the effects of ownership and benchmark competition an empirical analysis of u s water systems abstract should governments or private firms own water systems can yardstick or benchmark competition effectively discipline utilities little empirical research sheds light on these issues we use a panel dataset that includes every community water system in the united states from 1997 to 2003 to test the effects of ownership and benchmark competition on regulatory compliance we find that ownership does not generally affect compliance with the safe drinking water act sdwa greater benchmark competition however is associated with fewer sdwa violations the results suggest that ownership per se may not matter much but that competition even in its weaker form of benchmarking by consumers or regulators can improve performance

prices employment and pro labor governments in this analysis of a game between a government and a union the welfare function of the union depends on the welfare of the workers and the welfare function of the government depends on the welfare of the workers and the owners a government is said to be more proworker if it gives more weight to the workers welfare in its utility function we study the effect on a more proworker government on the equilibrium of the economy a more proworker government is found to induce a lower wage lower unemployment lower prices higher welfare for the workers and typically lower welfare for the owners copyright 1995 by the editors of the scandinavian journal of economics

u s bilateral trade flows and exchange risk during the floating period abstract this paper tests for real exchange rate risk effects on u s bilateral trade flows during the floating period using several new as well as previously used risk measures significant negative effects occur in five of six u s import flows and in two of six u s export flows with one export flow showing a significant positive effect these results are consistent with several previous findings for aggregate u s trade two risk measures using the forward exchange rate and assuming a time varying risk premium provide marginally more significant results than the others

economic growth strategies the effects of ideological partisanship on interest rates and business taxation in the united states we reformulate the partisanship thesis in light of four claims leveled against it the reformulated version ideological partisanship is based upon the theory that similar rates of economic growth may follow from the different use of policy instruments owing to their role as determinants of investment and growth interest rates business taxation rates and the redistribution of the tax burden between capital gains and earned income are examined we advance models that take into account other views of politics beside the partisan one and test for political influences the united states is characterized by very pronounced partisan differences in national economic policy with democratic administrations seeking to promote growth through a consumption driven while republican administrations promote an investment driven strategy democratic administrations also seek to shift the tax burden toward corporations and owners of capital these findings are examined in light of the comparative political economy literature we conclude that the forms and institutional foundations of left partisan policies differ among democratic capitalist countries

business political power the case of taxation we examine contending views about the forms and mechanisms of business power in u s politics by estimating time series models explaining taxation and redistribution taxation and redistribution constitute strong cases for theories about business and class power since all firms have an interest in reducing taxation we find that changes in corporate taxation and in redistribution between capital gains income and earned income and between corporate taxation and individual taxation are strongly influenced by political partisanship with democratic administrations increasing the tax burden on firms and their owners how far corporations engage in electoral financing measured through the establishment of corporate political action committees is also influential the models show some evidence consistent with the understanding of class power conceptualized by bowles gordon and weisskopf and the presence of election cycle effects but inconsistent with implications arising from the structural dependence of the state on capital and asset concentration in the largest corporations as a mechanism of class power

power and the control of capital this essay reviews three recent books on the political economy of finance in postcolonial asia and latin america and suggests a framework for examining the relationship between political power and varying patterns of control over investment resources the stress is on the constraints different controllers of capital can impose on state leaders the conditions under which policymakers can subvert these constraints and how conflicts within the state over the trajectory of policy are mediated by who or what supplies critical investment resources and the institutional channels through which the resources flow

employers and the welfare state the political economic organization of firms and social policy in contemporary capitalist democracies the authors argue that the organization of employers shapes social policy support among firms and in turn affects social policy outcomes specifically the authors argue that the centralization and cohesion of employer groups and economic cooperation across enterprises positively affects social welfare provision empirically the authors assess the impacts of business organization on social welfare effort in 15 developed democracies between the 1970s and 1990s the authors also provide analysis of the impact of employer organization on active labor market policy the authors find that the organization of employers is one of the most important determinants of overall social welfare effort the authors also find that employer organization affects the development of active labor market policies and it influences the degree to which social democratic parties pursue active labor market programs the authors conclude with a discussion of the findings implications for theories of social corporatism and the w

limits on authoritarian imposition of policy failed ecuadoran military populism in comparative perspective does regime type affect policy outcomes do authoritarian regimes have greater policy discretion than democratic regimes the empirical evidence is ambiguous using two cases of failed military populism in ecuador the author argues that two authoritarian characteristics lack of participation in decision making and nonmobilization frustrated implementation of import substitution policies ironically groups expected to benefit most industrialists and urban workers provided the principal opposition although the regime needed their cooperation to implement policy neither group had assurance that its interests were protected thus political alliances require more than an exchange of policies for support regimes must make their commitments credible by permitting the participation in decision making and mobilization of groups whose cooperation is needed for policy implementation this conclusion is supported by a comparison to peru where a military regime encountered similar obstacles and argentina where

electoral business cycles in oecd countries studies of oecd countries have generally failed to detect real economic expansions in the pre election period casting doubt on the existence of opportunistic political business cycles we develop a theory that predicts a substantial portion of the economy experiences a real decline in the pre election period specifically the political uncertainty created by elections induces private actors to postpone investments with high costs of reversal the resulting declines referred to as reverse electoral business cycles are larger the more competitive the electoral race and the greater the polarization between major parties we test these predictions using quarterly data on private fixed investment in ten oecd countries between 1975 and 2006 the results suggest that reverse electoral business cycles exist and as expected depend on electoral competitiveness and partisan polarization moreover simply by removing private fixed investment from gross domestic product gdp we uncover robust evidence of opportunistic cycles

the impact of constitutions on economic performance constitutions matter for economic performance to the extent that they promote stability accountability and credibility this article considers the nature of political constituions and their impact on economic efficiny and economic security wnder three aspects the basic righs laid down in the constitution the structure of government and the stringency of amedment procedures while emphasizing that constitutions can be usefid by serving as precommitment devices the analysis also emphasizes the dangers of rigidity and the need for flexibility t he relation between political institutions and economic performance is not well understood the causal link goes in both directions well designed insttutions can improve economic performance but some institutions may be feasible or effective only at specific levels of economic development here i consider only one aspect of the relationship the impact of institutions on economic performance however a full treatment of the subject would consider both aspects and the following discussion must be read with this important proviso in mind i further limit myself to the subset of political institutions that are embodied in constitutions the smdy of the impact of constitutions on economic performance is part of what is usually referred to as constitutional political economy a field that can be traced back to the caklcdus of consent by buchanan and tullock 1962 buchanan was also the founder of the journal constitutional political economy the public choice approach to constitutions has focused somewhat narrowly on fiscal and monetary constitutions although actual constitutions rarely stipulate tax systems or monetary institutions in any detail the ban on paper money in the u s constituton for instance has few analogues in modem constitutions moreover even that document is concerned mostly with other matters such as the organization of the executive and the legislature separation of powers and the relations between the federal government and the states constituitional political economy

increasing returns to scale in financial intermediation and the non neutrality of government policy a general equilibrium model of imperfectly competitive financial intermediaries is constructed and used to study the effects of some standard policy experiments one time increases in the growth rate and in the level of the stock of money have non neutral and sometimes surprising effects on interest rates the quantity of intermediated borrowing and lending the number of intermediary firms inflation and the price level optimal government macroeconomic policy is shown to reflect a tradeoff between public sector frictions and the capital market distortion created by increasing returns to scale and imperfect competition in private intermediation

state revenue extraction from different income groups variations in tax progressivity in the united states 1916 to 1986 we examine the conditions that affected the progressivity of the individual income tax in the united states between 1916 and 1986 a multivariate time series analysis shows how macroeconomic conditions state imperatives the organizational capacities of social classes and political conditions have affected the progressivity and the symbolic component of the income tax progressivity is measured by the difference between the effective tax rates paid by moderate income and very high income families the symbolic component of this tax is measured by the difference between the nominal tax rate and effective income tax rate paid by very high income families the results reveal that changes in tax progressivity are due largely to macroeconomic and state fiscal conditions such as unemployment economic development and budget deficits although the organizational capacities of social classes and political conditions such as labor organization and political participation also have effects changes in progressivity are due primarily to adjustments in the rates paid by very high income families however the impacts of these conditions on tax progressivity changed somewhat when the federal income tax was transformed into a mass tax during world war il finally political conditions have a relatively greater effect on the symbolic component of the income tax than on progressivity overall this analysis supports a structural theory of the state in which the influences of politics and social classes on revenue extraction are circumscribed by macroeconomic and state fiscal conditions

the politics of finance how capital sways african central banks abstractwhile there is a large literature on the politics of central banking its insights are difficult to translate to sub saharan africa this article addresses gaps in this literature by considering how the interests of those who control financial resources sway african central banks case studies of kenya nigeria and uganda demonstrate that variation in the sources of capital on which countries rely to finance investment helps to account for the pattern of variation in central bank policy stances the analysis further develops and probes arguments about power derived from the control of capital in the context of developing countries

does the organization of capital matter employers and active labor market policy at the national and firm levels does the organization of business matter for social policy development in the advanced capitalist democracies conventional welfare state analysis has given this significant question scant attention we argue however that the representational power of business coordination across business interest units and integration of associations in corporatist policy making forums or what we call the social corporatist organization of business should result in greater support and participation by employers in social policy formation and implementation we test our arguments with models both of 1980 98 pooled time series data on withinand across country variation in spending on active labor market programs and of extensive firm level survey data from denmark and the united kingdom we find that the centralization and coordination of employers as well as the integration of employer organizations in corporatist policy making forums are strongly associated with shares of national income devoted to active labor market policy we find moreover that the degree of employer organization conditions active labor market policy responses to de industrialization and increases in general unemployment at the firm level membership in an employer association has a significant positive effect on employer participation in active labor market programs in corporatist denmark but not in the pluralist united kingdom

cooperation and political economic performance in affluent democratic capitalism research on comparative political economic performance has traditionally followed two separate tracks one concerned with collective economic gain growth and efficiency and the other focused on distribution and redistribution cooperative institutions offer a key to understanding cross national variation among the affluent capitalist democracies in both facets of political economic performance these institutions cluster along two dimensions neocorporatism and firm level cooperation pooled time series analysis for 18 nations over 1960 89 suggests that 1 neocorporatism is a major source of distributive redistributive policies and outcomes and of several sources of collective gain 2 firm level cooperation is a key contributor to economic growth

central banks at war war is expensive troops must be equipped and weapons must be procured when the enormous borrowing requirements of war make the sovereigns credibility problem more difficult central banks enhance a government s ability to borrow by being the sole direct purchaser of government debt the central bank increases the effective punishment that can be imposed on the government for defaulting on the marginal lender this increases lenders confidence that the government will be punished in case of default making lenders willing to purchase the debt at a lower rate of interest the sovereign dependent on the low borrowing costs offered by the central bank has an incentive to retain the bank data covering the nineteenth and early twentieth centuries reveal that possessing a central bank lowers the sovereign s borrowing costs particularly during times of war

reputation and the control of pollution this paper investigates the effectiveness of reputation in inducing a polluting firm to self regulate its emissions when consumers have imperfect information in particular we ask to what extent must consumers reward and punish the firm before it chooses self regulation as its dominant strategy we find that if payoffs in the stage game are such that both the consumer and the polluting firm have beliefs that are consistent with each others behaviors then the firm has a positive probability of playing clean in each period of a finite game further we find that a weak reward punishment scheme may have an adverse effect on the environment and that there are both environmental and welfare gains associated with strengthening the scheme

political regimes and economic growth arguments that relate regimes to growth focus on property rights pressures for immediate consumption and the autonomy of dictators while everyone seems to agree that secure property rights foster growth it is controversial whether democracies or dictatorships better secure these rights the main mechanism by which democracy is thought to hinder growth is pressure for immediate consumption which reduces investment only states that are institutionally insulated from such pressures can resist them and democratic states are not the main argument against dictatorships is that authoritarian rulers have no interest in maximizing total output these views are summarized in turn

drink what you can pay for financing infrastructure in a fragmented water system the article investigates the relationship between environmental violations and water utility infrastructure investment in the houston metropolitan area through a lens of institutional fragmentation

the political economy of financial internationalization in the developing world in the last decade a growing number of developing countries have opened their financial systems by liberalizing capital flows and the rules governing the international operations of financial intermediaries one explanation of this rush toward greater financial internationalization is that increasing interdependence generates domestic and foreign political pressures for capital account liberalization while we find evidence for that hypothesis we find that the proximate cause in developing countries more frequently is found in balance of payments crises politicians perceive that financial openness in the face of crisis can increase capital inflows by indicating to foreign investors that they will be able to liquidate their investments and by signaling government intentions to maintain fiscal and monetary discipline the argument is explored through case studies of chile indonesia mexico and south korea

explaining capital account liberalization in latin america a transitional cost approach in the past three decades governments around the world have lowered barriers to international capital flows this movement is widely attributed to the forces of globalization as developed nations moved toward relative convergence on international financial openness yet developing nations with much to gain from openness to foreign investment moved only hesitantly and inconsistently in this direction analysis of two decades of capital account liberalization in latin america and the oecd reveals that nations in latin america with weaker domestic financial sectors face higher risks of transitional dislocations following liberalization and move less aggressively toward openness in the oecd by contrast financial weakness is associated with greater movements toward capital account opening as transitional costs are lower and governments are better equipped to ameliorate them examination of the transitional costs of liberalization thus helps to explain how market pressures may impede rather than promote market oriented reform in latin america

the enforcement of pollution control laws inspections violations and self reporting targeting is the practice of inspecting firms most likely to violate a regulation this paper provides empirical evidence on the role of targeting in regulatory compliance i propose that self reporting by a firm is used to demonstrate that firms are willing to cooperate the results indicate that there is a one quarter penalty period following a violation inspections are also determined by the economic situation of the surrounding community demonstrating that targeting opens the door to interest group influence inspections that detect violations encourage self reporting showing that firms demonstrate their desire to cooperate with regulators by disclosing violations

room to move international financial markets and national welfare states a central research question in international political economy concerns the influence of financial markets on government policy outcomes to what extent does international capital mobility limit government policy choices i evaluate the relationship between international financial markets and government policy outcomes with a focus on the government bond market in developed democracies evidence includes interviews with financial market participants and a cross sectional time series analysis of the determinants of interest rates this evaluation suggests that governments of developed democracies face strong but narrowly defined financial market pressures financial market participants are concerned with a few macroeconomic policy indicators including inflation rates and government deficit gdp ratios but not with micropolicy indicators such as the distribution of government spending across functional categories in these areas governments retain policymaking autonomy i conclude by exploring the role of financial market influences within domestic politics and offering suggestions for further research

the making of policy institutionalized or not this paper develops a framework for analyzing different policymaking styles their causes and their consequences in latin america finding that lower institutionalization and greater use of alternative political technologies apts are more likely the lower the cost of using these technologies the higher the potential damage they can cause the lower the wealth of the economy and the more asymmetric the distribution of de jure political power moreover strategic complementarity exists in the use of alternative political technologies for instance bribes by the rich and protests by the poor are likely to be countervailing forces and will both occur in polities with weaker political institutions

bankers alliances and economic policy patterns evidence from mexico and brazil this article suggests an organizational or institutional explanation of economic policy patterns which differs significantly from state or society centered explanations and those based on international factors bankers alliances defined as interest coalitions of public and private financiers play an important role in shaping economic policy the stronger the bankers alliance the more likely that long run economic policy patterns will feature orthodox policies such as tight monetary policy and limited government intervention in financial or foreign exchange markets the historical organization of state economic agencies and of capital create national environments more or less conducive to formation of strong bankers alliances the three key variables center on a the timing and actors involved in central bank formation b the relationship between the central bank and other state economic policy making agencies and c the extent of conglomeration between industrial and financial enterprises a

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

campaign contributions as a commitment device we explore the idea that the influence of interest groups in elections may have positive economic effects since the investment decisions of firms determine economic growth and employment voters have a common interest in making their governments commit to policies that encourage private investments however governments may renege on promises for economic stability and choose excessively leftist policies campaign contributions by firms tend to restrain the scope for such opportunism and provide a commitment device this is achieved if firms after the policy is chosen contribute to the governing party or to its rivals

capital mobility and coalitional politics authoritarian regimes and economic adjustment in southeast asia this article investigates the coalitional bases of authoritarian rule to explain striking variation in adjustment policy to the asian financial crisis in indonesia and malaysia given currency depreciation with financial sector fragility holders of mobile assets prefer to maintain an open capital account while owners of fixed assets and labor favor restrictions of capital mobility to facilitate expansionary macroeconomic policies differences in adjustment policy across the two countries reflect differences in the political coalitions supporting the authoritarian regimes these findings illuminate the nature of political conflict during financial crises and show how a nuanced view of the coalitions supporting authoritarian rule can yield powerful insights into the political economy of authoritarianism and economic adjustment in a global economy

interest group success in the european union when and why does business lose business lobbying is widespread in the european union eu but because not all lobbying is successful the following question arises when does business win and when does it lose in the context of legislative policy making in the eu we argue that business actors are overall less successful than citizen groups in the european policy process however they can protect their interests if interest group conflict is low or the role of the european parliament is restricted a new data set on the positions of more than 1 000 non state actors with respect to 70 legislative acts proposed by the european commission between 2008 and 2010 allows us to evaluate this argument empirical support for our expectations is highly robust our findings have implications for the literature on legislative decision making in the eu and for research on non state actors in international organizations

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

taxation corporate financial policy and the cost of capital the cost of capital plays an important role in the allocation of resources among competing uses in a decentralized market system the purpose of this paper is to organize and present what is known and what is hypothesized about the effects of taxation on the incentive to invest via the cost of capital taking full account of important issues that arise independently from the question of taxation included in the analysis is a discussion of empirical findings about the interaction of inflation and taxation in influencing the incentive to invest and a treatment of taxation and uncertainty this abstract was borrowed from another version of this item

politics and the structural dependence of the state in democratic capitalist nations i explore empirically a central claim of the structural dependence thesis namely that capitalists ability to disinvest fundamentally conditions policy choices in democratic capitalist systems utilizing time series data for 16 affluent democracies from 1965 to 1984 i find that indeed low rates of business investment are associated with reductions in corporate tax burdens and that these reductions are more pronounced in periods of economic crisis moreover low rates of capital formation engender cuts in personal income taxes during periods of economic stress however i also find that the magnitude of responsiveness of taxation to low rates of investment is relatively small and that analyses of the political context of investment and taxation indicate that governments have choices the responsiveness of corporate tax burdens to capital formation may under some governments be part of a policy mix designed to maintain adequate investment and to address the demands of core constituencies

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

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

the reputational penalties for environmental violations empirical evidence abstract this paper examines the sizes of the fines damage awards remediation costs and market value losses imposed on companies that violate environmental regulations firms that violate environmental laws suffer statistically significant losses in the market value of firm equity the losses however are of similar magnitudes to the legal penalties imposed and in the cross section the market value loss is related to the size of the legal penalty thus environmental violations are disciplined largely through legal and regulatory penalties not through reputational penalties

when governments regulate governments this article advances a political theory of regulation that accounts for the choices of regulators and regulated entities when both are governments leading theories of regulation assume that governments regulate profit maximizing firms governments set rules to which firms respond rationally in ways that constrain their behavior but often the entities that governments regulate are other governments we argue that government agencies and private firms often face different compliance costs and that agencies have greater incentives than firms to appeal regulations through political channels simultaneously the typical enforcement instruments that regulators use to influence firm behavior may be less effective against governments our empirical subjects are public and private entities compliance with the u s clean air act and safe drinking water act we find that compared with private firms governments violate these laws significantly more frequently and are less likely to be penalized for violations

the political economy of high income taxation capital taxation path dependence and political institutions in denmark denmark s income tax burden as the percentage of gdp is larger than the total tax burden of the united states and it has increased further after 1980 how can this be explained given increasing tax competition and widespread views that strong reliance on regressive taxes was conducive to building and maintaining large tax and welfare states the article highlights three factors first large income taxes are feasible if the capital tax burden is moderated within the income tax second the effective capital income tax burden that had developed up to the early 1980s was extremely low so that subsequent tax reforms could cut marginal tax rates on mobile types of capital income while increasing tax revenue third drastic changes in the legal structure of the income tax and stability in aggregate tax policy outcomes were facilitated by proportional representation and legislative majority rule

political responses to interdependence what s left for the left heightened economic interdependence in recent years is commonly argued to have generated great pressures for convergence in economic policies across the advanced industrial democracies interdependence has clearly had a great impact on the types of economic policies that governments can pursue they have been unable to pursue independent fiscal and monetary policies since the mid 1970s furthermore all governments have been forced to attempt to promote the competitiveness of national goods and services in world markets and to increase the speed and efficiency with which national producers adjust to changes in global markets there are however different policies consistent with these goals statistical analyses of economic policies since the mid 1970s show that governments of the left and the right continue to be able to enact distinctive supply side policies that promote competitiveness and flexible adjustment and simultaneously further their partisan objectives

globalization taxation and burden shifting in latin america most researchers interested in the relationship between global markets and public policy focus on advanced industrial democracies in contrast we examine competing hypotheses as to globalization s effect on governments by expanding the scope of the discussion to include developing nations more specifically we investigate the relationship between international market integration and the evolving burden of taxation on capital as well as the subsequent response of markets to shifts in tax policy in latin america since the late 1970s consistent with our theoretical expectations we find that global market forces are more constraining vis a vis tax policy in latin america than in the world s wealthiest nations despite these market based pressures however national politics continue to influence tax policy in latin america in a manner consistent with findings on advanced industrial democracies as such developing nations continue to have some room to manipulate policy though within the context of a more strictly neoliberal context than their counterparts in advanced industrial democracies

has exchange risk depressed international trade the impact of third country exchange risk abstract this paper argues that the effect of exchange risk on bilateral and aggregate trade flows should be analyzed by including the impact of third country exchange risk factors in addition to direct bilateral or multilateral risk after a theoretical examination of these effects us bilateral export flow to its six largest trading partners are analyzed empirically i find individuality and jointly significant third country risk effects in most cases in contrast to some recent bilateral efforts i find a steadily growing negative impact on trade flows from exchange risk during floating and in contrast to recent aggregate trade flow studies i conclude that there was no temporary decline in exchange risk during the late 1970s

the origins of financial openness a study of current and capital account liberalization theory we assess the determinants of the national regulation of international finance or the comparative degree of national financial openness or closure hypotheses partisanship interacts with a nation s factor endowments to account in part for different international financial policies by governments of the same partisan hue methods we offer a quantitative measure of international financial openness or current and capital account regulation for 21 member countries of the organization for economic cooperation and development for 1950 88 we use regression analysis employing panel corrected standard errors to discover the determinants of financial openness results our main finding is that political partisanship substantially explains openness but does so in complex ways differences in both political institutional arrangements and types of political economy also account for part of the differences in international financial regulation

leading the left to the right populist coalitions and economic reform abstract democratic political parties with a history of commitment to statist economic policies face internal stresses when they come to power and preside over programs of wholesale economic liberalization how do such parties and coalitions avoid splintering and manage to maintain electoral support examining the recent experiences of argentina and mexico edward gibson suggests that one can understand these achievements by treating each party as a combination of two separate components performing distinct functions a metropolitan policy component and a peripheral or rural electoral component his framework travels well beyond latin america and helps illuminate the different politics underlying three recent waves of economic liberalization in sri lanka

national tax systems versus the european capital market capital taxation alberto giovannini the current structure of taxes on capital income across ec countries can be exploited by corporations to reduce tax burdens skilled individuals can indulge in tax avoidance too the liberalization of capital movements stands to turn tax avoidance into a cottage industry this article provides a primer on capital income taxes and describes strategies which reduce the tax burden from a policy perspective the question is how to avoid massive tax evasion after 1992 there is no need to harmonize if the right taxation principle is adopted two principles are contrasted the territorial principle according to which taxes are levied on domestic investment irrespective of the country of residence of the beneficiary and the worldwide principle according to which taxes are levied on domestic savings irrespective of where they are invested it is shown that the worldwide principle involves much fewer distortions than the territorial principle a strict application of this principle would effectively solve the problem of tat evasion in europe without requiring full harmonization of the tax systems its full implementation would require the abolition of withholding taxes the elimination of tax deferrals which are quite pervasive throughout europe and an in depth review of blocking and secrecy laws

invested interests the politics of national economic policies in a world of global finance capital moves more rapidly across national borders now than it has in at least fifty years and perhaps in history this article examines the effects of capital mobility on different groups in national societies and on the politics of economic policymaking it begins by emphasizing that while financial markets are highly integrated within the developed world many investments are still quite specific with respect to firm sector or location it then argues that contemporary levels of international capital mobility have a differential impact on socioeconomic groups over the long run increased capital mobility tends to favor owners of capital over other groups in the shorter run owners and workers in specific sectors in capital exporting countries bear much of the burden of adjusting to increased capital mobility these patterns can be expected to lead to political divisions about whether or not to encourage or increase international capital market integration the article then demonstrates that capital mobility also affects the politics of other economic policies most centrally it shifts debate toward the exchange rate as an intermediate or ultimate policy instrument in this context it tends to pit groups that favor exchange rate stability against groups that are more concerned about national monetary policy autonomy and therefore less concerned about exchange rate stability similarly it tends to drive a wedge between groups that favor an appreciated exchange rate and groups that favor a depreciated one these divisions have important implications for such economic policies as european monetary and currency union the dollar yen exchange rate and international macroeconomic policy coordination