bureaucrats or politicians part ii multiple policy tasks abstract policies are typically chosen by politicians and bureaucrats this paper investigates first the normative criteria with which to allocate policy tasks to elected policymakers politicians or non elected bureaucrats politicians are preferable if there is uncertainty about social preferences and flexibility is valuable or if policy complementarities and compensation of losers is important bureaucrats are preferable if time inconsistency and short termism is an issue or if vested interests have large stakes in the policy outcome we then compare this normative benchmark with the case in which politicians choose when to delegate and show that the two generally differ

centralized versus decentralized provision of local public goods a political economy approach abstract this paper takes a fresh look at the trade off between centralized and decentralized provision of local public goods it argues that the sharing of the costs of local public spending in a centralized system will create a conflict of interest between citizens in different jurisdictions when spending decisions are made by a legislature of locally elected representatives this conflict of interest will play out in the legislature depending on precisely how the legislature behaves the result may be excessive public spending or allocations of public goods characterized by uncertainty and misallocation across districts the extent of the conflict of interest between districts is affected by spillovers and differences in tastes for public spending thus the relative performance of centralized and decentralized systems depends upon spillovers and differences in tastes for public spending but for different reasons than suggested in the existing literature

corruption in america abstract we use a data set of federal corruption convictions in the u s to investigate the causes and consequences of corruption more educated states and to a smaller degree richer states have less corruption this relationship holds even when we use historical factors like congregationalism in 1890 as an instrument for the level of schooling today the level of corruption is also correlated with the level of income inequality and racial fractionalization and uncorrelated with the size of government there is a weak negative relationship between corruption and economic development in a state these results echo the cross country findings and support the view that the correlation between development and good political outcomes occurs because education improves political institutions

dynamic tax externalities and the u s fiscal transformation abstract we propose a theory of tax centralization in politico economic equilibrium taxation has dynamic general equilibrium implications which are internalized at the federal but not at the regional level the political support for taxation therefore differs across levels of government complementarities on the spending side decouple the equilibrium composition of spending and taxation and create a role for inter governmental grants the model provides an explanation for the centralization of revenue introduction of grants and expansion of federal income taxation in the u s around the time of the new deal quantitatively it accounts for approximately 30 of the federal revenue share s doubling in the 1930s and for the long term increase in federal grants

secession with natural resources we look at the formation of new indian states in 2001 to uncover the effects of political secession on the comparative economic performance of natural resource rich and natural resource poor areas resource rich constituencies fared comparatively worse within new states that inherited a relatively larger proportion of natural resources we argue that these patterns reflect how political reorganisation affected the quality of state governance of natural resources we describe a model of collusion between state politicians and resource rent recipients that can account for the relationships we see in the data between natural resource abundance and post breakup local outcomes

decentralization and political career concerns abstract politicians career paths often start at some subnational governments and end at the national one allocation of authorities among national and subnational governments affects i how tempting the prospects of taking national offices are and hence how strong bureaucrats political career concerns are and ii whether the incentives generated by these political career concerns can be put into productive use at subnational governments we illustrate this tradeoff in determining the optimal degree of decentralization using china as a case study we also compare the equilibrium degree of decentralization in autocracy and in democracy

from rational actor to efficient complexity manager exorcising the ghost of homo economicus with a unified synthesis of cognition research it is now commonplace to note that economics canonical model of humans as rational self interested utility maximizers homo economicus is both descriptively misleading and often insufficiently predictive however certain outdated assumptions tied to homo economicus persist often influencing discourse and research design even in sustainability oriented fields we argue this ghost of homo economicus endures because the diversity of findings that confound the canonical model has surfaced across multiple behavioral and cognitive sciences each with its own terminology and focus area as such a unified accessible synthesis of this new information has yet to emerge in this paper we review recent insights from across the behavioral and cognitive sciences and propose an efficient complexity manager ecm model homo efficens as the best synthesizing option the crux of this model is that our species works within biological limits to efficiently filter massive environmental complexity this is achieved largely through analogical or case based reasoning we explain this synthesized model using a series of accessible metaphors finally we speculate on how this model may enrich future sustainable development research insofar as it points to fruitful units of analysis can stimulate methodological innovation and provide a more explicit theoretical foundation for the field

an institutional analysis of the design and sequence of trade and investment policy reform countries vary in their political commitment to change and in the capability of their bureaucracies policies vary in their organizational and political demands these institutional variations can be incorporated into the design of trade and investment policy reform in virtually all countries the presumption should be for reforms to dismantlenot reconfigure restrictive entry rules and dysfunctional discretionary investment incentives but there is no single approach common across countries through which trade policy reform sbould proceed countries with weak administrative capabilities should push import liberalization to the limits but politically constrained countries with a stronger administrative capability might consider roundabout reforms that secure outward orientation without full scale prior import liberalization during the past decade it has become apparent that efforts to reform trade and investment policy in developing countries have had uneven results a number of studies have sought to account for this uneven record by going beyond the narrow concerns of the optimal design of economic policies one approach reviewed by paul 1990 has been to highlight problems in implementation as the source of weaknesses and to imply that these can be overcome by improving institutional capability a second approach exemplified by the burgeoning literature on neoclassical political economy colander 1984 rodrik 1992 has been to probe into the underlying political determinants of a country s ability and willingness to adopt and implement trade and investment policy reforms taken alone each of these approaches is too narrow countries vary both in their political commitment to change and in the organizational capability of public bureaucracies moreover policies vary significantly in their organizational as well as political demands it follows that the mix and sequence of reforms should be quite different in countries where the political commitment to policy reform is strong but organizational capabilities are relatively weak than in countries that have strong organizational capabilities but only limited political commitment to reform this article illustrates in some detail how these crosscountry variations in institutional capabilities can be most effectively incorporated into the design and sequencing of programs of trade and investment policy reform

the protestant fiscal ethic religious confession and euro skepticism in germany during the european sovereign debt crisis most countries that ran into fiscal trouble had catholic majorities whereas countries with protestant majorities were able to avoid fiscal problems we find that christian conservative members of the german parliament from constituencies with higher shares of protestants were more likely to vote against a third bailout for greece survey data show that views on the euro differ between german protestants and non protestants at the individual level too among protestants concerns about the euro have compared to non protestants increased during the crisis we show that this increase in concern is linked to a reduction of protestants subjective well being we use the timing of survey interviews and news events in 2011 to account for the endogeneity of euro concerns emphasis on moral hazard concerns in protestant theology may thus still shape economic preferences jel d72 e00 i31 z12

political decentralization and corruption evidence from around the world abstract how does political decentralization affect the frequency and costliness of bribe extraction by corrupt officials previous empirical studies using subjective indexes of perceived corruption and mostly fiscal indicators of decentralization have suggested conflicting conclusions in search of more precise findings we combine and explore two new data sources an original cross national data set on particular types of decentralization and the results of a firm level survey conducted in 80 countries about firms concrete experiences with bribery in countries with a larger number of government or administrative tiers and given local revenues a larger number of local public employees reported bribery was more frequent when local or central governments received a larger share of gdp in revenue bribery was less frequent overall the results suggest the danger of uncoordinated rent seeking as government structures become more complex

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

school decentralization helping the good get better but leaving the poor behind abstract the decentralization of public services is a major feature of institutional innovation the main argument in support of decentralization is that it brings decisions closer to the people thereby alleviating information asymmetries and improving accountability however decentralization can also degrade service provision in poor communities that lack the ability to voice and defend their preferences in this paper we analyze the average and distributional effects of school decentralization on educational quality in argentina we find that decentralization had an overall positive impact on student test scores the decentralization gains however did not reach the poor thus although bringing decisions closer to the people may help the good get better the already disadvantaged may not receive these benefits

privatization possible lessons from the hungarian case abstract hungary was the first eastern european country to tackle the problem of economic reform initially in piecemeal fashion then by introducing broad sets of measures aimed at establishing a market based economic system this paper reviews the hungarian experience with privatization policies and presents some general conclusions regarding the design of successful privatization schemes that might serve as rough guidelines for other countries trying to reduce a vastly overextended public sector

size structure and administrative overheads an empirical analysis of english local authorities the relationship is analysed between size local government structure and administrative overheads in english local authorities size and structure effects are tested while controlling for a range of other variables including the relative prosperity of the local population and the diversity of their service needs the empirical results show that population size consistently has a linear negative effect central administrative costs are lower in larger local authorities the results also show that controlling for size administrative overheads are higher for councils in the lower tier of the existing two tier system the analysis provides support for arguments that economies of scale might be achieved by amalgamating smaller councils into larger units and by combining counties and districts into unitary authorities

eight questions about corruption this paper will discuss eight frequently asked questions about public corruption 1 what is corruption 2 which countries are the most corrupt 3 what are the common characteristics of countries with high corruption 4 what is the magnitude of corruption 5 do higher wages for bureaucrats reduce corruption 6 can competition reduce corruption 7 why have there been so few recent successful attempts to fight corruption 8 does corruption adversely affect growth

political centralization and government accountability boffa acknowledges financial support from the free university of bolzano ww82 piolatto from the spanish ministry of science and innovation eco 2012 37131 and the government of catalonia 2014 sgr 420 ponzetto from the spanish ministry of science and innovation jci 2010 08414 and eco 2011 25624 the spanish ministry of economy and competitiveness ryc 2013 13838 the government of catalonia 2009 sgr 1157 and 2014 sgr 830 the barcelona gse and the bbva foundation through its first grant for researchers innovators and cultural creators

optimal retention in agency problems this paper studies the interaction between a single long lived principal and a series of short lived agents in the presence of both moral hazard and adverse selection we assume that the principal can influence the agents behavior only through her choice of a retention rule this rule is further required to be sequentially rational i e no precommitment is allowed we provide general conditions under which equilibria exist where a the principal adopts a cut off rule under which agents are retained only when the reward they generate exceeds a critical bound and b agents separate according to type with better agents taking superior actions we show that in equilibrium a retained agent s productivity is necessarily declining over time but that retained agents are also more productive on average than untried agents due to selection effects finally we show that for each given type agents of that type are more productive in the presence of adverse selection than when there is pure moral hazard i e when that type is the sole type of agent in the model nonetheless adding uncertainty about agent types cannot benefit the principal except in uninteresting cases

shrouded costs of government the political economy of state and local public pensions abstract why do public sector workers receive so much of their compensation in the form of pensions and other benefits this paper presents a political economy model in which politicians compete for taxpayers and government employees votes by promising compensation packages but some voters cannot evaluate every aspect of promised compensation if pension packages are shrouded so that public sector workers better understand their value than ordinary taxpayers then compensation will be highly back loaded in equilibrium the welfare of public sector workers could be improved holding total public sector costs constant if they received higher wages and lower pensions centralizing pension determination has two offsetting effects on generosity more state level media attention helps taxpayers better understand pension costs and that reduces pension generosity but a larger share of public sector workers will vote within the jurisdiction which increases pension generosity a short discussion of pensions in two decentralized states california and pennsylvania and two centralized states massachusetts and ohio suggests that centralization appears to have modestly reduced pensions but as the model suggests this is unlikely to be universal

television and voter turnout i use variation across markets in the timing of television s introduction to identify its impact on voter turnout the estimated effect is significantly negative accounting for between a quarter and a half of the total decline in turnout since the 1950s i argue that substitution away from other media with more political coverage provides a plausible mechanism linking television to voting as evidence for this i show that the entry of television in a market coincided with sharp drops in consumption of newspapers and radio and in political knowledge as measured by election surveys i also show that both the information and turnout effects were largest in off year congressional elections which receive extensive coverage in newspapers but little or no coverage on television

decentralization and fuel subsidies abstract this paper explores the role of decentralization in explaining variation in fuel subsidies across countries using panel data over the period 1998 2008 and for 108 countries it emerges that the effect of decentralization taken to be an increase in the number of government levels broadly decreases both diesel and gasoline subsidies with this effect being more pronounced when the level of political accountability is low for developing countries for which political accountability is low decentralization decreases gasoline and diesel subsidies by at least 6 98 and 12 99 respectively for developed countries for which political accountability is high decentralization does not have any impact on both gasoline and diesel what this evidence points to is that in developing economies where voters are poorly informed and accountability is low decentralization appears to be associated with lower fuel subsidies

a critique of tiebout s theory of local public expenditures the last section of this paper presents a rigorous version of tiebout s theory of local public goods it is shown that equilibria exist and are pareto optimal this rigorous theory follows closely the more rigorous part of tiebout s work this rigorous theory makes a number of very special assumptions which make local public goods essentially private the body of this paper presents a series of examples which show that if one tries to generalize the rigorous version of tiebout s theory in a number of interesting directions then equilibria may no longer exist or may not be pareto optimal the conclusion is that tiebout s idea does not lead to a satisfactory general theory of local public goods the goal of this paper is to point out that tiebout s notion of equilibrium with local governments does not have the nice properties of general competitive equilibrium except under very restrictive assumptions tiebout 39 suggested that there are competitive forces which tend to make local governments allocate resources in a pareto optimal fashion consumers choose to live in those towns with the mix of taxes and public goods they prefer local governments choose this mix so as to attract inhabitants this idea may seem intriguing for it suggests that the invisible hand solves an important part of samuelson s perplexing public goods problem 32 tiebout in fact makes an argument which is nearly rigorous i give a rigorous version of his argument at the end of the paper however in this rigorous version so many restrictive assumptions are made that public goods become essentially private in the body of the paper i give a series of examples with which i try to convince the reader that one is forced to adopt tiebout s restrictive assumptions the idea is that if one changes any of his assumptions then either equilibria may not exist or may not be pareto optimal my examples are presented in the context of a general class of tiebout models i consider several subclasses one of which is the special case considered by tiebout in each of the subclasses except that considered by tiebout i give a counterexample either to the existence of equilibrium or to its pareto optimality the subclasses are so chosen that the difficulties they reveal would be shared by any reasonable tiebout model which differed from his special case i believe that my examples controvert tiebout s suggestion 39 last paragraph that his theory compares favorably with competitive equilibrium theory most of the examples in this paper have already appeared in the literature i cite related work as i go along what is new here is that i assemble the examples in a unified argument

incumbent behavior vote seeking tax setting and yardstick competition this paper develops a model of the political economy of tax setting in a multijurisdictional world where voters choices and incumbent behavior are determined simultaneously voters are assumed to make comparisons between jurisdictions to overcome political agency problems this forces incumbents into a yardstick competition in which they care about what other incumbents are doing we provide a theoretical framework and empirical evidence using u s state data from 1960 to 1988 the results are encouraging to the view that vote seeking and tax setting are tied together through the nexus of yardstick competition

accountability and decentralisation in government an incomplete contracts model this paper approaches the question of the appropriate level of decentralisation of power in government as a problem in the allocation of control rights under incomplete contracts the model of the paper compares allocations of power to local central and regional government as alternative means of motivating governments to act in the interests of citizens centralisation allows benefits from policy coordination but has costs in terms of diminished accountability which can be precisely defined as the reduced probability that the welfare of a given region can determine the re election of the government the model is extended to allow for conflicts of interest within regions and externalities between central and local governments in a federation it is also applied to determining levels of fiscal transfer between localities and to circumstances where governments may act as leviathans appropriating resources for their own use

electoral competition and special interest politics have fixed positions on some issues but vary their positions on others in order to attract votes and campaign contributions in this context we examine whether special interest groups are governed by an electoral motive or an influence in their campaign giving and how their contributions affect the equilibrium platforms we show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups the party that is expected to win a majority of seats caters more to the special interests

obstacles to developing indigenous small and medium enterprises an empirical assessment the article reports the results of field surveys conducted in sri lanka s leather industry and tanzania s furniture industry it outlines an approach to learning how small and medium enterprises smes perceive the impact of financial regulatory technical marketing and other input constraints and to evaluating the results in relation to other empirical indicators lack of access to finance emerges as the binding constraint for smaller less established firms in sri lanka and for all of tanzania s smes not only is informal financing limited for tanzania s firms even firms of adequate size and experience have difficulty borrowing from banks and if they do borrow have difficult relations with their lenders in tanzania regulatory and tax constraints appear largest for the smallest firms declining somewhat as firms grow because enforcement is comprehensive the bureaucratic burden of negotiating with government officials is greatest for small firms by contrast in sri lanka the regulatory burden rises with firm size because enforcement is more stringent for the larger and more visible firms constraints on physical inputs continue to inhibit sri lankan smes a legacy of excessive vertical integration by parastatals technical constraints are appraised as most significant by relatively educated entrepreneurs with some involvement in high quality market niches

harmonization and side payments in political cooperation for two districts or countries that try to internalize externalities i analyze a bargaining game under private information i derive conditions for when it is efficient with uniform policies across regions with and without side payments and when it is efficient to prohibit side payments in the negotiations while policy differentiation and side payments allow the policy to better reflect local conditions they create conflicts between the regions and thus delay the results also describe when political centralization outperforms decentralized cooperation and they provide a theoretical foundation for the controversial uniformity assumption traditionally used by the fiscal federalism literature

institutional barriers to policy reform in egypt the case of the agricultural machinery industry abstract economic reform has been on the egyptian policy agenda since the mid 1970s but progress has been slow in part due to strong regulatory and institutional obstacles the experience of the agricultural machinery manufacturing industry displays this problem an economic analysis of manufacturing threshers shows that while the impact of price policies was about neutral institutional barriers effectively taxed the industry 15 22 the greatest obstacle was access to marketing credit from the state owned principal bank for development and agricultural credit access to materials and difficulties with tax authorities also hampered the industry

the political economy of dilatory reform egypt in the 1980s abstract the paper explores the political economy of egypt s failure to implement policy reforms during the 1980s despite mounting problems of international indebtedness macroeconomics imbalances microdistortions lack of employment creation and the need for poverty alleviation after reviewing the size and origins of these problems the causes of reform failure are analyzed these causes lie in domestic blockages particularly the role of interest groups and especially in strategic rents the egyptian government s skillful exploitation of its political role in the region to extract unique favors from the united states and with us influence from the international monetary fund imf the paper concludes with an interpretation of the may 1991 agreement with the imf reached after the gulf war

distributive politics and the costs of centralization this paper studies the choice between centralization and decentralization of fiscal policy in a political economy setting with centralization regional delegates vote over agendas comprising sets of region specific projects the outcome is inefficient because the choice of projects is insufficiently sensitive to within region benefits the number of projects funded may be non monotonic in the strength of project externalities the efficiency gains from decentralization and the performance of constitutional rules such as majority voting which may be used to choose between decentralization and centralization are then discussed in this framework weaker externalities and more heterogeneity between regions need not increase the efficiency gain from decentralization

electoral competition with informed and uninformed voters i present a model of electoral competition in which candidates raise campaign contributions by choosing policies that benefit interest groups and then expend those contributions to influence voters who are uninformed about the policies informed voters however vote based on those policies so candidates face a trade off between choosing a policy to generate funds to attract the uninformed vote and choosing a policy to attract the informed vote electoral equilibria are characterized for two categories of policies particularistic and collective in the case of particularistic policies the equilibrium policies of the candidates are separated if the proportion of uninformed voters is sufficiently high and the degree of separation is an increasing function of that proportion the model is extended to include the public financing of elections and incumbency advantages for the case of collective policies the candidates locate at the median of the ideal points of the informed voters and contributions are zero