inequality and the dynamics of public opinion the self reinforcing link between economic inequality and mass preferences this article assesses the influence of income inequality on the public s policy mood recent work has produced divergent perspectives on the relationship between inequality public opinion and government redistribution one group of scholars suggests that unequal representation of different income groups reproduces inequality as politicians respond to the preferences of the rich another group of scholars pays relatively little attention to distributional outcomes but shows that government is generally just as responsive to the poor as to the rich utilizing theoretical insights from comparative political economy and time series data from 1952 to 2006 supplemented with cross sectional analysis where appropriate we show that economic inequality is in fact self reinforcing but that this is fully consistent with the idea that government tends to respond equally to rich and poor in its policy enactments

governance of competitive transmission investment in weak institutional systems despite progress in economic analysis in recent years transmission investment governance still poses policy design challenges in competitive electricity systems the degree of regulatory intervention in allocating investment costs is a central issue scholars tend to agree that centralized solutions are almost inevitable mainly due to free riding and coordination problems in systems with weak institutional endowments and pressures of distributive politics however there is an increased likelihood of regulators acting opportunistically or imposing arbitrary changes to the cost allocation rules which makes centralized solutions less desirable we provide some examples from argentina el salvador and peru and suggest that a two tier governance scheme composed of a self governing forum of transmission stakeholders with regulation as a subsidiary measure may be a more adequate design to restraint undue government interference the expected outcome is twofold a better match with users preferences and a restraint to government opportunism and arbitrariness measuring the robustness of this scheme in minimizing the risks for either too much or too little investment will certainly require further research

a bit is better than a lot bilateral investment treaties and preferential trade agreements the landscape of the global economy is dotted with institutions that regulate investment and trade in recent years the number of bilateral investment treaties bit s and preferential trade agreements pta s in particular has grown at a torrid pace practically every country is a member of at least one if not many of these institutions for all the scholarly attention that these institutions have received however there is little research tying bit s and pta s together this is surprising since both aim to increase commerce by making it more predictable the authors seek to fill this gap in the literature they argue that a bit between a developed and a developing country should make it more likely that this pair of states will subsequently form a pta that said the wrinkle in the story is that more is not better in this regard the authors further argue that a developing country that has many bit s is less likely to conclude a pta with a wealthy state the authors test these hypotheses using annual data on pairs of developing and developed countries between 1960 and 2004 and find strong evidence in support of their argument

on the interplay of informational spillovers and payoff externalities this thesis consists of four independent essays which consider different topics in information economics and political economy the first two papers are variants of the same idea an uninformed principal e g a government will make a decision in order to gain more information it may consult two experts however these experts have a private interest in certain policies being implemented the question is to gain as much information as possible should the principal consult experts who are biased in the same direction or experts who prefer different decisions the main result is that as long as collusion between experts can be prevented homogeneous panels are superior to heterogeneous ones and this advantage increases with the experts informational precision in the third paper two firms consider entry in a new product market and must decide when to enter the market and how to design their product firms do not know for certain what the best design is so both firms want to outwait the other s decision in order to gain more information the focus of the paper is on which firm will make the first decision the main result is that if products are strong strategic substitutes the worst informed firm makes the first decision in equilibrium the analysis should apply to a range of other contexts such as investors trading decisions or the policy choices of political candidates the final paper asks the following question could it be that parties in a two party system may benefit from using several candidates in the same election to promote the use of multiple candidates i assume that a party never runs the risk of having its votes split up among its candidates despite this it turns out that parties have a strong incentive to restrict their number of nominees paradoxically it seems that the more uncertain parties are about voter opinion the fewer candidates they want to use in particular with a uniform voter distribution the optimal number of candidates is one

inequality and growth in the united states why physical and human capital matter we investigate the relationship between economic growth and top income inequality under the influence of human and physical capital accumulation using an annual panel of u s state level data our analysis is based upon the unified framework offered by galor and moav 2004 while the empirics account for cross section dependence parameter heterogeneity and endogeneity in nonstationary series we conclude that changes in inequality do not influence growth neither in the short run nor in the long run in the united states as a whole in the 1929 2013 period our findings are robust to the inclusion of overall income inequality measures these findings provide support for the theoretical prediction of the unified theory of inequality and growth according to which the growth effect of inequality becomes insignificant in the latest stages of economic development that the united states experiences during our period of investigation therefore future policies aiming at moderating the concentration at the upper end of income distribution are not likely to have adverse growth consequences in developed countries such as the united states jel i21 o47 c23

the rise of the super rich power resources taxes financial markets and the dynamics of the top 1 percent 1949 to 2008 the income share of the super rich in the united states has grown rapidly since the early 1980s after a period of postwar stability what factors drove this change in this study we investigate the institutional policy and economic shifts that may explain rising income concentration we use single equation error correction models to estimate the long and short run effects of politics policy and economic factors on pretax top income shares between 1949 and 2008 we find that the rise of the super rich is the result of rightward shifts in congress the decline of labor unions lower tax rates on high incomes increased trade openness and asset bubbles in stock and real estate markets

market integration and price transmission in consumer markets of developing countries abstract world prices for agricultural commodities surged in 2006 08 and then again in 2011 12 in many developing countries consumer prices for staple foods such as bread and rice mirrored these movements this paper examines whether prices in urban consumer markets within developing countries are co integrated with prices in world agricultural commodity markets using a single equation error correction model we examine the response of consumer prices for wheat rice maize and sorghum to changes in world market prices and exchange rates in urban centers of the developing world analyzing over 60 country commodity pairings we find that developing countries consumer markets are co integrated with world markets yet we also find that the transmission of changes in both world prices and real exchange rates to domestic consumer prices is not high and that the movement of domestic consumer prices to new equilibrium with world prices after a shock to the latter is relatively slow

revenue substitution how foreign aid inflows moderate the effect of bilateral trade pressures on labor rights summary this paper investigates how foreign aid inflows moderate bilateral trade based pressures on the exporting countries labor rights because aid provides additional resources to recipient governments it reduces the importance aid recipient governments attach to the preferences of their export partners consequently aid inadvertently moderates the leverage exercised by importing countries on the governments of exporting developing countries our analysis of a panel of 91 aid recipient countries for the period 1985 2002 lends support to the revenue substitution hypothesis when aid levels are low bilateral trade based pressures are associated with improved labor rights as aid levels rise however the effect loses significance

longitudinal methods to investigate the role of health determinants in the dynamics of income related health inequality the usual starting point for understanding changes in income related health inequality irhi over time has been regression based decomposition procedures for the health concentration index however the reliance on repeated cross sectional analysis for this purpose prevents both the appropriate specification of the health function as a dynamic model and the identification of important determinants of the transition processes underlying irhi changes such as those relating to mortality this paper overcomes these limitations by developing alternative longitudinal procedures to analyse the role of health determinants in driving changes in irhi through both morbidity changes and mortality with our dynamic modelling framework also serving to identify their contribution to long run or structural irhi the approach is illustrated by an empirical analysis of the causes of the increase in irhi in great britain between 1999 and 2004

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

the new political economy of taxation in advanced capitalist democracies earlier versions of this paper were presented at the 1999 annual meeting of the american political science association september 1 5 atlanta ga and the 2000 annual meeting of the midwest political science association april 27 30 chicago il the authors thank steffen ganghof philip genschel mark hallerberg alex hicks william keech dennis quinn and the anonymous reviewers and editor of this journal for many helpful comments and dennis quinn for generously sharing data duane swank thanks the german marshal fund of the united states and marquette university for support of work incorporated in this paper data utilized in this paper are available from duane swank marquette edu

a model of rivalries with endogenous prize and strength abstract this paper extends bevia and corchon 2013 to a model with both endogenous contestable prize and endogenous relative strength such a setting is ideal for the study of intra organizational rivalries commonly observed in family sports promotion and duopoly we find that when the game starts with asymmetric players the weaker player exerts more effort than the stronger player as a result the weaker player partially overcomes the disadvantage of being weak in this setting neither domino nor avalanche effect exists

financialization and u s income inequality 1970 2008 focusing on u s nonfinance industries we examine the connection between financialization and rising income inequality we argue that the increasing reliance on earnings realized through financial channels decoupled the generation of surplus from production strengthening owners and elite workers negotiating power relative to other workers the result was an incremental exclusion of the general workforce from revenue generating and compensation setting processes using time series cross section data at the industry level we find that increasing dependence on financial income in the long run is associated with reducing labor s share of income increasing top executives share of compensation and increasing earnings dispersion among workers net of conventional explanations such as deunionization globalization technological change and capital investment the effects of financialization on all three dimensions of income inequality are substantial our counterfactual analysis suggests that financial

workers of the world unite franchise extensions and the threat of revolution in europe 1820 1938 abstract we test the hypothesis that the extension of the voting franchise in europe was related to the threat of revolution we contend that international diffusion of regime contention and information about revolutionary events happening in neighboring countries generate the necessary variation in the perceived threat of revolution using two samples of european countries covering the period from 1820 to 1938 we find robust evidence which is consistent with the threat of revolution hypothesis we also find some evidence that war triggered suffrage reform

why there should be no political foreign aid curse summary this paper considers the causality underlying the so called political aid curse which proposes that foreign aid like oil should hinder democracy using a theoretical model which identifies repression and appeasement as the primary alternatives to democratization it argues that aid revenue should not produce a political curse because it is less fungible more conditional and less constant than state oil revenue making it difficult for recipient governments to use their aid to fund either repression or appeasement using several different measures associated with repression and appeasement the statistical results show that aid cannot be associated with any of these dependent variables

preemption in r d races abstract fudenberg gilbert stiglitz and tirole 1983 consider a patent race in which each firm s instantaneous probability of discovering a patentable invention is an increasing function of its cumulative expenditure on rd in particular we show that for intermediate values of it is possible for the follower to spoil the race by forcing the leader to drop out

extending the bargaining power model explaining bargaining outcomes among nations mnes and ngos participants in international bargaining include different types nation states mnes ngos and multilateral organizations and different numbers of these actors our theoretical contribution is to extend the bargaining power paradigm with a framework that models bargaining in this complex environment as a network the configuration of supports and constraints among all participating actors in the bargaining environment is captured in the structure of the network antecedents of an actor s bargaining influence in the network include the actor s basis of power network position bargaining outcome preferences and motivation to influence bargaining the network bargaining power nbp model uses network theory to build upon and integrate insights from previous literature in a way that allows us to simultaneously apply these different insights to explain bargaining outcomes these insights include effects of coalitions strategies of less powerful actors leveraging more powerful allies integration of international and domestic politics and applicability to mne related issues beyond fdi finally we illustrate nbp in a scenario of privatized utilities in the dominican republic in which the bargaining power outcome predicted by nbp differs from that of the canonical bargaining power perspective

on industry life cycles delay entry and shakeout in beer brewing abstract this paper proposes a new explanation for industry shakeout an event evident in the life cycle of many industries in which the number of firms drops significantly in a short interval of time based on an in depth analysis of the shakeout in the united states beer brewing industry between 1880 and 1890 we propose that industry shakeouts naturally follow periods of mass entry by firms similar patterns are evident in two other industries we briefly examine the us automobile and tire industries while entry rates fluctuate broadly in all these industries we find that the timing of exit for a given cohort of entrants is remarkably similar over time the exit hazard rate is peaked in the first two years of every cohort s life and drops dramatically to low and stable levels for subsequent ages in this sense mass exit follows mass entry and does not require a deep explanation it is the mass entry evident in the data for these industries that requires an explanation we propose a theoretical model of information accumulation to explain entry into an industry entrepreneurs are uncertain about the profitability of the industry and this uncertainty is resolved through sufficient accumulation of information regarding the fortunes of incumbent firms delay in entry occurs solely due to the fact that it takes time to accumulate sufficient information to support more entry the resulting entry pattern from simulations of the model looks much like that observed in the industries we study

the political and economic origins of consumer confidence economic conditions the story usually goes influence consumer confidence which in turn influences both political evaluations and votes but we have little sense of the origins of consumer confidence itself it is generally assumed that monthly reports of the nation s level of consumer confidence respond to objective economic conditions we argue that politics is important for understanding consumer sentiment beyond what we know from economic conditions specifically we demonstrate a direct effect of political evaluations of the president s management of the economy the party of the president extraordinary political events and monetary policy as well as an indirect effect of media coverage of the economy on consumer sentiment after controlling for economic conditions when news coverage is positive citizens give favorable evaluations leading to more positive sentiment our findings suggest that understanding the political economy requires an emphasis on the causal effect of politics as well as economics

price stability and central bank independence discipline credibility and democratic institutions despite mixed empirical evidence in the past two decades central bank independence cbi has been on the rise under the assumption that it ensures price stability using an encompassing theoretical approach and new yearly data for de jure cbi seventy eight countries 1973 2008 we reexamine this relationship distinguishing the role of printing less money discipline from the public s beliefs about the central bank s likely actions credibility democracies differ from dictatorships in the likelihood of political interference and changes to the law because of the presence of political opposition and the freedom to expose government actions cbi in democracies should be directly reflected in lower money supply growth besides being more disciplinarian it also ensures a more robust money demand by reducing inflation expectations and therefore inflation empirical results are robust and support a discipline effect conditioned by political institutions as well as a credibility effect

recent advances in oligopoly theory from a game theory perspective abstract this paper surveys the contribution that recent developments in game theory have made to the understanding of oligopoly theory it is argued that conventional models suffer from the problem that there are a number of solution concepts offered with little guidance as to which should be selected and this is related to the static nature of the models employed one important development in game theory has been the analysis of repeated games and when applied to oligopoly theory this suggests that outcomes may be more cooperative than conventional theory suggests related to this is the requirement that firms employ credible threats to punish cheating from cooperative outcomes and the paper examines the extent to which imperfect information may restrict the scope of firms to employ such punishments one way in which firms may seek to make threats credible is through strategic investments for example in production capacity and the paper explores how competition over price or output is integrated with competition over instruments for strategic investment

does your hedge fund manager smooth returns intentionally or inadvertently abstract we propose an econometrically logical approach that distinguishes intentional from inadvertent smoothing of hedge fund return other than the hedge fund return y we introduce an explanatory variable a market portfolio of hedge fund returns x by connecting x and y some critical parameters are found to be effectively related to testing the two types of return smoothing using those parameters we develop distinct desmoothing algorithms against intentional and inadvertent smoothing our empirical results show that although intentional smoothing is partly responsible for hedge fund smoothing and is done more consistently than inadvertent smoothing return smoothing is mainly caused by the nature of underlying assets

do natural resources fuel authoritarianism a reappraisal of the resource curse a large body of scholarship finds a negative relationship between natural resources and democracy extant cross country regressions however assume random effects and are run on panel datasets with relatively short time dimensions because natural resource reliance is not an exogenous variable this is not an effective strategy for uncovering causal relationships numerous sources of bias may be driving the results the most serious of which is omitted variable bias induced by unobserved country specific and time invariant heterogeneity to address these problems we develop unique historical datasets employ time series centric techniques and operationalize explicitly specified counterfactuals we test to see if there is a long run relationship between resource reliance and regime type within countries over time both on a country by country basis and across several different panels we find that increases in resource reliance are not associated with authoritarianism in fact in many specifications we generate results that suggest a resource blessing

inter regional redistribution through infrastructure investment tactical or programmatic in this paper we study the political economy of the inter regional allocation of investment in infrastructure in an effort to disentangle tactical and programmatic motives where tactical politics refers to the discretionary allocation of investment to districts with more political clout and programmatic politics refers to the allocation of investment according to certain objective criteria e g income level we use a panel of data from the spanish electoral districts for the period 1964 2004 to estimate an equation in which investment depends both on economic and political variables the results show that tactical politics do matter since the districts receiving the most funds are those in which i the incumbent s vote margin is low ii few votes are needed to win an additional seat in the legislature iii the central and regional governments are controlled by the same party and iv regional parties play a pivotal role in the legislature however the results also show that programmatic politics matter since inter regional redistribution is shown to increase i with the arrival of democracy and european union funds ii under leftist governments and iii the weaker the correlation is between political clout and regional income

a theory of exit in duopoly we develop a duopoly model in which exit occurs because of the existence of fixed costs or opportunity costs each firm enters the market knowing its own cost but not that of its opponent as times goes on each firm becomes increasingly pessimistic about the cost of its remaining rival the time of exit is the only strategic variable so that our model is a war of attrition in contrast to the classic war of attrition however we assume that with positive probability each firm s costs may be low enough that staying in forever is a dominant strategy thus our model unlike the classic one has a unique equilibrium

capital as a commitment strategic investment to deter mobility abstract this paper analyzes how an early entrant in a market can exploit its head start by strategic investment the analysis is based on spence s paper investment strategy and growth in a new market bell j econ 10 1979 1 19 we frist study the investment game in the no discounting case which embodies the key features of mobility deterrence we establish the existence of a set of perfect equilibria and suggest that one particular equilibrium is most reasonable this equilibrium also valid with discounting involves the follower firm being forever deterred from investing to its steady state reaction curve in contrast to spence s proposed solution

aid effectiveness and the politics of personalism this article examines how political institutions that provide an incentive to cultivate a personal vote condition the relationship between foreign aid and economic growth in developing country democracies politicians in aid recipient countries with high levels of personalism are more likely to pursue corruption and target government spending to narrow constituencies because personalism affects these outcomes it provides incentives to use foreign aid for politically motivated spending at the expense of investing foreign aid in growth promoting public goods using panel data from 61 aid recipient democracies from 1961 to 2001 the author finds that aid increases growth in democracies with less personalist institutions but decreases growth in countries with high personalism the author also shows that personalism conditions the relationship between aid and the composition of government spending aid increases spending on public goods relative to narrow particularistic goods in countries with low person

does public support help democracy survive it is widely believed that democracy requires public support to survive the empirical evidence for this hypothesis is weak however with existing tests resting on small cross sectional samples and producing contradictory results the underlying problem is that survey measures of support for democracy are fragmented across time space and different survey questions in response this article uses a bayesian latent variable model to estimate a smooth country year panel of democratic support for 135 countries and up to 29 years the article then demonstrates a positive effect of support on subsequent democratic change while adjusting for the possible confounding effects of prior levels of democracy and unobservable time invariant factors support is moreover more robustly linked with the endurance of democracy than its emergence in the first place as lipset 1959 and easton 1965 hypothesized over 50 years ago public support does indeed help democracy survive

the sunk cost fallacy in penny auctions this article theoretically and empirically analyses behaviour in penny auctions a relatively new auction mechanism as in the us dollars or war of attrition players in penny auctions commit higher non refundable costs as the auction continues and only win if all other players stop bidding i first show that in any equilibria that does not end immediately players bid probabilistically such that the expected profit from every bid is zero then using two large data sets covering 166 000 auctions i calculate that average profit margins actually exceed 50 to explain this deviation i incorporate a sunk cost fallacy into the theoretical model to generate a set of predictions about hazard rates and player behaviour which i confirm empirically while players do slowly learn to correct this bias and there are few obvious barriers to competition activity in the market is rising and concentration remains relatively high

dynamic pie a strategy for modeling trade offs in compositional variables over time the substance of politics involves competition that evolves over time while our theories about competition emphasize trade offs across multiple categories most empirical models tend to oversimplify them by considering trade offs between one category and everything else we propose a research strategy for testing theories about trade off relationships that shape dynamic compositional variables this approach improves current methods used to analyze compositional dependent variables by addressing two limitations first although scholars have considered compositional dependent variables they have done so in contexts that were not dynamic second current approaches toward graphical presentations become unwieldy when the compositional dependent variable has more than three categories we demonstrate the utility of our strategy to expand current theories of party support and political budgeting in both cases we can extend trade offs across pairs of alternatives e g prime minister versus all other parties or spending on defense versus everything else to competition across multiple alternatives

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

immigration globalization and unemployment benefits in developed eu states at a time of mounting concern about how traditional welfare states will react to globalization there has been increasing interest in specifying how global economic forces affect welfare policies in industrialized states building on theories from the political economy and comparative institutional literatures we analyze the influence of an important aspect of globalization the flow of immigration focusing on states in the european union we present a theoretical model that illustrates the interactive relationships between immigration eu labor market integration and domestic institutions our findings highlight how immigration in conjunction with domestic political institutions affects unemployment provisions while labor market integrative forces remain in the background the story of immigration and unemployment compensation in the eu is less about the opening of borders and the market forces of integration and more about the domestic political pressures

money supply class power and inflation monetarism reassessed recent sociological work shows that pro market neoliberal policies across advanced capitalist countries are due to distributional struggle between classes in the 1970s and 1980s the orthodox monetarist view alternatively sees neoliberal reform as a nonpolitical attempt to end the stagflation crisis of the 1970s from this perspective monetary and fiscal expansions brought high inflation and central bank discipline and government austerity is the solution but the recent trend of low inflation despite accelerating money growth and government spending contradicts this view analyses of time series cross section data for 23 oecd countries from 1960 to 2009 support the thesis that the rise and fall of inflation is more about distribution of power between labor and capital than about monetary and fiscal discipline inflation in the 1970s originated from a strong working class and hurt capital more than it did workers while neoliberal repression of workers power has kept inflation low from the 1980s onwa

investment timing and learning externalities abstract we study a duopoly model of investment in which each player learns about the quality of a common value project by observing some public background information and possibly the experience of his rival investment costs are private information and the background signal takes the form of a poisson process conditional on the quality of the project being low the resulting attrition game has a unique symmetric equilibrium which depends on initial public beliefs we determine the impact of changes in the cost and signal distributions on investment timing and how equilibrium is affected when a first mover advantage is introduced

the political manipulation of macroeconomic policy conventional wisdom and some research indicate that macroeconomic policies follow cycles corresponding to political as well as economic forces using vector autoregression analysis i test three models of monetary policy determination for the united states 1953 1984 the electoral cycle model that reelection motivations on the part of presidents create a policy cycle the party differences model that policy changes reflect revolving presidential party administrations and the referendum model that changes in presidential approval create in effect a continuing referendum allowing presidents to monitor their success and change macroeconomic policies when necessary analysis shows that monetary policies as measured by the monetary base and short term interest rates respond to the election cycle and presidential approval although the effect on macroeconomic outcomes is ambiguous party differences are found in real income but are not very significant in other variables

the impact of financialisation on the wage share a theoretical clarification and empirical test it is frequently asserted that financialisation has contributed to the decline in the wage share this paper provides a theoretical clarification and a systematic empirical investigation we identify four channels through which financialisation can affect the wage share 1 enhanced exit options of firms 2 rising price mark ups due to financial overhead costs for businesses 3 increased competition on capital markets and shareholder value orientation and 4 the role of household debt in increasing workers financial vulnerability and undermining their class consciousness the paper compiles a comprehensive set of empirical measures of financialisation and uses it to test these hypotheses with a panel regression of 14 oecd countries over the 1992 2014 period we find strong evidence for negative effects of financial liberalisation and financial payments of non financial corporations on the wage share that are in the same order of magnitude as the effects of globalisation

the politics of regulation in the turkish electricity market abstract turkey began reforming the electricity market in 2001 the regulatory reform aimed to liberalize the market however the institutional and political structure was not ready for creating an efficiently working competition the independent regulator did not have both experience and will to direct the industry to a more competitive environment currently the reform has slowed down and political preferences drive the industry this paper studies the reasons for the slowdown in the reform efforts by focusing on the relationships between the government judiciary and the independent regulator we conclude that strategic behaviors of players in the market including the judiciary the government and the regulator have made the introduction of competition to the market more costly

foreign law bonds can they reduce sovereign borrowing costs abstract governments often issue bonds in foreign jurisdictions which can provide additional legal protection vis a vis domestic bonds this paper studies the effect of this jurisdiction choice on bond prices we test whether foreign law bonds trade at a premium compared to domestic law bonds we use the euro area 2006 2013 as a unique testing ground controlling for currency risk liquidity risk and term structure foreign law bonds indeed carry significantly lower yields in distress periods and this effect rises as the risk of a sovereign default increases these results indicate that in times of crisis governments can borrow at lower rates under foreign law

legitimacy and the cost of government while previous research documents a negative relationship between government size and economic growth suggesting an economic cost of big government a given government size generally affects growth differently in different countries as a possible explanation of this differential effect we explore whether government legitimacy measured by satisfaction with the way democracy works influences how a certain government size affects growth on the positive side a government perceived as legitimate may get away with being big since legitimacy can affect behavioral response to and therefore the economic growth cost of taxation and government expenditures on the negative side perceived legitimacy may make voters less prone to acquire information which in turn facilitates interest group oriented or populist policies that harm growth a panel data analysis of up to 30 developed countries in which two different measures of the size of government are interacted with government legitimacy reveals that perceived legitimacy exacerbates a negative growth effect of government size in the long run this could be interpreted as governments taking advantage of being regarded as legitimate in order to secure short term support at a long term cost to the economy

bargaining power strike durations and wage outcomes an analysis of strikes in the 1880s strike outcomes in the 1880s had a winner take all character successful strikes ended with a discrete wage gain failed strikes ended with a return to work at the prestrike wage we present a theoretical interpretation of these outcomes based on a war of attrition model we fit an empirical model specifying the capitulation times of the two parties and the size of the wage gain in the event of a strike success the results show a systematic relation between the determinants of strike success and the determinants of the wage gain for a successful strike

deregulating with no regulator is the german electricity transmission regime institutionally correct abstract from 1998 to 2005 the german transmission grid has been put under a self regulated arrangement it seems hard to believe that transmission lines can be opened to third party access only with a negotiated access regime and no regulator supervision it seems contradictory with the notion of ex post contractual hazards promoted by v goldberg and o williamson if a weak institutional arrangement is implemented one might assume that it has to be harmful to network and market access if it is not to be inefficient why and how could it work when looking at rules and prices for accessing the transmission network and the corresponding wholesale markets in germany the club arrangement for transmission opening does not appear so harmful accordingly we have to reconsider the ex ante and ex post institutional mechanism of such a club arrangement ex ante we first reconsider skills and strengths of industrial consumers and german business associations in defining and assessing rules of transmission access we underline that incomplete vertical and horizontal integration of german electricity companies impeded extensive cartel collusion ex post we first look at a strong competition authority backing then we discover that ex ante and ex post dimensions are much more mixed and reinforced in an open cumulative pro competition process framed by the competition authority

understanding the energy gdp elasticity a sectoral approach abstract this paper uses per capita data for 132 countries over 1960 2010 to estimate elasticities of sectoral energy use with respect to national gross domestic product gdp we estimate models in both levels and growth rates and use our estimates to sectorally decompose the aggregate energy gdp elasticity our estimates show that residential energy use is very inelastic to gdp if primary solid biofuels are counted in energy use tallies especially at low income levels residential use of electricity is more tightly linked to gdp as is energy use by the transportation industrial and services sectors agriculture typically accounts for a small share of energy use and has a modest energy gdp elasticity the aggregate energy gdp elasticity tends to be higher for countries at higher income levels in large part because traditional use of primary solid biofuels is less important gasoline prices winter temperature population and land area are among other factors influencing sectoral energy use

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

the eurotower strikes back crises adjustments and europe s austerity protests the 2008 global financial crisis came with fears and for some hopes that a new wave of public mobilization would emerge in industrialized countries especially throughout the european union eu the epicenter of the crisis large protests were expected yet the energy with which social groups mobilized against the proposed austerity measures quickly fizzled this article provides new evidence for why this was the case in line with neo keynesian theory we argue that the interest rate adjustments and political announcements of the european central bank ecb limited the potential for mass unrest in the member states of the economic and monetary union emu affected by the crisis we provide evidence for our argument with yearly panel data and a new original data set of monthly political protests between 2001 and 2013 our analyses support the hypothesis that the ecb was able to successfully assuage dissatisfaction with the limited reform options of the eurozone member states in the wake of the eurocrisis

the origins of persistent current account imbalances in the post bretton woods era why do some countries run persistent current account surpluses why do others run deficits often over decades leading to enduring global imbalances such persistent imbalances are the root cause of many financial crises and a major source of international economic conflict we propose that differences in wage bargaining institutions explain a large share of imbalances through their effect on the trade balance in countries with coordinated wage bargaining wage growth in export industries can be restrained to ensure competitiveness leading to persistent trade surpluses we estimate the contribution of these institutions to trade balances in organisation for economic co operation and development oecd member countries since 1977 and find ample support for our hypothesis contrary to much of the literature the choice of fixed or floating exchange rate regimes has only a small effect on trade or current account balances in other words internal adjustment in surplus countries via wage bargaining institutions trumps external adjustment by deficit countries

continuous time games of timing abstract we address the question of existence of equilibrium in general timing games with complete information under weak assumptions any two player timing game has a markov subgame perfect e equilibrium for each e 0 this result is tight for some classes of games symmetric games games with cumulative payoffs stronger existence results are established

a unified method for dynamic and cross sectional heterogeneity introducing hidden markov panel models conventional statistical methods for panel data are based on the assumption that unobserved heterogeneity is time constant despite the central importance of this assumption for panel data methods few studies have developed statistical methods for testing this assumption and modeling time varying unobserved heterogeneity in this article i introduce a formal test to check the assumption of time constant unobserved heterogeneity using bayesian model comparison then i present two panel data methods that account for time varying unobserved heterogeneity in the context of the random effects model and the fixed effects model respectively i illustrate the utility of the introduced methods using both simulated data and examples drawn from two important debates in the political economy literature 1 the identification of shifting relationships between income inequality and economic development in capitalist countries and 2 the effects of the gatt wto on bilateral trade volumes

winners and losers in a major price war abstract although retail price wars have received much business press and some research attention it is unclear how they affect consumer purchase behavior this article studies an unprecedented price war in dutch grocery retailing that started in fall 2003 initiated by the market leader to halt its sliding market share the authors investigate the short and long term effects of the price war on store visits on spending and on the sensitivity of these decisions to weekly prices and price image they use a unique data set with consumer hand scan and perceptual data for a national panel of 1821 households covering two years before and two years after the price war started although the price war initially entailed more shopping around and increased spending spending per visit ultimately dropped because consumers redistributed their purchases across stores the price war made consumers more sensitive to weekly prices and price image which helped both the chain that showed an improvement in price image

are smallholder farmers better or worse off from an increase in the international price of cereals citation nakelse t dalton t j hendricks n p hodjo m 2018 are smallholder farmers better or worse off from an increase in the international price of cereals food policy 79 213 223 https doi org 10 1016 j foodpol 2018 07 006

when are stabilizations delayed alesina drazen revisited abstract in an influential article alesina and drazen 1991 why are stabilizations delayed american economic review 81 1170 1188 model delay of stabilization as the result of a struggle between political groups supporting reform plans with different distributional implications in this paper we show that ex ante asymmetries in the costs of delay for the groups will reduce the probability of conflict and will lead to a shorter expected delay accurate common information about the cost of delay may lead to no delay at all in an asymmetric conflict a wider divergence in the distributional implications of reform will reduce the probability of conflict but will lead to a longer expected delay we motivate the asymmetric model of delay by reference to latin american episodes of the 1980s

risk aversion heterogeneity and contests we introduce a novel method of modellingcontests that avoids the complexitiesencountered by the best response function approach we analyse contests in which i there are many risk averse players ii attitudes to risk may differ acrossindividuals and iii the technology thattransforms rent seeking effort intoprobability of winning may also differacross individuals we establish that ifevery player has a constant degree ofabsolute risk aversion a uniqueequilibrium exists we also establishcomparative static results and examine howthe level of rent dissipation is affectedby the heterogeneity of attitudes towardsrisk and the precise nature of the technology

capacity choice under uncertainty in a duopoly with endogenous exit abstract applying the real options framework this article investigates the investment decision of the entrant given that an incumbent is already active both firms have an option to exit this market if the demand level falls too low the combination of three decision components capacity choice entry and exit timing results into multiple trigger strategies for the entrant in particular in the presence of a large incumbent it can either choose to coexist with its rival in a duopoly or eventually monopolize the market by installing a sufficiently large capacity the former scenario is realized when the market is large while the latter occurs when the market is small when the market is of intermediate size a hysteresis region emerges where the entrant does not take any actions and prefers to postpone investment

taking credit redistribution and borrowing in an age of economic polarization several recent studies link rising income inequality in the united states to the global financial crisis arguing that us politicians did not respond to growing inequality with fiscal redistribution instead americans saved less and borrowed more to maintain relative consumption in the face of widening economic disparities this article proposes a theory in which fiscal redistribution dampens the willingness of citizens to borrow to fund current consumption a key implication is that pretax inequality will be more tightly linked with credit in less redistributive countries the long run partisan composition of government is in turn a key determinant of redistributive effort examining a panel of eighteen oecd democracies the authors find that countries with limited histories of left wing participation in government are significantly more likely see credit expansion as prefisc inequality grows compared to those in which the political left has been more influential

working capital and fixed investment new evidence on financing constraints this article presents new tests for finance constraints on investment by emphasizing the often neglected role of working capital as both a use and a source of funds the coefficient of endogenous working capital investment is negative in a fixed investment regression as expected if working capital competes with fixed investment for a limited pool of finance this finding addresses a criticism of previous research on finance constraints that cash flows may simply proxy shifts in investment demand in addition previous studies may have underestimated the impact of finance constraints on growth and investment because firms smooth fixed investment in the short run with working capital

the determinants of exit in an open economy in this paper the determinants of exit are investigated for the manufacturing sector of the united states economy which has been subjected to growing international influences the analysis uses united states cross sectional data the results of the exit equation suggest that low profitability declining industry growth and displacement of incumbents by entrants foster exit international influences are also seen to have an impact on u s manufacturing exit specifically imports into an industry have a small effect on exit and protection has little influence in stemming exit

global market integration and central political control foreign trade and intergovernmental relations in china prevailing economic theories predict that world market integration unleashes centrifugal forces from within and undermines domestic central political authority reversing the conventional bottom up demand side approach this article highlights the incentives of national level political actors it suggests that when institutionally empowered vis a vis the subnational units the center will seek to enhance political control over regions thriving in the global market to extract revenues remedy interregional disparity and maintain central rule through analyzing pooled cross sectional time series data for chinese provinces during 1978 to 2002 it shows that the chinese political center has manipulated its personnel monopoly power within the ruling communist party to exert a tighter grip over provincial party secretaries the top officials in the provinces more exposed to the international market furthermore provinces overseen by more controlled party secretaries actually received less favorable terms du

domestic regulation and the wto the case of water services in developing countries n recent years the interface between domestic regulation and trade liberalisa tion in services has received increasing attention in public policy debate inboth developed and developing countries trade in services to a much greaterextent than trade in goods is affected by a variety of domestic regulations whichmay in uence the effects of trade and investment liberalisation mattoo andsauve 2002 and 2003 many services particularly those provided by utilities ornetwork industries are characterised by various forms of market imperfection and regulation is needed in order to ensure a certain level of quality of service toprotect consumers or to protect the environment understandably governmentshave been concerned to retain national autonomy in regulation policy and havebeen wary of agreeing to commit themselves to common international rules inthis area as part of the uruguay round the general agreement on trade in services gats entered into force on 1 january 1995 with a set of binding rules anddisciplines to promote liberalisation of services trade and investment ows thewto ministerial declaration at doha in november 2001 agreed to negotiationson the reduction or elimination of tariff and non tariff barriers for environmentalgoods and services as part of the negotiations on trade in services within thegats framework wto 2001

evaluating price transmission between global agricultural markets and consumer food price indices in the european union this paper uses error correction models to evaluate the extent to and speed at which world agricultural commodity price movements affect consumer food prices in the european union member states we consider three types of world commodity price indices each containing different commodities and weighting criteria results reveal a long run relationship between world agricultural commodity and consumer food prices in over half of the member states consumer prices in different member states and categories of member states respond differently to specific world price indices suggesting that there are disparities in the structure and the efficiency of their food markets the eurozone founders generally have lower transmission elasticities this should be taken into account when predicting the impacts of extreme world price volatility and consumer food price rises prompting governments to pay attention to the most vulnerable households

don t stand so close to me spatial contagion effects and party competition in this article we bring together elements from the literatures on economic voting and spatial voting to gain theoretical leverage on the combined role of clarity of responsibility party policy positions and economic performance in elections building on evidence of voter knowledge we develop a theory of spatial contagion effects to explain how factors drawn from both of these literatures combine to shape changes in support for political parties we test this theory with a spatial autoregressive model of party competition in 23 nations from 1951 to 2005 as expected we find evidence of strong spatial contagion effects in elections with low clarity of responsibility

adaptability of competitive electricity reforms a modular analysis abstract among the competitive electricity reforms that have been implemented in europe and the us for the last 18 years none has survived over several years without major changes their changing nature raises the question of their adaptability two characteristics of reforms play a key role on their adaptation properties firstly they are modular objects in the sense of baldwin c 2008 where do transactions come from modularity transactions and the boundaries of firms industrial and corporate change 17 1 155 195 secondly they are produced in an institutional process which leads to incomplete rules and designs pistor k xu c 2003 incomplete law international law and politics 35 931 1013 we propose a typology of adaptations based on the framework proposed by williamson o e 1991 comparative economic organization the analysis of discrete structural alternatives administrative science quarterly 36 2 269 296 for contracts 1 in case of small disturbances adaptations are realized quasi automatically by autonomous decisions of the institutions governing the implementation of reforms 2 in case of middle range disturbances adaption is made by coasian bargaining 3 finally in case of strong disturbances or when bargaining is not feasible the adaptation of reforms is in the hands of legislative and executive institutions north d c 2005 le processus du developpement economique editions d organisation these institutions can reform the reforms joskow p l 2006 introduction to electricity sector liberalization lessons learned from cross country studies in sioshansi f p ed electricity market reform an international perspective elsevier amsterdam pp 1 32 hogan w w 2002 electricity market restructuring reforms of reforms journal of regulatory economics 21 103 132 the role of these types of adaptations in each electricity reform is a consequence of the allocation of rights to the regulator to stakeholders and to legislative and executive institutions

a dynamic model of entry and exit in a growing industry the potential demand in a new industry evolves over time demand is initially low but advertising by the industry s early entrants can speed up demand growth however there is intrinsic uncertainty of the demand level in each period and uncertainty of the demand evolution path which can be affected by the underlying economic environment we construct a dynamic model that features the stochastically and endogenously expanding demand of a new industry and we investigate the optimal entry and exit behavior of firms as the industry evolves we find that firms incentive to enter early depends critically on the cost that early entrants have to pay in developing the market when the cost is high and the benefit spills over to potential entrants firms have an incentive to wait and the probability of entry can increase with the number of incumbents under certain circumstances firms entry strategy is also influenced by the transition of economic states firms are more likely to enter under a state that shows the prospect of demand taking off soon we also find that in the early stage of an industry higher demand uncertainty can induce faster entry

gambling in contests this paper presents a strategic model of risk taking behavior in contests formally we analyze an n player winner take all contest in which each player decides when to stop a privately observed brownian motion with drift a player whose process reaches zero has to stop the player with the highest stopping point wins unlike the explicit cost for a higher stopping time in a war of attrition here higher stopping times are riskier because players can go bankrupt we derive a closed form solution of a nash equilibrium outcome in equilibrium highest expected losses occur at an intermediate negative value of the drift

government responses to fiscal austerity the effect of institutional fragmentation and partisanship how does the institutional context affect government responses to fiscal austerity despite the institutional turn in political science we still possess an incomplete understanding of the relati

the rise of finance and firm employment dynamics this article sheds light on the ongoing employment stagnation in the united states by investigating the links between the rise of finance and firm employment dynamics during the 1982 2005 period i argue that the rise of finance marginalized the role of labor in revenue generating and sharing processes which led to employment stagnation among the largest nonfinancial firms in the united states evidence suggests that increasing investment in financial assets depresses the workforce size the growing dependence on debt reprioritizes the order of distribution heightening the need for workforce reduction the increasing rewards for shareholders generate a downsize and distribute spiral in which labor expense becomes a primary target of cost cutting strategies further analysis indicates that production and service workers are more vulnerable to shifts associated with the rise of finance than managers and professionals

good times bad times postwar labor s share of national income in capitalist democracies this article returns to a classic question of political economy the zero sum conflict between capital and labor over the division of the national income pie a detailed description of labor s shar

institutions and commitment the thrust of this paper is that to understand the roles institutions play in society a deep analysis of opportunism and its implications is necessary for that purpose a transactions costs cum positive political theory approach is developed with a focus on the role of institutions and their implications for regulatory commitment a major issue is restraining political opportunism countries that have succeeded in developing a healthy private sector are those that have developed institutions that restrain governmental decision making but such restraining is itself a political choice countries with electoral and legislative systems that bring about decentralized government have stronger chances of developing equilibria where government discretion is restrained copyright 1996 by oxford university press

remittances and social spending remittances are a significant source of foreign exchange for developing economies i argue that remittances due to their compensation and insurance functions will increase the general income level and economic security of recipients thereby reducing their perceived income risk over time this will dampen demand from recipients for government taxation and social insurance therefore i expect increases in income remitted to an economy to result in reduced levels of social welfare transfers at the macro level this dynamic can help us to understand spending patterns in developing democracies and the absence of demand for social security transfers in countries with high levels of inequality and economic insecurity i test this argument with a sample of 18 latin american states over the period 1990 to 2009 and subject the central causal mechanism to a battery of statistical tests the results of these tests provide strong support for this argument