the public choice of superior sanctions this paper analyzes the public choice of specific forms of sanctions current sanctions are essentially quantity constraints q sanctions which are like quotas in that they might bestow benefits on certain special interest groups in the target country revenue sanctions r sanctions may be able to recapture such benefits in the form of sender government revenue which could either compensate for the costs of sanctions to the sending country or finance other sanction enhancing activities aimed at the target country hence r sanctions may be superior to q sanctions in general or on the basis of target efficiency however public choice analysis suggests that q sanctions will generally be chosen over r sanctions by democratic countries

on the efficiency of law a public choice perspective economists have not yet developed a comprehensive theoretical framework incorporating transaction cost economics within a public choice perspective for predicting when there will be an efficiency problem with the law transaction cost reasoning and the rent seeking insight have not been applied systematically in a dynamic institutional context to evaluate when the law will be used to increase or not minimize problems of bounded rationality and opportunism this paper takes a first step at identifying and remedying this deficiency the paper first provides a critical review of relevant theoretical contributions made by becker 1983 1985 posner 1977 priest 1977 rubin 1977 1982 williamson 1975 1985 and others we then show how analysis of the efficiency of law can be synthesized into a broader whole by incorporating transaction cost economics more fully into existing understanding of rentseeking in the political realm thus within the public choice paradigm this paper develops a deeper transaction cost analysis of the efficiency of law building on prior research by the authors crew and rowley 1988a 1988b twight 1983 1988 the paper identifies variables that position legal rules on a spectrum that ranges from those that are predominantly transaction cost

voter preferences and state regulation of smoking i introduction tobacco taxation and smoking restrictions are two areas of regulation for which states have maintained a high level of control relative to the federal government 1 given this flexibility states have established a wide range of restrictions on smoking in areas such as government workplaces restaurants bars shopping malls indoor arenas and hospitals 2 although most states restrict smoking in hospitals there is considerable variation among states in restrictions in other areas in the 1998 99 period of this study about two thirds of states restricted smoking in restaurants whereas only four states restricted smoking in bars what has led to variation in smoking restrictions across states in a democratic society one would expect voter preferences to play an instrumental role in determining which policies are enacted and which are not this article provides the first empirical exploration of whether state level smoking restrictions are consistent with preferences of the citizenry taking into account both voting behavior and the role of smoking status in influencing whether an individual votes specifically we examine whether voters preferences for smoking restrictions in restaurants bars malls indoor sporting events and hospitals are consistent with state level restrictions on smoking in each of these public areas 3 our research draws on public choice models of policy making by state and local governments voters preferences typically play a central role because voting affects legislators incentives to support regulations 4 public choice research also finds that nonvoter factors may influence state and local policy making 5 in the case of smoking regulations public health advocates or tobacco industry lobbyists might influence regulatory policies the specific building block of our analysis of state restrictions on smoking is information on individuals voting behavior which we link to their smoking status and preferences over smoking restrictions our analysis uses measures of political pressure that account for individual preferences as well as their voting behavior to examine the possible role of interest group pressures we also control for nonvoter influences on smoking regulation including the proportion of the state population who smoke measures of state ideology and size of the tobacco industry with the exception of smoking in bars there is majority support for smoking restrictions unsurprisingly smokers are less supportive of restrictions than are nonsmokers nonetheless even smokers demonstrate a high level of support for many restrictions smokers are also less likely to vote than are nonsmokers even after controlling for other demographic factors the lower voting rate diminishes voter opposition to antismoking regulation but is usually not critical in view of the substantial support that most smoking restrictions have among smokers the political pressure indices for restrictions on smoking in each public area are generally significantly related to the probability that a state restricts smoking in that public area the nonvoter factors such as the smoking rate in the state and tobacco s role in the state economy are rarely influential policy debates over the desirability of smoking restrictions emphasize possible health risks due to exposure to environmental tobacco smoke ets and effects on business profitability the primary argument for expanding smoking restrictions is to protect workers and customers from exposure to ets 6 as our results show voters are generally supportive of smoking restrictions in public areas which would thereby protect workers as well as themselves and other customers however there is a substantial controversy over the extent of health risks associated with exposure to ets the basis for the push by the u s occupational and safety health administration osha for increased smoking restrictions to protect workers is the highly controversial u

strategic extremism why republicans and democrats divide on religious values party platforms differ sharply from one another especially on issues with religious content such as abortion or gay marriage given the high return to attracting the median voter why do vote maximizing politicians take extreme positions in this paper we find that strategic extremism depends on an intensive margin where politicians want to induce their core constituents to vote or make donations and the ability to target political messages toward those core constituents our model predicts that the political relevance of religious issues is highest when around one half of the voting population attends church regularly using data from across the world and within the united states we indeed find a nonmonotonic relationship between religious extremism and religious attendance

clientelism and vote buying lessons from field experiments in african elections electoral clientelism and vote buying are widely perceived as major obstacles to economic development this is because they may limit the provision of public goods in this paper we review the literature on clientelism and vote buying and propose the use of field experiments to evaluate empirically the consequences of these phenomena we provide an overview discuss implementation and interpret the main results of recent field experiments conducted by the authors in west african countries clientelism and vote buying seem to be effective and to enjoy widespread electoral support the results suggest that increased access to information and political participation by women may limit clientelism in addition voter education campaigns may undermine the effects of vote buying on voting behaviour we argue that our findings may inform the design of development aid interventions as a way effectively to increase public good political accountability we also discuss directions for fruitful future research copyright 2009 oxford university press

promotion of the agricultural sector and political power in austria in most industrialized countries farmers as a small and well orgnized group are ableto influence government decisions to get rent creating proposals enacted two different viewsare presented to explain why the chicagoan view efficient redistribution hypothesis and the virginian view inefficient outcome of political bargaining a vertically structuredempirical model of the austrian farm sector is employed to test both hypotheses quantitativeresults of the welfare transfers from consumers taxpayers to farmers and agribusiness firmsare derived and the political weights of these groups are presented

predatory versus productive government the case of u s agricultural policies this essay will argue that agricultural policy in the united states has led to both the enhancement of efficiency through productive policies and the transfer of wealth and income to special interests through redistributive or predatory policies these two activities can be labeled as pests and perts pest policies or political economic seeking transfers are meant to redistribute wealth from one social group to another and are not explicitly concerned with efficiency in contrast perts or political economic resource transactions are intended to correct market failures or to provide public goods these policies have neutral distributional effects at least in design a review of the history of public policy in agriculture reveals not only tension between the pert and pest roles of the public sector but also some coordination between these two types of activities as different interest groups pressure the political process the government trades off pests and perts in its attempts to acquire balance and secure political power at times this has led to combinations of programs that appear incoherent in such a world the challenge for economists is to design and advocate policies that are both economically productive and politically sustainable

political economy of public policies insights from distortions to agricultural and food markets the agricultural and food sector is an ideal case for investigating the political economy of public policies many of the policy developments in this sector since the 1950s have been sudden and transformational while others have been gradual but persistent this paper reviews and synthesizes the literature on trends and fluctuations in market distortions and the political economy explanations that have been advanced based on a rich global data set covering a half century of evidence on commodities countries and policy instruments the paper identifies hypotheses that have been explored in the literature on the extent of market distortions and the conditions under which reform may be feasible

the roles of ownership ecology and economics in public wetland conservation decisions abstract scholars have studied the problem of optimal reserve site selection however the actual conservation choices made by government decision makers may yield reserve networks that are far from optimal this paper uses data on patterns of wetland conservation in austria in order to identify patterns in government decisions regarding which wetlands to protect we find that conservation decisions are guided at least in part by variation in ecological value and economic cost however there is also a marked bias against conserving lands that happen to be privately owned this bias against protecting private land is likely to be cost ineffective driven by asymmetric information and political pressure

government policy and the firm s capital structure abstract the purpose of this paper is to examine the effects of commonly observed forms of government intervention on the firm s capital structure we show that since market claims against the firm are always properly priced the firm is forced to take market claimants interests into account on the other hand since government claims are usually not adjusted for risk the firm can take advantage of the government it does so by choosing strategies that extract maximum value minimum cost from these policies in particular the firm uses its capital capital structure to maximize the value of the policy thus leading to a determinate capital strucure

capital budgets borrowing rules and state capital spending abstract this paper compares the level and composition of government spending in u s states that maintain separate budgets for capital and operating expenditures with that in states that employ unified budgets it also investigates the effects of pay as you go financing rules for capital projects the empirical findings suggest that states with separate capital budgets spend more on public capital projects than comparable states with unified budgets there is no evidence that the presence or absence of a capital budget affects the level of non capital spending pay as you go requirements for financing capital projects are associated with lower levels of both capital and non capital spending

economic development institutional change and the political economy of agricultural protection an econometric study of belgium since the 19th century this empirical study uses 100 years of annual data on 11 agricultural commodities from belgium to measure the impact of structural changes coinciding with economic development and changes in political institutions on agricultural protection the analysis shows that changes in agricultural protection are caused by a combination of factors governments have increased protection and support to farmers when world market prices for their commodities fell and vice versa offsetting market effects on producer incomes other economic determinants were the share of the commodities in total consumer expenditures negative effect and in total output of the economy positive effect with belgium a small economy there was no impact of the trade position changes in political institutions have affected agricultural protection democratic reforms which induced a significant shift in the political balance towards agricultural interests such as the introduction of the one man one vote system led to an increase in agricultural protection the integration of belgian agricultural policies in the common agricultural policy in 1968 coincided with an increase in protection ceteris paribus both institutional factors related to changes in access to and information about the decision making at the eu level and structural changes in the agricultural and food economy may explain this effect

government growth in the twenty first century public choice explanations of government growth fall into three main categories budget maximization theories rational choice models and path dependent models like the ratchet hypothesis the strengths and weaknesses of these theories as explanations for government growth are considered along with some facts about the actual growth of government to conjecture about its trajectory in the twenty first century government size seems to have been constrained in the past primarily by its ability to raise revenue growth rates in the new century thus appear to depend on factors constraining government s ability to continue to expand the tax base

a new approach for identifying the parameters of a tax capitalization model abstract this study re estimates property tax capitalization rates with two empirical innovations first the underidentification problem inherent in all capitalization studies is resolved using estimates of rental values instead of estimates of the net user cost second the methodology along with the utilization of a unique data set mitigates biases resulting from potential correlations between property tax rates and unobservable amenities or public services the extent of tax capitalization estimated here is greater than estimates reported in many recent studies and is statistically indistinguishable from full capitalization the study also provides insights regarding the variability of the net user cost of housing

politics and the rescue of insolvent savings and loans before 1989 the results presented in this paper are consistent with those predicted by public choice economists who believe that regulatory agencies represent the interests of their controlling congressional committees membership on committees is not random congressmen seek committee assignments where they can represent the interests of their constituency congressmen from states where financial institutions are significant will seek membership on their respective banking committees once on those committees congressmen will seek to protect and promote their own constituency in the case of the savings and loan industry insolvent savings and loans received benefits from staying in operation these savings and loans gained another chance to gamble for resurrection being shut down or placed in a management consignment program did not give this option the results presented in our paper indicate that participation in one of the rescue programs is not random savings and loans in states with political power representation on the senate banking committee are less likely to be resolved

economic principles and incentives structure management and funding of agricultural research in the united states the problems faced by public agricultural research and land grant system in the us is discussed in the context of its response to public pressure and criticism several proposals are put forward to address these problems which are related to the following issues grant funding versus formula funding breakdown of organized science in agriculture privatization of the land grant system harnessing the efficiencies of competition in public agricultural research and long term social productivity modelling

on the political economy of guest worker programs in agriculture guest workers have provided a source of agricultural labor supply in many countries recent legislative proposals on immigration reform in the united states have renewed discussions about the role of guest worker programs and highlighted the arguments for and against such programs even within the agricultural sector there has not been strong broad based support for an expansion in the number of guest workers a model is developed that considers competing interests between commodity groups horticulture crops and grain crops to explain this lack of support and then a series of simulations are conducted to highlight the possible economic effects of an expanded guest worker program results suggest that an increase in the labor supply would have much larger economic impacts for horticultural producers and firms in the supporting input markets furthermore under some conditions simulation outcomes show how an increase in the labor supply may lead to small revenue losses for both producers and input suppliers in grain markets

why does nuclear power performance differ across europe abstract this paper compares the performance of nuclear power plants in five european countries by estimating a microeconomic model of managerial decision making the statistical formulation of production as a controlled stochastic process connects economic theory much more closely to actual production events than standard economic production functions in this application the structural behavioral model distinguishes variations in economic regulatory and cultural environments different incentives for plant operations from technical variations different production functions it also estimates the weights that management attaches to different aspects of performance such as reliability safety and availability productivity while any structural model necessitates debatable assumptions the approach nevertheless has much to contributes to public policy discussions the results from 1981 1986 reveal that management attitudes towards the reliability productivity trade off differ substantially between european countries this suggests that the incentives of plant managers differ in ways that may not have been intended or desirable

reexamining the expected effect of available resources and firm size on firm environmental orientation an empirical study of uk firms an emergent body of literature examined why some firms apply some environmental initiatives while other firms do not take responsibility for their natural environment thus firm environmental orientation responsiveness and performance are linked in the literature to several variables unfortunately the relationship between firm environmental orientation and either available resources or firm size showed mixed results and inconclusive evidence therefore the aim of this paper is to show empirically how available resources and firm size can explain differences in firm environmental responsiveness and environmental performance econometric results of environmental responsiveness using the logistic regression model demonstrated that firm size does appear to add something unique in explaining differences in environmental responsiveness while available resource can be safely dropped from the model however econometric analysis of environmental performance using the maximum likelihood random effects model showed strong evidence that available resources and firm size are significant predictors of firm environmental performance

the effect of environmental regulation on optimal plant size and factor shares the method for measuring the effects of environmental regulation on the size distribution of industrial plants and the distribution of factor shares described in this paper focuses on the 20 industries with highest per unit pollution abatement costs and the 20 with the lowest costs the study finds that compliance with environmental laws has not only reduced the number of plants in the affected industries but has placed a greater burden on small rather than on large plants besides redistributing within industry market shares environmental regulation has increased the use of capital relative to labor although the disproportionate burden placed on small plants in the high abatement cost industries may have been unintended it is likely that large firms will be less vocal opponents of environmental regulation than are small firms 22 references 12 tables

systematic assessment error and intrajurisdiction property tax capitalization over the past twelve years considerable evidence has accumulated on the extent to which intercommunity differences in property tax burdens are capitalized into property values 17 21 8 7 25 recently linneman 14 has analyzed the validity of this evidence after taking into consideration alternative models of local government finance in the model that he believes best represents the spirit of the tax capitalization literature local government expenditures are financed wholly by property tax receipts he demonstrates that in this case a perfect correlation between taxes and public goods makes it econometrically impossible to estimate property value equations unless measurement errors and omitted variables are present he therefore asserts that existing results on the tax capitalization issue are of nebulous value

historical construction costs of global nuclear power reactors the existing literature on the construction costs of nuclear power reactors has focused almost exclusively on trends in construction costs in only two countries the united states and france and during two decades the 1970s and 1980s these analyses koomey and hultman 2007 grubler 2010 and escobar rangel and leveque 2015 study only 26 of reactors built globally between 1960 and 2010 providing an incomplete picture of the economic evolution of nuclear power construction this study curates historical reactor specific overnight construction cost occ data that broaden the scope of study substantially covering the full cost history for 349 reactors in the us france canada west germany japan india and south korea encompassing 58 of all reactors built globally we find that trends in costs have varied significantly in magnitude and in structure by era country and experience in contrast to the rapid cost escalation that characterized nuclear construction in the united states we find evidence of much milder cost escalation in many countries including absolute cost declines in some countries and specific eras our new findings suggest that there is no inherent cost escalation trend associated with nuclear technology

budgetary policy with unified and decentralized appropriations authority the divestiture of the house appropriations committee in the1880 s has received considerable attention of an empiricalnature this paper presents a formal model of legislativedecisionmaking using a common agency formulation to representinterest group lobbying of legislators this framework is usedto analyze the effects of decentralizing appropriationsauthority the conditions under which decentralization leadsto higher spending are characterized it is argued that theconventional view that divestiture caused higher levels ofspending only holds if decentralization created barriers tolobbying and political bargaining across different committees in addition the role of specialized committee knowledge isexamined

inequality as a cause of environmental degradation abstract this paper advances two hypotheses first the extent of an environmentally degrading economic activity is a function of the balance of power between the winners who derive net benefits from the activity and the losers who bear net costs second greater inequalities of power and wealth lead all else equal to more environmental degradation

optimal response to a shift in regulatory regime the case of the us nuclear power industry this paper studies the impact of the march 1979 three mile island tmi accident on the regulation of nuclear power plants npps and its consequences for the operating behaviour and profitability of the us nuclear power industry we treat the tmi accident as a natural experiment that caused a sudden unexpected and permanent increase in the intensity of safety regulation by the us nuclear regulatory commission nrc and a shift towards increased disallowances of operating costs by state and local public utility commissions pucs we analyse the nuclear power industry s reaction to this shift in regulatory regime using detailed monthly data on npp operations collected by the nrc one of the industry s responses was to increase the planned durations between refuellings from 12 months in the pre tmi period to 18 months in the post tmi period we estimate a simple dynamic programming dp model of npp operations that shows how an operator optimally balances the potential increases in capacity utilization rates associated with longer operating cycles against the increased costs of unplanned and forced outages associated with longer cycles under the maintained hypothesis that npp operators seek to maximize expected discounted profits we use the npp operating data to infer profit functions for npps in the pre and post tmi periods the estimated profit functions reveal that utilities have been responsive to nrc regulation insofar as they impute a significantly higher cost to imprudent operation of a reactor in the post tmi period than in the pre tmi period the results show that utilities responded optimally to the change in regulatory regime since the dp model predicts that optimal planned operating cycles were approximately 12 months in the pre tmi period and 18 months in the post tmi period we find that while npps appear safer in the post tmi period in terms of having a lower rate of forced outages they are also substantially less profitable over 90 of the expected discounted profits from continued operation of existing npps have been eliminated in the post tmi period however since most of the investments in existing npps are already sunk and given the high costs of plant decommissioning the dp model predicts that utilities will continue to operate npps rather than shut them down interestingly we find that the hypothesis of expected discounted profit maximization provides a much better approximation to npp operating behaviour in the post tmi period than in the pre tmi period

pricing and regulating affect environmental ethics effluent charges and tradeable permits are economically efficient but rarely used a new explanation for this discrepancy is offered pricing may crowd out environmental ethics in the pricing and via spillovers also in non pricing sectors pricing may therefore increase pollution providing a reason why decision makers tend to reject environmental pricing five propositions showing the conditions for counterproductive effects are advanced they are consistent with available empirical evidence regulation by setting standards and subsidies damage environmental ethics less than pricing because pollution is condoned damaging environmental ethics may prevent political action in favor of the environment

ideological conviction and persuasion in the rent seeking society abstract the paper develops a model of rent seeking in a democratic political context where voting as well as rent seeking matters in this context the paper demonstrates that voter ideology is a constraint on the rent seeking game as well as a possible avenue of rent seeking in a setting where there are both rent seeking and ideological interest groups rent seekers can free ride on the efforts of ideologues which tends to reduce rent seeking effort in a setting where complementary economic and ideological interest groups coordinate their efforts both rent seeking and ideological conflict tend to increase

voting and paying for public goods an application of the theory of the core abstract let any coalition with a majority of all voters have the power to choose the quantities of public goods under rule i a majority coalition bears a cost of its decision that is proportional to its size under rule ii it must bear the whole cost of its decision thus rule i imposes costs on minorities although they have no power to choose the quantities of public goods while rule ii allows goods to have some attributes of semiprivate goods it is shown that a nonempty core under rule i implies a nonempty core under rule ii but not conversely necessary and sufficient conditions in terms of the properties of the von neumann morgenstern characteristic function are given

property taxation and the demand for housing an econometric analysis abstract there is disagreement among economists regarding the effect of a local increase in property taxation on the housing market in defining the price of housing services studies of the demand for housing have treated the property tax exclusively as an excise tax on housing consumption two recent theoretical developments suggest this is a misrepresentation of the tax one theory holds that the excise effects of property taxation may be shifted backward to the factors employed in the production of housing the other theory concludes that the property tax is not an excise but rather serves as an efficient price for local public services to investigate these hypotheses data from the annual housing survey were employed to estimate a housing demand model which included the net effective property tax rate among the set of independent variables in addition to revealing the property tax housing demand relationship the model provides more reliable estimates of income and price elasticities by eliminating specification errors found in previous studies results indicate that the property tax reduces the housing consumption of central city homeowners but does not distort the suburban housing market

the theory of economic regulation and public choice and the determinants of public sector bargaining legislation in this study we used the theory of economic regulation and public choice to derive a model to explain the pattern of public sector bargaining laws among the states we find this type of legislation is influenced by the following demand factors 1 the extent of public sector union membership which represents the interest group hypothesis has a positive influence on pro union legislation 2 the extent of employer opposition to unions as measured by unfair labor practice charges against employers in representation elections has a negative effect on bargaining laws 3 two taste variables the salaries of public employees and the percent of nonwhite employment in the state have a positive influence on these laws a result which will be surprising to many people is that the extent of private sector union membership has no significant influence on the passage of public sector bargaining legislation

demographic structure and the political economy of education subsidies this paper investigates the politico economic impact of a society s age structure on the extent of public funding of education education subsidies serve to internalize positive spillovers of human capital investment but redistribute resources from the working old to the non working young thus creating a conflict of interest between the two generations the political process is characterized by a representative democracy

the bias in favor of pro tariff lobbies abstract we show that the probability of success of the pro tariff lobby defined as a decreasing function of the ratio of consumer loss to producer gain rent generated by the tariff rises with the tariff under very general conditions this appears as an exception to becker s view that less distortionary measures tend to be adopted over their more distortionary counterparts we then provide a micro foundation for our probability definition using the imperfectly discriminating lobbying framework

a tale of two cities the political economy of local investment climates in indonesia abstract there is little doubt that protecting property rights reducing corruption and improving public services are desirable long term objectives for all countries but are such institutional prescriptions sufficient or even necessary to achieve investment and growth by exploring the political economy of the cities of solo and manado in indonesia this article shows that relationship based rather than rule based cooperation between government leaders and local firms can provide an effective mechanism to boost investment and improve local investment climates our findings challenge the conventional wisdom that impartial rule based economic governance is a precondition for investment although it suggests that the creation of such institutions may make growth more sustainable and equitable in the medium and long term

instrument choice political reform and economic welfare the purpose of this paper is to formally examine the effect of placing constraints such as the line item veto or a balanced budget amendment on legislative behavior there are two basic findings that emerge from the analysis first constraints on one type of instrument such as spending will in general result in more widespread use of other kinds of instruments such as regulation second it is naive to conclude that constraints on legislative behavior will promote economic efficiency and or reduce the growth of government the primary contribution of the paper is to suggest how changes in the political environment can affect instrument choice economic welfare and the size of government

random errors dirty information and politics rational voters assessments of candidates and policy proposals are unbiased but affected by random errors clean information decreases these errors while dirty information increases them in politics most voting procedures weigh random individual errors asymmetrically thus such errors do not counterbalance one another in the aggregate they systematically affect politics this illuminates the roles of political propaganda and interest groups it helps to explain various puzzles in public choice e g the frequent use of inefficient policy instruments institutional conditions are identified that shape the aggregate impact of individual errors and the politicians incentives to produce dirty information

impact of plasma arc reforming deployment on economic performance of a commercial coal to liquids process abstract coal remains integral to the supply of energy in many parts of the world despite the associated negative effects on the environment plasma arc reforming has the potential of making coal to liquids processes cleaner by reducing its greenhouse gas footprint however the chances of adoption without a clear understanding of how the process modification would affect economic performance are slim in this study financial models were built using an existing commercial coal to liquids process as a reference case economic analyses were done to evaluate the impact of deploying a plasma arc reformer on financial performance of a coal to liquids process in building the financial models the possibility of the introduction of a carbon tax was taken into consideration the results show that deploying plasma arc reforming reduces the oil price required for break even from 89 bbl to 82 bbl achieves a positive project npv and exceeds the hurdle rate for similar projects in the process it reduces vulnerability to the introduction of a carbon tax the requirement for extra low carbon electricity can be a hurdle to implementation however the alternative carbon tax related charges are less desirable overall it was concluded that the deployment of plasma arc reforming to coal to liquids processes is value adding the project demonstrates that by implementing a cleaner production initiative it is possible to reduce greenhouse gas emissions of coal to liquids without significantly losing shareholder value

regulation and firm size fda impacts on innovation this article estimates the highly differential impacts of fda regulations on pharmaceutical firms of various sizes where size is measured as scale of r d expenditures estimation is performed using the method of maximum quasi likelihoods using productivity trends of the united kingdom as a control to isolate fda regulatory effects in the united states it is shown that smaller u s pharmaceutical firms suffered devastating reductions in research productivity because of fda regulations in contrast the largest u s pharmaceutical firms apparently benefited from regulation as sales gains due to reduced competition more than offset their quite moderate declines in research productivity

rent seeking market structure and growth we study the role of productive and unproductive entrepreneurship in economic growth in a setting where firms compete in both economic and political markets specifically firms compete for market share through cost reducing technological innovation and they vie for influence over government transfer policy through rent seeking activities we find that rent seeking affects growth in two ways it allows firms to ignore economic competition leading to less innovation and it alters the number of firms that are supported in equilibrium the former effect is negative while the latter is ambiguous we show how these effects depend on various characteristics of economic and political markets

appropriation violent enforcement and transaction costs a critical survey this paper focuses on the extension of transaction costs to appropriative activity and coercive power in the property rights approach it has been argued that including the costs of appropriation and violent enforcement in transaction costs is based on the assumption that coaseian bargaining can be extended to any institutional scenario i e voluntary as well as coercive exchange however voluntary transactions cannot capture the logic of coercive power this means that the assumption of an efficient political market is not valid and that the political coase theorem lacks the logical consistency to provide a cornerstone for political theory

are government transfers efficient an alternative test of the efficient redistribution hypothesis the efficient redistribution hypothesis says that no available government policies are pareto superior to observed government policies efficient redistribution from government policy is a central tenet of much recent theoretical and applied political economy literature in this paper limitations of previous attempts to test the efficient redistribution hypothesis are discussed and an alternative test of the efficient redistribution hypothesis that uses vector optimization theory and bootstrap methodology is presented

production costs of global conventional and unconventional petroleum abstract concerns about the costs of developing oil and gas from conventional and unconventional formations have led many commentators to assume that increasing prices are in the offing and may be a limiting factor for economic growth historically production costs have fluctuated as influenced by the cost increasing effects of depletion versus the cost reducing effects of technological progress this paper aims to review several methods for assessing current and long term costs despite the uncertainty of such estimation evidence shows that production costs in the foreseeable future might not increase dramatically and actually could decrease as petroleum development methods improve and additional supplies come online recent examples include the commercially viable production of unconventional oil and gas resources that has kept energy prices contained

transaction costs institutional design and the separation of powers abstract the internal organization of the government can be used as a constraint on the capture of political decision makers in a setting where multiple interest groups try to influence policy outcomes centralization i e the choice of a single agency dealing with all interest groups is costly because it induces a better coordination of their influences the choice of specialized agencies is better because it increases the overall transaction costs of capture making agencies more immune to capture by interest groups more generally we discuss how an institutional design relying on separation of powers among specialized agencies may improve policy outcomes

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

a policy preference function for government intervention in the u s wheat market this paper estimates a policy preference function that explains the government s choices of target prices government held wheat stocks and public wheat research funding the policy preference function depends on producers surplus consumers surplus and budget expenditures an important innovation in this paper is the inclusion of interactions between public research expenditures and other public policy variables results indicate that the government places a premium of 25 to 45 on the welfare of wheat producers of relative to budget expenditures while wheat consumers welfare is discounted as much as 50 relative to budget expenditures the purpose of this paper is to provide an explanation of government commodity programs stock accumulations and research expenditures in the u s wheat sector the explanation is based on a policy preference function ppf that depends on producers surplus consumers surplus and budget expenditures it is assumed that target prices reductions in or additions to government stocks and public research expenditures are chosen to maximize the policy preference function the central contribution of the paper is the estimation of a function that is consistent with the observed government interventions in the u s wheat market that is the paper explains the observed target prices government sales and public research expenditures as rational behavior by a government which seeks to maximize the estimated policy preference function the approach in this paper is based on the political interest group theories of peltzman and becker applications of these ideas to agriculture include rausser and freebairn s description of the beef industry gardner s 1985 analysis

the economics of special interest politics the case of the tariff this paper investigates the interaction of politicians and special interest lobbies the goal is to model the equilibrium levels of redistributive policies such as taxes subsidies tariffs and regulatory decisions the model is applied throughout to the setting of tariffs by contributing to political campaigns special interest lobbies generate economic returns higher tariffs generate revenue for import competing industries through higher product prices higher milk support prices raise dairy farm income and so forth the lobby invests to maximize these net economic returns in evaluating their chances of election politicians weigh the favorable effects of special interest money against the unfavorable association with the lobby and the social cost of the redistributive policy section i explores the lobby s problem it describes a formalization of mancur olson s discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns section ii describes determination of the equilibrium tariff positions of each politician in a political campaign

self regulation taxation and public voluntary environmental agreements an increasingly popular instrument for solving environmental problems is the public voluntary agreement va in which government offers technical assistance and positive publicity to firms that reach certain environmental goals prior papers treat such agreements as a superior low cost instrument that can be used to preempt a threat of traditional inefficient regulation we present a more general model in which public vas may instead be weak tools used when political opposition makes environmental taxes infeasible we explore the conditions under which taxes public vas and unilateral industry actions are to be expected and the welfare implications of the various instruments notably we also show that welfare may be reduced by the introduction of public vas 2002 elsevier b v all rights reserved

organizational structure and expected output at nuclear power plants this paper examines the relationship between organizational structure and operation and outage durations at nuclear power plants in the united states it empirically examines aoki s 1990 proposition that 1 hierarchical control increases productivity in situations that are very stable or very uncertain and 2 horizontal coordination increases productivity in intermediate situations it describes a model of continuous production in which management chooses an organizational structure that minimizes the ratio of the hazard rates for operation and outage and proposes an index of hierarchy based on measures of plant level organization parameter estimates support the proposition that less hierarchy is associated with higher productivity through longer periods of operation copyright 1996 by mit press

regulation competition and liberalization in many countries throughout the world regulators are struggling to determine whether and how to introduce competition into regulated industries this essay examines the complexities involved in the liberalization process while stressing the importance of case specific analyses this essay distinguishes liberalization policies that generally are procompetitive from corresponding anticompetitive liberalization policies

explaining price policy bias in agriculture the calculus of support maximizing politicians a model is developed to explain observed patterns of policy intervention in agriculture we analyze the interaction between political support seeking politicians and supportsupplying citizens society consists of a rural and urban group we determine the effects on transfers of relative group size disparities in income endowments between groups and the deadweight loss of redistribution the framework advanced is an alternative to that of the interest group model and is used to explain for example why the export sectors in developing countries are taxed more and why the united kingdom is less adamant for higher price supports than germany

allocation of goods by lottery i introduction many goods such as hunting permits oil drilling leases cellular telephone licenses and rights to fishing berths as well as some buds such as the military draft jury duty and who is to be thrown overboard on a sinking life raft are or have been allocated by lotteries in neo classical welfare economics the random distribution of property rights does not affect allocative efficiency as long as transferability is allowed and the transactions costs are non prohibitive lottery allocations however are generally not transferable thus lottery allocations are inefficient since the goods are not ultimately allocated to the users who value them the most a number of authors such as aubert 1959 fienberg 1971 eckhoff 1989 and elster 1989 36 122 have argued that lotteries are chosen as the allocative instrument because it represents a fair or just means of allocating the goods rawls 1971 374 and eckhoff 1989 have noted that where it is impractical to divide the goods equally among those who desire them a lottery serves to satisfy both the requirement that the process be fair and that the allocation problem be resolved relatively costlessly elster 1989 113 however notes that lotteries are not the only fair allocation mechanism for example he points out that in jewish ethics the problem of allocating an indivisible good such as life saving resources is resolved by denying it to everyone even economists would probably prefer a lottery to this resolution the fairness hypothesis has a rich history in the old testament lotteries are deemed a fair way of allocating goods such as the inheritance of land numbers 33 54 lotteries are also used to allocate bads in perhaps the most famous biblical example of use of lots jonah was chosen by lot to be sacrificed to appease god who had brought a storm that threatened to wreck the ship the story goes that the lot selected jonah because he was shirking his duties elsewhere and should not have even been on the vessel jonah 1 6 1 notice that fair here is taken to mean just given this theological foundation it is not surprising that the lottery has seen frequent use in legal history as well one of the most interesting cases occurred in swedish and finnish trials in the 17th and 18th centuries in cases where a man was murdered by a mob lotteries were used to allocate punishment since the law required an eye for an eye no more and no less eckhoff says that if it was impossible to ascertain which of them had dealt the mortal blow the courts determined that one of the responsible parties be sentenced to death and that the person be selected by lottery 1989 19 a similar use of lotteries occurs in military history to deal with cases of mass desertion in roman armies every tenth man was executed decimated and the remainder pardoned in more modern times the lottery has been used in u s law 2 first of course is the use of a lottery to decide who shall sit on a jury a connection between fairness and lotteries however has also appeared in the common law in an 1842 case u s v holmes which has been discussed by fienberg 1971 eckhoff 1989 and elster 1989 a ship sank in a heavy storm and the lone surviving life raft was in grave danger of sinking the crew threw overboard fourteen male passengers in an effort to save the rest when back in port after being rescued a crewman named holmes the only crew member who had not disappeared upon arrival to port was brought to trial for the deaths of the passengers the court ruled that the non essential members of the crew should have been thrown overboard before any passengers and if that was not sufficient then passengers should have been selected by lot which is the fairest mode elster 1989 65 the fact that a human life presumably a large cost was at stake ex post did not affect the decision 3 the environmental economics literature contains a number of references to the social preferences for and benefits of lottery allocations

regulatory change corporate restructuring and the spatial development of the british financial sector marshall j n gentle c j s raybould s and coombes m 1992 regulatory change corporate restructuring and the spatial development of the british financial sector reg studies 26 453 467 the paper explores the dynamics of employment growth and change in the financial sector in the regions of britain during the 1980s complementing other work which has focused on international and corporate finance it focuses on personal financial markets the paper demonstrates the way in which regulatory change has initiated corporate diversification into new markets this reorganization has also included a round of innovation in new financial services and intensified competition in established personal sector markets restructuring has both intensified the concentration of the industry in the south and east of the country and promoted decentralization from london professional and managerial staff associated with the development of new services have been concentrated in the greater south east the rationaliza

the influence on congress by the thrift industry abstract the investigation of the influential role of the thrift industry on congress as demonstrated by voting behavior on regulatory policy changes in the eighties is the focus of this study specifically we search for the degree to which the inadequately capitalized component of the thrift industry has captured the house of representatives we examine the influence on congress by the thrift industry using the votes by the house of representatives associated with three different legislative acts the garn st germain act the competitive equality banking act and the financial institutions reform recovery and enforcement act addressing the thrift crisis using a multi chotomous voting model we identify traditional public choice variables that could influence the probability of voting for legislation to capture the variation of the thrifts interests we consider a series of financial variables motivated by the thrift literature of failure prediction models these variables allow us to investigate the influences from the health of the congressional district s thrifts their asset composition characteristics and their reliance on regulatory forbearance

alternative value estimates of owner occupied housing evidence on sample selection bias and systematic errors abstract numerous econometric models have used various estimates of housing value as dependent variables the three most common measures in order of descending popularity have been homeowner estimates sales price and assessed value each of these measures has limitations the use of sales price can cause sample selection bias while owner and tax assessor estimates are subject to measurement error this study investigates the magnitude of the selection bias associated with sales price samples and whether the errors in owner and assessor estimates are systematically related to independent variables typically included in estimated equations our most important conclusion is that the use of owner estimates may cause bias in the estimated coefficients on many independent variables

merger activity in the waste disposal industry the impact and the implications of the environmental protection act over the last two and a half decades the uk s waste disposal industry has evolved from a disparate collection of localized small scale operators to a coherent multimillion pound industry with particular reference to the 1990 environmental protection act this paper uses multinomial logit analysis to estimate the degree to which increased regulation of the industry has led to a rise in merger activity within the sector it is shown that the act did increase the probability of a waste disposal firm being associated with merger activity either as an acquiring firm or as a target for other firms as a result intra industry consolidation took place alongside attempts by non waste disposal firms to diversify their interests within a buoyant sector which was avoiding the recessionary downturn affecting other sectors of the british economy

balancing environmental protection and energy production in the federal hydropower licensing process the u s federal energy regulatory commission ferc must balance environmental protection of riverine resources with the nation s growing demand for power production every time it issues a hydroelectric license this paper models the bureaucratic agency s decision making process in issuing these licenses data on nearly 500 hydro power licenses issued from 1983 to 2005 are utilized it is discovered that legislative and institutional constraints are by far the largest influences on ferc s regulatory decisions implying that if the current allocation of surface water in the united states is considered inefficient the most effective way to alter this allocation is by passing new legislation or by implementing institutional reform at ferc

interest group politics under majority rule abstract we develop a model of interest group politics in which the groups and coalitions that arise and the form of redistributive policies sought are jointly determined the model generates three key results first programs intended to reduce income inequality are more likely to involve direct payments than are programs that redistribute wealth across groups with similar incomes second nonequalizing redistribution is unlikely unless the various participants in the political process face significantly different political and economic costs of obtaining transfers third many policies that induce asymmetries among interest groups also impose significant deadweight costs stable nonequalizing redistribution will therefore tend to involve indirect and economically inefficient methods of transferring income

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

studying the role of political competition in the evolution of government size over long horizons here we argue for the use of cointegration and error correction analysis to combine economic factors that are nonstationary with political factors that are stationary into an empirical model of the evolution of public policy over long periods the approach is applied to disentangle the contributions of economics and politics to the evolution of public expenditure by the government of canada over 130 years political competition emerges as the primary political factor affecting government size

donors and domestic policy makers two worlds in agricultural policy making in recent decades many developing countries have moved from taxing their agricultural sector to subsidizing it a phenomenon referred to as overshooting using ghana and uganda as case study countries this study aims to contribute to explaining this phenomenon by examining the role of policy beliefs the study is based on the advocacy coalition framework and relies on discourse analysis as analytical method in depth interviews with policy actors in both countries served as empirical basis a quantitative analysis of the transcripts was used to identify different discourse coalitions and a qualitative analysis was conducted to examine the discourses and identify their underlying policy beliefs the paper identified far reaching differences in the agricultural policy beliefs between domestic policy makers and donors regarding the question what does it actually take to develop small holder agriculture the evidence from this analysis highlights the role that divergent policy beliefs can play in influencing agricultural policy choices

a monte carlo based decision support tool for assessing generation portfolios in future carbon constrained electricity industries abstract this paper presents a novel decision support tool for assessing future generation portfolios in an increasingly uncertain electricity industry the tool combines optimal generation mix concepts with monte carlo simulation and portfolio analysis techniques to determine expected overall industry costs associated cost uncertainty and expected co 2 emissions for different generation portfolio mixes the tool can incorporate complex and correlated probability distributions for estimated future fossil fuel costs carbon prices plant investment costs and demand including price elasticity impacts the intent of this tool is to facilitate risk weighted generation investment and associated policy decision making given uncertainties facing the electricity industry applications of this tool are demonstrated through a case study of an electricity industry with coal ccgt and ocgt facing future uncertainties results highlight some significant generation investment challenges including the impacts of uncertain and correlated carbon and fossil fuel prices the role of future demand changes in response to electricity prices and the impact of construction cost uncertainties on capital intensive generation the tool can incorporate virtually any type of input probability distribution and support sophisticated risk assessments of different portfolios including downside economic risks it can also assess portfolios against multi criterion objectives such as greenhouse emissions as well as overall industry costs

politics and the effectiveness of foreign aid abstract critics of foreign aid programs have long argued that poverty reflects government failure in this paper i test predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes i find that aid does not significantly increase investment nor benefit the poor as measured by improvements in human development indicators but it does increase the size of government the impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive but liberal political regimes and democracies ceteris paribus have on average 30 lower infant mortality than the least free regimes this may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs an implication is that short term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs

hospital mergers who merges with whom merger pairings are categorized based on the ownership status teaching status hospital size caseload severity and geographical distance of merging hospitals to determine the types of hospitals that tend to merge with each other the results show that mergers between two non teaching nonprofit or for profit hospitals occur more often but that only ownership status not teaching status affects the propensity to merge after controlling for other merger pair characteristics this paper also finds that hospitals are more likely to merge with a partner of similar size and close geographical proximity but not necessarily the closest candidate however ownership status not distance between hospitals is the dominant determinant of merger pairs

separating economic from political influences on government decisions abstract the public interest theory is a poor predictor of government decisions relative to interest group theories but a sophisticated public interest theory is a more serious alternative to the former testing the sophisticated theory s predictions is problematic however when public interest is coincident with an interest group s interests a four step method is developed that disentangles public interest and interest group interests by separating economic from political incentives applying the method to the national forest service decisions about wilderness designations indicates whether interest groups were successful in influencing allocation decisions and whether allocation decisions were in the public interest

the political economy of farmland ownership regulations and land prices one of the most ubiquitous forms of agricultural regulation is a restriction on farmland ownership one canadian example of a farmland ownership restriction is the saskatchewan farm security act fsa passed in 1974 the purpose of this article is to explain using a political economy framework why the fsa was implemented and to estimate the effect of the fsa on saskatchewan farmland values a present value pv model is used to estimate the relationship between land values rents and the regulation the hausman endogeneity test reveals that the regulation variable is endogenous with the land price the sign of the regulation variable is negative which fits with the theory i e the more stringent the regulation the lower the land value we estimate that the regulation lowered saskatchewan farmland prices by an average of 4 to 34 us acre depending on whether ordinary least squares ols or two stage least squares tsls is employed in the estimation over the period of 1974 2001

property tax shifting under imperfect competition the hedonic price models are commonly used to empirically assess the degree to which property taxes are shifted from property owners to property renters the findings of these studies vary sporadically in terms of the degree of tax shifting the competitiveness of housing markets may significantly influence the degree of tax shifting in this article we allow a nonzero price cost markup in the hedonic price equation and examine the impact of market power on property tax shifting in our case study we examine the property specific characteristics occupancy record and local property tax associated with hundreds of managed rental properties in central new hampshire the results show that depending on the degree of market power exercised by a property management firm the anti competitive structure of the market may significantly contribute to property tax shifting from property owners to property renters