public capital in the 21st century as productive as ever abstractthe global financial crisis and the euro area sovereign debt crisis that followed induced a rapid deterioration in the fiscal positions of countries across the globe in the ensuing fiscal

political determinants of government loans in japan abstract this paper examines the political determinants of government banks lending decisions using prefecture level panel data on japan s government loans from 1975 to 1992 it finds that the size of government loans is positively correlated with two political factors 1 the electoral vulnerability of politicians who belong to the ruling liberal democratic party ldp and 2 their seniority these political effects are statistically robust to the inclusion of prefecture fixed effects year fixed effects and other socioeconomic factors and more important are present only in government loans and not in private loans these results suggest that self interested ldp members ab used government loans for political purposes as implied by the political view of government banks

common agency and coordination general theory and application to government policy making we develop a model of common agency with complete information and general preferences with nontransferable utility and we prove that the principals nash equilibrium in truthful strategies implements an efficient action we apply this theory to the construction of a positive model of public finance where organized special interests can lobby the government for consumer and producer taxes or subsidies and targeted lump sum taxes or transfers the lobbies use only the nondistorting transfers in their noncooperative equilibrium but their intergroup competition for transfers turns into a prisoners dilemma in which the government captures all the gain that is potentially available to the parties

infrastructure and development a critical appraisal of the macro level literature this survey reviews the existing macro level empirical literature on the link between infrastructure and development outcomes in a critical light after providing a general framework that casts the relevant terms of the controversy on the real effect of infrastructure on growth in the context of an aggregate production function it signals what are the relevant empirical questions to be addressed this guides the systematic review of a number of empirical studies and the discussion of the main econometric challenges to the identification of the effect of infrastructure on output and productivity finally building on related research in particular in contract theory and political economy the paper spells out several promising research avenues

the political economy of publicly provided private goods abstract this paper integrates two different approaches to the analysis of public provision of private goods education health care day care etc while normative public economics has established an efficiency case for such provision the commonly held political economy view has been that it is an economically inefficient phenomenon generated by the political process we establish a political economy framework which in general yields an efficient choice of distributional policy it follows that the central mechanism studied in the normative theory is equally relevant to voting models of decisions on public provision it is shown that under plausible information constraints economically efficient public provision of private goods will be part of politically rational decisions the result is established both within a median voter process and a representative democracy of political parties

home market vs vote market effect location equilibrium in a probabilistic voting model abstract this paper considers the location of manufacturing activities when regional policies are endogenous we find that once the political economy of regional policy is explicitly taken into account regional population size has an ambiguous effect on the level of regional subsidy even though it plays a key role in determining the equilibrium spatial allocation of industry in particular the final allocation of firms depends both on the relative economic strengths of the two regions as predicted by more orthodox economic geography models as well as by their relative political strengths

political incentives and state subsidy allocation evidence from hungarian municipalities using a comprehensive database on successful and rejected applications for the european union s structural and cohesion funds between 2004 and 2012 in hungary we study which grant types are susceptible to political favoritism and how this is achieved with fixed effects and matching estimators we study whether applicants from municipalities with a mayor endorsed by the governing coalition won a higher grant value than applicants where the mayor was affiliated with the opposition we find limited evidence for such a difference for total grant value but in cases when the applicant is a public entity or the purpose of the project is construction and therefore visible to voters and thus may bring about electoral benefits we do find effects of 16 21 the decomposition of the effect suggests that favoritism plays a role both in the application and the decision making process as applicants from aligned townships apply in larger numbers and have higher acceptance rates when analyzing the effect of grants on votes we show that voters indeed reward construction and public projects but not the other grant types

favoritism and reverse discrimination abstract we analyze the inefficiency that may arise in the form of reverse discrimination in the presence of favoritism or nepotism favoritism is typically associated with inefficient transfers to the core support of the incumbent government but inefficiency that is opposite in nature may also arise through the electoral process in a political environment where favoritism is pervasive we show that if the policy maker is sufficiently office seeking a socially efficient action may never be taken if it yields benefits to his core support due to reputational concerns hence the core support of the incumbent may fare worse than other groups we also consider the implications of policies such as anti nepotism laws or term limits in the presence of favoritism

granting votes exposing the political bias of intergovernmental grants using the within between specification for panel data instead of alleviating fiscal inequalities intergovernmental grants are often used to fulfill the grantors political goals this study uses a unique panel dataset on more than 500 croatian municipalities over a 12 year period to uncover the extent to which grant distribution is biased owing to grantors electoral concerns instead of the default fixed effects approach to modelling panel data we apply a novel within between specification aimed at uncovering the contextual source of variation focusing on the effects of electoral concerns on grant allocation within and between municipalities we find evidence of a substantial political bias in grant allocations both within and between municipalities particularly when it comes to local level electoral concerns the paper offers researchers a new perspective when tackling the issue of politically biased grant allocation using panel data particularly when they wish to uncover the simultaneous impact of time variant and time invariant factors or when they cannot apply a quasi experimental approach because of specific institutional contexts

embedding the multinationals institutions and the development of overseas manufacturing affiliates in wales and north east england phelps n a mackinnon d stone i and braidford p 2003 embedding the multinationals institutions and the development of overseas manufacturing affiliates in wales and north east england reg studies 37 27 40 the impact of foreign direct investment fdi upon host regions is a topic of perennial interest within the fields of regional economics industrial geography and regional development much of the early literature here draws negative conclusions regarding the wider indirect impacts of fdi on host regions pointing to the branch plant syndrome in light of significant processes of corporate restructuring and the build up of host region institutional capacities however recent literature has claimed that the plants of multinational enterprises mnes are becoming increasingly embedded in regional economies against this backdrop this paper aims to provide a critical assessment of the regional embeddedness of fdi in wales and the north east of england based upon an extensive survey of o

how are investments allocated in a publicly owned port system political factors versus economic criteria castillo manzano j i and fageda x how are investments allocated in a publicly owned port system political factors versus economic criteria regional studies this paper estimates the determinants of investments in port infrastructure in the spanish regions made by the central administration it is found that the use of the infrastructure in relation to capacity has some influence on the amount of investment received by a region furthermore specialization in containers is also relevant for receiving more resources however it is found that when greater political decentralization does not go hand in hand with greater financial decentralization the importance of tactical political aspects increases overall efficiency plays a more relevant role in the regional allocation of investments in ports than in other transport infrastructures

separating the effects of aggregate and sectoral shocks with estimates from a markov switching search model abstract a two sector stochastic model of labor market search is estimated in order to identify aggregate and sectoral shocks which impact upon the recruitment intensity decisions of firms separation of aggregate and sectoral recruitment effects is achieved through the use of data for two canadian regions which were affected in opposite directions by recent resource price shocks the results of the estimation process suggest that sectoral shocks can have significant quantitative effects on unemployment duration and the unemployment rate

the provision of public goods under alternative electoral incentives politicians who care about the spoils of office may underprovide a public good because its benefits cannot be targeted to voters as easily as pork barrel spending we compare a winner take all system where all the spoils go to the winner to a proportional system where the spoils of office are split among candidates proportionally to their share of the vote in a winner take all system the public good is provided less often than in a proportional system when the public good is particularly desirable we then consider the electoral college system and show that it is particularly subject to this inefficiency

state infrastructure and productive performance recent research on productivity growth has focused on public infrastructure and its impact on economic growth and productivity the authors construct a model of firms technology and behavior taking advantage of the analytical framework provided in the cost function based applied production theory literature and apply it to state level data for u s manufacturing they find that infrastructure investment provides a significant return to manufacturing firms and augments productivity growth the net benefits of infrastructure investment may or may not be positive depending upon the social costs of infrastructure investment and the relative growth rates of output and infrastructure copyright 1996 by american economic association

the politics of infrastructure a number of recent studies attempt to measure the productivity of public capital some estimates indicate that government investments are a potential well spring for economic progress while others indicate that public infrastructure has a negligible effect on private sector output this article investigates political institutions and processes underlying the decisions for public infrastructure spending we apply the framework of strategic models of fiscal policy and develop an empirical model to analyze the substantial differences in public capital across american states institutions such as term limits citizen initiative and budgeting procedures were significant determinants of state public capital stocks and the flow of new public investments during the 1980s the results further suggest that political conditions such as legislative stability and voter volatility are systematically related to infrastructure differences across states

contribution to productivity or pork barrel the two faces of infrastructure investment abstract this paper proposes a simultaneous equation approach to the estimation of the contribution of transport infrastructure accumulation to regional growth we model explicitly the political economy process driving infrastructure investments in doing so we eliminate a potential source of bias in production function estimates and generate testable hypotheses on the forces that shape infrastructure policy our empirical findings on a panel of france s regions over 1985 92 suggest that electoral concerns and influence activities were indeed significant determinants of the cross regional allocation of transportation infrastructure investments by contrast we find little evidence of concern for the maximization of economic returns to infrastructure spending even after controlling for pork barrel

infrastructure investment a review essay economists try not to be faddists but they often cannot help themselves while work on a topic should mirror the prospective importance of the topic that situation seems to occur with disappointing frequency instead the usual pattern is that some reasonably important topic will be totally ignored for the longest time then recognized and then the subject of a flurry of work all out of proportion to its likely long run importance nowhere has this speculative bubble of economic research been more clearly illustrated than with infrastructure investment macroeconomists havelong felt that the stock of public capital is an important factor input in the production of total output macroeconomists have known that u s productivity growth slowed dramatically in about 1973 and macroeconomists should have known that united states investment in public capital has been down since the late 1960s yet analysis of the u s productivity slowdown completely ignored infrastructure investment for the first fifteen years of this slowdown concentrating instead on energy prices social regulation the composition of the work force research and development different rates of obsolescence of the private capital stock and any number of other matters the public capital stock was hardly ever even mentioned as a potential factor in the productivity slowdown aschauer changed all that he wrote a series of papers 1989a 1989b 1989c that put these two movements together econometrically infrastructure investment turned down and aggregate productivity turned down slightly later both in the united states and in some other developed countries his work hit the magic button those who had worried about the productivity puzzle for fifteen years welcomed a new suspect those who were worried about low rates of u s national saving welcomed a new way to make their argument even more forcefully than with official figures on saving and investment which do not count infrastructure investment as investment political liberals and liberal politicians saw a way to rescue government spending and projects from the assaults of reaganism and even a way to avoid oth

urban growth and transportation we estimate the effects of interstate highways on the growth of u s cities between 1983 and 2003 we find that a 10 increase in a city s initial stock of highways causes about a 1 5 increase in its employment over this 20 year period to estimate a structural model of urban growth and transportation we rely on an instrumental variables estimation that uses a 1947 plan of the interstate highway system an 1898 map of railroads and maps of the early explorations of the u s as instruments for 1983 highways we investigate the role of interstate highways in the growth of u s cities our investigation is in three parts in the first we develop a simple structural model describing the joint evolution of highways and employment in cities in the second we develop an instrumental variables strategy that allows us to identify key parameters of our structural model we are also able to provide out of sample evidence for the validity of our estimates and for the central assumptions of our model in the third we use our estimates to assess counterfactual transportation policies we find that a 10 increase in a city s stock of interstate highways causes about a 1 5 increase in its employment over 20 years and that an additional kilometre of highway allocated to a city at random is associated with a larger increase in employment or population than is a road assigned to a city by the prevailing political process our results also suggest that too many new highways were built between 1983 and 2003 these findings are important for three reasons first transportation generally and infrastruc ture in particular are large segments of the economy the median u s household devotes about 18 of its income to road transportation while all levels of government together spend another 200 billion dollars annually overall the value of capital stock associated with road transporta tion in the u s tops 5 trillion dollars united states bureau of transportation statistics 2007 2010 given the magnitude of transportation expenditures it is important that the impact of these expenditures on economic growth be carefully evaluated and not assessed on the basis of the claims of advocacy groups our analysis provides a basis for assessing whether these resources are well allocated our results also provide useful guidance to policy makers charged with planning cities since changes in a city s transportation infrastructure cause changes to the city s employment new transportation infrastructure causes complementary changes in the demand for public utilities and schools our results provide a basis for estimating the magnitude of such changes finally this research is important to furthering our understanding of how cities operate and grow transportation costs are among the most fundamental quantities in theoretical models

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

electoral systems and public spending we study the effects of electoral institutions on the size and composition of public expenditure in oecd and latin american countries we emphasize the distinction between purchases of goods and services which are easier to target geographically and transfers which are easier to target across social groups we present a theoretical model in which voters anticipating government policymaking under different electoral systems have an incentive to elect representatives more prone to transfer public good spending in proportional majoritarian systems the model also predicts higher total primary spending in proportional majoritarian systems when the share of transfer spending is high low after dee ning rigorous measures of proportionality to be used in the empirical investigation we e nd considerable support for our predictions

the failure of training in britain analysis and prescription in the last decade education and training et reform has become a major issue in many of the world s industrial powers one theme which runs throughout these reform initiatives is the need to adapt et systems to the changing economic environment these changes include the increasing integration of world markets the shift in mass manufacturing towards newly developed nations and the rapid development of new technologies most notably information technologies education and training are seen to play a crucial role in restoring or maintaining international competitiveness both on the macro level by easing the transition of the workforce into new industries and at the micro level where firms producing high quality specialized goods and services require a well qualified workforce capable of rapid adjustment in the work process and continual product innovation this paper will highlight the need for policy makers and academics to take account of the two way nature of the relationship between et and the economy

votes and regional economic growth evidence from turkey in countries where governments disproportionate power over the bureaucracy is coupled with a strong political polarization can votes for the national incumbent party buy preferential policy treatment and faster regional economic growth the article tests such question on turkey s 81 provinces over 2004 12 results uncover a link between votes and faster regional growth as well as a small influence of preferential allocations in explaining it yet after addressing potential endogeneity economic performance is almost entirely explained by standard drivers primarily human capital endowment results suggest that the impact of electorally motivated distributive politics on regions economic performance is extremely limited

creating self sustaining high skill ecosystems geographic clusters of high technology companies are an increasingly important source of wealth and job creation in the advanced industrial countries this article provides a framework for understanding the conditions that give rise to these self sustaining high skill ecosystems hses that is based on the cases of the highly successful biomedical and computer hardware and software firms clustered in northern and southern california the framework identifies four requirements that hses share in common with natural ecosystems a catalyst to trigger the start of their development ongoing nourishment a supportive host environment and a high degree of interdependence among the actors in the system the framework is then applied to the uk identifying those policy options that are necessary for gaining greater returns from the uk s strong research base

preferential resource spending under an employment guarantee the political economy of mgnregs in andhra pradesh are ostensibly demand driven public works programs with high levels of safeguards nonetheless susceptible to political influence this conjecture is investigated using expenditure data at the local level from india s national rural employment guarantee scheme focusing on one state where accountability and transparency mechanisms have been employed and implementation efforts have been widely applauded there is no evidence of partisan influenced spending before the 2009 election however a statistically significant but small in magnitude effect after the 2009 election most variation in public works expenditures is explained by the observed needs of potential beneficiaries as the scheme intended

politics and investment examining the territorial allocation of public investment in greece rodriguez pose a psycharis y and tselios v politics and investment examining the territorial allocation of public investment in greece regional studies this paper discusses how electoral politics shapes the regional allocation of public investment expenditures per capita in greece using regional public investment data for ten political periods 1975 2009 combined with electoral data by constituency a model is proposed that captures the influence of politics on the regional distribution of public investment expenditures the results of the analysis point to a strong relationship between electoral results and regional public investment spending greek governing parties have tended to reward those constituencies returning them to office moreover an increase in both the absolute and the relative electoral returns of the governing party in a region has traditionally been followed by greater public investment per capita in that region regions where the governing party whether liberal or socialist

public budget composition fiscal de centralization and welfare we study the optimal degree of fiscal decentralization in a dynamic federal economy where governments decide on budget size and its allocation between public education and infrastructure spending we find that full centralization of tax and expenditure policies is optimal when infrastructure productivity is similar across regions when differences are not too large partial centralization is optimal with strong differences full decentralization becomes optimal national steady state output tends to be highest under full decentralization we provide a justification for the mixed evidence regarding the oates conjecture by showing that full dominates partial decentralization despite being inferior to complete decentralization on etudie le degre optimal de decentralisation fiscale dans une economie federale dynamique ou les gouvernements decident de la taille du budget et de son allocation entre les depenses en education publique et en infrastructures on decouvre qu une pleine centralisation des taxes et des depenses est optimale quand la productivite des infrastructures est la meme dans toutes les regions quand les differences ne sont pas trop importantes une centralisation partielle est optimale en presence de fortes differences la pleine decentralisation est optimale la production nationale en regime permanent tend aetre la plus elevee quand il y a pleine decentralisation on fournit une justification pour les resultats mixtes obtenus quant a la conjoncture de oates en montrant que la pleine decentralisation est preferable a la decentralisation partielle meme si elle est inferieure a la decentralisation complete

inter regional redistribution through infrastructure investment tactical or programmatic in this paper we study the political economy of the inter regional allocation of investment in infrastructure in an effort to disentangle tactical and programmatic motives where tactical politics refers to the discretionary allocation of investment to districts with more political clout and programmatic politics refers to the allocation of investment according to certain objective criteria e g income level we use a panel of data from the spanish electoral districts for the period 1964 2004 to estimate an equation in which investment depends both on economic and political variables the results show that tactical politics do matter since the districts receiving the most funds are those in which i the incumbent s vote margin is low ii few votes are needed to win an additional seat in the legislature iii the central and regional governments are controlled by the same party and iv regional parties play a pivotal role in the legislature however the results also show that programmatic politics matter since inter regional redistribution is shown to increase i with the arrival of democracy and european union funds ii under leftist governments and iii the weaker the correlation is between political clout and regional income

dynamic common agency a general model of dynamic common agency with symmetric information is considered the set of truthful markov perfect equilibrium payoffs is characterized and the efficiency properties of the equilibria are established a condition for the uniqueness of equilibrium payoffs is derived for the static and the dynamic game the payoff is unique if and only if the payoff of each principal coincides with his marginal contribution to the social value of the game the dynamic model is applied to a game of agenda setting

financing urban infrastructure knowns unknowns and a way forward improved urban infrastructure is widely believed to be essential in facilitating economic growth and in improving the lives of urban dwellers both in developed and in developing countries this paper focuses on several dimensions of urban infrastructure finance finance for major infrastructure improvements in major economic centers finance for expansion of basic municipal services in secondary cities and towns and intergovernmental systems for financing investments with impacts beyond jurisdictional limits it reviews what is known about current practices in these areas using international evidence and case studies and summarizing international best practices it also indicates areas in which knowledge gaps remain despite these unknowns there are avenues by which our understanding of infrastructure schemes can be enhanced and some suggestions for a research agenda on financing urban infrastructure are offered in the concluding section

the political economy of government responsiveness theory and evidence from india the determinants of government responsiveness to its citizens is a key issue in political economy here we develop a model based on the solution of political agency problems having a more informed an politically active electorate strengthens incentives for governments to be responsive this suggests that there is a role both for democratic institutions and the mass media in ensuring that the preferences of citizens are reflected in policy the ideas behind the model are tested on panel data from india we show that public food distribution and calamity relief expenditure are greater controlling for shocks where governments face greater electoral accountability and where newspaper circulation is highest

bringing home the bacon an empirical analysis of the extent and effects of pork barreling in australian politics which electorates receive targeted funding and does targeted funding swing votes to answer these questions i analyze four discretionary programs funded by the australian federal government during the 2001 2004 election cycle controlling for relevant demographic characteristics of the electorate those electorates held by the governing coalition received a larger share of discretionary funding and a larger number of program grants among government seats funding does not appear to have been directed towards those that were more marginal more discretionary funding particularly on road building was associated with a larger swing towards the government in the 2004 election

continuity and evolution in an old industrial region the labour market dynamics of the rise and fall of northern rock dawley s marshall n pike a pollard j and tomaney j continuity and evolution in an old industrial region the labour market dynamics of the rise and fall of northern rock regional studies the northern rock mortgage bank was a high profile casualty of the credit crunch in 2007 an evolutionary geographical political economy approach demonstrates that northern rock s growth and decline was shaped by its location in an old industrial region and echoes the historical position of the peripheral region in the spatial division of labour a longitudinal investigation focuses on the labour market dynamics of northern rock s rapid growth and decline on the north east of england the northern rock case highlights the enduring occupational structure of the region s labour market and shows how older industrial regions suffer from a process of occupational disadvantage that restricts their ability to adapt to economic change

public sector capital and the productivity puzzle a number of studies have suggested a quantitatively important relationship between public sector capital accumulation and private sector productivity with the most compelling evidence derived from analyses of state level data estimates herein of production functions that use standard techniques to control for unobserved state specific characteristics however reveal essentially no role for public sector capital in affecting private sector productivity only estimates of state production functions that do not include such controls find substantial productivity impacts this result reconciles existing econometric estimates with the findings of hulten and schwab based on growth accounting techniques as such techniques effectively control for state specific effects region level estimates are essentially identical to those from state data suggesting no quantitatively important spillover effects across states copyright 1994 by mit press

unemployment and vacancies with sectoral shifts recent analyses of unemployment vacancy series suggest that aggregate shocks rather than sectoral shocks are the primary factors responsible for unemployment fluctuations this inference follows from two widely held beliefs sectoral shocks induce only positive unemployment vacancy comovements while negative comovements are necessarily the result of aggregate demand shocks this paper describes an equilibrium matching model that identifies plausible circumstances in which neither assumption is correct thus suggesting that unemployment vacancy data are inconclusive interestingly this model s novel results are due to standard features in the contracting literature firms experience relative price shocks and negotiate contracts that prescribe temporary layoffs copyright 1994 by american economic association

distributive politics and regional development assessing the territorial distribution of turkey s public investment turkey is often perceived as a country with low bureaucratic capacity and prone to political manipulation and pork barrel this article tests whether this is the case by analysing the extent to which politics rather than equity and efficiency criteria have determined the geographical allocation of public investment across the 81 provinces of turkey between 2005 and 2012 the results show that although the turkish government has indeed channelled public expenditures to reward its core constituencies socioeconomic factors remained the most relevant predictors of investment moreover in contrast to official regional development policy principles we uncover the concentration of public investment in areas with comparatively higher levels of development we interpret this as the state bureaucracy s intentional strategy of focussing on efficiency by concentrating resources on the better off among the most in need

is public expenditure productive abstract this paper considers the relationship between aggregate productivity and stock and flow government spending variables the empirical results indicate that i the nonmilitary public capital stock is dramatically more important in determining productivity than is either the flow of nonmilitary or military spending ii military capital bears little relation to productivity and iii a core infrastructure of streets highways airports mass transit sewers water systems etc has most explanatory power for productivity the paper also suggests an important role for the net public capital stock in the productivity slowdown of the last fifteen years

distributive politics in china regional favouritism and expansion of construction land land conversion control in china remains in the shadow of the planned economy highly hierarchical governments fully control both land quotas and land approval which are indispensable for each add

sources of inefficiency in a representative democracy a dynamic analysis this paper studies the efficiency of policy choice in representative democracies it extends the citizen candidate model of democratic policy making to a dynamic environment equilibrium policy choices are shown to be efficient in the sense that in each period conditional on future policies being selected through the democratic process there exists no alternative current policy choices which can raise the expected utilities of all citizens however policies that would be declared efficient by standard economic criteria are not necessarily adopted in political equilibrium the paper argues that these divergencies are legitimately viewed as politicalfailures

cyclical fluctuations and sectoral reallocation evidence from the psid abstract this paper documents the correlation between permanent sectoral reallocation and the business cycle using data from the michigan panel study of income dynamics we find that the outflow of workers from goods to services accelerates during recessions the flow from services to stable employment in surables accelerates during booms we also document the contribution of sectoral reallocation to total unemployment permanent switchers account for about a quarter of the total weeks of unemployment during booms this proportion rises to nearly 40 duing recessions

the road to power partisan loyalty and the centralized provision of local infrastructure this paper sets out a simple dynamic probabilistic voting model in which a government allocates a fixed budget across electoral districts that differ in their loyalties to the ruling party the model predicts that the geographic pattern of spending depends on the way the government balances long run machine politics considerations and the more immediate concern to win over swing voters empirical results obtained from a panel of electoral districts in quebec provide robust evidence that districts which display loyalty to the incumbent government receive disproportionately more spending especially close to an election at odds with the standard swing voter view

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

the making of economic policy a transaction cost politics perspective economic policymaking as a political process the normative approach to policy analysis the positive view of political economy a synthesis the policy process in real time a theme transaction costs the transaction cost politics framework political outcomes and economic efficiency transaction cost analysis in politics mechanisms to cope with transaction costs in politics national differences two case studies to illustrate transaction cost politics tax and expenditure reform in the united states the gatt and national trade politics some reflections and suggestions some lessons for the policy process the role of the economist concluding comments appendix multiprincipal multitask agencies

the politics of infrastructure investment the role of product market competition abstract in spatial competition public infrastructure plays a crucial role in determining product market outcomes in our model consideration of infrastructure s impact on the product market drives the preferences of consumers in their dual role as voter taxpayers the spatial heterogeneity of consumers produces conflicting political interests and in many cases inefficient outcomes however across both exogenous and endogenous market environments product market competition consistently leads to higher levels of publicly funded infrastructure than monopoly collusion furthermore competition s boost to the popular support for infrastructure investment is often excessive while monopoly leads to underinvestment

search wage bargains and cycles in this paper i describe an equilibrium model of job matchings with perfect foresight that has the following property the number of people looking for work changes temporarily when there is a temporary shock to the value of labour s marginal product it does not change when the shock is permanent by contrast real wages change temporarily by a small amount when the shock is temporary but change permanently and by a bigger amount when the shock is permanent thus the model offers an explanation for the observation that over the cycle small wage changes are associated with changes in unemployment whereas secularly wage growth does not seem to affect the rate of unemployment the two most common explanations for this observation in the literature the phelps lucas misperceptions model and the lucas rapping intertemporal substitution model are well grounded in equilibrium theory but they have not stood up well to empirical testing the misperceptions model requires more ignorance of aggregate changes than can be reasonably assumed whereas the intertemporal substitution model requires bigger wage elasticities of labour supply than those estimated in the model of this paper neither misperceptions nor changes in the supply of labour play a role in generating the unemployment cycle all agents observe the shocks when they occur and they anticipate correctly the economy s adjustment path but like the new classical explanations of the cycle the model is an equilibrium one in the sense that all private gains from trade are fully exploited at all phases of the cycle although the social gains from trade may not be fully exploited because of search externalities the cycle i derive here is not due to externalities unlike other related perfect foresight models such as diamond s 1982a the structure of the model is such that the externalities do not give rise to multiple equilibria the key element of the model which is responsible for the transmission of output shocks to unemployment is the equation for wages in markets where the allocation of jobs takes place through search both firms and workers have some monopoly power a point emphasised by mortensen 1970 though he attributed only temporary monopoly power and only to firms i use the nash bargaining solution to solve for the equilibrium wage rate and show that the firm s and worker s alternative returns threat points or

distributive politics and spatial equity the allocation of public investment in chile abstractdistributive politics and spatial equity the allocation of public investment in chile regional studies this paper analyzes the influence of electoral concerns on investment distribution from the central government to chilean municipalities drawing upon panel data it shows that investment is mediated by pork barrel and political budget cycles as well as favouring the relatively better off areas estimations also reveal that resources are channelled to the municipalities where the vote margin in local elections is larger whereas national results are not relevant indicating that local governments lobbying capacity is prioritized over national electoral interests based on these results the implications for regional governance and for reducing the margin of arbitrary allocations are discussed

public infrastructure and regional economic development a simultaneous equations approach an analysis of how central bank exchange market intervention can affect both the level of exchange rates and the risk premium in asset returns showing how the risk premium is related to the conditional variances of intervention and other exogenous processes

unemployment dynamics and labour market tightness an empirical evaluation of matching function models the implications of matching function models for the relationship between labour market tightness and the transition probability into employment are summarized these implications are then tested using monthly data for three canadian provinces british columbia ontario and quebec testing methods use flexible regression techniques so as to reduce the effect of any extraneous restrictions the results show rough concordance between theoretical assumptions and empirical facts evidence of non linearity in the estimated relationships favours a search theoretic model of labour markets over one based on queues and some quantitative results offer guidance to those using calibrated search models in theoretical analysis

business cycles with costly search and recruiting a business cycle model is developed in which output is traded on lucas phelps islands and labor services on each island are exchanged through costly search and recruiting with transactions externalities the model exhibits persistent involuntary unemployment and inefficient equilibria even though there are no nominal rigidities and no unexploited privately attainable gains from trade it also exhibits employment fluctuations without any real wage fluctuations it yields a lucas aggregate supply curve to a linear approximation it also implies that the natural rate of unemployment depends positively upon the variability and persistence of relative price shocks

what have we learned from three decades of research on the productivity of public capital the last three decades have witnessed a great deal of research effort devoted to measuring the private output elasticity of public capital the wide range of available estimates have precluded any consensus so far however this paper reconciles the empirical findings of the literature by quantitatively analyzing a sample of 578 estimates collected from 68 studies for the 1983 2008 period using meta regression analysis we show how study design characteristics and publication bias can explain a large fraction of the variation across estimates we find a short run output elasticity of public capital supplied at the central government level of 0 083 which increases to 0 122 in the long run if in addition only core infrastructure at a regional local level of government is considered these estimates are almost doubled the average output elasticity of public capital amounts to 0 106 our results suggest that public capital is undersupplied in oecd economies

public infrastructure investments productivity and welfare in fixed geographic areas abstract measures of the value of public investments are critical inputs into the policy process and aggregate production and cost functions have become the dominant methods of evaluating these benefits this paper examines the limitations of these approaches in light of applied production and spatial equilibrium theories a spatial equilibrium model of an economy with nontraded localized public goods like infrastructure is proposed and a method for identifying the role of public capital in firm production and household preferences is derived empirical evidence from a sample of large us cities suggests that public capital provides significant marginal benefits but the marginal productivity of public capital is low and aggregate city willingness to pay for large increases in public capital is less than their cost the paper concludes with a brief discussion of the political economy of urban infrastructure investment