retaliation bargaining and the pursuit of free and fair trade that domestic political economic factors are important determinants of a nation s trade barriers has been empirically well established however the question of how effective strategically retaliatory trade barriers are in deterring foreign protectionism has received far less systematic empirical attention in this article we use bilateral nontariff barrier ntb data between the united states and five developed partner countries japan france germany italy and the united kingdom to systematically examine the effectiveness of strategic retaliation we employ a simultaneous tobit model where the home and foreign ntb levels are determined endogenously in a bilateral game the model provides estimates of deterrence coefficients that is the reduction in foreign trade barriers as a result of u s retaliation which we use to characterize the nature of bilateral ntb games our hope is that the empirical results presented here which have realistic though controversial implications will inform u s trade policy

fraudulent collection of unemployment benefits a theoretical analysis with reference to income tax evasion abstract the harshest abusers of the unemployment insurance program are those employed who collect benefits while working this paper analyzes fraudulent claiming behavior and optimal deterrence policy under two alternative penalty schemes commonly used in tax evasion analyses one relates punishment to the magnitude of the dishonesty whereas the other relates punishment to the amount of illegal returns two exclusive features of fraudulent benefit claiming are given special attention the requirement to report at a labor exchange to demonstrate availability for work and the need to serve a waiting period before benefits can be collected

could tariffs be pro cyclical abstract conventional wisdom says that tariffs are counter cyclical we analyze the relationship between business cycles and applied mfn tariffs using a disaggregated product level panel dataset covering 72 countries between 2000 and 2011 strikingly and counter to conventional wisdom we find that tariffs are pro cyclical further investigation reveals that this pro cyclicality is driven by the tariff setting behavior of developing countries tariffs are acyclical in developed countries we present evidence that pro cyclical market power drives the pro cyclicality of tariffs in developing countries providing further evidence of the importance of terms of trade motivations in explaining trade policy

a political economic analysis of congressional voting patterns on nafta this paper delves into the question of the determinants of congressional voting on nafta it uses a logit model to examine both house and senate votes and is able to use district specific estimates in the former it finds only very limited support for the thesis that narrowly defined employment gainers and losers were important determinants of congressional voting patterns though some substantial support that districts that were highly agricultural or already possessed a substantial hispanic population and skilled labor force and had the most to gain from the general effects of nafta lead to a positive effect on the probability that a member of the house would vote affirmatively contributions from labor unions lowered the likelihood of affirmative votes political partisanship and ideological positions apparently had little effect on the votes a representative s political capital had a marginally significant effect on the probability on an affirmative vote but it performed positively in the senate and negatively in the house

free to trade democracies autocracies and international trade trade relations we address this issue by analyzing the relationship between regime type and trade policy in a formal model of commercial policy we establish that the ratification responsibility of the legislature in democratic states leads pairs of democracies to set trade barriers at a lower level than mixed country pairs composed of an autocracy and a democracy we test this hypothesis by analyzing the effects of regime type on trade during the period from 1960 to 1990 the results of this analysis accord with our argument democratic pairs have had much more open trade relations than mixed pairs t he effects of domestic political institutions on trade policy have long been a source of controversy among social scientists despite the widespread interest that this debate has prompted however remarkably few studies have addressed the links between political regime type and commercial policy 1 most work on the political economy of trade policy that examines institutional factors focuses only on variations in policy among democracies and avoids comparing democracies with other types of regimes moreover many analyses of trade barriers especially those by economists ignore the effects of domestic political

understanding international trade policies an emerging synthesis the international trade problems of the 1980s stimulated an expansion of scholarship on trade policies by economists and political scientists at least four distinct theoretical perspectives weave their way through recent literature that concentrates on the united states emphasizing market conditions policy beliefs and values national political institutions and global structures respectively new studies in each of these traditions advance beyond the work of their predecessors but none of the perspectives has yet proved adequate as a single unifying vehicle nevertheless we can also see clear movement toward a synthesis with single works blending insights from several traditions thus the books under review do not all fall neatly into the familiar exclusive categories of economics or political science the emerging synthesis needs strengthening in several ways including the development of conditioning hypotheses that will reduce remaining apparent confusions

further reflections on hidden unemployment an examination of the off flows from the claimant count in the north west of england one of the most significant set of papers to come out of the portfolio of regional studies association publications in recent years has concerned the exposure of the levels of hidden unemployment in many of the old industrial areas of britain see for instance labour market adjustment in areas of chronic industrial decline the case of the uk coalfields regional studies 30 7 1997 627 640 the authors of these papers christina beatty and stephen fothergill have generated a debate that has uncovered major implications for the way the regional problem is measured perceived and tackled although these are important in terms of regional economic development strategies and policies it remains to be seen how the failure to count the real levels of unemployment will impact on the review of regional policy assisted areas the designation of european structural fund areas and the successful introduction of such initiatives as the new deal and welfare to work underpinning and deepening the rigour of t

international institutions and economic sanctions economic sanctions have long occupied the attention of both scholars and policy makers despite the widespread use of sanctions many observers have concluded that the inherent problems associated with imposing sanctions involving multiple senders substantially limit their effectiveness this article reviews two books that analyze the factors that influence cooperation among senders of multilateral sanctions these books indicate that international institutions can do much to promote cooperation of this sort however this essay argues that the extent to which international institutions facilitate cooperation among senders of sanctions is likely to depend on the domestic politics of members the type of institution being used for this purpose the nature of the strategy being pursued and the distribution of power among members although these books make significant contributions to our understanding of the factors that promote cooperation among senders of multilateral sanctions they examine the factors that promote the effectiveness of sanctions in only a peripheral manner one potential influence on the effectiveness of sanctions that are organized by an international institution however is the likelihood that the institution will be captured by member states or by interest groups within them additional research that investigates the conditions under which international institutions are likely to be captured and the implications of institutional capture for their performance may therefore prove useful to scholars of international relations and economic statecraft

protecting free trade the political economy of rules of origin the design of rules of origin in free trade agreements ftas arouses spirited lobbying campaigns that mostly escape public attention this article argues that the domestic groups generally most favorable to ftas differ in their preferences over rules of origin industries with large returns to scale favor strict rules of origin to gain scale economies in an fta while industries with multinational supply chains prefer lenient rules of origin to accommodate offshore procurement an econometric analysis of rules of origin in the north american free trade agreement nafta finds tougher rules of origin the higher the external trade protection and the larger the returns to scale and more permissive rules of origin the greater the involvement in foreign sourcing the results suggest that rules of origin may be critical to building domestic coalitions for ftas industry preferences toward rules of origin therefore have important implications for the politics of fta ratification

foreign direct investment and the demand for protection in the united states over the past decade foreign direct investment fdi in the united states has grown dramatically changing the composition of many u s industries and bringing foreignowned firms into the domestic political process presumably fdi also has affected the politics of protection by both altering the domestic coalitions around protectionist demands and shifting the potential benefits that protectionism is likely to bring to understand this process we create and test a model that examines the level of inward investment and the extent to which this investment either complements or substitutes for existing import levels import complementing investment we suggest will cause a split in protectionist demands with local producers favoring protectionism and foreign investors pushing for free trade import substituting investment by contrast will create convergent interests between local and foreign producers in both cases inward fdi reshuffles traditional alliances and demands for protection challenging many prevailing views about protectionism in the united states

exchange rates and industry demands for trade protection the recent confrontation between china and the united states over currency policy illustrates a broader phenomenon exchange rate misalignments tend to spill over into trade policy although previous studies have shown that aggregate protectionist activity is positively related to the level of the real effective exchange rate we explore this relationship at the industry level several industry specific characteristics determine the protectionist response to exchange rate changes including the degree of exchange rate pass through the level of import penetration and the share of imported intermediate inputs in total industry inputs we find that the marginal effect of currency appreciation on the number of industry level antidumping petitions is positive and significant only for industries with high pass through therefore exchange rates appear to induce demands for trade barriers only in industries where competitiveness is directly harmed by currency appreciation

a synthesis of foreign direct investment theories and theories of the multinational firm this paper first presents a taxonomy of the foreign direct investment theories following the market imperfections paradigm it then focuses on recent developments pertaining to the theory of the multinational firm specifically the appropriability internalization and diversification theories subsequently the multinational phenomenon is seen as the result of an international differentiation of activities and an intrafirm integration across national borders all this within a markets and hierarchies approach last the paper points to areas for future research

testing theories of regime change hegemonic decline or surplus capacity two theories explain changes in the international regimes for major economic sectors a theory of hegemonic stability explains sectoral change as a consequence of ebbing hegemony a theory of surplus capacity attributes regime shifts to a serious global problem with excess production capacity in the sector the history of the world automobile industry shows that surplus capacity offers the better prediction and explanation for the timing of regime changes however a synthesis of the two theories is even more satisfactory hegemonic decline is a necessary but not sufficient condition for change surplus capacity in the absence of a hegemon creates the conditions necessary for change

firms and tariff regime change explaining the demand for protection although it is commonly argued that there is a connection between tariff levels and business conditions this hypothesis has not been subjected to systematic empirical analysis or given any theoretical basis the author presents two complementary theories of the movement of tariff levels in response to changing business conditions both explain tariff changes in terms of the changing political demands of business firms and both rely on the business cycle to drive these changing demands one theory is a conventional argument about changing opportunities for entry and exit the other treats firms as satisficers the theories yield similar predictions preliminary empirical analysis while consistent with both does not differentiate between them

distribution and redistribution the shadow of the nineteenth century the authors present an alternative to power resource theory as an approach to the study of distribution and redistribution while they agree that partisanship and union power are important they argue that both are endogenous to more fundamental differences in the organization of capitalist democracies specifically center left governments result from pr consensus political systems as opposed to majoritarian systems while strong unions have their origins in coordinated as opposed to liberal capitalism these differences in political representation and in the organization of production developed jointly in the early twentieth century and explain the cross national pattern of distribution and redistribution the clusters have their origins in two distinct political economic conditions in the second half of the nineteenth century one in which locally coordinated economies were coupled with strong guild traditions and heavy investment in cospecific assets and one in which market based economies were coupled with liberal states and more mobile assets

supplying trade reform political institutions and liberalization in middle income presidential democracies correcting the relative lack of attention to the supply side of trade policy this article addresses how political institutions channel societal demands for protection i hypothesize that strong presidents with significant legislative powers and strong party leaders empowered through electoral rules that rein in the personal vote can help overcome protectionist biases these arguments compare with two institutional alternatives first that protectionism should decrease as electoral district size grows because elections become more proportional and second that the collective action problems in fragmented party systems thwart trade reform i evaluate these hypotheses empirically using pooled time series cross sectional data involving 18 developing countries from 1971 to 1997 i find that delegation to presidents and party leaders is significantly related to trade liberalization and some evidence suggests that the effective number of parties and the size of electoral districts may also influence levels of protectionism

the concentration of capabilities and international trade over the course of the previous two decades political scientists have become increasingly interested in the relationship between international politics and global trade much of the literature on this topic centers on the effects of a hegemonic distribution of power on commerce hegemonic stability theorists argue that hegemony is a necessary condition for the existence of a liberal economic order and that in the absence of a hegemon a liberal international economy is particularly difficult to establish and maintain however a growing number of theoretical and empirical critiques have been leveled against the gemonic stability theory and the issue of whether hegemony helps shape patterns of global trade continues to be the topic of heated debate

unemployment and female labour supply the definition of labour force participation in the standard labour supply model stands in sharp contrast to that used in compiling the labour force statistics in the labour supply models only those supplying positive hours of work are considered to be labour force participants on the other hand participation in the labour force statistics is often defined to include not only those supplying positive hours but also those actively searching for work this paper is an attempt to reconcile these concepts by allowing unemployed workers to enter a generalisation of the standard labour supply model this turns out to be a convenient way to enter demand side factors directly into the determination of an individual s labour market position the model is applied with some success to the working behaviour of married women in the uk family expenditure survey

income maintenance schemes under wage rate uncertainty economists thinking on taxation schemes and work incentives is usually founded on a set of propositions concerning the supply of labor under perfect certainty insofar as labor is supplied under a regular fixed wage contract with no risk of involuntary unemployment this neglect of uncertainty seems reasonable however if one applies tax theory to income maintenance schemes for the poor the assumption of perfect certainty could be misleading accordingly we need to know whether risk on the seller s side in the labor contract significantly alters the market response to tax and subsidy schemes if it does then how does this affect a government s choice of design of an income maintenance scheme in this article i shall concentrate specifically on wage rate uncertainty as a preliminary it is interesting to note the number of ways in which such uncertainty affects poor people s incomes 1 those who are self employed receive a random return to the weekly hours they devote to their job 2 piecework or other productivity related employment contracts clearly have an uncertainty component 3 promotion and bonus schemes can have a similar effect in the life cycle of poverty many currently low paid workers know that the prospect of a higher wage through career ladder advancement may be obtained by currently working more hours or at a greater intensity at the time that the labor supply decision is made of course the returns to this marginal effort are uncertain 4 the possibility of unemployment can also be interpreted in the context of a random wagethough more care is needed here if the hours of work decision is made collectively for example via union representation although the going wage rate may be known with certainty for each individual it may be uncertain whether he will be able to find employment or not or indeed keep his job at the going rate why does wage rate uncertainty raise special problems there are in fact a number of issues involved2 but let me anticipate the formal argument of section i to iv by some reasoning on basic neoclassical theory i do so in two steps first take the standard case of an individual with a determinate wage where utility is a function of consumption and leisure increase the marginal tax rate mtr and his her nonlabor income if this is done so as to ensure exact compensation in utility terms then obviously we isolate a conventional pure substitution effect and labor supply is reduced if the compensation is such that ex post consumption remains constant then again labor supply is reduced as long as consumption is a superior good if the compensation is such that ex post net tax liability remains constant labor supply is reduced as long as leisure is a superior good second take the standard pure portfolio problem an individual is deciding how to allocate a fixed total wealth between a safe asset bearing a given rate of return and an asset with a higher but risky rate of return i assume that utility depends on disposable income that the individual aims to maximize london school of economics research reported here was supported in part by funds granted to the institute for research on poverty by the department of health education and welfare i thank members of the staff seminars at the university of reading and the institute for research on poverty madison and i garfinkel j r kesselman and d de meza for comments on earlier versions of this paper examples of the theory of taxation and labor supply under certainty are m g allingham and henry cassidy one paper that has dealt with the general problem of wage rate uncertainty is by m j block and j m heineke 2for a more general treatment see my forthcoming article

democratic institutions and exchange rate commitments since the collapse of the bretton woods system countries have been able to choose from a variety of exchange rate arrangements we argue that politicians incentives condition the choice of an exchange rate arrangement these incentives reflect the configuration of domestic political institutions particularly electoral and legislative institutions in systems where the cost of electoral defeat is high and electoral timing is exogenous politicians will be less willing to forgo their discretion over monetary policy with a fixed exchange rate in systems where the costs of electoral defeat are low and electoral timing is endogenous politicians are more likely to adopt a fixed exchange rate regime consequently differences in domestic political systems can help account for variations in the choice of exchange rate arrangements we test this argument using constrained multinomial logit and binomial logit on a sample of twenty democracies over the period 1974 95 domestic political institutions have a significant effect on exchange rate regime choice even after controlling for systemic macroeconomic and other political variables

growth waves systemic openness and protectionism there is a distinctively repetitive quality about trade policy problems domestic economic growth slows producers seek protection against foreign competitors and national decision makers raise barriers to trade while at the same time criticizing their counterparts in other governments for engaging in similar practices because trade is one of the more important topics in international and comparative political economy and because this scenario has played itself out more than a few times it is not surprising that a number of theorists have sought to model the underlying processes thought to produce movements toward and away from protectionism by now a variety of different types of approaches ranging from the cognitive to the systemic have been tried systemic structure ideas and ideology surplus capacity business cycles and shifts in elite orientation and domestic coalitions in response to external crises have been emphasized as principal theoretical foci our position is that the different levels of analysis and alternative foci all have merit and utility what they lack is an appreciation for the underlying systemic processes that link together these various facets of the political economy we seek to develop a theoretical argument that explicates these underlying processes the argument centers on recurring growth waves characterized in alternating pattern by the ascent of system leaders and the subsequent successful attempt of technological followers to catch up with the leaders the downturns of the growth waves produce conditions favoring protectionism but we contend the form and the intensity of protectionism that are likely to be produced will depend on which of the two types of growth waves is in progress ascent waves are characterized by the emergence of new technological leaders and a consequent increase in the gap between the leaders and the technological followers during the periods of structural transition and intense

integrating western and eastern european markets changing trade preferences in traditional manufacturing sectors in the european union although general trade theories are useful for specifying which groups support or oppose trade these frameworks see preferences as static and do not explain how they change over time instead this article proposes a dynamic perspective that considers how economic adjustment and liberal trade policies alter trade preferences the article examines why the traditionally protectionist german textile and apparel sectors accept the recent trade agreements with eastern europe producers can exploit technological and product changes by gaining access to export markets furthermore to take advantage of low labor costs abroad producers shift production to these countries for later reimportation lower trade barriers are therefore attractive to producers this strategy is also supported by increasingly liberal trade policy orientations in germany the european union eu and the general agreement on tariffs and trade gatt german producers have therefore modified their protectionist focus to a qualified suppo

the political economy of the tariff cycle how can protectionism and free trade succeed one another our answer focuses on the changing balance of private actors political demands these actors acquire interests in tariff policies because their assets are spatially concentrated and trade in these assets is subject to various limitations actors in regions experiencing no new investment in an established industry old regions have interests that sometimes differ from those in regions where there is new investment we show that old regions have no reason to be involved in tariff politics at business cycle peaks during troughs whether a state becomes more or less protectionist depends ceteris paribus on the relative political strength of old import competing and old exporting interests if old import competing industries outweigh the old exporters then protection will tend to increase at the trough and decrease at the peak of a business cycle the opposite result occurs when old exporters are more influential

corporatism in decline an empirical analysis of the impact of corporatism on macroeconomic performance and industrial disputes in 18 industrialized democracies during the 1970s and early 1980s most studies on corporatism indicated that corporatist policies led to lower unemployment and inflation and higher economic growth rates in the mid and late 1980s however voices claiming that corporatism is in decline became more and more frequent although hardly any empirical examinations were undertaken the purpose of this study is to estimate empirically the influence of corporatist arrangements on macroeconomic performance and industrial disputes in the 1980s as compared with the 1970s and 1960s this pooled time series cross sectional analysis provides evidence that corporatist policies have not lost their capacity to achieve the desired macroeconomic goals in the 1980s in addition corporatism significantly reduces the number of working days lost however no evidence was found that corporatism leads to increased economic growth there is evidence that economic growth is adversely affected by government outlays

a regional analysis of the distribution of married women s labour force participation rates in the uk molho i i 1983 an analysis of the regional distribution of married women s labour force participation rates in the uk reg studies 17 125 134 a model analysing and conceptually simplifying the possible causes of regional variation in participation rates is constructed and contrasted with previous models of regional participation rates the model is implemented using quarterly data for married women derived from the family expenditure survey 1968 77 the major influences are found to be the unemployment rate of their husbands wage rates family structure and age structure an analysis of the causes of regional convergence in participation rates over time indicated that the trend was due to regional convergence in the unemployment rate of married males and the wage rate of married women

a note on progression penalty schemes and tax evasion abstract this note deals with the question of whether shifting the tax base towards more progression will stimulate or discourage tax evasion when the tax base is shifted so that either the expected tax revenues of government or the expected utility of taxpayer will remain unchanged the answer turns out to depend sensitively on the nature of penalty schemes if caught in tax evasion if the penalty rate is charged on the undeclared income tax evasion will increase while if the penalty rate is charged on the evaded tax tax evasion will decrease when the tax base is shifted towards progression

the political economy of nontariff barriers a cross national analysis nontariff barriers to trade are most pervasive when deteriorating macroeconomic conditions give rise to demands for protection by pressure groups when countries are sufficiently large to give policymakers incentives to impose protection and when domestic institutions enhance the ability of public officials to act on these incentives statistical results based on a sample of advanced industrial countries during the 1980s support the argument that the incidence of nontariff barriers tends to be greatest when the preferences of pressure groups and policymakers converge more attention should be devoted to the interaction between societal and statist factors in cross national studies of trade policy

who determines mexican trade policy using a political economy approach the authors analyze the pattern of protection in mexico s manufacturing sector during the period of trade policy reforms 1985 89 when mexico experienced significant trade liberalization and an important inflow of foreign direct investment they take into account the potential effect of foreign direct investment on endogenous tariff formation it turns out that the data support this analytic approach in which the formulation of trade policy reflects political support and in which the presence of foreign direct investment in the sector strongly affects the pattern of tariff protection before and after reform in mexican manufacturing especially sectors with heavy foreign direct investment received greater protection in import competing sectors although the move toward greater openness was associated with a reduction in the influence of industrial and foreign investor lobbying

the limitations of structural theories of commercial policy if a structural theory is one that purports to explain behavior in terms of environmental conditions and that largely eschews analysis of the internal processes of decision makers then it is difficult to identify a theory of commercial policy which is not structural most microeconomic theory is structural so are most balance of power theories in the realm of theories of commercial policy hegemonic stability theories as well as some recently developed theories of international tariff levels fit this description in the latter category judith goldstein s work which attempts to account for american commercial policy in terms of the ideology of american central decision makers and charles kindleberger s ambitious sketch of a general theory of 19th century tariff changes in terms of the diffusion of liberal ideology constitute lonely examples of nonstructural research strategies

consensus versus majoritarian democracy political institutions and their impact on macroeconomic performance and industrial disputes this article argues that consensual political institutions as operationalized by lijphart and crepaz 1991 have significantly favorable effects on unemployment inflation and the number of working days lost whereas economic growth remains unaffected although this finding is consistent with olson s theoretical concept of encompassing organizations this study shows that olson s empirical operationalization is flawed strong two party westminster systems based on single member district electoral rules and single party bare majority cabinets do not perform as well as weak multiparty coalition governments with proportional representation as an electoral rule an empirical measure of encompassing organizations is introduced termed popular cabinet support a cross sectional time series panel study of 162 elections 18 countries and 9 elections per country n 162 provides strong evidence that governments with consensual inclusive and accommodative constitutional structures and wider popu

a mean variance model of mnf location strategy the purpose of this paper is to show that a portfolio theoretic model which directly incorporates the effect of interdependence among national markets can be useful in the analysis of an mnf s explicit location decisions a numerical mean variance portfolio model is developed and applied to the case of geographical expansion of the mnf while international diversification may not be considered a necessary and sufficient cause for fdi its effect on firm earnings should not be ignored in the mnf s location decisions

electoral markets party strategies and proportional representation closeness of its dialogue with historical knowledge kreuzer 2010 383 kreuzer also insists on the role that historical research plays in generating and testing theoretical propositions however in what i judge to be a more ambitious move he maintains that historical work when properly conducted may be a particularly suitable method to test the causal structures of a large swath of the theoretical work currently done in political science the crux of this position can be stated succinctly although still crucial for testing many causal propositions standard statistical methods may be inadequate to capture the underlying strategic structure that characterizes most if not all political and for that matter social events that is they may be insufficient to fully identify the players of the game inspect their beliefs payoffs and alternative strategies properly examine the sequence of decisions and verify the equilibrium conditions of the final outcome 2

tariffs and growth in the late 19th century the paper estimates the correlation between tariffs and economic growth in the late 19th century in the context of three types of growth equation unconditional convergence equations conditional convergence equations and factor accumulation models it does so for a panel of ten countries between 1875 and 1914 tariffs were positively correlated with growth in these countries during this period economic theory is ambiguous as regards the relationship between trade policy and growth the growth literature of the past decade has produced an impressive array of models in which protection can either increase or reduce long run growth rates grossman and helpman 1991 rivera batiz and romer 1991 stokey 1991 young 1991 such theoretical ambiguity invites empirical research while new growth theory is ambiguous on the subject the new empirical growth literature has produced a consensus that free trade is positively associated with growth based on evidence from the late 20th century but see rodrlguez and rodrik 1999 for a sceptical review of the literature the clear

access to protection domestic institutions and trade policy in democracies previous institutional explanations of trade policy have focused on the role of proportional representation on the promotion of free trade this explanation generates numerous unsolved anomalies and provides limited guidance in explaining the difference between proportional representation countries and between majoritarian countries as well as within country variation in trade policy this article introduces a more general institutional theory that argues that the number of access points provided by institutions is the crucial institutional feature as increasing the number of access points makes lobbying less costly which benefits protectionists from this i hypothesize that the number of parties in government the number of electoral districts the nature of the vote and other such institutions affect the level of protection and that once these factors are controlled for proportional representation has no impact on trade policy i test this theory on tariff data in the post world war ii developed democracies and find broad support for these hypotheses this article was previously presented at the 2004 annual meetings of the midwest political science association i would like to thank alan deardorff rob franzese matt golder mike hanmer jude hays cherie maestas corrine mcconnaughy will moore james d morrow won ho park and jeff staton for advice and comments and yoshi ono for excellent research assistance all errors of course remain my own

unemployment collective bargaining and the demand for protection there is a widespread consensus among nonacademic observers that labor unions with large numbers of unemployed members have been central actors in political coalitions demanding protectionist trade policies since the mid 1970s in advanced industrial societies yet trade unions and unemployment are hardly mentioned in most theories of the politics of international trade the purpose of this paper is to develop a theoretical framework for understanding the importance of unemployment as a determinant of protectionist demands that is consistent with optimizing behavior on the part of union members and firms models of labor negotiations derived from cooperative bargaining theory are used to illustrate why the material benefits of protection received by union members and their employers in protected industries increase when union members are unemployed even when workers are risk neutral and capital is immobile

wage uncertainty and competitive equilibrium in labour markets this paper analyzes the effect of wage rate uncertainty on long run competitive equilibrium for a labor market made up of heterogeneous workers the authors show that if workers are risk averse an increase in wage rate uncertainty always lowers aggregate hours of work and increases the expected wage they also characterize precisely the class of distribution changes that decrease or increase aggregate hours of work and use this result to construct a pareto improving negative income tax scheme finally the authors demonstrate that an increase in risk aversion has the same qualitative effect on aggregate hours of work and the expected wage as an increase in wage risk copyright 1994 by the london school of economics and political science

the march of an economic idea protectionism isn t counter cyclic anymore conventional wisdom holds that protectionism is counter cyclic tariffs quotas and the like grow during recessions while that may have been a valid description of the data before the first world war it is now inaccurate since the second world war protectionism has not been counter cyclic tariffs and non tariff barriers simply do not rise systematically during downturns i document this new stylised fact with a panel of data covering over 180 countries and 40 years using over a dozen measures of protectionism and six of business cycles i test and reject a number of potential reasons why protectionism is no longer counter cyclic a diagnosis of exclusion leads me to believe that modern economics may well be responsible for the decline in protectionism s cyclic behaviour economists are more united in their disdain for protectionism than virtually any other concept this in turn leaves one optimistic that the level of protectionism will continue to decline along with its cyclicality andrew k rose

strategic trade policy and welfare foreign equity ownership is shown empirically to weaken significantly and occasionally reverse common strategic trade policy results existing levels of u s cross ownership for example reduce the average optimal export subsidy by 47 relative to the brander and spencer journal of international economics 1985 18 83 100 value in industries with particularly high cross ownership and relatively small imputed labor rents optimal subsidies fall to less than one seventh of their former level previous studies which overlook high rates of cross ownership overstate the effectiveness of strategic policies most sharply in sectors with above average expected profitability scope for strategic investments and barriers to rent dissipation

tax evasion with labour income allingham and sandmo s 1972 classic paper on tax evasion set out a simple framework for looking at the effects of regular tax parameters and of the structure of penalties on the amount of tax dodging carried out by a tax evader subsequent papers have enriched the basic model of individual behaviour and have attempted to adduce some empirical evidence 2 but with few exceptions the essential nature of the assumed underlying problem has remained the same how much income shall i reveal to the authorities in the face of the known penalties and the known possibility of getting caught whilst this approach is useful for some types of tax evasion by individuals it is clearly inappropriate for others such as the phenomenon of working off the books rather than concealing a portion of a uniform lump of income that is undistinguished as to its source the person cheats the government by taking one or more different jobs either in addition to or as a replacement for his regular employment the income from which is administratively difficult to tax this paper examines the implications of the possible diversity of form of the tax evasion problem for the analysis of the fundamental questions which allingham and sandmo addressed the effect of government instruments on the incentives to participate in legal and illegal work activities to do this we must concentrate on one major development of the original model namely that where income is endogenous in effect we construct a particular version of the analysis of labour supply under uncertainty within which to

diversification exchange risk and corporate international investment all international investments inevitably have some diversification consequences yet the literature on foreign direct investment accords only a limited role to diversification or financial variables this paper develops a theory of corporate international investment from the standpoint of finance in an environment where the segmentation of international capital markets for individuals or the presence of agency costs provide some independence to corporate decisions separate from shareholders the model does not depend on any particular advantage of multinational firms and is specifies the stochastic properties of domestic and foreign output and input prices it is found that real exchange risk and diversification gains affect corporate international investment in a significant way it is also shown that the model embodies several existing explanations based on behavioral and economic variables

domestic institutions and the credibility of international commitment japan and the united states the domestic politics of great powers significantly influence the fate of such multilateral regimes at the general agreement on tariffs and trade and the north atlantic treaty organization unless great powers can make credible commitments to support those regimes few countries will offer more than token support domestic political constraints may bind national leaders to good faith adherence to multilateral regimes even if international circumstances do not compel adherence domestic politics also influence the ability of other countries to monitor national adherence to agreements case studies of u s and japanese responses to multilateral regimes show how the nature of the national electoral system the division of powers in the government and the transparency of the national political system influence credibility and lead to special features of multilateral economic and security regimes

a regional analysis of labour force participation rates across the member states of the european union elhorst j p 1996 a regional analysis of labour force participation rates across the member states of the european union reg studies 30 455 465 this study investigates the causes of variation in labour force participation rates in a regional europe two participation rate equations are estimated one for men and one for women using annual data derived from eurostat 1983 1989 the explanatory variables are based on previous studies on the subject of the neoclassical formulation of the individual s labour supply function extended by the situation in which an individual who wishes to work cannot find a job and becomes involuntarily unemployed the consistency of the parameter estimates to different estimation models is investigated it turns out that heterogeneity between the member states of the eu is so important that it is almost impossible to find an overall regression equation for the whole eu elhorst j p 1996 une analyse regionale des taux d activite dans les pays membres de l union europ

toward a business cycle model of tariffs a modified interest group model links movements in tariffs to changes in the level of economic activity within nations this model is introduced and tested for tariff behavior in the 19th and early 20th centuries in three nations the united states great britain and germany empirical analysis lends strong support to the model s central thesis that tariffs are sensitive to movements within a business cycle tariff changes occurring in the three nations with the exception of british tariff increases generally conform to the expectations of the model furthermore business cycle sensitivity provides an explanation of the behavior of tariffs superior to two prominent alternatives those based on ideology and on hegemonic stability

on the economics of multiplant operation some concepts and an example textbook microeconomic theory has mostly neglected the more refined aspects of the economic problems associated with the existence of firms operating multiple plants ordinarily the neoclassical firm is simply modelled in its long rung static equilibrium given by the minimum point on the long run average cost function at this point the firm operates plants of optimal size the outputs of which are determined by the minimum point on their respective u shaped average cost functions the number of plants operated by each firm in optimum is thus given by a division of optimal firm output with optimal plant output since the relevant cost functions in ordinary circumstances should not for any extended period of time significantly differ from each other in different countries one would expect plant sizes to be approximately equal in a given industry in different countries this deduction is not however confirmed in empirical studies carried out by prominent economists bain i arrived at the following figures for comparative plant sizes in eight countries

trade and the variety of democratic institutions students of comparative politics have long acknowledged the importance of such institutional factors as electoral systems parliamentary versus presidential rule and the strength of parties but they have either regarded the institutions as given or have explained them entirely in domestic terms associating proportional representation for example with the intensity of social cleavages in economically advanced democracies however these institutional aspects can be plausibly linked to dependence on trade proportional representation the parliamentary system strong parties and large electoral districts have survival value for developed democracies exposed to trade that the recently revived agitation for proportional representation in the united kingdom has been cast explicitly in terms of economic necessity and dependence on trade adds force to this argument and suggests the need for further historical research on other cases of institutional adaptation and change

do electoral rules matter political institutions and foreign direct investment in latin america despite the growing importance of domestic institutions in the political economy literature few studies explore the effects of disaggregated measures of political institutions specifically electoral rules and systems on foreign direct investment fdi building on institutional accounts this articles tests the effects of electoral rules on fdi inflows for 16 latin american countries from 1978 to 2000 using panel data and controlling for common explanations in the fdi literature the authors find that candidate centered electoral systems increase political access for voters and industries supportive of fdi inflows the results show the benefits of unpacking political institutions to explain fdi inflows paving the way for many new research avenues

veto points veto players and international trade policy much of the literature on foreign economic policy focuses on the preferences of societal groups to explain policy decisions here however the author emphasizes the effects of domestic political i

the size of government in majoritarian and consensus democracies this article looks at the effect of democratic institutions on the size of government with the help of the ordinary least squares regression analysis of data from the organization for economic cooperation and development oecd countries from 1974 to 1995 the study provides considerable evidence that the variance in the type of democracy measured by the lijphart index of majoritarian consensus political institutions has a systematic effect on the variance in the size of government measured both by total government outlays as well as total government revenue as a percentage of gross domestic product the article further argues that such institutional effects on the size of government are strengthened by partisan politics more specifically the analysis demonstrates the presence of the multiplicative interaction effect of the mutually reinforcing nature between the institutional structure and partisan composition of government in their association with the size of government

the domestic politics of banking regulation this article seeks to ground financial regulatory choices in domestic politics based on evidence from twenty two industrialized countries we argue that electoral rules specifically the extent to which they are centrifugal or centripetal have a significant effect on whether the banks or their consumers pay for the security of the banking system moreover despite the homogenizing effects of global financial integration the political dynamics generated by these electoral rules continue to shape the nature and extent of prudential regulations that countries adopt in the place of banking cartels

unemployment insurance benefits and the supply of labor of an employed worker abstract the unemployment insurance program is believed to adversely affect the supply of labor of the unemployed yet it generates favorable incentives for the employed since unemployment benefits are aimed to compensate the unemployed for earnings loss of which past earnings serve as a practical measure a worker might choose to increase his efforts when employed insuring himself partially against future unemployment however this possible impact on labor supply has escaped any attention until very recently incorporating an earnings related benefits scheme into a multi period decision model the present paper investigates the labor supply behavior of an insured worker over time

taxation and labour supply with risky activities consider the following three phenomena a in recent years dramatic shifts in the types of contract between london cabbies and the taxi owners have been observed b if one tries to hire a housepainter in the uk one is often quoted two rates one for official work during regular hours and for unofficial weekend and evening work c in two unrelated discussions with economics professors about the textbook model of taxation and labour supply each revealed to me that marginal hours released from his regular employment were spent not in the form of leisure but in participating in stock market speculation

the spatial variation in unemployment and labour force participation rates of male and female workers lillydahl j h and singell l d 1985 the spatial variation in unemployment and labour force participation rates of male and female workers reg studies 19 459 469 this paper investigates the spatial patterns of male and female unemployment and labour force participation rates the theoretical underpinnings for differences in work and residential choices for males and females are reviewed census tract data from five metropolitan areas in the united states are examined we find that no significant pattern exists for overall labour market activity however when male and female unemployment and participation rates are analysed separately significant and dissimilar spatial patterns exist for each hence returns from relocating industry improving transportation investing in human capital or providing job information need to be evaluated in sex specific terms

the limits of international organization systematic failure in the management of international relations contributors to the literature on international organization io have traditionally been overly optimistic about the ability of multilateral management to stabilize in ternational relations and have tended to ignore the destabilizing effects of io while recent revisionist scholarship has acknowledged both the potential for organizational failure and the conditionality of management it has tended to focus on how io fails within specific issue areas and institutions this article offers a typology of the inherent systematic failures of io across issue areas and institutions and thereby seeks to bridge the gaps in our understanding of why many different institutions and managerial schemes have adverse effects it argues that io is prone to failure 1 when it attempts to manage complex tightly coupled systems of relations and issues 2 when it serves as a substitute either for more substantive and long term resolutions to international problems or for responsible domestic or foreign policy 3 when it intensifies international disputes and 4 when it generates moral hazard in offering a general theoretical approach to understanding the destabilizing effects of io the analysis is intended to serve both as a focal point for understanding critical approaches to the study of io and as an alternative rationale for eliminating the excesses of multilateral management

policy uncertainty in hybrid regimes evidence from firm level surveys cross national surveys suggest that regulatory and policy uncertainty is an important constraint on investment in developing countries yet there has been little direct empirical investigation of the sources of this uncertainty this article presents evidence of an inverted u shaped relationship between firms perceptions of policy uncertainty and political regime type firms in hybrid regimes report higher levels of concern over policy uncertainty than those in either more authoritarian regimes or liberal established democracies the authors argue that the explanation lies with a combination of polarized political competition and limited access to credible information and test their theory using survey data of around 10 000 firms from the world bank european bank for reconstruction and development s business environment and enterprise performance survey from 27 postcommunist countries and five organisation for economic co operation and development countries methodologically the authors propose a means

labour supply under uncertainty with piecewise linear tax regimes the analysis of labour supply under uncertainty has been developing rapidly in recent years papers by block and heineke 1973 stiglitz 1976 cowell 1981a b eaton and rosen 1980a b stern 1980 and tressler and menezes 1980 have all presented analyses of the problem almost without exception the focus of the analysis has been the effects of greater risk in the wage rate or in non labour income on the labour supply decision of the individual not surprisingly therefore the well known comparative static results of rothschild and stiglitz 1971 and diamond and stiglitz 1974 on how increases in risk influence the optimal choice of a control variable have been found to be useful in this literature some of the above mentioned papers have also considered the problem of labour supply under uncertainty when there are taxes in operation thus stiglitz 1976 cowell 1981a b and eaton and rosen 1980a b all analyse the role of taxation however none of these papers has examined labour supply under uncertainty with tax regimes of the type we observe in practicewhich are typically piecewise linear 1 moreover in all the studies i am aware of the tax regime itself is held to be constant thus the role of tax risk as opposed to wage risk remains unanalysed the object of this paper therefore is to advance the literature on labour supply under uncertainty in these two directions first we ask the more common question about the impact of greater risk on labour supply but this time in the context of piecewise linear tax regimes it will be seen that the answers now have to be modified in interesting ways in particular it will be shown that the problem belongs to a general class of problems in decision making under uncertainty analysed in kanbur 1980 1982 where the pay off function has a kink or non differentiability at a critical value of the random variable in such a setting the rothschild stiglitz 1971 and diamond stiglitz 1974 results are no longer directly applicable we have to use their generalized counterparts developed in kanbur 1981 second we ask a question that has not been asked in the literature up to now what is the impact of greater uncertainty about the tax regime on labour supply decisions it will be seen that the piecewise linear regime allows us to parametrize such tax regime risk in a convenient and manageable way the plan of this paper is as follows section i introduces the model and in the context of the model gives a precise statement of the questions that this paper asks section ii begins the analysis by considering the effects of greater risk in the wage rate and in non labour income sections iii and iv then consider the question of tax regime risk section v concludes the paper

mnes and industrial structure in host countries a portfolio analysis of irish manufacturing ireland has been very successful in attracting foreign mnes in high technology sectors although these sectors exhibit faster growth than the traditional low technology sectors populated primarily by indigenous firms the high technology sectors are also more volatile we use portfolio theory to show that ireland s fdi strategy has led to a more diversified manufacturing sector that exhibits higher growth without a commensurate increase in volatility and risk

optimal choices under uncertainty the case of two argument utility functions this paper presents a unified treatment for the analysis of two argument utility functions with a random budget constraint the way in which changes in both additive and multiplicative risk affect optimal choices has been analyzed prov iding intuitive economic explanations to third order magnitudes which usually appear in this kind of analysis two examples are given in t erms of optimal savings and labor supply under uncertainty finally an application to taxation under uncertainty is given where both the effects of increased tax progressivity and the rules for efficient t axation are analyzed copyright 1988 by royal economic society

income tax evasion labour supply and the equity efficiency tradeoff abstract this paper is an attempt to incorporate tax evasion into the analysis of optimum income taxation a model of variable labour supply with tax evasion is used to derive supply functions for labour in regular and irregular markets given taxpayer behaviour the government chooses tax rates penalties and the probability of detection to maximize a utilitarian social welfare function the results consist in the derivation of a formula for the optimum marginal tax rate and a characterization of the factors determining the choice between the penalty rate and the probability of detection as instruments for the control of tax evasion

voting for protection an electoral model of tariff policy politicians want to please their constituents and will attempt to manipulate trade policy to further this goal this article elaborates a model of the electoral incidence across congressional districts of the interindustry structure of tariff protection with an application to the mckinley tariff of 1890 it may contribute to a neglected area of research on the domestic politics of tariffs to the history of a period of tariff formation in which there has been little recent work and to the debate over legislative representation of constituency interests models of the domestic political market for trade policy endogenous tariff theory can be divided into four categories with classification based on whether they are formal or empirical and on whether they focus on the demand or the supply side of the political market many of the formal models are too abstract to produce readily testable propositions 1 wolfgang mayer s model for example assumes that tariffs are set by a national popular referendum and deduces tariff structures from median voter results 2 there is no government in this type of model the demanders and suppliers of policy are the same william brock and stephen magee s model assumes a singleissue election in which politicians bid for votes by offering tariff protection up to the point at which marginal gains votes plus campaign contributions equal marginal costs lost votes plus lost contributions 3

the political economy of international trade enduring puzzles and an agenda for inquiry a similar set of concepts has been central to the literatures on the formation of trade policy coalitions and the new economics of institutions the political and economic consequences of the degree to which assets are specific to a particular economic activity in this survey the authors take the necessary first step of summarizing the main findings of these two literatures and then suggest ways in which the issue might be joined in addition to providing a more coherent understanding of the findings of these two literatures and some new directions for them the authors show that many puzzles remain in the field of trade politics puzzles for which there are no appealing answers or where there are answers no strong evidence in support of them this essay then in addition to being a theoretical review of the literature puts forward an agenda for future study of international trade politics

a political explanation of variations in central bank independence although central banks possess a similar function across the industrial democracies their institutional structures their levels of independence differ greatly my explanation of this variation emphasizes the informational asymmetries of monetary policymaking government ministers have informational advantages in the policy process potentially creating conflicts with backbench legislators and in a multiparty government coalition partners an independent central bank can help alleviate these conflicts politicians will choose an independent bank 1 if government ministers party legislators and coalition partners have different monetary policy incentives and 2 if government ministers fear that party legislators and coalition partners will withdraw their support over a policy dispute i statistically test the argument against the cross national variation of central bank institutions i also use the theoretical framework to examine episodes of institutional choice and reform in germany britain and italy

taxation and the political economy of the tariff traditional accounts of u s tariff policy emphasize trade strategies and interest group politics this article makes a departure it opens with an observation up until world war i the tariff was the largest single source of federal government revenues it then explores the significance of tariffs as taxes theoretically and empirically in its first part the article develops a theory of taxation politics and applies it to the tariff in its second part it submits the theory to an empirical test modeling changes in u s tariff rates from 1829 to 1940 the politics of tariff revision it argues followed from two characteristics of the tariff as tax from the extent of the treasury s dependence upon it and from the distributive pattern of its burdens and benefits taken together the article concludes revenue dependence and distributive incidence account for several diverse aspects of american tariff policy including the structure of its coalitions the shifts in its objectives and the timing of its innovations

does electoral competition affect politicians trade policy preferences evidence from japan this study examines the effect of electoral competition on politicians trade policy preferences using candidate observations from the house of representatives in japan s 2012 general election the study clarifies the effects of constituency size and the electoral strength of constituencies on candidates political stances the empirical results provide evidence that politicians preferences for trade policy are sensitive to electoral pressure but their reactions differ depending on the characteristics of each constituency the results reveal that for a broad constituency with a large concentration of agricultural workers election candidates are more likely to support protectionism than their counterparts running in a narrow constituency for city district election candidates electoral strength measured by the vote margin significantly affects their trade policy preferences candidates in close elections are more likely to be protectionist than candidates elected by a substantial majority suggesting that electoral pressures deter politicians from supporting trade liberalization

democracy and markets the case of exchange rates the relationships between the workings of democratic institutions and currency markets are studied severa competing propositions about how political re equilibration affects currency markets are derived and tested the results support the view that democratic politics affects currency markets expectations and uncertainty about electoral outcomes and government survival affect the probability of switching between currency market equilibria additionally opinion polls about chief executive performance have a direct effect on the probabilities of switches between currency regimes suggesting that these polls cause currency traders to revise their expectations about the stability of governments and or the contents of public policies electoral institutions mitigate the impact of politics on currency market equilibria political effects are weaker in countries with proportional representation electoral systems than in countries with majority plurality systems there is less evidence that central bank independence consensual corporatist systems or political coherency reduces the effect of politics on currency markets he study of democracy and markets is at the heart of political economy understanding how political equilibration and economic equilibration are related is one of the main challenges facing this field the size and nature of currency markets make them especially important cases substantively with globalization currency markets have become important constraints on elected governments reducing their room to maneuver analytically in comparison to most goods markets currency markets are informationally efficient asset markets with distinctive equilibria today s exchange rate is determined by currency traders fully informed expectations about tomorrow s exchange rate the sensitivity of these markets to the arrival of new information therefore makes them particularly well suited for studying the effects of political news and uncertainty on economic equilibration 1 this article demonstrates there are informationally relevant political factors insofar as exchange rate determination is concerned factors that directly affect the transition probabilities between currency market equilibria moreover these factors vary in important ways across democracies some electoral institutions lessen the effects of politics on currency

short versus long coalitions electoral accountability and the size of the public sector this article examines the policy consequences of the number of parties in government we argue that parties externalize costs not borne by their support groups larger parties thus internalize more costs than small parties because they represent more groups this argument implies that the public sector should be larger the more parties there are in the government coalition we test this prediction using yearly time series cross sectional data from 1970 to 1998 in 17 european countries we find that increasing the number of parties in government increases the fraction of gdp accounted for by government spending by close to half a percentage point or more than one billion current dollars in the typical year we find little support for the alternative claim that the number of legislative parties affects the size of the public sector except via the number of parties in government

the implications of institutional design for macroeconomic performance reassessing the claims of consensus democracy the choice between a proportional representation pr or plurality based electoral system is commonly assumed to involve a trade off the former is assumed to provide fairer representation but at a

who lobbies whom special interest politics under alternative electoral systems why do some interest groups lobby politicians and others lobby bureaucrats we theorize lobbying venue choices and intensityasafunctionofcontractenforceabilitywithpolicymakers politicians orbureaucrats wearguethatorganizational structures of interest groups in particular whether they are centralized or decentralized substantially affect their lobbying strategies because they are associated with different ability to monitor and enforce contracts with policy makers and punish them when they fail we further demonstrate that the effect of centralized versus decentralized structure on venue choices is conditional on the types of electoral system majoritarian semiproportional single nontransferable vote sntv or proportional representation systems we test this argument using longitudinal survey data on lobbying which span two decades and cover around 250 interest groups in various sectors and issue areas in japan the results lend strong support to our argument about contract enforceability under alternative electoral systems