pareto improving campaign finance policy this paper argues that campaign finance policy in the form of contribution limits and matching public financing can be pareto improving even under very optimistic assumptions concerning the role of campaign advertising and the rationality of voters the optimistic assumptions are that candidates use campaign contributions to convey truthful information to voters about their qualifications for office and that voters update their beliefs rationally on the basis of the information they have seen the argument also assumes that campaign contributions are provided by interest groups and that candidates can offer to provide policy favors to attract higher contributions

threshold effects in price transmission the case of brazilian wheat maize and soya prices recent studies into price transmission have recognized the important role played by transport and transaction costs threshold models are one approach to accommodate such costs we develop a generalized threshold error correction model to test for the presence and form of threshold behavior in price transmission that is symmetric around equilibrium we use monthly wheat maize and soya prices from the united states argentina and brazil to demonstrate this model classical estimation of these generalized models can present challenges but bayesian techniques avoid many of these problems evidence for thresholds is found in three of the five commodity price pairs investigated

democracy and human capital formation education spending in latin america 1980 to 1997 this article examines the relationship between democratic representation and spending on education in latin america the authors assess the impact that democracy has on the distribution of resources between different levels of schooling and on total spending on education specifically they test whether democratic governments allocate a greater share of resources to primary education the level that benefits the largest segment of the electorate and that is most critical for human capital formation in developing countries using time series cross sectional analysis the authors find that democracies devote a higher percentage of their educational resources to primary education and that they maintain higher absolute spending levels on education in the aggregate thereby enhancing the prospects of human capital formation

asymmetry in retail wholesale and shipping point pricing for fresh vegetables the linkage among retail wholesale and shipping point prices for a select group of fresh vegetables is measured using wolffram s asymmetry model procedures for dealing with discontinuous time series are shown and granger s causality test is used to show the direction of the price linkage wholesale prices are shown to lead both retail and shipping point prices asymmetry in the retail wholesale response indicates that wholesale price decreases are reflected at the retail more so than are wholesale price increases wholesale price decreases are more fully passed through to the shipping point relative to wholesale increases

distinguishing between equilibrium and integration in spatial price analysis this article introduces a new spatial price analysis methodology based on maximum likelihood estimation of a mixture distribution model incorporating price transfer cost and trade flow data this method permits differentiation between market integration and competitive market equilibrium and derivation of intuitive measures of intermarket tradability competitive market equilibrium perfect integration segmented equilibrium and segmented disequilibrium one can also use these estimates to derive semiparametric measures of time varying regime probabilities to track changing market conditions an application to trade in soybean meal among pacific rim economies demonstrates the usefulness of the method copyright 2002 oxford university press

selling favors in the lab experiments on campaign finance reform campaign advertising can provide benefits to constituencies when used to fund the distribution of useful information but voters can be harmed if candidates finance such advertising by trading policy favors to special interests in exchange for contributions we report data from novel laboratory campaign finance experiments that shed light on this tradeoff and that provide rigorous empirical evidence on formal campaign finance theory our key finding is that voters respond to advertising differently between special interest and publicly financed campaigns and that the nature of this difference is qualitatively consistent with formal models predictions

market institutions and price relationships the case of coffee in the ethiopian commodity exchange while the ethiopian commodity exchange ecx is widely considered a successful market institution very little rigorous empirical investigation has been done on it this paper contributes to filling this knowledge gap using a unique set of spatially disaggregated prices for five different coffee varieties we examine how the ecx has influenced the dynamics of international and domestic prices for coffee the largest traded commodity in terms of trade value on the exchange floor we follow a multivariate generalized autoregressive conditional heteroscedasticity garch approach to assess the extent of market interdependence conditional correlations and volatility transmission we also evaluate structural changes in price dynamics over time our results suggest that contrary to popular media stories the ecx s success in strengthening coffee price relationships has been limited we discuss the underlying reasons and implications of this finding

determination of the international maize price what is the growing role of brazil and ukraine this paper examines the relationships among maize prices for four countries to determine if newly emerging exporters brazil and ukraine influence the international price of maize our work focuses on each market s participation in the price discovery process rather than trying to determine a price leader we find that the united states plays the largest role in price discovery followed by argentina brazil and ukraine we also search for export thresholds and find that ukraine s contribution to price discovery rises slightly when an export threshold of 2 3 million tons is reached no export thresholds were found for brazil export thresholds for argentina were found but only have a minor impact on price relationships we also found that price relationships vary considerably across seasons of the year

democracy and social spending in latin america 1980 92 what is the effect of regime type on public expenditures for social programs we investigate the relationship between democracy and the change in social spending controlling for gdp the debt inflation and age structure of the population through a time series cross sectional panel data set for 17 latin american countries from 1980 to 1992 the results show that especially in poor countries during economic crisis democracies increase the allocation of resources to social programs relative to authoritarian regimes this suggests that the latter are more constrained by economic forces whereas democracies are more constrained by popular demands hence calls to abandon broad categorizations of regime type appear to be premature democracy can matter in systematic and substantial ways

transaction costs and trade liberalization an empirical perspective from the mercosur agreement abstract studies investigating the effect of trade liberalization policies on transaction costs in agricultural markets are scarce the objective of our paper is to determine whether brazil became more integrated with reduced transaction costs after the introduction of mercosur with respect to its main agricultural trade partners argentina a mercosur member and the united states a non mercosur member using a threshold vector error correction model tvecm we estimate the transaction cost price transmission elasticity and half life adjustments for the most traded agricultural products between brazil argentina and brazil united states from january 1980 to december 2012 our findings suggest a strong mercosur effect with lower transaction costs and higher price transmission elasticity when compared to a non agreement scenario moreover the variations of both parameters are highly heterogeneous across products depending mainly on their degree of differentiation from a policy perspective elements such as the sources of comparative and competitive advantages together with investment policies specific market regulations and agricultural subsidies among others are mainly what influence the extent of transaction cost and market integration our results show that brazil has made progress but still has considerable room for improvement in reducing barriers to agricultural products and as a consequence to achieving the full benefits of the mercosur agreement

the economic development democratization relationship does the outside world matter the relationship between economic development and democratization offers a central focus in linking comparative and international politics analysts agree that economic development facilitates democratization but that the relationship is considerably less than perfect should advocates of the democratic peace argument prove to be correct in emphasizing the role of regime type in pacifying international politics an obvious question becomes what else drives democratization besides economic development in this article the authors explore the relationship between domestic development in the form of economic growth and democratization and international conditions they suggest that a number of international factors such as external threat conflict and trade openness can aid or abet democratization and economic growth to systematically analyze one facet of this proposition they use both robust regression and generalized estimating equations and find that the international environment significantly al

campaign finance reform and electoral competition using state senate data from 1984 through the beginning of 2002 this paper finds that campaign donation regulations clearly reduce the competitiveness in political races this is reflected in several dimensions conservative estimates indicate that different donation limits are associated with anywhere from a 4 to over a 23 percentage point increase in win margins the regulations increase the probability that only one candidate will run for office and they increase the probability that incumbents win re election campaign finance regulations also tend to reduce the number of candidates who run for office by an average of about 20 percent

privatization and democracy the effects of regime type in the developing world what is the effect of regime type on privatization of state owned enterprises the authors investigate the relationship between regime type and privatization through a panel data set for 76 developing countries from 1987 to 1994 the results show that contrary to most studies that claim that authoritarian regimes are better able to ignore societal interests opposed to economic measures that impose austerity democracies privatize more than authoritarian regimes moreover challenging conventional interpretations that claim that economic difficulties contribute to state sell offs the authors find that privatization is most likely in wealthier developing democracies whose budgets operate with current account surpluses hence authoritarian regimes provide neither the right nor the correct model for countries wishing to pursue unpopular economic policies

reevaluating the modernization hypothesis we revisit and critically reevaluate the widely accepted modernization hypothesis which claims that per capita income causes the creation and the consolidation of democracy existing studies find support for this hypothesis because they fail to control for the presence of omitted variables controlling for these factors either by including country fixed effects in a linear model or by including parameterized random effects in a nonlinear double hazard model removes the correlation between income and the likelihood of transitions to and from democratic regimes in addition the estimated fixed effects from the linear model are related to historical factors that affect both the level of income per capita and the likelihood of democracy in a country this evidence is consistent with the idea that events during critical historical junctures can lead to divergent political economic development paths some leading to prosperity and democracy others to relative poverty and non democracy

the commodity terms of trade unit roots and nonlinear alternatives a smooth transition approach market price dynamics for north american oriented strand board markets are examined specifically the role of transactions costs are examined vis a vis the law of one price weekly data for the january 3rd 1995 through april 14th 2006 period are used in the analysis nonlinearities induced by unobservable transactions costs are modeled by estimating smooth transition autoregressions stars results indicate that nonlinearity is an important feature of these markets and that the parity relationships implied by economic theory are generally supported by the star models implications for the efficiency of spatial market linkages are examined by estimating generalized impulse response functions

a duration analysis of democratic transitions and authoritarian backslides recent theories of political development have emphasized redistributive demands as the main drivers of democratic transitions and consolidation the authors employ cox duration models to evaluate a number of economic institutionalist and sociological theories of regime transition using global data from 1970 to 1999 this study suggests that demands for redistribution are insufficient explanators of political transitions the authors find that transitions to democracy depend primarily on a high level of oppositionist social mobilization and secondarily favorable patterns of economic distribution on the other hand a high level of socioeconomic development is by far the best guarantor of democratic resiliency whereas mass political conflict endangers consolidation once democracy has been introduced the study also reveals that institutionalist factors are less influential than socioeconomic characteristics in explaining regime transitions this study highlights the contribution of social movement the

competition policy for elections do campaign contribution limits matter this paper examines whether campaign contribution restrictions have consequences for election outcomes states are a natural laboratory to examine this issue we analyze elections to assemblies from 1980 to 2001 and determine whether candidates vote shares are altered by changes in state campaign contribution restrictions we find that limits on giving narrow the margin of victory of the winning candidate limits lead to closer elections for future incumbents but have less effect on the margin of victory of incumbents who passed the campaign finance legislation we also find some evidence that contribution limits increase the number of candidates in the race

the coevolution of economic and political development from monarchy to democracy this article establishes a unified political economy model to analyze the democratization process from monarchy to oligarchy and to democracy in the context of dynamic economic development as the predominant source of wealth evolves from land to physical capital and finally to human capital the relative economic and hence coercive power of land owners capitalists and workers shifts accordingly inducing the transition of the political system where political power is expanded from landlords to capitalists and finally to workers a smooth transition through political compromise facilitates efficient allocation of savings in physical capital followed by efficient investment in human capital

democracy and economic growth a historical perspective recent studies appear to show that democracy has no robust association with economic growth yet all such work assumes that the causal effect of democracy can be measured by a country s regime status in a particular year t which is correlated with its growth performance in a subsequent period t 1 the authors argue that democracy must be understood as a stock rather than a level measure that is a country s growth performance is affected by the number of years it has been democratic in addition to the degree of democracy experienced during that period in this fashion democracy is reconceptualized as a historical rather than a contemporary variable with the assumption that long run historical patterns may help scholars to understand present trends the authors speculate that these secular historical infiuences operate through four causal pathways each of which may be understood as a type of capital physical capital human capital social capital and political capital this argument is tested in a cross country analysis and is shown to be robust in a wide variety of specifications and formats

why are african commodity exchanges languishing a case study of the zambian agricultural commodity exchange abstract food price volatility and high transactions costs remain major problems in african food markets these persistent problems provide a strong theoretical justification for the development of commodity exchanges however the majority of african commodity exchanges remain underdeveloped through a case study of the zambian agricultural commodity exchange zamace this article explores why agricultural commodity exchanges in the region have thus far failed to develop into sustainable trading platforms and identifies the most important changes needed to enhance their performance drawing on interviews and group discussions with the primary participants on zamace five main factors that impede volumes traded on the zamace exchange are identified and analyzed 1 the limited success in attracting financial institutions commitment to commodity exchanges 2 the anonymous nature of trading on a commodity exchange exacerbates the risks associated with contract non compliance and opportunistic behavior 3 the potential for conflict of interest among brokers 4 the potential for market manipulation in a thinly traded market and 5 the high fixed costs that are imposed on actors trading in a thin market exacerbating all these factors is the unpredictability of government intervention in cereal markets

price transmission and trader entry in domestic commodity markets abstract using detailed data from three simultaneous surveys of producers traders and exporters this paper examines the transmission of international coffee prices through the domestic value chain in uganda we find that producer price fluctuations are inconsistent with constant transaction costs we investigate three possible explanations for this finding storage and contango marketing costs that increase with price and trader entry that raises search time we test and reject the storage and marketing costs explanation but we find some evidence of trader entry in response to a rise in export price our findings suggest that small itinerant traders enter in response to an export price increase probably taking advantage of farmers ignorance of the rise in wholesale price

do energy prices stimulate food price volatility examining volatility transmission between us oil ethanol and corn markets this paper examines volatility transmission in oil ethanol and corn prices in the united states between 1997 and 2011 we follow a multivariate garch approach to evaluate the level of interdependence and the dynamics of volatility across these markets preliminary results indicate a higher interaction between ethanol and corn markets in recent years particularly after 2006 we only observe however significant volatility spillovers from corn to ethanol prices but not the converse we also do not find major cross volatility effects from oil to corn markets the results do not provide evidence of volatility in energy markets stimulating price volatility in grain markets

democracy market liberalization and political preferences abstract we estimate the impact of market development and democratization on subjective political preferences we rely on the specific situation of frontier zones and the considerable regional variations in culture and economic development in the countries of the former socialist bloc for identification using a survey conducted in 2006 we find a positive and significant effect of democracy on support for a market economy but no effect of market liberalization on support for democracy hence in contrast with the conventional wisdom concerning the sequencing of political and economic reforms democratization may become a necessary condition to obtain public support for further economic liberalization

campaign finance reform and electoral competition comment campaign finance regulation is an important issue for democracies proponents of stricter contribution limits believe it will improve competitiveness opponents argue that contribution caps are just a mask for incumbency protection this paper comments on john lott s 2006 article in campaign finance reform and electoral competition in public choice

spatial equilibrium and price transmission between southern african maize markets connected by informal trade policies regulating the international grain trade in southern africa sa are motivated by uncertainty regarding private sector performance and in turn private sector performance is generally constrained by the policy environment we study spatial price transmission between sa maize markets where trade is dominated by informal product flows this provides an opportunity to study private sector market performance in a largely unregulated market environment contrary to some existing evidence on the performance of sa grain markets connected by formal trade we find that informally trading markets work quite well long run price equilibrium is consistent with competitive trade price transmission is rapid and potential trade constraints have no disruptive impact on long run relationships nevertheless we do find evidence of occasionally high transfer costs that may impede informal trade flows the conclusion is that a policy focus on encouraging informal trade and lowering informal trade costs would lead to improved market performance

campaign finance reform a public choice perspective the federal election campaign act as passed in 1971 and amended in 1974represented landmark federal legislation it imposed new restrictions oncampaign contributions and contained path breaking provisions for the useof public funds to partially finance the campaigns of qualifyingpresidential candidates the nominal intent of the legislation was torestrain the skyrocketing campaign costs and the feared abuses thatgrowing dependencies on such money engendered three decades later withthe campaign spending arms race still raging congress sought toimpose further constraints on campaign spending with enactment of thebipartisan campaign reform act of 2002 bcra competing theories ofgovernment regulation are reviewed to better understand the intent andlikely consequences of the 2002 legislation in particular and campaignfinance regulation in general a simple model of the campaign spendingprocess highlights the likely causes of the rapid growth in campaignspending data and evidence are presented to test hypotheses concerningthe timing of and underlying motivations for bcra

what price accountability the lucas island model and the politics of monetary policy this paper develops a model of an electoral cycle in inflation and output based on rational inflation expectations and rational retrospective voting voters are heterogeneous and partially informed about aggregate macroeconomic variables they observe precisely how monetary policy stimulates their local economies but their observations of economic activity in other sectors are imprecise voters extract information about the incumbent policymaker s economic competence from cross sectoral spillover effects the incumbent has incentives to generate preelection monetary surprises that stimulate the local economies and generate cross sectoral spillover effects he thereby creates an impression of economic competence and furthers his reelection prospects his policy manipulations are the price of political accountability on a positive note the incumbent is more likely to survive voter scrutiny if he is more competent than the average political candidate

an experimental study of alternative campaign finance systems transparency donations and policy choices we experimentally study the transparency effect of alternative campaign finance systems on donations election outcomes policy choices and welfare three alternatives are considered one where donors preferences and donations are unobserved by the candidate and public one where they are observed by the candidate but not the public and one where they are observed by all we label them full anonymity fa partial anonymity pa and no anonymity na respectively we find that in na and pa candidates consistently respond to donations by choosing policies favoring the donors fa in contrast is the most successful in limiting the influence of donations on policy choices donors benefit greatly from the possibility of donations whereas social welfare may be harmed in some treatments to our knowledge this article is the first to investigate the effect of different campaign finance systems distinguished by their transparency level jel d72

the political economy of growth democracy and human capital democracy is more than just another brake or booster for the economy we argue that there are significant indirect effects of democracy on growth through public health and education where economists use life expectancy and education as proxies for human capital we expect democracy will be an important determinant of the level of public services manifested in these indicators in addition to whatever direct effect democracy may have on growth we predict an important indirect effect through public policies that condition the level of human capital in different societies we conduct statistical investigations into the direct and indirect effects of democracy on growth using a data set consisting of a 30 year panel of 128 countries we find that democracy has no statistically significant direct effect on growth rather we discover that the effect of democracy is largely indirect through increased life expectancy in poor countries and increased secondary education in nonpoor countries t he relationship between democracy and economic growth has received considerable attention in recent years as yet however there is no consensus among analysts on the relationship between these two widely studied variables sound theoretical positions have been advanced suggesting that democracy is both an impediment and facilitator of growth careful quantitative tests of the relationship have produced contradictory results in our view existing studies fail to develop an adequate political theory of growth and as a result their empirical models are typically misspecified with competing arguments on both sides of the question many analysts merely add a variable for democracy to existing economic models and then look at the sign of the coefficient and its significance this is inadequate democracy is more than just another brake or booster for the economy we argue that there are important indirect effects of democracy on growth that are manifested through public health and education where economists typically use life expectancy and secondary school enrollment as proxies for human capital we expect that democracy will itself be an important determinant of the level of public services captured in these indicators thus in

political quid pro quo agreements an experimental study we experimentally study the common wisdom that money buys political influence in the game one special interest i e a corporate firm has the opportunity to influence redistributive tax policies in her favor by transferring money to two competing candidates the success of the investment depends on whether or not the candidates are willing and able to collude on low tax policies that do not harm their relative chances in the elections in the experiment successful political influence never materializes when the firm and candidates interact just once by contrast it yields substantially lower redistribution in about 40 of societies with finitely repeated encounters however investments are not always profitable and profit sharing between the firm and candidates depends on prominent equity norms our experimental results shed new light on the complex process of buying political influence in everyday politics and help explain why only relatively few firms do actually attempt to influence policymaking

the transmission of world maize price to south african maize market a threshold cointegration approach this article seeks to provide an explanation for the relationship between domestic maize price in south africa and world maize prices in order to evaluate comovement and transmission of world prices to domestic prices in sub sahara african countries this is done by comparing nested and nonnested models that capture different forms of nonlinearity in the price spread adopting a bayesian approach that allows for comparison of models using bayes factor we found that the relationship between south african price and world price for maize indicates the presence of nonlinearity in price transmission with three regimes that is triggered by the price spread in previous period

asymmetry in farm retail price transmission for major dairy products an econometric model is used to estimate the net relationship between changes in the farm level price of milk and changes in the retail prices of four major dairy products fluid milk butter cheese and ice cream results indicate that the farm retail price transmission process in the dairy sector is asymmetric retail dairy product prices adjust more rapidly and more fully to increases in the farm price of milk than to decreases the role in pricing asymmetry of retail demand versus farm supply shifts is tested via a chow type test asymmetry is tested using the houck procedure for estimating nonreversible functions

investigation of production sales and inventory relationships using multicointegration and non symmetric error correction models the accumulated sum of a stationary series is called integrated if a linear combination of some of the integrated series is stationary it is said to be cointegrated this paper presents empirical results on inventories to consider the possibility of a deeper form of cointegration called multicointegration which is introduced in granger and lee 1989 a vector integrated series is multicointegrated if the accumulated sum of its stationary cointegrated linear combination is again cointegrated with itself inventory which is the accumulated sum of production minus sales is probably cointegrated with production and sales the empirical results generally support the presence of multicointegration of production and sales in many u s industries and industrial aggregates the results also favour the non symmetric error correction model providing evidence that the strength of attraction is different on both sides of the attractor a modified s s rule for inventory control is investigated in the context of a non symmetric error correction model and the results generally do not support the s s rule sufficient evidence is found to conclude that multicointegration is a useful concept in the area of inventory determination

an information rationale for the power of special interests political decisions are often biased in favor of special interests at the expense of the general public and they are frequently inefficient in the sense that the losses incurred by the majority exceed the gains enjoyed by the minority this article explains the bias in terms of information asymmetries and the free rider problem first incumbents increase their reelection prospects by biasing policy toward groups that are better able to monitor their activities second because smaller groups are better able to overcome the free rider problem of costly monitoring policy will be biased in their favor third the effect of asymmetric monitoring on voter welfare is ambiguous the inefficiencies created by the policy bias are offset by a positively valued selection bias incumbents of above average quality are more likely to survive voter scrutiny than are low quality types

a unified model of cabinet dissolution in parliamentary democracies the literature on cabinet duration is split between two apparently irreconcilable positions the attributes theorists seek to explain cabinet duration as a fixed function of measured explanatory variables while the events process theorists model cabinet durations as a product of purely stochastic processes in this paper we build a unified statistical model that combines the insights of these previously distinct approaches we also generalize this unified model and all previous models by including 1 a stochastic component that takes into account the censoring that occurs as a result of governments lasting to the vicinity of the maximum constitutional interelection period 2 a systematic component that precludes the possibility of negative duration predictions and 3 a much more objective and parsimonious list of explanatory variables the explanatory power of which would not be improved by including a list of indicator variables for individual countries

foreign aid and statehood in africa has foreign aid destroyed state institutions in africa african states depend on development assistance to conduct basic government operations yet few of these states are well governed or effective at providing public goods the two trends mounting foreign aid and static or diminishing state performance raise an obvious question is aid dependency contributing to misrule and state failure in africa many critics argue the two phenomena are related i find they are not my analysis fails to show a negative association between aid receipts and two measures of democracy and economic freedom instead the evidence is consistent with a small positive relationship between aid and these indicators of state performance since the international community seems bent on reducing foreign aid an important issue is how african states can maintain and improve their performance with less foreign assistance

nonlinear mean reversion in the term structure of interest rates abstract the expectations hypothesis implies that the yield curve provides information on the future change in the short term interest rate however transaction costs exist in the financial market which prevent investors from realizing the arbitrage opportunity when the arbitrage does not fully cover the transaction costs the purpose of this paper is to assess the effect of transaction costs on the predictability of the term structure by using the threshold vector error correction model which allows for the nonlinear adjustment to the long run equilibrium relationship a significant amount of threshold effect is found and the adjustment coefficients are regime dependent the empirical result supports the nonlinear mean reversion in the term structure of interest rates

comparative democracy the economic development thesis in comparative politics an established finding that economic development fosters democratic performance has recently come under challenge we counter this challenge with a dynamic pooled time series analysis of a major but neglected data set from 131 nations the final generalized least squares autoregressive moving averages estimates n 2 096 appear robust and indicate strong economic development effects dependent in part on the nation s position in the world system for the first time rather hard evidence is offered on the causal relationship between economics and democracy according to granger tests economic development causes democracy but democracy does not cause economic development overall the various tests would seem to advance sharply the modeling of democratic performance

reversal of fortunes democratic institutions and foreign direct investment inflows to developing countries does increased democracy promote or jeopardize foreign direct investment fdi inflows to less developed countries we argue that democratic institutions have conflicting effects on fdi inflows on the one hand democratic institutions hinder fdi inflows by limiting the oligopolistic or monopolistic behaviors of multinational enterprises facilitating indigenous businesses pursuit of protection from foreign capital and constraining host governments ability to offer generous financial and fiscal incentives to foreign investors on the other hand democratic institutions promote fdi inflows because they tend to ensure more credible property rights protection reducing risks and transaction costs for foreign investors hence the net effect of democracy on fdi inflows is contingent on the relative strength of these two competing forces our argument reconciles conflicting theoretical expectations in the existing literature empirical analyses of fifty three developing countries from 1982 to 1995 substantiate our claims we find that both property rights protection and democracy related property rights protection encourage fdi inflows after controlling for their positive effect through property rights protection democratic institutions reduce fdi inflows these results are robust against alternative model specifications statistical estimators and variable measurements

economic openness democracy and income inequality an empirical analysis scholars have studied effects of economic openness and democracy on national income inequality in two literatures in democracy studies scholars agree democracy reduces inequality but empirical evidence is ambiguous in globalization studies effects of economic openness on inequality are debated but have not been rigorously examined this article is the first systematic statistical study of the effects of both economic openness and democracy on income inequality these effects need to be studied together the authors measure national income inequality from a comprehensive gini coefficient data set economic openness is measured from trade flows foreign direct investment inflows and financial capital inflows the period studied is 1960 to 1996 the unit of analysis is a country decade and the sample includes 69 countries the authors find that democracy and trade reduce income inequality foreign direct investments increase income inequality and financial capital does not affect income inequality policy implications are discussed

does high income promote democracy the authors construct a statistical model with which to test whether the regularity that democracy is more commonly found among wealthy countries stems from a democratizing effect of high income or is due entirely to other factors such as the historical context various features of the institutional setting and simultaneity with the process of leadership change even after correcting for these many other influences the democratizing effect of income remains as a statistically significant factor promoting the emergence of democratic political institutions the authors go on to find that leaders risks of losing power rise during their time in office and that these risks are higher in more democratic countries the authors confirm the finding by burkhart and lewis beck that the democracy promoting effect of income is stronger among the european countries they suggest that high income has a more powerful democratizing effect among the southern european countries because it interacts with pressure from major trading partners to democratize this suggests a revaluation of policies designed to foster the replacement of authoritarian regimes by democratic ones through free trade

campaign finance and voter welfare with entrenched incumbents two candidates compete for elective office each candidate has information she would like to reveal to the voters but this requires costly advertising the candidates can solicit contributions from interest groups to finance such advertising these contributions are secured by promises to perform favors for the contributors should the candidate win the election voters understand this and elect the candidate they like best taking into account their expectations about promises to special interests there is an incumbency advantage in fundraising which is sometimes so great that the incumbent faces no serious opposition at all introducing partial public financing through matching funds improves voter welfare in districts that have advertising under the decentralized system while it can reduce welfare in other districts the optimal policy must strike a balance between these two effects

comparative democratization big and bounded generalizations comparative studies of democratization have produced two types of generalizations those having nearly universal application and those applying to a range of countries within a region in the first category are such arguments as the role of high levels of economic development in guaranteeing democratic sustainability the centrality of political elites in establishing and terminating democracy and deficits in rule of law and state capacity as the primary challenge to the quality and survival of new democracies in the second category are contrasts between recent democratization in post socialist europe versus latin america and southern europe for example in the relationship between democratization and economic reform and in the costs and benefits for democratic consolidation of breaking quickly versus slowly with the authoritarian past the two sets of conclusions have important methodological implications for how comparativists understand generalizability and the emphasis placed on historical versus pr

nonlinearities in the u s corn ethanol oil gasoline price system we use a smooth transition vector error correction model to assess price relationships within the u s ethanol industry monthly ethanol corn oil and gasoline prices from 1990 to 2008 are used in the analysis results indicate the existence of long run relationships among the prices analyzed strong links between energy and food prices are identified

spatial price transmission and asymmetry in the ghanaian maize market abstract this paper utilizes recently developed threshold cointegration tests that allow for asymmetric adjustment toward a long run equilibrium relationship to examine price linkages between principal maize markets in ghana unlike previous studies the approach employed here assumes that economic agents only act to move the system back to equilibrium when the deviation from equilibrium exceeds a critical threshold whereby the benefits of this adjustment exceed the costs the findings indicate that major maize markets in ghana are well integrated both the threshold cointegration and asymmetric error correction models reveal that wholesale maize prices in local markets accra and bolgatanga respond more swiftly to increases than to decreases in central market techiman prices accra prices are found to react faster than bolgatanga prices to changes in techiman market prices

world market integration for export and food crops in developing countries a case study for mali and nicaragua using a generalized error correction model this article measures and compares market integration for export cash crops versus imported food crops for mali and nicaragua and computes transmission elasticities between changes in the goods border and domestic prices both mali and nicaragua obtain the bulk of their export revenue from a particular agricultural commodity cotton for mali and coffee for nicaragua and both import the same key staple food of rice to reap the economic gains from this trade specialization the two countries agriculture must be well integrated into world markets the two countries present an important policy contrast that affects their degree of world market integration and price transmission in mali a parastatal enterprise controls its cotton industry while nicaragua has less state direction over agriculture reflecting this difference the results show that for both its main export and import commodity nicaragua is more integrated into world markets and has higher price transmission than mali the results for nicaragua also show much higher integration and price transmission for its main agricultural export coffee than its major import rice

on the determinants of political polarization in this article we aim to identify the main determinants of political polarization using bayesian model averaging to overcome the problem of model uncertainty we find that the level of trust within a country and the degree of income inequality are the most robust determinants of political polarization

interest groups campaign contributions and probabilistic voting this essay develops a simple model to analyze the impact of campaign contributions on electoral policy decisions of candidates for office interest groups here are firms that select contributions under the assumption that candidates policies and opposing groups donations remain unaltered candidates however recognize that their policy choices affect contributions campaign contributions are used by candidates to affect policy oriented voters perceptions of candidates positions in this framework the introduction of campaign contributions may affect candidates electoral policies and if they do then they benefit surely exactly one of the two interest groups

the origins of democracy a model with application to ancient greece abstract this paper seeks to provide an improved understanding of the origins of democracy it begins by developing a theoretical model to demonstrate how exogenous economic conditions can influence the incentives to establish democratic institutions the model predicts that democratic institutions will expand where they mitigate important time inconsistency problems and therefore encourage investment exogenous conditions determine the magnitude of those time inconsistency problems and hence the likelihood of democracy a comparison of ancient greek city states suggests that the conditions under which democracy first emerged support the model other potential applications are discussed

modelling trends in food market integration method and an application to tanzanian maize markets abstract pushed by increasing availability of price data and extensive market liberalisation efforts in many developing countries research on food market integration has evolved rapidly over the last two decades empirical methods to measure market integration diverged in two directions on the one hand there is the parity bounds model pbm using a switching regressions technique while on the other hand the use of threshold autoregressive tar models has been proposed this article provides a discussion on the two methods and argues that tar models are better able to capture the dynamics of the arbitrage process underlying interconnected markets furthermore we extend the standard tar model to include a time trend in both the threshold and the adjustment parameter using weekly maize price data on seven selected markets in tanzania we illustrate how both transaction cost and the speed of adjustment have changed during the nineties

market interdependence and volatility transmission among major crops this article provides a comprehensive analysis of the dynamics of volatility across major agricultural commodities in the united states volatility interactions across markets may lower the effectiveness of diversification strategies to mitigate price risks and should be taken into account when analyzing the pricing behavior of different agricultural commodities we follow a multivariate garch approach to evaluate the time evolution of conditional correlations and volatility transmission across corn wheat and soybeans price returns on a daily weekly and monthly basis the period of analysis is from 1998 to 2012 the estimation results indicate a lack of lead lag relationships between corn wheat and soybeans price returns at the mean level we find however important volatility spillovers across commodities particularly at the weekly and monthly level wheat and corn seem to play a major role in terms of volatility transmission despite the supposed higher financial market integration of agricultural commodities we do not observe that agricultural markets have become more interdependent in recent years

do economic sanctions destabilize country leaders do economic sanctions destabilize the governments they target a form of foreign pressure sanctions are typically meant to alter the policies of other countries there is much pessimism on whether they ever work this article shows that economic pressure works in at least one respect it destabilizes the leaders it targets i present a theoretical argument that explains why destabilization is a necessary condition for successful coercion i find evidence that pressure destabilizes in a large panel of cross country time series data the destabilization finding indicates that sanctions may be more effective at altering policies than we think i conclude by noting that greater optimism regarding the effectiveness of sanctions should be balanced by a careful consideration of the policy s real and sizeable costs for those caught in the middle

the democratic peace and a sequential reciprocal causal arrow hypothesis one of the democratic peace puzzles is the question of whether and to what extent the democracy peace relationship underestimates the possibility that peace precedes democracy the reversed causal arrow hypothesis from a war making state making perspective democratization needs to be viewed as a partial function of external threat and domestic power concentration all three variables are found to be interrelated as predicted and related in turn to the external conflict behavior of major powers from 1816 to 1992 these monadic findings however do not appear to negate the dyadic relationship between democratization and selectively reduced conflict behavior in sum there is substantial support for the reversed causal arrow hypothesis but it does not render the regime type conflict behavior relationships spurious rather it enriches the understanding of the context in which democratization has emerged to have some effect on international politics

transfer costs spatial arbitrage and testing for food market integration conventional tests for food market integration ask often misleadingly whether prices in different locations move together in this paper an alternative methodology the parity bounds model pbm is developed which uses information on transfer costs in addition to food prices to assess the efficiency of spatial arbitrage monte carlo experiments using data generated by a point space spatial price equilibrium model show the pbm to be statistically reliable an application to philippine rice markets demonstrates that the pbm detects efficient arbitrage when other tests do not

political competition with campaign contributions and informative advertising this paper presents a theory of political competition with campaign contributions and informative political advertising policy motivated parties compete by selecting candidates and interest groups provide contributions to enhance the electoral prospects of like minded candidates contributions are used to finance advertising campaigns that provide voters with information about candidates ideologies voters update their beliefs rationally given the information they have received the paper uses the theory to analyze the welfare economics of contribution limits such limits are shown to redistribute welfare from ordinary citizens to members of interest groups jel d72 h40

campaign advertising and voter welfare this paper investigates the role of campaign advertising and the opportunity of legal restrictions on it an electoral race is modeled as a signalling game with three classes of players many voters two candidates and one interest group the group has non verifiable insider information on the candidates quality and on the basis of this information offers a contribution to each candidate in exchange for a favorable policy position candidates spend the contributions they receive on non directly informative advertising this paper shows that 1 a separating equilibrium exists in which the group contributes to a candidate only if the insider information about that candidate is positive 2 although voters are fully rational a ban on campaign advertising can be welfare improving and 3 split contributions may arise in equilibrium and if they arise too often they are detrimental to voters

does the law of one price really hold for commodity prices in spite of the empirical failure of the law of one price it is usually assumed that commodity prices are perfectly arbitraged at least in the long run this paper argues that this assumption is counterfactual and that much of the empirical evidence provided to support it is flawed and affected by econometric shortcomings spurious regressions nonstationarity in the data inappropriate use of first differences an alternative methodology co integration by which a long run relationship between nonstationary series can be tested is proposed tests of nonstationarity and co integration for a group of commodities show quite uniformly that the law of one price as a long run relationship fails and that deviations from the pattern are permanent

do civil and political repression really boost foreign direct investments multinational enterprises are often accused of having a preference for investing in countries in which the working populations civil and political rights are largely disregarded this article presents an empirical investigation of the popular political repression boosts fdi hypothesis and arrives at the conclusion that the hypothesis is not supported on the contrary multinational enterprises rather appear to be attracted by countries in which civil and political freedom is respected

contribution limits and transparency in a campaign finance experiment we experimentally compare electoral outcomes when donor contribution limits are varied the effect of contribution limits is studied under three levels of transparency one where donors preferences and donations are unobserved by the candidate and public one where they are observed by the candidate but not the public and one where they are observed by all we find that a combination of stricter contribution limits and full transparency is most successful at limiting donors influence on policy choice we also find that stricter contribution limits improve social welfare in some treatments we further find that the partial and no anonymity settings lead to centrist bias whereby implemented policies on average are more centrist than the candidate s preferences in most treatments

income and democracy existing studies establish a strong cross country correlation between income and democracy but do not control for factors that simultaneously affect both variables we show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and vari ous measures of democracy we present instrumental variables estimates that also show no causal effect of income on democracy the cross country corre lation between income and democracy reflects a positive correlation between changes in income and democracy over the past 500 years this pattern is con sistent with the idea that societies embarked on divergent political economic development paths at certain critical junctures jel d7 e 1

threshold cointegration and spatial price transmission when expectations matter we examine the performance of the threshold cointegration approach specifically band tvecm to price transmission analysis in an explicit context where trade decisions are made based on expectation of final prices because trade takes time we find that following a standard inference strategy a large portion of three regime cases are not identified as such results show that transfer costs are systematically underestimated particularly in three regime models the speed of price transmission is also biased in three regime models furthermore inferences about occurrence of trade are poor with estimated models suggesting far lower market integration than is true in the data generating process

spatial market integration in the presence of threshold effects a large body of research has evaluated price linkages in spatially separate markets much recent research has applied models appropriate for nonstationary data such analyses have been criticized for their ignorance of transactions costs which may inhibit price adjustments and thus affect tests of integration this analysis utilizes threshold autoregression and cointegration models to account for a neutral band representing transactions costs we evaluate daily price linkages among four corn and four soybean markets in north carolina nonlinear impulse response functions are used to investigate dynamic patterns of adjustments to shocks our results confirm the presence of thresholds and indicate strong support for market integration though adjustments following shocks may take many days to be complete in every case the threshold models suggest much faster adjustments in response to deviations from equilibrium than is the case when threshold behavior is ignored a large amount of empirical research has evaluated the extent to which spatially separate markets are integrated though the term is used loosely in the literature tests of market integration usually consider the extent to which shocks are transmitted among spatially separate markets the integration of markets can have important implications for price discovery and the operation of the market since persistent deviations from integration may imply riskless profit opportunities for spatial traders

multiple regime spatial price transmission with an application to maize markets in southern africa conventional threshold models of price transmission allow for different speeds of adjustment to equilibria depending on the magnitude of price differentials between markets however these models typically assume only one underlying long run equilibrium price relationship in this article we develop a framework for allowing multiple equilibria and multiple speeds of adjustment with regime separation depending on the magnitude of trade flows between regions rather than the magnitude of price differentials applying this framework to maize price transmission between south africa and zambia shows no transmission during periods of high imports when the government was heavily involved in maize importation but stronger transmission during periods of low imports when the government was not importing copyright 2012 oxford university press

spatial market arbitrage and threshold cointegration goodwin and piggott reported that corn and soybean prices in spatially separated markets in north carolina exhibited threshold cointegration and that commodity prices in different markets may persistently diverge here a multivariate approach is used to test for threshold cointegration and nonlinear cointegration the results suggest that departures from the law of one price do not persist indefinitely goodwin and piggott gp examined daily corn and soybean prices across spatially separated markets in north carolina and reported that bivariate pairings of prices were threshold cointegrated gp used a twothreshold model in which price differences across markets could persist indefinitely they concluded that empirical models should consider threshold effects in order to adequately characterize spatially integrated markets the purpose of this article is to extend the gp analysis in several directions gp employed the techniques of martens kofman and vorst which involve a multistepped search for thresholds in the residuals of a cointegrating regression this single equation search process is subject to potential misspecification so it is interesting to determine whether the direct multivariate test of threshold cointegration of hansen and seo provides confirmatory evidence in addition gp allowed two thresholds to affect each commodity pair without directly testing for the number of thresholds the second extension uses hansen tests to determine the number of thresholds two thresholds imply no arbitrage bounds that allow persistent departures from the law of one price one threshold is consistent with the traditional view that price differentials are fleeting as arbitrageurs drive excess returns to zero the final extension recognizes that spatially integrated markets might follow a nonlinear relationship that depends on transactions costs peter s sephton is professor school of business queen s university kingston ontario canada the author would like to thank nick piggott for providing his dataset and the dean s research fund in the school of business for financial assistance two anonymous referees provided helpful comments sufficiently large deviations from the law of one price should lead to a reduced price dispersion a direct test of nonlinear cointegration demonstrates that price differences tend to be resolved over time background