits of holding office by contrast when politicians hold office only to extract rents tax competition is harmful if politicians are sufficiently patient in the debate on tax competition two extreme views dominate both in the academic literature and in the policy arena in the canonical tax competition model benevolent governments set tax rates without taking into account the effect national tax policy has on other countries tax bases as a result a fiscal externality arises that makes competition harmful in the sense that tax rates are set too low and public goods are under

comparing electoral systems a geometric analysis this paper constructs a game theoretic model of elections inalternative electoral systems with three or four candidates each electoral system specifies how the platforms of thecandidates and their scores give rise to an outcome whengeometrical analysis shows that two outcomes can competeagainst each other for victory a pivot probability isassociated to that pair each voter is rational and picks thecandidate that maximizes her expected utility which resultsfrom the balancing of her preferences and beliefs about thepivot probabilities candidate positioning is endogenous andthe result of a nash game the possible equilibria arecomputed for plurality and runoff majority systems

when and how do voters try to manipulate experimental evidence from borda elections we study strategic voting in a laboratory experiment using a borda mechanism we find that manipulation rates are surprisingly low even for individuals who know that they possess superior information about the other agents preferences exploring possible explanations we find that manipulation rates rise significantly if individuals are not only informed about the other agents preferences but also about their actual votes this suggests that uncertainty plays a key role in understanding strategic behavior in elections by contrast distributional concerns e g in the form of inequality aversion are found to play a negligible role in our context

picking a loser a social choice perspective on the danish government formation of 1975 all democratic systems are theoretically open to so called election inversions i e instances wherein a majority of the decision makers prefer one alternative but where the actual outcome is another the paper examines the complex 1975 danish government formation process which involved five rounds of negotiations and at least five competing alternatives we demonstrate that in terms of party preferences the final outcome was not the condorcet winner but rather one that could have been beaten by at least three other government alternatives in head to head comparisons the danish procedural system of negative parliamentarism combined with simple plurality rule to produce the electoral inversion

empirical evidence of paradoxes of voting in dutch elections in this paper we analyze four national elections held in 1982 1986 1989 and 1994 in the netherlands on the occurrence of the condorcet paradox in addition we investigate these elections on the occurrence of three so called majority plurality paradoxes the first paradox states that a party having a majority over another party may receive less seats the second states that a condorcet winner may not receive the largest number of seats and even may not receive a seat at all the third says that the majority relation may be the reverse of the ranking of parties in terms of numbers of seats

corporate income taxation of multinationals in a general equilibrium model abstract this paper contributes to the discussion on separate accounting versus formula apportionment in the corporate income taxation of multinational enterprises the innovation is that we consider a general equilibrium tax competition model with an endogenous interest rate in contrast to previous studies we show that tax rates are inefficiently low not only under separate accounting but also under formula apportionment moreover we identify a wide range of empirically relevant cases where formula apportionment is superior to separate accounting independent of the magnitude of the concealment cost of profit shifting the reason for the change in results is that one country s tax rate affects other countries additionally via changes in the interest rate

an approach to empirical studies of voting paradoxes an update and extension by tradition public choice theorists have pointed out many paradoxes of collective choice the phenomenon of cyclical majorities and the more general issue of political equilibrium have proven to be fertile searching grounds one class of paradoxes derives from the intransitivity of social orderings implied by the cycle as riker 1982 notes this property of majority rule is most perplexing and paradoxical to those who hold populist beliefs that voting reflects a fair and meaningful amalgamation of individual preferences and must therefore reflect the will of the people if voting in general elections and committees is interpreted this way then the existence of voting cycles and the implied intransitivity or more generally the impossibility of any rule for making social choices assuring transitive sometimes equated with rational outcomes shakes the foundations of populist principles of political philosophy another paradox of cyclical majorities and simulations of voting games in general concerns the stability of political equilibria the body of theory regarding this issue is skillfully summarized by shepsle and weingast 1982 and can be reduced to a simple proposition with sufficient assumptions regarding the states of participants knowledge and the manipulability of

stability and coordination in duverger s law a formal model of preelection polls and strategic voting this paper investigates the dynamics of the wasted vote phenomenon and duverger s law i construct a theoretical model in order to consider how preelection polls serve to inform the electorate about the relative chances of the candidates and how that information acts over time to decrease the support of the trailing candidate the results shed light on how public opinion polls can aggregate information in the electorate and coordinate voters on the viable candidates in the election specifically i show that in a bayesian game model of strategic voting there exist non duvergerian equilibria in which all three candidates receive votes in the limit these equilibria require extreme coordination however and any variation in beliefs leads voters away from them to one of the duvergerian equilibria thus non duvergerian equilibria are unstable while two party equilibria are not in addition i describe how preelection polls provide information to voters about the viability of candidates and can thus be used by voters to coordinate on a duvergerian outcome

spatial models of political competition under plurality rule a survey of some explanations of the number of candidates and the positions they take this paper surveys work that uses spatial models of political competition to explain the number of candidates and the positions that they take in plurality rule elections

the economic effect of corruption in italy a regional panel analysis abstractthe economic effect of corruption in italy a regional panel analysis regional studies this paper provides a within country analysis of the impact of corruption on economic growth using a panel of italian regions from 1968 to 2011 through a robust measure of corruption this measure is averaged over five year periods to reduce short run fluctuations and probable delayed effects the results show a significant negative impact of corruption on long term growth in all specifications both on average and for each italian region as a consequence a zero level of corruption is growth maximizing this effect is non linear such that the negative impact of corruption on growth becomes less intense as corruption increases

the effects of tax competition when politicians create rents to buy political support abstract we set up a probabilistic voting model to explore the hypothesis that tax competition improves public sector efficiency and social welfare in the absence of tax base mobility distortions in the political process induce vote maximising politicians to create rents to public sector employees allowing tax base mobility may be welfare enhancing up to a point because the ensuing tax competition will reduce rents however if tax competition is carried too far it will reduce welfare by causing an underprovision of public goods starting from an equilibrium where tax competition has eliminated all rents a coordinated rise in capital taxation will always be welfare improving for plausible parameter values it will even be welfare enhancing to carry tax coordination beyond the point where rents to public sector workers start to emerge

cycles and instability in politics evidence from the 2009 danish municipal elections social choice theory predicts that political processes are prone to instability or outright chaos yet the evidence that actual politics is dominated by the phenomena identified in the literature is somewhat anecdotal and widely contested in order to systematically assess the degree to which politics is affected by cyclicality or chaos as predicted by social choice theorists we study the outcome of the 2009 municipal elections in denmark this yields a total of 97 cases which allows for a systematic assessment of the frequency of cycling through a large n study evidence of four cyclical results is presented

carbon tariffs on chinese exports emissions reduction threat or farce abstract 1 we estimate co2 implicitly exported via commodities relative to a region s total emissions we find 15 for the industrialized 12 for the developing region and 24 for china 2 we analyze a contraction and convergence climate regime in a cge model including international capital mobility and technology diffusion when china does not participate in the regime and instead a carbon tariff is imposed on its exports it will likely be worse off than when participating this result does not hold for the developing region in general meanwhile the effect on emissions appears small

judge don t vote this article explains why 1 the traditional model of the theory of social choice misrepresents reality 2 it cannot lead to acceptable methods of ranking and electing in any case and 3 a more realistic model leads inevitably to one method of ranking and electing majority judgment that best meets the traditional criteria of what constitutes a good method

more politicians more corruption evidence from swedish municipalities in the literature on political economy and public choice it is typically assumed that government size correlates positively with public corruption the empirical literature however is inconclusive owing to both measurement problems and endogeneity this paper creates a corruption index based on original data from a survey covering top politicians and civil servants in all swedish municipalities the effect of more politicians on corruption problems is analyzed using discontinuities in the required minimum size of local councils despite the fact that sweden consistently has been ranked among the least corrupt countries in the world the survey suggest that non trivial corruption problems are present in sweden municipalities with more local council seats have more reported corruption problems and the regression discontinuity design suggests that the effect is causal

tax competition rent seeking and fiscal decentralization abstract the present paper provides a basis for evaluating fiscal decentralization of expenditure and tax responsibilities by encompassing the literature on tax competition and rent seeking both tax and rent seeking competitions are conceived of as being wasteful and self defeating we find that rent seeking activities account for political distortions which may be mitigated in the process of fiscal decentralization while tax competition results in economic distortions associated with decentralization welfare evaluation should be based on the balance of the political gain and the economic cost

electoral competition with informed and uninformed voters i present a model of electoral competition in which candidates raise campaign contributions by choosing policies that benefit interest groups and then expend those contributions to influence voters who are uninformed about the policies informed voters however vote based on those policies so candidates face a trade off between choosing a policy to generate funds to attract the uninformed vote and choosing a policy to attract the informed vote electoral equilibria are characterized for two categories of policies particularistic and collective in the case of particularistic policies the equilibrium policies of the candidates are separated if the proportion of uninformed voters is sufficiently high and the degree of separation is an increasing function of that proportion the model is extended to include the public financing of elections and incumbency advantages for the case of collective policies the candidates locate at the median of the ideal points of the informed voters and contributions are zero

the central government private sector wage differential since ehrenberg and schwarz 1986 there has been a plethora of articles investigating the relationship between public and private sector wages this article examines part of this post 1986 literature by reviewing articles that examine central government private sector wage differentials in sum most articles find that there is a premium paid to central government workers although the premium has declined in recent years in developing countries however the differential is usually negative women and minorities tend to do better in the public sector relative to their private sector counterparts the evidence on union premiums between sectors is mixed although the premium tends to be higher in the private sector however public sector union workers do not do much better than private sector union members the magnitude of all of the wage differentials discussed are sensitive to the estimation technique and data source used the most common explanation for the public sector wage premium is economic rent accruing to government workers although the public sector wage determination literature suggests that the differential is due to returns to political and vote producing activities not relevant in the private sector