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

political cycles and economic performance in oecd countries empirical evidence from 1951 2006 this paper examines whether electoral motives and government ideology influence short term economic performance i employ data on annual gdp growth in 21 oecd countries over the 1951 2006 period and provide a battery of empirical tests in countries with two party systems gdp growth is boosted before elections and under leftwing governments in the first two years of a legislative period these findings indicate that political cycles are more prevalent in two party systems because voters can clearly punish or reward political parties for governmental performance my findings imply that we need more elaborate theories of how government ideology and electoral motives influence short term economic performance

political cycles in oecd economies this paper studies whether the dynamic behaviour of gnp growth unemployment and inflation is systematically affected by the timing of elections and of changes of governments the sample include the last three decades in 18 oecd economies we explicitly test the implication of several models of political cycles both of the opportunistic and of the partisan type also we confront the implication of recent rational models with more traditional approaches our results can be summarized as follows a the political business cycle hypothesis as formulated in nordhaus 1975 on output and unemployment is generally rejected by the data b inflation tends to increase immediately after elections perhaps as a result of pre electoral expansionary monetary and fiscal policies c we find evidence of temporary partisan differences in output and unemployment and of long run partisan differences in the inflation rate as implied by the rational partisan theory by alesina 1987 d we find virtually no evidence of permanent partisan differences in output growth and unemployment

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

information and legislative bargaining the political economy of u s tariff suspensions this paper studies the political influence of individual firms on congressional decisions to suspend tariffs on u s imports of intermediate goods we develop a legislative bargaining model in which firms influence legislators by transmitting information about the value of protection using verbal messages and lobbying expenditures model estimation using firm level data on tariff suspension bills and lobbying expenditures reveals that the probability a suspension is granted decreases with each additional firm that expresses opposition this effect is significantly larger than that of either opponent or proponent lobbying due to the greater information content of verbal opposition and legislative bargaining costs jel f13 d7

temporal aggregation in political budget cycles electoral cycles have been widely debated since the pioneering studies of the 1970s on monetary and fiscal policy 1 drazen sums up the evidence in terms of active fiscal policy and passive monetary policy while expansionary fiscal policy is the main impulse behind electoral cycles monetary policy has an accommodating role 2 recently there has been a flurry of empirical work on political budget cycles pbcs using cross country panels the most influential works concentrate on the budget surplus because it can capture both increases in expenditures and tax cuts before elections and is thus the most sensitive indicator of aggregate pbcs 3a drawback of these extant studies is their reliance on annual observations since elections take place between january and december annual data do not allow one to identify the election year precisely to get around this problem other schemes have been proposed for example by the rule of the semester the previous year is counted as the election year if elections take place before july 4 what are the consequences of temporal aggregation for the measurement of pbcs instead of being concentrated in the election year pre electoral effects may be spread out over the two years leading up to elections more important if the sign of policies is reversed after elections lower frequency data may mask pbcs because the effects in the election year cancel out as akhmedov and zhuravskaya point out in their country study of russia 5to illustrate the differences between using annual and quarterly data to identify the election year imagine that elections take place in june furthermore assume there is a pre electoral deterioration in the budget surplus surplus 1 during the four quarters running up to elections followed by an improvement surplus 1 the next four quarters in the calendar year in which elections take place the net effect on the budget surplus is zero elections are not always in june of course what happens if elections are evenly spread out over the year table 1 presents a simulation where y 0 is the calendar year of elections y 1 is the year before and y 1 is the year after for elections in the first quarter of the election year namely y 0 q 1 our textbook example of a pre electoral expansion in the deficit during the four quarters prior to elections followed by a contraction the next four quarters implies that the surplus equals 1 from y 1 q 2 to y 0 q 1 it equals 1 from y 0 q 2 to y 1 q 1 and it equals 0 otherwise when the budget surplus is at its average value normalized here at zero the same procedure is followed for elections in the other three quarters if we aggregate the effects by calendar year there is a serious underestimation of pbcs in the election year since pre electoral expansions are almost cancelled out by post electoral contractions leaving a net expansive effect that is only 25 percent of the total stimulus before elections the least affected by temporal aggregation are post electoral fiscal adjustments since 62 5 percent of the total effect is reflected the year after elections on the other hand if there were no post electoral fiscal adjustments the problem of temporal aggregation would be much less severe since 62 5 percent of the total expansive effect would be reflected the calendar year of elections and 37 5 percent the year before this paper tackles the issue of temporal aggregation in pbcs head on we build a cross country panel with annual and quarterly data from nineteen latin american countries and twenty member states of the organization for economic cooperation and development oecd over the 1980 2005 period 6 quarterly data allow us to identify the election year more precisely with annual data the election year is the calendar year in which elections take place with quarterly data the election year comprises the election quarter plus the three prior quarters we introduce two nonstandard features in our analysis

political economy of the u s temporary duty suspension program an empirical note we examine every tds bill introduced by the house of representatives and approved by the u s international trade commission in the last six years the significant relationship between these bills and campaign contributions coupled with the personal characteristics of proponents and sponsors influence the policy outcomes of the u s tds program

black residential centralization and the spatial mismatch hypothesis abstract black residential centralization is found to be an important determinant of black employment status when estimated across metropolitan areas mas to avoid neighborhood selection the effects are greatest in large mas for the young and elderly and for individuals with less than a college education instrumental variable iv estimates support ordinary least squares ols results black residential centralization can account for 48 62 of the black white employment differential among 18 30 year olds living in large mas when estimated together black residential centralization job centralization and segregation all have large effects but the effects of black centralization and job centralization are considerably larger

academic earmarks and the returns to lobbying abstract in this paper we estimate the returns to lobbying by universities to motivate our empirical work we develop a simple theoretical model of university lobbying for academic earmarks our statistical analysis shows that universities represented by a house appropriations committee hac or senate appropriations committee sac member spend less money on lobbying than those that are not represented in addition using instrumental variables estimations we show that universities without hac or sac representation may receive some benefit to lobbying for earmarks although in many estimations this benefit is not statistically different from zero however for universities with hac or sac representation a 10 percent increase in lobbying yields an additional 2 8 percent or 3 5 percent increase in earmarks respectively this suggests that there are large returns to lobbying for academic earmarks if a university is represented by a member of one the hac or sac but little or no return if not

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

political and institutional determinants of fiscal policy in the european community in recent theoretical and empirical research the variation in political and institutional arrangements which may affect the process of national policy formation is examined in order to explain cross country differences with respect to fiscal policies pursued in this paper we build upon this literature and examine whether and how cross country differences in debt accumulation and public sector size of member countries of the european community during the 1980s can be explained we conclude that the growth of government debt is positively related to the frequency of government changes and negatively to sound budgetary procedures in countries with left wing governments the growth of the share of government spending in total output generally tends to be higher

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

partisan governments the international economy and macroeconomic policies in advanced nations 1960 93 this article examines the impact of parties domestic institutions and the international economy on the conduct of monetary and fiscal policies using time series cross section data from nineteen oecd countries for the years between 1960 and the mid 1990s the results are as follows partisan governments have affected alone and in interaction with the organization of labor markets the pattern of macroeconomic management still their impact has varied over time partly as a function of economic conditions but fundamentally as a function of the degree of financial liberalization and the exchange rate system in place after following broadly similar macroeconomic policies in the 1960s oecd governments pursued divergent monetary and fiscal policies in response to the economic slowdown of the 1970s even when they initially adopted countercyclical measures conservative governments quickly favored tight monetary policies and strove to achieve fiscal discipline by contrast taking advantage of generalized capital controls and floating exchange rates socialist cabinets embraced demand management policies in a systematic fashion mostly through budget deficits in corporatist countries and through both loose monetary and loose fiscal measures in noncorporatist settings as financial liberalization progressed in the early 1980s partisan and institution led differences in macroeconomic policies waned across countries

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

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

a quantile based test of protection for sale model this paper proposes a new test of the protection for sale pfs model by grossman and helpman 1994 unlike existing methods in the literature our approach does not require any data on political organization we use quantile and quantile iv regressions to do so using the data from gawande and bandyopadhyay 2000 surprisingly the results do not provide any evidence favoring the pfs model we also explain why previous work may have inadvertently found support for it

fiscal policy deficits and politics of subnational governments the case of the german laender the first part of the paper briefly describesinstitutional aspects of the german federal system andexamines the economic and fiscal performance of thegerman laender since 1970 taking into account theinstitutional settings especially the fact that thegerman laender cannot set tax rates individually wedevelop a highly stylized model of subnationalgovernments that do not have access to the tax rateinstrument and thus have to use expenditures as apolicy variable the model implies an expendituresmoothing policy of subnational governments andcomplements the famous tax smoothing model theempirical section examines whether governments ofvarious ideology show significant differences infiscal stabilization policy our results indicatethat regional differences in public debt accumulationand public expenditure policy in general is largelydetermined by interregional differences in economicperformance whereas we do not find any significantimpact on the ideological composition of the laendergovernments

electoral cycles in savings bank lending we provide evidence that german savings banks which are controlled by county level politicians systematically adjust lending policies in response to local electoral cycles the different timings of county elections across states and the existence of a comparable group of cooperative banks that are very similar to savings banks but lack their political connectedness allow for identification of the effects of county elections on savings bank lending these effects are economically meaningful and very robust to various specifications we find that election induced lending negatively impacts savings bank profitability and is associated with an increase in credit defaults roughly three years after an election examining the political economy aspects of our findings we provide evidence that savings bank excess lending and public spending at the county level are substitute levers for county politicians finally we find indications that subpar pre election economic county performance hurts re election prospects and increases the intensity of lending cycles

voters as fiscal conservatives voters penalize federal and state spending growth this is the central result of my analysis of voting behavior in presidential senatorial and gubernatorial elections from 1950 1988 the composition of federal spending growth seems irrelevant the vote loss to the president s party from an extra dollar of defense or nondefense spending is the same however in gubernatorial elections expansion of state welfare spending exacts a disproportionate political price deficit financing of federal or state spending does not appear to matter politically i conclude by discussing the obvious question of why government budgets have grown in the face of this voter hostility

the effect of fiscal performance on local government election results in israel 1989 1998 abstract we discuss the circumstances under which voters in local elections will reward fiscal responsibility and suggest that such circumstances evolved in israel in the mid 1990s we present empirical evidence that indeed fiscal performance of mayors substantially affected their reelection probability in the 1998 campaign but not in the 1989 and 1993 campaigns changes in the political environment enforcement of audit and financial reporting requirements tougher imposition of hard budget constraints and the development of local media are proposed as explanations the hypotheses that the fiscal variables reflect the income level at the locality or the mayor s success in extracting resources from the central government are tested and rejected

the electoral budget cycle on municipal waste collection expenditure abstractthis article analyses the determinants of municipal waste collection expenditure specifically the effects of electoral cycles on municipal waste collection expenditure we use a database with information on spanish municipalities with more than 1000 inhabitants for the period 2002 2011 our results reveal that incumbents adopt an opportunistic behaviour increasing spending on waste in the preelection year and reducing it in the election and post election years therefore we confirm an electoral budget cycle on waste collection expenditures in spain additionally we find that the levels of income unemployment and upper level governments transfers have a positive impact on waste collection spending finally population density level of urbanization average age of the population of the municipality and less fragmented governments negatively influence waste collection spending

electoral cycles and budgetary growth in veterans benefit programs while many studies have generated negative findings regarding the general existence of electoral cycles in economic phenomena we have found an apparently robust electoral cycle in veterans benefits this pattern was found between 1961 and 1978 but has disappeared since then we use this case to investigate the possibility that electoral cycles might contribute to the growth of government spending using two different methods of inference we find no strong basis to conclude that such cycles cause increasing public sector growth

can black workers escape spatial mismatch employment shifts population shifts and black unemployment in american cities abstract this paper uses a spatial mismatch index that measures the extent to which residential and employment locations differ across a metropolitan area to determine whether the spatial separation of black residential locations and employment locations impacted black labor market outcomes from 1980 to 1990 it is found that between 1980 and 1990 unemployment rates for black workers were negatively affected by a growing divergence between black residential locations and metropolitan employment locations metropolitan employment shifts increased black unemployment rates by 0 63 to 4 32 percentage points while black population shifts did not fully offset the impact of employment shifts

fiscal transparency political parties and debt in oecd countries abstract many believe and argue that fiscal or budgetary transparency has large positive effects on fiscal performance however the evidence linking transparency and fiscal policy outcomes is less compelling to analyze the effects of fiscal transparency on public debt accumulation we present a career concerns model with political parties this allows us to integrate as implications of a single model three hitherto separate results in the literature on deficit and debt accumulation that transparency decreases debt accumulation at least by reducing an electoral cycle in deficits that right wing governments at least for strategic reasons tend to have higher deficits than left wing governments and that increasing political polarization increases debt accumulation to test the predictions of the model we construct a replicable index of fiscal transparency on 19 country oecd data simultaneous estimates of debt and transparency strongly confirm that a higher degree of fiscal transparency is associated with lower public debt and deficits independent of controls for explanatory variables from other approaches

searching for political business cycles in germany one reslt of the revitalised literature on political business cycles is that there are signs in german data that elections and ideology have an impact however using monthly data for the period 1950 1989 and standard methods of time series analysis we reject both the nordhaus hypothesis of opportunistic cycles and the partisan approaches by hibbs ans alesina we show that some results are sensitive to the assumption of stationarity there are signs of policy cycles in m1 it is hard though to bring this in line with the rogoff hypothesis of rational opportunistic cycles because of the german institutional setting

information access and contributions a signaling model of lobbying interest groups pay monetary contributions to gain access and provide information to a policymaker if their interests are aligned with those of the policymaker s constituency they have costless access and report their private information truthfully if their interests conflict they are forced to pay a strictly positive contribution in order to enhance the credibility of their reports the policymaker bases her policy decision on the competing reports and the size of the contributions accompanying these reports the interest groups contribution decisions are plagued by a free rider problem i derive the implications of this problem for the size and pattern of contributions and for the degree of information aggregation

lobbying and asymmetric information informational lobbying the use by interest groups of their alleged expertise or private information on matters of importance for policymakers in an attempt to persuade them to implement particular policies is often regarded as an important means of influence this paper analyzes this phenomenon in a game setting on the one hand the interest group is assumed to have private information which is relevant to the policymaker whilst on the other hand the policymaker is assumed to be fully aware of the strategic incentives of the interest group to mis report or conceal its private information

the political economy of fiscal policy an experimental study on the strategic use of deficits field data on the strategic use of deficits to limit thebudgetary scope of future governments are inconclusive aboutthe effects of political polarization or a government sre election probability on fiscal policy therefore wedesigned a controlled experiment to examine the strategic useof deficits using a within subjects design we find thatdeficits rise with a higher degree of polarization and a lowerreelection probability however in a between subjects designneither polarization nor reelection probabilities have asystematic effect we discuss the implications of ourexperimental results for empirical tests of the strategic useof deficits with field data

separation of powers and political budget cycles political budget cycles pbcs arise when the electorate is imperfectly informed about the incumbent s competence and the incumbent has discretion over the budget focusing on the second condition we study how separation of powers affects pbcs in the composition of government spending we find that the details of the budget process namely the bargaining rules the status quo s location and the degree of compliance with the budget law are critical for the existence and the amplitudes of pbcs in particular when the status quo is determined by the previous budget and there is high compliance with the budget law separation of powers acts as a commitment device which solves the credibility problems that drive pbcs

electoral cycles in active labor market policies we examine how electoral motives influence active labor market policies that promote short term job creation such policies reduce measures of unemployment using german state data for the period 1985 to 2004 we show that election motivated politicians pushed job promotion schemes before elections

economic freedom and government ideology across the german states potrafke n economic freedom and government ideology across the german states regional studies this paper examines whether government ideology influenced economic freedom across the german states the results show that in former west germany rightwing governments promoted economic freedom whereas leftwing governments confined it in the former east germany however rightwing governments were not associated with propagating economic freedom this finding appears to conflict with the common notion of policy convergence at the federal level in fact the observed variation in political preferences across states may indicate that politicians gratify the local electorate and in return offer moderate policies at the federal level potrafke n potrafke n la liberte economique et l ideologie du gou

legislative budget cycles recent literature suggests that electoral budget cycles are a phenomenon of new rather than established democracies what part of the democratization process explains the amelioration of the political budget cycle we argue the answer lies in part in the development of a strong party system we extend the classic rogoff siebert model to show that political budget cycles are possible in a legislative context with rational voters we then demonstrate that the development of a strong party system can restrain political budget cycles in a majoritarian electoral system finally we follow prior work in using vote share volatility as a measure of the institutionalization of the party system using newly collected vote share data for 433 elections for 90 democracies from 1980 2007 we calculate a measure of party institutionalization we then use this data to demonstrate that institutionalized party systems are associated with mitigated political budget cycles especially in majoritarian electoral systems

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

political budget cycles the case of the western german lander this paper focuses on the issue of the electoral andideological cycles in state government budget for the elevenwestern german lander we verify this hypothesis over theperiod 1974 1994 for the following budgetary variables totalexpenditures surplus deficit administration health care education roads and social security benefits while overallour results seem to show that generally the party variabledoes not play a systematic role in spending decisions theyprovide some support to the opportunistic cycle theory showingthat the only relevant phenomenon is the effect of theupcoming election on the government spending inclinations

central banks partisan politics and macroeconomic outcomes what are the implications of the trend toward granting central bank independence for partisan theories of the macroeconomy the conventional view is that parties of the left and right strive to achieve distinctive macroeconomic outcomes when in government however when faced with an independent central bank parties of the left may prove unable to produce their preferred partisan outcomes whereas right parties may be privileged in their ability to pursue their goals moreover granting the central bank independence can be expected to have differing effects depending on whether left or right parties prevail in government these issues are explored with a pooled time series model of inflation and unemployment in 16 organization for economic co operation and development countries from 1961 through 1991 the results support the claim that the effects of partisan government and central bank organization are mutually contingent the pattern of results anticipated by partisan theory only arises where central b

the political economy of monetary institutions in recent decades countries have experimented with a variety of monetary institutions including alternative exchange rate arrangements and different levels of central bank independence political economists have analyzed the choice of these institutions emphasizing their role in resolving both the time inconsistency problem and dilemmas created by an open economy this first generation work however suffers from a central limitation it studies exchange rate regimes and central bank institutions in isolation from one another without investigating how one monetary institution affects the costs and benefits of the other by contrast the contributors to this volume analyze the choice of exchange rate regime and central bank independence together and in so doing present a second generation of research on the determinants of monetary institutions the articles incorporate both economic and political factors in explaining the choice of monetary institutions investigating how political institutions democratic processes political party competition and interest group pressures affect the balance between economic and distributional policy objectives

electoral cycles in public administration decisions evidence from german municipalities abstractelectoral cycles in public administration decisions evidence from german municipalities regional studies this paper provides evidence that there is an electoral cycle in public administration decisions using data from german local governments in the period 2001 10 specifically it finds that the number of building licences issued by the public administration significantly increases in election years this result is robust to various specification tests and to dealing with the potential endogeneity of the election timing

us presidential elections and real gdp growth 1961 2004 in this paper i show that since 1960 an electoral cycle in us output growth can both be seen by the naked eye in the raw data and confirmed by a statistical analysis that allows for rational partisan effects as well as a wide range of control variables that is controlling for multiple lags of interest rate changes inflation money growth energy prices lagged output growth government spending or its growth and temporary partisan effects the timing of elections exerts a significant influence on quarterly real gdp growth

foreign informational lobbying can enhance tourism evidence from the caribbean there exist legal channels for informational lobbying of u s policymakers by foreign principals foreign governments and private sector principals frequently and intensively use this institutional channel to lobby on trade and tourism issues this paper empirically studies whether such lobbying effectively achieves its goal of trade promotion in the context of caribbean tourism and suggests the potential for using foreign lobbying as a vehicle for development panel data are used to explore and quantify the association between foreign lobbying by caribbean principals and u s tourist arrivals to caribbean destinations a variety of sensitivity analyses support the finding of a strong association the policy implications are obvious and potentially important for developing countries

welfare costs of the u s antidumping and countervailing duty laws abstract the antidumping ad and countervailing duty cvd laws in the united states have become the most pervasive form of import relief sought by domestic producers this paper estimates the collective economic effect of the hundreds of active u s ad cvd orders using a computable general equilibrium model we estimate that the collective net economic welfare cost in 1993 of these orders to be 4 billion this welfare estimate is sensitive to various modeling assumptions which are explored in the paper with the implementation of the uruguay round agreements the ad cvd laws remain one of the costliest programs restraining u s trade

the electoral budget cycle this article begins with a review of the now substantial literature on the thesis that polticians manipulate governmental outputs so as to favor their chances of reelection it concludes that while this electoral cycle thesis was initially overstated by its proponents it retains more plausibility than recent critics have allowed this conclusion is then demonstrated through an analysis of expenditures by the ten provincial governments in canada between 1951 and 1984

partisan and electoral motivations and the choice of monetary institutions under fully mobile capital central bank independence and pegged exchange rates have each been viewed as solutions to the inflationary bias resulting from the time inconsistency of discretionary monetary policy while it is obvious that a benevolent social planner would opt for such an institutional solution it is less obvious that a real world incumbent facing short term partisan or electoral pressures would do so in this article i model the choice of monetary institutions from the standpoint of a survival maximizing incumbent it turns out that a wide range of survival maximizing incumbents do best by forfeiting control over monetary policy while political pressures do not in general discourage monetary commitments they can influence the choice between fixed exchange rates and central bank independence i highlight the importance of viewing fiscal policy and monetary policy as substitutes and identify the conditions under which survival maximizing incumbents will view fixed exchange rates and central bank independence as substitutes in so doing i provide a framework for integrating other contributions to this volume

partially independent central banks politically responsive governments and inflation theories of central bank independence have more exact implications regarding inflation in different political economic environments than generally understood or empirically examined they imply that inflation in any given country time will be a weighted average of what it would be if the central bank completely controlled monetary policy and what it would be if the government completely controlled it with the degree of central bank independence weighting the former an equation embodying this theoretical expectation is estimated by constrained least squares from a time series cross section of inflation rates in developed democracies since the bretton woods era the results confirm that the antiinflationary benefit of central bank independence is not constant but rather depends on every variable in the broader politicaleconomic environment to which wholly autonomous central banks and governments would respond differently conversely the inflationary impacts of all such political economic variables depend on the degree of central bank independence

rulers of the game central bank independence during the interwar years central bank independence is associated with restrictive monetary choices that can be deflationary within fixed exchange rate regimes because central banks act to counteract domestic inflation they put a premium on domestic price stability at the expense of international monetary stability evidence from fifteen countries between 1925 and 1938 shows that the more independent central banks took more deflationary policies than were necessary for external adjustment central banks in general were more restrictive under left wing governments than they were under more conservative regimes and often were more restrictive than required for external equilibration this suggests that policies of independent central banks designed to enhance domestic price stability may force deflationary pressures onto other states in the system and potentially destabilize a fixed exchange rate regime

a protectionist bias in majoritarian politics we develop a novel model of campaigns elections and policy making in which the ex ante objectives of national party leaders differ from the ex post objectives of elected legislators this generates a distinction between policy rhetoric and policy reality and introduces an important role for party discipline in the policy making process we identify a protectionist bias in majoritarian politics when trade policy is chosen by the majority delegation and legislators in the minority have limited means to influence choices the parties announce trade policies that favor specific factors and the expected tariff or export subsidy is positive positions and expected outcomes monotonically approach free trade as party discipline strengthens i introduction in a democracy the majority rules often this means that the policies enacted by elected governments reflect the preferences of some citizens more than those of others this feature of democracy commonly known as tyranny of the majority arises in institutional settings in which elected officials represent disproportionately the interests of their own constituents and electees who represent the minority have limited means to influence policy in this paper we argue that tyranny of the majority imparts a protectionist bias to democratic politics this is so even when the average citizen covets free trade and when every citizen has an equal probability of being represented in the policy making process by protection we mean policies that favor quasi fixed factors of production thus protection in our parlance refers both to tariffs that shield import competing industries from foreign competition and subsidies that promote exports the bias refers to the average or expected policy outcome we focus on majoritarian systems in which elected legislators represent geographic regions the existence of a protectionist bias requires only that i national party leaders cannot fully commit their candidates to adopt particular policies if elected ii mem

transparency political polarization and political budget cycles in oecd countries we investigate the effects of fiscal transparency and political polarization on the prevalence of electoral cycles in fiscal balance while some recent political economy literature on electoral cycles identifies such cycles mainly in weak and recent democracies in contrast we show conditioning on a new index of institutional fiscal transparency that electoral cycles in fiscal balance are a feature of many advanced industrialized economies using a sample of 19 oecd countries in the 1990s we identify a persistent pattern of electoral cycles in low er transparency countries while no such cycles can be observed in high er transparency countries furthermore we find in accordance with recent theory that electoral cycles are larger in politically more polarized countries

federalism and central bank independence the politics of german monetary policy 1957 92 two channels of political control allow elected politicians to influence monetary policy first political threats to the status structure or very existence of the central bank may force central bankers to comply with politically motivated demands on monetary policy second politicians may use their powers of appointment to ensure that central bank appointees share their electoral and party political goals this paper derives the monetary policy outcomes obtained as a function of the degree of central bank independence zero partial or full and central bankers types partisans or technocrats based on a case study of the 1957 and 1992 institutional changes to the german central banking system and a regression analysis covering the period in between i argue that the formal independence of the system is protected by its embeddedness in the institutions of german federalism and by the federalist components of its decentralized organizational structure the behavioral independence of the german central bank fluctuates over time with the party control of federalist veto points the bundesbank is staffed with nonpartisan technocrats who are partially insulated from political pressures

is german domestic social policy politically controversial this paper investigates empirically the influence of government ideology on social policy using german data examining the funding and the benefits of social security and public healthcare policy my results suggest that policies implemented by governments dominated by left and rightwing parties were similar over the 1951 2007 period leftwing governments however spent more in the 1970s and rightwing governments did so after german reunification in 1990 since policy convergence encourages new parties to enter the political arena and party platforms on social policy matters are likely to undergo further changes in light of demographic change the observed pattern may thus be a transitory phenomenon

partisan politics and public finance changes in public spending in the industrialized democracies 1955 1989 this paper evaluates the role that partisan politics plays in altering public spending levels the analysis covers over three decades of data on the developments of the public sectors in 16 oecd countries the results of the analysis lend firm support to the partisan politics model of special note is the distinction between the electorate and the government ideological preferences and the dominant role that the former plays the results also suggest contrary to conventional wisdom that partisan political influences have not been eliminated with the tightening of linkages to the international economy

international and domestic constraints on political business cycles in oecd economies the effect of increased capital mobility on the national control of macroeconomic policy continues to be a topic of debate empirical contributions to this debate share the assumption that domestic macroeconomic policy is driven by either partisan or countercyclical motivations and that the effects of international financial flows have roughly similar effects in all countries this article reevaluates the integration hypothesis in a framework in which manipulations of the macroeconomy derive from opportunistic motivations the article emphasizes the ways in which prior institutional choices effect the way these motivations are translated into actions evidence from individual country and pooled time series tests suggests that opportunistic cycles are less likely to occur when 1 a government maintains a fixed exchange rate in the presence of highly mobile capital or 2 when the central bank enjoys above average independence

political budget cycles and divided government abstractpolitical budget cycles and divided government regional studies this study empirically examines the effect of divided governments on the existence of political budget cycles it uses a setting at the german municipality level where divided governments occur frequently and can be clearly disentangled from the underlying political system in this setting the executive does not have full discretion over expenditures and tax rates and needs support from the legislative to manipulate policy before executive elections the study shows that political budget cycles in expenditures and tax rates are more likely when the same party controls executive and legislative under divided government policy manipulation is significantly smaller

preemption contests between groups we consider a preemption game between competing groups firms lobbying individually for their groups interests provide an empirical example among symmetric groups the first firm to take action bears an unobserved cost and wins the prize on behalf of its group in equilibrium the firm with the lowest cost takes action but with delay more competition and a smaller ratio of costs to benefits reduce delay firms in larger groups wait longer but group action can occur earlier as the probability of a low cost firm is higher asymmetries in group size or strength of externalities also matter

the spatial mismatch hypothesis what has the evidence shown this paper reviews 20 years worth of empirical evidence on the spatial mismatch hypothesis after briefly surveying the relevant models from urban and labour economics and recent trends in employment and population suburbanisation the empirical evidence on spatial effects is examined this literature includes evidence on the effects of residential segregation residential suburbanisation and employment suburbanisation and direct measures of access such as travel times the most recent evidence suggests that spatial mismatch is relevant for explaining black white employment differences though the magnitudes of these effects remain unclear

partisan political business cycles in the german labour market empirical tests in the light of the lucas critique this paper focuses on alternative specifications ofpartisan political business cycles partisan theory rational partisan theory and hysteresis augmentedrpt it elaborates on analogies of the natural ratehypothesis underlying all specifications and thecointegration concept accordingly problems of thespecification of hypotheses estimation and inferencein a cointegrating framework with politicalinterventions are treated super exogeneity tests areshown to be equivalent to tests of the lucas critiqueand the rpt therefore the concept ofsuper exogeneity is transferred to empirical tests ofpartisan cycles by this a new testing framework ofpartisan cycles is developed and applied to germanlabour market data

the mechanisms of spatial mismatch the spatial mismatch hypothesis smh argues that low skilled minorities residing in us inner cities experience poor labour market outcomes because they are disconnected from suburban job opportunities this assumption gave rise to an abundant empirical literature which is rather supportive of the smh surprisingly it is only recently that theoretical models have emerged which probably explains why the mechanisms of spatial mismatch have long remained unclear and not properly tested this article presents relevant facts reviews the theoretical models of spatial mismatch confronts their predictions with available empirical results and indicates which mechanisms deserve further empirical tests

mobile capital domestic institutions and electorally induced monetary and fiscal policy the literature on global integration and national policy autonomy often ignores a central result from open economy macroeconomics capital mobility constrains monetary policy when the exchange rate is fixed and fiscal policy when the exchange rate is flexible similarly examinations of the electoral determinants of monetary and fiscal policy typically ignore international pressures altogether we develop a formal model to analyze the interaction between fiscal and monetary policymakers under various exchange rate regimes and the degrees of central bank independence we test the model using data from oecd countries we find evidence that preelectoral monetary expansions occur only when the exchange rate is flexible and central bank independence is low preelectoral fiscal expansions occur when the exchange rate is fixed we then explore the implications of our model for arguments that emphasize the partisan sources of macroeconomic policy and for the conduct of fiscal policy after economic and monetary union in europe

overlapping political budget cycles we advance the literature on political budget cycles by testing for cycles in expenditures for elections to the legislative and the executive branches using municipal data we identify cycles independently for the two branches evaluate the effects of overlaps and account for general year effects we find sizable effects on expenditures before legislative elections and even larger effects before joint elections to the legislature and the office of mayor in the case of coincident elections we show that it is important whether the incumbent chief executive seeks reelection to account for the potential endogeneity of that decision we apply an iv approach using age and pension eligibility rules

politics and business cycles in industrial democracies politics alberto alesina influences from political competition on macroeconomic policy are often thought to be a source of economic fluctuations politicians are described as being driven by two not mutually exclusive main motivations they want to be reelected and they harbour political or ideological biases when such theories are confronted with actual cycles in a number of industrial countries the pattern of inflation unemployment output and budget deficits indicates that partisan policy making is a fairly widespread phenomenon with more limited evidence that electoral preoccupations result in major fluctuations the combination of partisanship and electoral cycles may easily result in socially undesirable outcomes in particular the degree of politico institutional stability and the independence of the central bank have a bearing on macroeconomic outcomes these observations raise a number of important questions about the design of political institutions

anti lobbying gains from international agreements abstract i argue that an important potential benefit of international agreements is to reduce wasteful rent seeking activities by domestic and foreign special interest groups through a reduction in policy discretion the presence of foreign lobbying generates a novel type of international externality by inviting wasteful rent seeking by foreign lobbies the presence of policy discretion itself generates a negative international externality i examine the potential anti lobbying effects of three salient types of international rules exact policy commitments policy bounds and non discrimination rules unlike exact policy commitments which remove policy discretion and hence shut down ex post lobbying policy bounds may invite ex post lobbying and hence may forego part or all of the potential anti lobbying gains i also find that policy bounds may lead to mixed strategy equilibria of the rent seeking game a non discrimination rule can reduce rent seeking by foreign lobbies by injecting a free rider problem in the strategic interaction between these lobbies and under some conditions can achieve all the potential anti foreign lobbying gains

opportunistic political cycles test in a young democracy setting this paper tests the theory of opportunistic cycles in a decade old democracy russia finds strong evidence of cycles and provides an explanation for why previous literature often found weaker evidence using regional monthly panel data we find that 1 the budget cycle is sizable and short lived public spending shifts toward direct monetary transfers to voters 2 the magnitude of the cycle decreases with democracy government transparency media freedom voter awareness and over time and 3 preelectoral manipulation increases incumbents chances for reelection the short length of the cycle explains underestimation of its size by previous literature because of low frequency data used in previous studies

residential segregation and unemployment the case of brussels this paper investigates the causal effects of the spatial organisation of brussels on unemployment propensities using census data at the individual level the unemployment probability of young adults is estimated while taking into account personal household and neighbourhood characteristics the endogeneity of residential locations is solved by restricting the sample to young adults residing with their parents the potential remaining bias is evaluated by conducting a sensitivity analysis the results suggest that the neighbourhood of residence significantly increases a youngster s probability of being unemployed a result which is quite robust to the presence of both observed and unobserved parental covariates

making rules credible divided government and political budget cycles political budget cycles pbcs can result from the credibility problems office motivated incumbents face under asymmetric information due to the temptation to manipulate fiscal policy to increase their electoral chances we analyze the role of rules that limit public debt because borrowing is a necessary condition for aggregate pbcs since the legislature must typically authorize new debt divided government can make these fiscal rules credible commitment is undermined by either unified government or imperfect compliance with the budget law which can help explain why pbcs are stronger in developing countries and in new democracies when divided government affects efficiency voters must trade off electoral distortions and government competence