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

do fiscal rules dampen the political business cycle this paper develops and tests the theory that fiscal rules limit politicians ability to manipulate the budget for electoral gain using panel data from the american states i find evidence suggesting that stringent balanced budget rules dampen the political business cycle that is while spending rises before and falls after elections in states that can carry deficits into the next fiscal year this pattern does not exist in states with strict no carry rules neither binding gubernatorial term limits nor the partisan composition of government appear to significantly affect the magnitude of the political business cycle

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

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

wheat policy and economy wide reform in brazil abstract in recent years the wheat sector in brazil has moved from governmental protection and public intervention to a free market and privatization in this study those changes are analyzed through measures of governmental intervention on nominal rates of protection and on welfare of producers and consumers elasticities of demand and supply of wheat are estimated and the effects of changes in policies are analyzed under official and shadow exchange rates welfare measures indicate that almost us 8 billion were spent from 1970 until 1989 with policies to subsidize producers and consumers the policy induced stimulus to consumer demand exceeded the stimulus to domestic production and self sufficiency in wheat declined the reduction in wheat subsidies since 1989 was more than an isolated sector specific policy it was part of macroeconomic anti inflation policy and it coincided with other economy wide changes such as real appreciation and a decline in international commodity prices

divided government fiscal institutions and budget deficits evidence from the states does partisan control of american state government have systematic effects on state spending and taxing levels does divided control affect the government s ability to make hard decisions do institutional rules like legal deficit carryover restrictions matter using a formal model of fiscal policy to guide empirical analysis of data covering the american states from 1968 to 1987 we conclude that 1 aggregate state budget totals are driven by different factors under democrats and republicans the net result being that democrats target spending and taxes to higher shares of state level personal income 2 divided government is less able to react to revenue shocks that lead to budget deficits particularly where different parties control each chamber of the legislature and 3 unified party governments with restricted ability to carry deficits into the next fiscal year outside the south have sharper reactions to negative revenue shocks than those without restrictions

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

concurrent elections and turnout causal estimates from a german quasi experiment conventional wisdom suggests that scheduling elections concurrently with other contests increases turnout however causal empirical evidence in favor of this claim is scarce at best moreover it is a priori unclear whether theory would predict a higher turnout if two low office elections are combined instead of a combination of a low office election and a major electoral race using a quasi experiment and a difference in differences estimation approach at the german municipality level i provide evidence that combining two low office elections significantly increases turnout

social welfare effects of removing multiple exchange rates evidence from the rice trade in iran in order to encourage the involvement of the private sector in importing rice the iranian government plans to relax the system of multiple foreign exchange rates applied to importers wishing to supply the domestic market in this article the welfare effects of removing the current controls on the rice trade and a domestic rice coupon program are evaluated by applying a partial equilibrium analysis to 1961 1999 data the results show that as far as foreign exchange is concerned liberalization of the rice market causes an increase in rice imports mainly due to a decrease in domestic supply in welfare terms the loss in producer surplus from rice market liberalization is relatively high but most rice consumers and the iranian taxpayer would gain overall gains to consumers and taxpayers are estimated to be higher than the losses incurred by domestic suppliers and therefore net social welfare at national level can be improved by rice market liberalization in iran issues for further discussion include residual food security roles for the state and supply side adjustments in terms of resource use and higher quality production

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

selection on observed and unobserved variables assessing the effectiveness of catholic schools in this paper we measure the effect of catholic high school attendance on educational attainment and test scores because we do not have a good instrumental variable for catholic school attendance we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables we also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of catholic school attendance to selection bias we use our methods to estimate the effect of attending a catholic high school on a variety of outcomes our main conclusion is that catholic high schools substantially increase the probability of graduating from high school and more tentatively attending college we find little evidence of an effect on test scores

elected or appointed how the nomination scheme of the city manager influences the effects of government fragmentation abstract empirical research on the causal effect of government fragmentation derives diverse results one reason for this diversity might be that studies are typically settled in a variety of institutional environments to assess the extent to which the local political system might shape the effects of fragmentation this study measures the causal effect of a change in the nomination scheme of the city manager on the council size effect i combine a regression discontinuity design with a difference in differences approach in a large panel dataset of german municipalities the study finds that when the manager is appointed by council there is no significant council size effect but that there is a negative effect when the manager is elected by voters for those expenditure categories over which the manager has the most discretion these findings suggest that the nature of the political system does indeed matter

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

a theory of divided government this paper extends the spatial theory of voting to an institutional structure in which policy choices depend upon not only the executive but also the composition of the legislature voters have incentives to be strategic since policy reflects the outcome of a simultaneous election of the legislature and the executive and since the legislature s impact on policy depends upon relative plurality to analyze equilibrium in this game between voters we apply coalition proof type refinements the model has several testable implications which are consistent with voting behavior in the united states for instance the model predicts a split tickets where some voters vote for one party for president and the other for congress b for some parameter values a divided government with different parties controlling the executive and the majority of the legislature and c the midterm electoral cycle with the party holding the presidency always losing votes in midterm congressional elections

real exchange rate behavior and economic performance in ldcs in recent years policy discussions have included increasing references to real exchange rate rer stability and correct exchange rate alignment as crucial conditions to improve economic performance in less developed countries ldcs 1 evidence from latin american asian and african countries is often quoted to support the view that the link between rer behavior and economic performance is strong it is argued that while unstable rers inhibited export growth in some of latin america their stability was fundamental in promoting east asian expansion in many african countries on the other hand persistently misaligned local currencies harmed the development of agriculture reducing domestic food supply 2 but in spite of its importance no empirical work has been attempted either to test the relationship between rer behavior and performance indicators at a broad multicountry level or to investigate the sources of rer variability and misalignment in ldcs the theoretical literature on rer determinants has been recently surveyed by sebastian edwards 3 he distinguishes between equilibrium and disequilibrium rers and between external and domestic rer determinants although domestic policies are often said to account for significant rer variations empirical work has only concentrated on the effect of nominal devaluations4 or speculative crises arising from expansionary monetary policies in a system of fixed ex

a framework for analyzing food subsidies abstract budgetary pressures and foreign exchange scarcities are increasingly forcing countries to review the costs and benefits of food subsidy programs this paper is intended to help policymakers to assess alternative food subsidy policies and to draw out their more important implications a number of alternative policies are analyzed including both rationing and market clearing schemes these schemes are assessed according to 1 their effectiveness in restricting program benefits to the most nutritionally at risk segment of the population 2 their effect on the level and composition of demand for other goods particularly imports 3 consequences for domestic agricultural price and 4 the long run implications of economic growth for the size of the subsidy bill the conclusions highlight the importance of the demand characteristics of the subsidized good

divided government versus incumbency externality effect quasi experimental evidence on multiple voting decisions abstract this paper explores the causal relationship between vote outcomes in different elections we ask 1 does the partisan identity of the mayor influence the voter s decision in subsequent town council elections 2 do voters condition their vote for the mayor on the result of the last council election the analysis mainprod type flply relies on a regression discontinuity design focusing on close election outcomes based on municipal level data for germany we find that the party of the mayor can receive a significant bonus in the next town council election moreover voters punish mayor candidates of parties that performed strongly in earlier council elections throughout the paper we highlight how these findings can be related to an incumbency externality effect and to the theory of divided government

returns interest rates and inflation how they explain changes in farmland values weather in the corn belt and northern plains and the elimination of traditional commodity programs have refocused attention on farmland valuation this study uses a statistical formulation of information provided by individual regressors to examine the sensitivity of farmland values to changes in inflation returns on agricultural assets and the cost of capital the results indicate that inflation provides the most information on changes in farmland values however the regional results indicate that regions that tend to be more sensitive to changes in the return on agricultural assets also rely more heavily on government payments

does government ideology matter in monetary policy a panel data analysis for oecd countries this paper examines whether government ideology has influenced monetary policy in oecd countries we use quarterly data in the 1980 1 2005 4 period and exclude emu countries our taylor rule specification focuses on the interactions of a new time variant index of central bank independence with government ideology the results show that leftist governments have somewhat lower short term nominal interest rates than rightwing governments when central bank independence is low in contrast short term nominal interest rates are higher under leftist governments when central bank independence is high the effect is more pronounced when exchange rates are flexible our findings are compatible with the view that leftist governments in an attempt to deflect blame of their traditional constituencies have pushed market oriented policies by delegating monetary policy to conservative central bankers

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

impacts of world prices transmission to domestic rice markets in rural iran abstract this paper attempts to assess the degree to which iranian rural households have responded to the change in price of imported rice due to exchange rate unification and to examine the extent to which the policy has affected the economic welfare of various household income groups particularly the poor utilizing samples of 2472 households selected from national expenditure survey data of 2002 and 2003 armington and pass through elasticities were calculated as two measures of substitutability and are discussed separately for each household group in these areas the findings of this study indicate that domestic rice prices are associated differently with imported rice prices among the households however a price increase in imported rice that is mainly consumed by the poor worsens their position much more severely than for the rich people who mainly prefer domestic rice the findings contribute to the understanding of how price changes resulting from trade liberalization may affect various groups of households and the ways they respond to such changes in prices

political cycles in a developing economy effect of elections in indian states the author studies the effect of state legislative assembly elections on the policies of state governments in 14 major states of india from 1960 to 1996 she identifies the effect of the timing of elections using an instrument for the electoral cycle that distinguishes between constitutionally scheduled elections and midterm polls she contrasts two levers of policy manipulation fiscal policy and public service delivery to distinguish between alternative models of political cycles the predictions of three models are tested 1 populist cycles to woo uninformed and myopic voters 2 signaling models with asymmetric information 3 a moral hazard model with high discounting by political agents the empirical results for fiscal policy show that election years have a negative effect on some commodity taxes a positive effect on investment spending but no effect on deficits primarily because consumption spending is reduced with regard to public service delivery elections have a positive and large effect on road construction by state public works departments strikingly the fiscal effects are much smaller than the effect on roads the author argues that the pattern of evidence is inconsistent with the predictions of models of voter myopia and asymmetric information she explores an alternative moral hazard model in which the cycle is generated by high political discounting and career concerns persuade politicians to exert greater effort in election years on the management of public works

the impact of government structure on local public expenditures though the relationship between local government structure and expenditure has received considerable attention there is little consensus as to how the features of representative government affect local expenditure an exception is city council size which has consistently been found to be positively related to spending previous results rely on cross sectional estimation which may be subject to omitted variable bias this paper analyzes three components of municipal governments the form of government the size of the city council and the election method of city councilors once fixed effects estimation is employed the positive relationship between city council size and expenditure disappears

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