strikes as a result of imperfect information this paper proposes a model of the bargaining process that recognizes that negotiators have only imperfect information at their command the author argues that the probability of a strike occurring will increase if one party bases its perception of the opponent s position on the same variables employed to form its own position when the opponent s position is in fact based on different variables strike probability is therefore assumed to be related to movements in variables of interest to only one side the model is tested on a sample of fourteen bargaining relationships drawn from the series wage chronology published by the bureau of labor statistics which details settlements between particular firms and unions over a period of about thirty years estimates of strike probability are derived from the maximum likelihood logit procedure the findings suggest that although both relative and absolute wage increases in a firm have a negative effect on strike frequency relative changes are more important

the democratic political economy of progressive income taxation why do both left and right political parties typically propose progressive income taxation schemes in political competition analysis of this problem has been hindered by the two dimensionality of the issue space to give parties a choice over a domain that contains both progressive and regressive income tax policies requires an issue space that is at least two dimensional nash equilibrium in pure strategies of the standard two party game whose players have complete preferences over a two dimensional policy space generically fails to exist i introduce a new equilibrium concept for political games based on the fact of factional conflict within parties each party is supposed to consist of reformists militants and opportunists each faction has a complete preference order on policy space but together they can only agree on a partial order nash equilibria of the two party game where the policy space consists of all quadratic income tax functions and each party is represented by its partial order exist and it is shown that in such equilibria both parties propose progressive income taxation

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

imperfect information and strikes an analysis of canadian experience 1967 82 to test their hypothesis that the propensity to strike is affected less by the actual balance of bargaining power than by the parties uncertainty about their relative power the authors perform a probit analysis of data on 1 871 collective agreements negotiated in the canadian manufacturing sector between 1967 and 1982 they find consistent with their hypothesis that some characteristics of individual bargaining units the relevant industries and the economy as a whole that affect both the quantity and reliability of information needed to assess relative bargaining power do have significant value in predicting strike incidence across industries and over time

openness central bank independence and the sacrifice ratio traditional explanations of the negative correlation between openness and inflation presume that an inverse relationship between the degree of openness and the sacrifice ratio reduces the inflation bias of descretionary monetary policy temple 2002 concludes however that such a relationship fails to emerge in cross country data our analysis of the same cross country data considered by temple indicates that once the degree of central bank independence and its interaction with greater openness and the sacrifice ratio in addition increased openness lessens the positive effect of central bank independence on the sacrifice ratio

productivity and distribution effects of codetermination in an efficient bargaining model codetermination can be regarded as an extreme regulatory intervention of the legislator in the labor market which might affect the efficiency of production and the bargaining power of labor based on a model that covers both efficient bargaining and employment bargaining a simple equation is derived that is suited to empirical testing the empirical test is based on german data and includes years before and after the extension of german codetermination law in 1976 the estimates determine the productivity of labor and relative bargaining power of capital and labor it turns out that codetermination does not affect productivity but leads to a significant increase in workers bargaining power and the distribution of rents

macroeconomic policy in a two party system as a repeated game this paper considers the interaction of two parties with different objectives concerning inflation and unemployment and rational and forward looking wage setters if discretionary policies are followed an economic cycle related to the political cycle results in equilibrium this cycle is significantly different from the traditional political business cycle reputational mechanisms due to the repeated interaction of the two parties and the public or commitments to a common policy rule can improve upon the discretionary outcome by reducing or eliminating the magnitude of the economic fluctuations

the dismantling of conasupo a mexican state trader in agriculture in the 1990s mexico gradually dismantled and ultimately liquidated conasupo its state enterprise in agriculture conasupo was a typical less developed country ldc parastatal exacting control over an important component of mexico s food chain this paper examines the demise of conasupo in the context of domestic economic reforms and trade liberalisation it documents the process by which conasupo was eleminated the political environment that made this possible and the implications for agricultural production and trade the paper concludes by distilling lessons from mexico s experience for other ldcs as the liberalisation of domestic and international markets continues to unfold

separation of powers and political accountability political constitutions are incomplete contracts and therefore leave room for abuse of power in democracies elections are the primary mechanism for disciplining public officials but they are not sufficient separation of powers between executive and legislative bodies also helps to prevent the abuse of power but only with appropriate checks and balances checks and balances work by creating a conflict of interest between the executive and the legislature yet requiring both bodies to agree on public policy in this way the two bodies discipline each other to the voters advantage under appropriate checks and balances separation of powers also helps the voters elicit information

factions and political competition this paper presents a new model of political competition in which candidates belong to factions before elections factions compete to direct local public goods to their local constituencies the model of factional competition delivers a rich set of implications relating the internal organization of the party to the allocation of resources in doing so the model provides a unified explanation of two prominent features of public resource allocations the persistence of possibly inefficient policies and the tendency of public spending to favor incumbent party strongholds over swing constituencies

an economic model of representative democracy this paper develops an approach to the study of democratic policy making where politicians are selected by the people from those citizens who present themselves as candidates for public office the approach has a number of attractive features first it is a conceptualization of a pure form of representative democracy in which government is by as well as of the people second the model is analytically tractable being able to handle multidimensional issue and policy spaces very naturally third it provides a vehicle for answering normative questions about the performance of representative democracy

the macroeconomic strike model a study of seventeen countries 1948 1975 this paper reports the results of an analysis of data on industrial conflict strikes and lockouts in seventeen oecd countries during the period 1948 75 a number of models are tested on this broad data set including the major elements of the ashenfelter and johnson model contrary to ashenfelter and johnson s results for the united states this study finds for most countries a positive relationship between the number of conflicts and the rate of increase in real wages in manufacturing further the increase in nominal wages produces stronger results in all models tested than the increase in real wages the effect of unemployment is unstable across countries and only one of two political variables yields even modest results the authors suggest that an explanation of their findings might be found in the relationship between changes in the wage structure and changes in the level of conflict

bargaining in standing committees with an endogenous default committee voting has mostly been investigated from the perspective of the standard baron ferejohn model of bargaining over the division of a pie in which bargaining ends as soon as the committee reaches an agreement in standing committees however existing agreements can be amended this article studies an extension of the baron ferejohn framework to a model with an evolving default that reflects this important feature of policymaking in standing committees in each of an infinite number of periods the ongoing default can be amended to a new policy which is in turn the default for the next period the model provides a number of quite different predictions i from a positive perspective the key distinction turns on whether the quota is less than unanimity in that case patient enough players waste substantial shares of the pie each period and the size principle fails in some pure strategy markov perfect equilibria in contrast the unique markov perfect equilibrium payoffs in a unanimity committee coincide with those in the corresponding baron ferejohn framework ii if players have heterogeneous discount factors then a large class of subgame perfect equilibria including all markov perfect equilibria are inefficient

the economic and organizational basis of early united states strikes 1900 1948 this paper examines the question of whether economic factors played an important role in determining strike activity in the united states in the first half of the twentieth century a review of recent research shows one author david snyder concluding that economic factors mattered little during that period and that union organization and political variables explained much more and another p k edwards concluding the opposite a retest of these authors analyses employing ordinary least squares regression and a variety of measures suggests that snyder s position is more sound this author argues however that edwards was correct in claiming that economic factors are major determinants of the extent of unionism as well as of strike activity and thus one needs to apply a two stage least squares test of the snyder hypothesis when that is done the results show that economic variables are highly significant determinants of strike activity throughout the pre 1949 period but for the subperiod 1921 29

resistance to reform status quo bias in the presence of individual specific uncertainty comment why do governments so often fail to adopt policies which economists consider to be efficiency enhancing our answer to this question relies on uncertainty regarding the distribution of gains and losses from reform we show that there is a bias towards the status quo and hence against efficiency enhancing reforms whenever some of the individual gainers and losers from reform cannot be identified beforehand there are reforms which once adopted will receive adequate political support but would have failed to carry the day ex ante the argument does not rely on risk aversion irrationality or hysteresis due to sunk costs jel d72 f13 why do governments so often fail to adopt policies that economists consider to be efficiency enhancing this is one of the fundamental questions of political economy the answer usually relies on what may be

information aggregation and optimal structure of the executive we model two aspects of executives in parliamentary democracies decision making authority is assigned to individuals and private information is aggregated through communication when information is relevant to all policies and communication is private all decisions should be centralized to a single politician a government that holds cabinet meetings where information is made available to all decision makers outperforms one where communication is private a multimember cabinet can be optimal it need not be single peaked around the most moderate politician or ideologically connected centralization is nonmonotonic in the degree of ideological divergence in a large cabinet all power should be given to the most moderate politician even when uncertainty is policy specific and a single politician is informed on each policy power should never be fully decentralized our model provides a justification for centralized authority and cabinet meetings that enhance the quality of policy

credibility and policy convergence in a two party system with rational voters the traditional approach to modeling political parties behavior based upon the contribution of anthony downs 1957 assumes that the parties unique objective is to win elections thus they maximize their popularity the crucial implication of this assumption for a two party system is that if the two parties have the same information about voters preferences full convergence of policies results from electoral competition this is the crucial implication of the median voter theorem more generally it may be argued that different parties are motivated differently because they represent different constituencies parties may not care only about winning elections per se but also about the quality of the policies resulting from an election in this case the candidates of the two parties view winning an election not only as a goal per se but also as a means of implementing a better policy for their respective constituencies this paper shows that electoral competitions imply dynamic inconsistency if the voters are modeled as rational and forwardlooking agents and parties do not care exclusively about being elected but also about which policy to implement once elected the dynamic inconsistency arises as follows the parties have an incentive to announce convergent platforms to increase their chances of election however if the elected party is not committed to its electoral platform it has an incentive to follow its most preferred policy rather than the policy announced in its platform if voters are rational they account for this incentive thus in general in a one shot electoral game the only timeconsistent equilibrium is one in which no convergence is possible the two parties follow their most preferred policies and the voters rationally expect this outcome full convergence of parties platforms results only as a limiting case when the parties are completely indifferent with respect to the quality of the policies resulting from the election thus these results differ from the existing literature on ideologically motivated politicians for instance donald wittman 1977 1983 randall calvert 1985 which implicitly assumes the possibility of binding commitments to electoral platforms complete or partial policy convergence can be the outcome of political competition if the interaction between the parties and the voters is modeled as an infinitely repeated game in fact if the candidates have concave objective functions the welfare maximizing policy rule implies a complete convergence of parties policies however this cooperative and agreed upon policy may or may not be sustainable as a subgame perfect equilibrium depending on parameter values in particular it depends on the discount rates of the two parties the degree of polarization of their preferences and the relative popu graduate school of industrial administration carnegie mellon university pittsburgh pa 15213 and national bureau of economic research cambridge ma 02138 this paper is based upon a chapter of my unpublished doctoral dissertation at harvard university i am greatly indebted to jeffrey sachs for directing my attention toward these issues and for many conversations i also wish to thank andrew abel dilip abreu olivier blanchard ramon caminal andrew caplin alex cukierman morris fiorina benjamin friedman herschel grossman howard rosenthal and the referees for very useful comments the responsibilitv af anv n mtnkieis af calrirp nfnlv mine the result of policy convergence in a two party system is more general than the median voter theorem for discussions of convergence results not at the median see john ledyard 1984 peter coughlin 1984 coughlin and shmuel nitzan 1981 melvin hinich 1977 for earlier work on spatial competition see richard mckelvey 1975 hinich ledyard and peter ordeshook 1972 1973 and the references quoted therein the present paper focuses on the result of convergence rather than on the median voter theorem per se

openness exchange rate regimes and the phillips curve abstract recent research suggests that the phillips curve slope measured using sacrifice ratios from the period 1961 88 is positively related to trade openness contradicting the romer 1993 openness and inflation theory and evidence quarterly journal of economics 108 869 903 hypothesis that disinflations are less costly in open economies in this paper i consider sacrifice ratios and output inflation trade offs from 1981 98 and allow their dependence on openness to vary with the exchange rate regime sacrifice ratios are weakly negatively related to openness but the strength of the relationship does not increase with exchange rate flexibility output inflation trade offs are negatively related to openness and the strength of the relationship increases with exchange rate flexibility

comparative economic voting britain france germany italy likelihood of a vote for the incumbent coalition in contrast personal economic circumstances no matter how measured demonstrate nonexistent to weak effects on vote choice overall economic conditions emerge as a relatively important vote determinant when a more properly specified general multi equation model of the vote is estimated economics shows itself to be as powerful as traditional factors used to explain the western european vote in particular economic variables exceed the impact of partisan identification in britain and roughly equal it in germany moreover the economic variables exercise more influence than the social cleavages of class and religion everywhere except italy

does delegation of fiscal policy to an independent agency make a difference evidence from intergovernmental transfers in india abstract one area of fiscal policy in which several countries have delegated responsibility to an independent agency is the distribution of national resource transfers across regional and local governments such delegation is expected to promote equity and efficiency and mitigate distortions created by political incentives this paper tests whether delegation to an independent agency indeed makes a difference by contrasting the impact of partisan politics on two types of fiscal transfers to states in the indian federation over a period of time 1972 1995 the pattern of evidence shows that while the transfers that are determined by the central political executive are indeed distributed to favor particular states that are politically important for the central ruling party the transfers that are delegated to an independent agency serve to constrain such partisan impact

estimating strike effects in a general model of prices and quantities estimates of the effect of strikes on the production price and purchases of north american automobiles are provided over the period 1966 79 the estimates are based on a model that reflects the decisions of both consumers and producers and that captures important intertemporal adjustments before during and after the strike to allow for inventory buildup in anticipation of the strike as well as inventory depletion during the strike and replacement afterward the results generally indicated that both consumers and producers rationally responded to the expected and the actual event of the strike through a variety of related intertemporal adjustments and while the initial effects are in some instances quite pronounced the long run effects are usually minimal

balanced budget redistribution as the outcome of political competition this paper models balanced budget redistribution between socio economic groups as the outcome of electoral competition between two political parties equilibrium is unique in the present model and a sufficient condition for existence is given requiring that there be enough stochastic heterogeneity with respect to party preferences in the electorate the validity of hotelling s principle of minimum differentiation and of director s law are examined under alternative hypotheses concerning administrative costs of redistributions and voter s possibilities both of abstaining from voting and of becoming campaign activists for one of the parties the policy strategy of expected plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality incomes are fixed and known so lump sum taxation is feasible however constraints on tax transfer differentiation between individuals are permitted in the analysis

employee participation in management bargaining power and wages the paper analyzes the impact of employee participation in management on bargaining power and wages it presents an empirical model which allows for variable bargaining powers of the parties who jointly control the firm and it tests this model with postwar west german data the results suggest that parity codetermination has had a positive effect on earnings in iron and steel but not in coal mining moreover it appears that the positive effect in iron and steel could be due to increased profitability rather than an increase in the bargaining power of labor as defined in this study

the industrial organization of congress or why legislatures like firms are not organized as markets this paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions like market institutions legislative institutions reflect two key components the goals or preferences of individuals here representatives seeking reelection and the relevant transactions costs we present three conclusions first we show how the legislative institutions enforce bargains among legislators second we explain why given the peculiar form of bargaining problems found in legislatures specific forms of nonmarket exchange prove superior to market exchange third our approach shows how the committee system limits the types of coalitions that may form on a particular issue

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

bayesian inference for comparative research rv egression analysis in comparative research suffers from two distinct problems of statistical inference first because the data constitute all the available observations from a population conventional inference based on the long run behavior of a repeatable data mechanism is not appropriate second the small and collinear data sets of comparative research yield imprecise estimates of the effects of explanatory variables we describe a bayesian approach to statistical inference that provides a unified solution to these two problems this approach is illustrated in a comparative analysis of unionization a widely used tool in quantitative comparative politics is the linear regression model estimating relationships between institutional and economic variables observed for a set of countries constituting some population of interest a brief survey of recent comparative research finds no shortage of work of this type for instance remmer 1991 identifies economic crisis as a source of electoral volatility in latin american countries in the 1980s robertson 1990 presents evidence that institutions moderating the transaction costs of negotiations between capital and labor reduce industrial conflict and golden 1993 finds that union wage moderation in industrialized democracies results from coordinated collective bargaining although the methodological advantages are well documented jackman 1985 we identify two distinct problems of statistical inference endemic to this type of quantitative comparative research first because the data constitute all the available observations from a population conventional inference based on the long run behavior of some repeatable data mechanism is not appropriate second because data sets tend to be small and collinear the effects of explanatory variables are estimated imprecisely in most applications the first problem is generally ignored and the second is solved by imposing restrictions on the regression model to obtain sensible results the bayesian model of statistical inference provides a unified solution to these two distinct problems of quantitative comparative research two features of bayesian inference are important in this context first probability is conceived subjectively as characterizing a researcher s uncertainty about the parameters of a statistical model this subjective probability concept seems particularly useful in comparative settings where the data are typically convenience samples not generated by a known probability mechanism such as random sampling second bayesian inference allows the inclusion of other information in addition to the quantitative sample information again this seems useful in the comparative context where rich historical material is commonly available sparking ideas for researchers but formally discarded in the final analysis in the bayesian approach this historical material can be formally incorporated into the analysis we begin by detailing why the nonstochastic and weak data typical of comparative research are problematic for conventional linear regression analysis we next introduce some ideas about bayesian inference and describe bayesian regression analysis these ideas are applied to a comparative analysis of unionization the subject of a recent exchange in the american political science review between michael wallerstein and john stephens stephens and wallerstein 1991 wallerstein 1989 the bayesian regressions we present are supplemented with a sensitivity analysis that investigates how our conclusions depend upon the sample data and our prior beliefs although we survey some ideas in bayesian statistics a full introduction to the bayesian approach to statistical inference is beyond our scope here good book length treatments are pollard 1986 lee 1989 and at a slightly higher level press 1989 our intention here is to spotlight problematic but ignored issues of statistical inference in a common area of application the bayesian alternative that we present represents just one way forward to address these inferential problems

the new economics of organization over the last ten years or so an important new approach to the study of organizations has emerged within economics it is perhaps best characterized by three elements a contractual perspective on organizational relationships a theoretical focus on hierarchical control and formal analysis via principal agent models this paper provides political scientists with an overview of the new economics of organization and explores its implications for the study of public bureaucracy so far positive political theory has not contributed much to our understanding of public bureaucracy in part this is due to the unsympathetic treatment that rational modeling and most other modes of quantitative analysis have long received from students of public administration the other side of the coin however is that positive theorists have not made much of an effort to develop theories of bureaucracy their concerns have centered around two basic mechanisms of social choice voting and markets and they have devoted little systematic attention to a third mechanism that is clearly important for understanding how societies and other aggregates make collective decisions this third and relatively unexplored mechanism is hierarchy movement toward a positive theory of hierarchies would fill a serious gap in the social choice literature while at the same time making a theoretical contribution that strikes to the essence of public bureaucracy indeed of all organizations in fact significant steps toward a positive theory of hierarchies have very recently been taken but by economists not political scientists in small numbers of course economists made contributions to the study of public bureaucracy some time ago with the pioneering works of downs 1967 tullock 1965 and niskanen 1971 but this new wave of theoretical work is different it is already a large complex body of literature that is the focus of innovation and excitement among a growing number of economists and it reflects an unusual degree of theoretical coherence and cumulative effort work in this tradition tends to receive orientation from a distinctive economic approach to the analysis of organizations an approach perhaps best characterized by three elements a contractual perspective on organizational relationships a focus on hierarchical control and formal analysis via principal agent models this approach has emerged from recent attempts to move beyond the neoclassical theory of the firm which assumes away all organizational considerations to a theory of economic organizations that can explain why firms corporations and other enterprises behave as they do propo

radio s impact on public spending if informed voters receive favorable policies then the invention of a new mass medium may affect government policies since it affects who is informed and who is not these ideas are developed in a voting model the model forms the basis for an empirical investigation of a major new deal relief program implemented in the middle of the expansion period of radio the main empirical finding is that u s counties with many radio listeners received more relief funds more funds were allocated to poor counties with high unemployment but controlling for these and other variables the effects of radio are large and highly significant

friends with benefits patronage networks and distributive politics in china abstract existing research on distributive politics mainly focuses on the influence of electoral competition between political parties but less is known about non electoral mechanisms of resource allocation inside a dominant party this study examines how informal patron client networks within the ruling communist party shape the distribution of intergovernmental transfers in china a major one party regime using a new dataset on city level fiscal transfers and a novel method to infer informal political connections through past promotions we show that provincial leaders allocate significantly more transfers to localities governed by officials who are part of their networks this bias persists even when we use a specification that only exploits variations in connection caused by exogenous turnovers of higher level leadership we evaluate two plausible motivations behind this bias network based policy coordination and collective corruption and find evidence in stronger support of the former our findings suggest that private networks may function as an important albeit costly tool of mobilization in one party systems

auctionin entry into tournaments a research tournament model with heterogeneous contestants is presented for a large class of contests the optimal number of competitors is two this insight makes designing the tournament easier and highlights the importance of selecting highly qualified contestants while customary uniform price and discriminatory price auctions are intuitively appealing mechanisms for solving this adverse selection problem in practice they generally will not be efficient mechanism for selecting contestants instead we propose an alternative auction format that is equally simple to implement and efficiently selects the most qualified contestants to compete regardless of the form of contestant heterogeneity

bringing home the bacon an empirical analysis of the extent and effects of pork barreling in australian politics which electorates receive targeted funding and does targeted funding swing votes to answer these questions i analyze four discretionary programs funded by the australian federal government during the 2001 2004 election cycle controlling for relevant demographic characteristics of the electorate those electorates held by the governing coalition received a larger share of discretionary funding and a larger number of program grants among government seats funding does not appear to have been directed towards those that were more marginal more discretionary funding particularly on road building was associated with a larger swing towards the government in the 2004 election

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

election goals and income redistribution recent evidence from albania this paper examines the impact of political competition on block grants from federal to sub federal levels of government we model the extent and direction of income redistribution as determined proximately by the political agendas of central decision makers and at a deeper level by the institutions within which they nd themselves operating we contrast two political objective functions that yield di erent empirical predictions of the ways in which politics should a ect scal policy lessons learned here may prove important in understanding limits on the types of redistribution possible via block grants given the institutional framework in both developing and developed countries 2001 elsevier science b v all rights reserved jel classixcation h1 h7 o1

wage effects of increased union coverage methodological considerations and new evidence although many studies show a positive relationship between extent of unionization and union members wages some analysts suggest that this relationship could reflect a concentration of labor organization in industries with potentially high wage gains rather than unions efficacy in raising wages consistent with that speculation studies across occupations or geographic areas generally show a much weaker relationship between unionization and wages than do studies across industries the authors of this study argue however that the weakness of the relationship found in some empirical research is due to the use of data sets mixing local market industries characterized by local bargaining with national market industries characterized by national bargaining an empirical analysis supports this hypothesis wages are positively correlated with the extent of unionization in a local market industry supermarkets but not in a national market industry aerospace

pipelines of pork japanese politics and a model of local opposition party failure the liberal democratic party ldp has dominated japanese politics since 1955 and the party s even greater dominance of subnational level elections is much of the reason why this article seeks to

bargaining power fear of disagreement and wage settlements theory and evidence from u s industry the paper develops and estimates a theoretical model of wage determination and union nonunion wage differentials in order to overcome the institutional ctiticisms of the formal bargaining literature the paper generalizes the nash zeuthen harsanyi model by linking the solution to the institutional concepts of bargaining power and fear or cost of disagreement and by making the outcome depend not only on endogenous but also on exogenous factors an operational specification of bargaining power and fear of disagreement allows the model to be estimated with data covering twelve companies and trade unions during the period from mid 1950 s to the late 1970 s while giving limited support to the nashzeuthen harsanyi solution the empirical analysis indicates that the bargaining outcome usually deviates from the nash zeuthen harsanyi point and in accordance with the institutionalist claim that it varies significantly with exogenous factors contrary to the traditional labor economics view the results do not support the general conclusion that the bargaining solution lies on the marginal revenue product curve of labor instead the relevant coefficients suggest that for many firms and unions the outcome might be better characterized by the efficient contract vertical contract curve

the survival of the welfare state this paper provides an analytical characterization of markov perfect equilibria in a model with repeated voting where agents vote over distortionary income redistribution a key result is that the future constituency for redistributive policies depends positively on current redistribution since this affects both private investments and the future distribution of voters the model features multiple equilibria in some equilibria positive redistribution persists forever in other equilibria even a majority of beneficiaries of redistribution vote strategically so as to induce the end of the welfare state next period skill biased technical change makes the survival of the welfare state less likely

war and conflict in economics theories applications and recent trends we review the main economic models of war and conflict these models vary in details but their implications are qualitatively consistent highlighting key commonalities across a variety of conflict settings recent empirical literature employing both laboratory and field data in many cases confirms the basic implications of conflict theory however this literature also presents important challenges to the way economists traditionally model conflict we finish our review by suggesting ways to address these challenges

bargaining theory inflation and cyclical strike activity in manufacturing this paper presents a theoretical and empirical analysis of cyclical movements in strike activity the first part of the paper develops a bargaining model that demonstrates the crucial role of limi

transaction cost economics and cross national patterns of industrial conflict a comparative institutional analysis at the core of a capitalist system is an implied coalition between labor and capital built upon a system of exchange and compromise without capital the material condition upon which labor s interests are realized would be impossible likewise without labor s consent to exchange wages for future investment capital could not procure the profits and savings necessary for its reproduction and transformation organizing stable and cost efficient class coalitions has long been recognized as not merely an economic priority but a political challenge yet some democracies have met this challenge more successfully than others for the student of comparative political economy an enduring question remains why the present study is an attempt to provide an answer that complements and integrates the more common macroand microanalytic studies of industrial conflict it is argued here that a useful approach is to explicate some of the major microeconomic dynamics that condition exchanges between labor and capital and to demonstrate how institutional devices designed to accommodate political representation and conflict resolution facilitate or impede the process of class compromise by employing the logic of transaction cost economics the analysis highlights the comparative institutional elements fundamental to economizing on the costs of exchange shaping consensus within a political economy s industrial relations system the resulting transaction cost efficiency model of industrial conflict specifies the ex ante cost factors price margin of transaction and the institutional control of bounded rationality and the ex post cost factors legislative polarized pluralism executive hegemony and the frequency of general elections central to the process of building and sustaining class coalitions the model is tested on data drawn from 19 democracies covering the years 1965 83 use of simulation models reveals the relative trade offs associated with different patterns of ex ante and ex post cost structures

electoral goals and center state transfers a theoretical model and empirical evidence from india we construct a model of redistributive politics where the central government is opportunistic and uses its discretion to make transfers to state governments on the basis of political considerations these considerations are the alignment between the incumbent parties at the central and state levels and whether a state is a swing state or not a testable prediction from the model is that a state that is both swing and aligned with the central government is especially likely to receive higher transfers we test this prediction using indian data for 14 states from 1974 75 to 1996 97 we find that a state which is both aligned and swing in the last state election is estimated to receive 16 higher transfers than a state which is unaligned and non swing

the structure of class conflict in democratic capitalist societies the article presents a theory of class conflict between workers and capitalists who pursue their material interests under a form of societal organization that combines private ownership of instruments of production with representative political institutions there exist economic and political conditions under which both classes would simultaneously choose courses of action that constitute a class compromise workers consent to the institution of profit and capitalists to democratic institutions through which workers can effectively press claims for material gains when these conditions hold and a compromise is in force the role of the state consists in institutionalizing coordinating and enforcing the terms of a compromise that represents the preferences of workers as well as capitalists the combination of private ownership of the instruments of production with representative political institutions based on widespread suffrage constitutes a compromise between workers who consent to the private appropriation of profit by owners of capital and capitalists who accept the democratic institutions through which workers can make effective claims for an improvement of their material conditions this form of societal organization was con

the road to power partisan loyalty and the centralized provision of local infrastructure this paper sets out a simple dynamic probabilistic voting model in which a government allocates a fixed budget across electoral districts that differ in their loyalties to the ruling party the model predicts that the geographic pattern of spending depends on the way the government balances long run machine politics considerations and the more immediate concern to win over swing voters empirical results obtained from a panel of electoral districts in quebec provide robust evidence that districts which display loyalty to the incumbent government receive disproportionately more spending especially close to an election at odds with the standard swing voter view

the political model of strikes a new twist the political model of strikes in which work stoppages are viewed as the result of worker intransigence has occupied an influential position in the strikes literature since its empirical specification by ashenfelter and johnson 1 there are two basic reasons for the popularity of the model first it is an eminently accessible treatment in a literature of highly abstract bargaining models most of which do not have a direct bearing on strikes second until the ashenfelter johnson study little progress had been made in applying models of union behavior drawing on ross s 6 insight that the union was essentially a political institution operating in an economic environment ashenfelter and johnson sought to examine the implications for strikes of the divergent goals of the union leadership and the rank and file membership the basic idea is that strikes are caused by the unrealistically high wage aspirations of the latter which are nonetheless processed by the better informed union leadership so as to deflect any incipient challenge to its authority and continued tenure in office the function of a strike is an equilibrating mechanism to square up the membership s wage expectations with what the firm may be prepared to pay strikes are attributed exclusively to the union side the difficulty with the model lies precisely in its assumption that it is the union side which bargains badly and hence precipitates strikes for example one can construct a model employing the opposite assumption after eaton 2 and rabinovitch and swary 4 indeed the assumption that it is the employer side which bargains badly forms the basis of our revisionist model conceptual issues apart the twist is that our model is applied to the very same data set used by farber 3 in his re estimation of the ashenfelter johnson model using data on eighty contract negotiations for ten large manufacturing firms on which more below we show that the two very differently assumptioned models both yield reasonable results using the same data set the implications of this finding are then discussed

some stronger measures of risk aversion in the small and the large with applications the arrow pratt measures of risk aversion for von neumann morgenstern utility functions have become workhorses for analyzing problems in the microeconomics of uncertainty they have been used to characterize the qualitative properties of demand in insurance and asset markets to examine the properties of risk taking in taxation models and to study the interaction between risk and life cycle savings problems to name just a few applications equally importantly they have generated the linear risk tolerance class of utility functions which has provided canonical examples in such diverse areas as portfolio theory and the theory of teams despite these successes there have been a number of areas for which the results have been weaker than hoped it is natural to use the risk aversion measures to compare the behavior of individuals in risky choice situations for example consider the individual portfolio choice problem in a two asset world with a riskless asset and a risky asset if individual a has a uniformly higher arrow pratt coefficient of risk aversion than individual b then b will always choose a portfolio combination with more wealth invested in the risky asset but suppose that both assets are risky now there is no obvious sense in which the more risk averse individual can be said to hold a less risky portfolio but it seems strange that such a simple alteration should destroy the analytics which support the basic intuition similarly consider the basic insurance problem if one individual a is more risk averse than another b in the arrow pratt sense it follows that a will pay a larger premium to insure against a random loss than will b typically though an individual evaluates partial rather than total insurance that is only some gambles can be insured against and others must be retained in this case even when the gambles which are retained are independent from those which are insured it is no longer true that the individual whose arrow pratt measure of risk aversion is higher will pay a larger insurance premium the situation is no better when we consider comparative statics exercises for a single individual decreasing absolute risk aversion in the sense of arrow and

voter influence and big policy change the positive political economy of the new deal what conditions cause major policy changes under representative government this article addresses that question by providing a theoretically grounded analysis of a massive policy change the new deal it explains how the economic problems of the early 1930s initiated changes on several dimensions of policy federal spending labor market regulation and civil rights the article concludes by considering the broader lessons learned from the political economy of the new deal

relative wage effects of unions dictatorship and codetermination econometric evidence from germany t he present study estimates the effects of trade unions hitler s regime and codetermination on relative wages in germany i each of these establishments is considered to have had important implications for germany s labor market moreover a thorough understanding of their effects can be valuable for comparative purposes following a brief discussion of these phenomena and their hypothesized effects on wages the analytical model is developed in section ii the empirical results are reported in section iii and section iv contains the summary and conclusions the extensive literature on the relative wage effects of trade unions has focused almost exclusively on the union impact in north america2 and more recently in great britain 3 since the german institutions of industrial and labor relations differ considerably from their angloamerican counterparts4 and often have been studied as a successful possibly superior system which might be adopted by others it is worthwhile exploring the magnitude of the union wage effect in the german institutional setting in particular it has been argued that compared to their american and british counterparts the continental unions tend to place more emphasis on political and social rather than economic achievements 5 if this hypothesis is correct then ceteris paribus the estimated relative wage effect of german unions ought to be smaller than that found in the united states and great britain with the advent of hitler s regime in 1933 there was a dramatic transformation of the existing political and economic institutions trade unions which in 1932 represented over 40 of the industrial labor force were promptly abolished6 and replaced by a government operated labor front 7 strikes and lockouts were forbidden and wages were determined centrally 8 while the effects of these changes on the cultural political and social life have been well documented few economic studies attempted to analyze the effect of hitler s regime on wages and incomes moreover those that did used a qualitative or only a loose quantitative approach partially as a result of the lack of a systematic wage series prior to 1934 9 w krelle 1962 p 17 has shown for example that labor income received for publication july 30 1979 revision accepted for publication may 1 1980 cornell university i would like to thank orley ashenfelter albert rees and two anonymous referees for helpful comments i have also benefited from discussions with j s butler william greene louis phlips and katherine terrell any remaining errors are of course my own this research was in part supported by a grant to the princeton university economics department from the sloan foundation i the term codetermination refers to the german participatory system of management as it was originally established in the federal republic by the 1951 codetermination act and the 1952 works constitution act 2 the most important work and collection of references on the subject is still lewis 1963 among the later studies in the private sector are ashenfelter 1972 ashenfelter and johnson 1972 bloch and kuskin 1978 boskin 1972 de menil 1971 rosen 1969 and schmidt and strauss 1976 public sector studies are summarized by lewin 1977 x see especially pencavel 1974 mulvey 1976 and metcalf 1977 4 needless to say there are important differences between the u s and british systems of industrial and labor relations they exhibit considerable homogeneity however when compared to the systems in continental europe historically the relatively most salient features of the german system have been 1 trade union affiliation with political parties and or religioiis organizations 2 industrial unionism 3 governmental interference in industrial and labor relations and 4 paternalistic management world war ii led to the unification of the formerly splintered unions in the deutsches gewerkschafts bund dgb close collaboration with the social democratic party sdp and the establishment of codetermination for institutional references see almanasreh 1977 fiirstenberg 1969 1977 schregle 1978 and vollmer 1976 1979 5 see kassalow 1969 1980 and windmuller 1969 6 employers associations followed their lead in 1934 7 the labor front included all employees and employers it represented the nazi government in the factories and possessed broad powers over its member subjects 8 in fact the entire economy underwent considerable centralization as hitler proclaimed his first four year plan in 1933 and a second one in 1936 9 among the most thorough and informative of these conventional studies is that of bry 1960 for a discussion of the data see gerss 1977

structural dependence of the state on capital a central claim of both marxist and neoclassical political theory is that under capitalism all governments must respect and protect the essential claims of those who own the productive wealth of society this is the theory of structural dependence of the state on capital using a formal model the internal logic and the robustness of the theory is examined we conclude that in a static sense the theory is false virtually any distribution of consumption between wage earners and owners of capital is compatible with continual private investment once an appropriate set of taxes and transfers is in place yet the state may be structurally dependent in a dynamic sense policies that once in place redistribute income without reducing investment do reduce investment during the period in which they are anticipated but not yet implemented

parties as political intermediaries this paper argues that parties regulate competition among like minded factions so as to enhance reputation building by and voter trust in the politicians standing for a given cause while intra and interparty competition contributes to keeping politicians on their toes unbridled competition may encourage politicians to challenge good platforms and to wage competition along socially suboptimal dimensions for example by privileging form over content the paper builds a simple model of intraparty competition and studies whether various hierarchical or democratic party institutions constitute an efe cient form of party governance the paper shows that intraparty disagreements when they occur hurt the party s position in the general election but that their possibility enhances party image and that parties must be able to avoid behind the scene allocations of portfolios and spoils in order to be credible last it analyzes the impact of political polarization and interparty competition on the choice of party governance

who delivers partisan clients in the argentine electoral market why do some parties fail to benefit from patronage in pork ridden political systems this article analyzes the interaction between patronage and partisanship to explain why some incumbents are more likely to benefit from pork politics than others we explain such differences by focusing on political parties access to resources supply side and voters dependence on fiscal largesse demand side we show how these differences affect the patron s choice of public sector wages and employment we use subnational level data to show different electoral returns from patronage for the two major political coalitions in argentina peronism and the ucr alianza and their effect on preferences over public sector wages and employment w hy do some political parties fail to benefit from patronage in pork ridden political systems this article analyzes the interaction between patronage and partisanship to explain why some incumbents are more likely to benefit from pork politics than others we explain returns to patronage by highlighting differences in the political parties access to resources supply side and the voter s dependence on public sector jobs demand side we propose that just as political parties cater their policies to particular groups of voters they pursue different strategies when allocating pork in exchange for support on the supply side we highlight the importance of partisan biases in the fiscal and electoral institutions that regulate the access and distribution of public resources on the demand side we show that patronage is a distributive mechanism that provides different returns to voters with different skills and labor market expectations

a model of political competition with citizen candidates the authors develop a model of electoral competition in which citizens choose whether or not to run as candidates a winner implements her favorite policy the equilibrium number of candidates depends negatively on the cost of running and positively on the benefits of winning for some parameter values all equilibria under plurality rule have exactly two candidates whose positions are distinct two candidate elections are more likely under plurality rule than under a runoff system the candidates positions are less differentiated under a runoff system there exist equilibria under both systems in which some candidates have no chance of winning

central bank independence political regimes and the sacrifice ratio a replication study of caporale and caporale 2008 a recent article by caporale and caporale 2008 this journal provides an important finding on the determinants of the sacrifice ratio central bank independence is not a determining factor for the sacrifice ratio when political regimes and other factors are controlled for our replication study shows that their result is driven by errors in the data with correct data it can be found that central bank independence is positively and significantly correlated with the sacrifice ratio even when the nature of the political regime is controlled for

the determinants of strike incidence and severity a micro level study this paper investigates the determinants of strike incidence and severity during labor contract negotiations the author develops a model that considers the forces influencing both unions willingness to strike and employers willingness to take a strike and estimates it using data describing 1 050 negotiations in u s manufacturing during the 1971 80 period the results indicate that strike incidence is influenced by the gender composition of the labor force demand fluctuations in the product market location in a right to work state the number of workers in the bargaining unit union density in the industry and the extent to which wages kept pace with inflation over the prior contract period on the other hand neither the local unemployment rate when negotiations began nor the inflation rate over the term of the expiring contract influenced strike incidence or severity in this sample