intrinsic motivation in public service theory and evidence from state supreme courts abstractthis paper provides a theoretical and empirical analysis of the intrinsic preferences of state appellate court judges we construct a panel data set using published decisions from all state supreme courts from 1947 to 1994 we estimate the effects of changes in judges employment conditions on a number of measures of judicial performance the results are consistent with the hypothesis that judges are intrinsically motivated to provide high quality decisions and that at the margin they prefer quality over quantity when judges face less time pressure whether from the introduction of an intermediate appellate court the weakening of electoral demands or an increased salary they write more well researched opinions that are cited more often by other judges these effects are strongest when judges have more discretion to select their portfolios of cases

truth effort and the legal battle in lawsuits relative success depends upon two main factors the true degree of fault and the efforts invested on eachside a proposed litigation success function displays thisdependence while satisfying other essential properties undertwo different protocols nash cournot and stackelberg solutions are obtained for the litigation efforts proportionate success and values of the lawsuit on each side outcomes are evaluated in terms of two normative criteria i achieving justice interpreted as equality between defendantfault and relative plaintiff success and ii minimizingaggregate litigation cost achievement of these aims isdetermined by the decisiveness of litigation effort relativeto true fault

does direct democracy reduce public debt evidence from swiss municipalities although some countries have managed toobtain balanced budgets or even budgetsurpluses in recent times public debts ofmany oecd countries remain at high levels since structural reforms of public spendinghave only infrequently taken place in mostcountries fiscal pressure will increaseagain in the future due to society s ageingand the accompanying increases in socialtransfer spending constitutionalrestrictions on debt levels and legal rulesof the budgetary process such as a strongrole of the minister of finance aresupposed to be helping against the debtbias inherent in political decision makingprocedures in addition to such top downbudgetary procedures this paperinvestigates the impact of referendumapproval of budget deficits by the voterson the level of public debt in a crosssection of the 134 largest swissmunicipalities in 1990

interregional redistribution and budget institutions under asymmetric information empirical evidence from the u s and the european union suggests that regions which contribute to interregional redistribution face weaker borrowing constraints than regions which benefit from interregional redistribution this paper presents an argument in favor of such differentiated budget institutions it develops a two period model of a federation consisting of two types of regions the federal government redistributes from one type of regions contributors to the other type recipients it is shown that a fiscal constitution with lax budget rules for contributors and strict budget rules for recipients solves the self selection problem the federal government faces in the presence of asymmetric information regarding exogenous characteristics of the regions

political and institutional determinants of fiscal policy in the european community in recent theoretical and empirical research the variation in political and institutional arrangements which may affect the process of national policy formation is examined in order to explain cross country differences with respect to fiscal policies pursued in this paper we build upon this literature and examine whether and how cross country differences in debt accumulation and public sector size of member countries of the european community during the 1980s can be explained we conclude that the growth of government debt is positively related to the frequency of government changes and negatively to sound budgetary procedures in countries with left wing governments the growth of the share of government spending in total output generally tends to be higher

do fiscal rules dampen the political business cycle this paper develops and tests the theory that fiscal rules limit politicians ability to manipulate the budget for electoral gain using panel data from the american states i find evidence suggesting that stringent balanced budget rules dampen the political business cycle that is while spending rises before and falls after elections in states that can carry deficits into the next fiscal year this pattern does not exist in states with strict no carry rules neither binding gubernatorial term limits nor the partisan composition of government appear to significantly affect the magnitude of the political business cycle

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

fiscal institutions fiscal policy and sovereign risk premia in emu we investigate the effect of fiscal institutions such as the strength of the finance minister in the budget process and deficits on interest rate spreads of eurozone countries deficits significantly increase risk premia measured by relative swap spreads the effect of deficits is significantly lower under emu this effect partly results from neglecting the role of fiscal institutions after controlling for institutional changes fiscal policy remains a significant determinant of risk premia in emu better institutions are connected with lower risk premia furthermore deficits matter less for risk premia in countries with better institutions markets acknowledge that better institutions reduce fiscal difficulties rendering the monitoring of annual developments less important

a note on the empirical effectiveness of formal fiscal restraints abstract an important agrument in the current debate over european monetary integration is that a monetary union requires formal fiscal restraints limiting individual member states budgetary powers to reduce the common monetary authority s risk of having to bail out insolvent member governments this note presents empirical evidence on the effectiveness of fiscal restraints on state budgets in the united states nonparametric tests reveal that fiscal restraints significantly affect the probability of fiscal choices and performance without however preventing extreme outcomes fiscal restraints induce substitution of nonrestricted for restricted debt instruments

the effect of fiscal performance on local government election results in israel 1989 1998 abstract we discuss the circumstances under which voters in local elections will reward fiscal responsibility and suggest that such circumstances evolved in israel in the mid 1990s we present empirical evidence that indeed fiscal performance of mayors substantially affected their reelection probability in the 1998 campaign but not in the 1989 and 1993 campaigns changes in the political environment enforcement of audit and financial reporting requirements tougher imposition of hard budget constraints and the development of local media are proposed as explanations the hypotheses that the fiscal variables reflect the income level at the locality or the mayor s success in extracting resources from the central government are tested and rejected

state government expenditure determinants and tax revenue determinants revisited the primary aim of the research was to test the general hypothesis that many institutional and political variables affect fiscal outcomes that the preferences of public officials and the decision processes used to act on those preferences matter state government data state only not state and local from 1980 1985 and 1990 were used to specify state tax revenue and expenditure models a previous merrifield 1991 state tax revenue model identified many significant institutional and political variables but it was based only on 1985 data 49 observations the larger data set 147 observations including better data for some of the variables indicated that most of merrifield s 1991 findings are robust the state expenditure models facilitated a second test of the general institutional and political variable hypothesis as well as the hypotheses about specific variables the expenditure model also facilitated comparisons of expenditure and tax determinants and comparisons with results published in the literature though there are some noteworthy differences between the expenditure and tax models the expenditure models also supported many of the institutional and political variable hypotheses

does direct democracy reduce the size of government new evidence from historical data 1890 2000 using historical data for all swiss cantons from 1890 to 2000 we estimate the causal effect of direct democracy on government spending the main innovation in this paper is that we use fixed effects to control for unobserved heterogeneity and instrumental variables to address the potential endogeneity of institutions we find that the budget referendum and lower costs to launch a voter initiative are effective tools in reducing canton level spending however we find no evidence that the budget referendum results in more decentralized government or a larger local government our instrumental variable estimates suggest that a mandatory budget referendum reduces the size of canton spending between 13 and 19 percent a 1 percent lower signature requirement for the initiative reduces canton spending by up to 2 percent

budget institutions and fiscal policy in the u s states this paper summarizes state balanced budget requirements and the available empirical evidence on the effect of these rules on state fiscal policies existing state rules differ from many current proposals at the federal level they are typically restricted to part of the state budget they frequently permit short term borrowing and they lack formal enforcement mechanisms the paper also surveys previous research on how anti deficit provisions affect state fiscal policy the available evidence indicates that stringent anti deficit provisions lead to more rapid adjustment of state taxes and expenditures when fiscal deficits emerge this suggests that changing the federal budget process has the potential to affect federal fiscal policy this abstract was borrowed from another version of this item

the role of lawyer legislators in shaping the law evidence from voting on tort reforms abstractattorneys elected to the us congress and to state legislatures are systematically less likely to vote in favor of tort reforms that restrict tort litigation but more likely to support bills that extend tort law than are legislators with different professional backgrounds this finding is based on the analysis of 64 roll call votes at the federal and state levels between 1995 and 2014 it holds when controlling for legislators ideology and is particularly strong for term limited lawyer legislators the empirical regularity is consistent with the hypothesis that lawyer legislators at least in part pursue their private interests when voting on tort issues our results highlight the relevance of legislators identities and individual professional interests for economic policy making

does delegation of fiscal policy to an independent agency make a difference evidence from intergovernmental transfers in india abstract one area of fiscal policy in which several countries have delegated responsibility to an independent agency is the distribution of national resource transfers across regional and local governments such delegation is expected to promote equity and efficiency and mitigate distortions created by political incentives this paper tests whether delegation to an independent agency indeed makes a difference by contrasting the impact of partisan politics on two types of fiscal transfers to states in the indian federation over a period of time 1972 1995 the pattern of evidence shows that while the transfers that are determined by the central political executive are indeed distributed to favor particular states that are politically important for the central ruling party the transfers that are delegated to an independent agency serve to constrain such partisan impact

the elusive costs and the immaterial gains of fiscal constraints we study whether fiscal restrictions affect volatilities and correlations of macrovariables and the probability of excessive debt for a sample of 48 us states fiscal constraints are characterized with a number of indicators and volatilities and correlations are computed in several ways the second moments of macroeconomic variables in states with different fiscal constraints are economically and statistically similar excessive debt and the mechanism linking budget deficit and excessive debts are independent of whether tight or loose fiscal constraints are in place creative budget accounting may account for the results

a nonlinear principal component analysis of the relationship between budget rules and fiscal performance in the european union tests of the relationship between budget rules and fiscal performance are metric sensitive and arbitrary in the evaluation of the stringency of the rules in the aggregation of these evaluations in an index and in the imposition of a linearly specified model we propose a nonlinear principal component analysis to solve these problems and evaluate the relative disciplinary power of each rule a battery of panel regressions on 1980 2003 optimally transformed data relative to 12 eu countries confirms that upon controlling for standard economic political and institutional variables more stringent rules reduce fiscal imbalances and budget size

local versus central wage bargaining with endogenous investments investment behavior may depend on whether wage bargaining takes place centrally or locally at the firm level the outcome of the wage bargain will in turn depend on previous investments ignoring other differences between the two bargaining regimes endogenous investments imply that wages are lower and profits higher under local wage bargaining than under central bargaining this does not necessarily imply that employment is highest under local bargaining since investments may differ in the two cases with a nash bargaining solution however reasonable assumptions imply that employment is highest under local wage bargaining

organizational determinants of wage moderation this article contributes to the political economic literature regarding the effects of industrial relations institutions on national economic outcomes based on an econometric analysis of the determinants of wage moderation in sixteen industrialized countries between 1974 and 2000 it argues that the organizational characteristics of trade unions have a significant impact on wage dynamics controlling for a number of institutional and economic factors the countries in which trade union confederations directly involve workers in the process of collective bargaining ratification have on average lower wage growth relative to productivity than others the authors also find that collective bargaining coordination and contract ratification magnify each other s wage dampening effect through case studies of ireland and italy the article examines the causal mechanisms underlying the uncovered statistical regularities and concludes that particularly at a time in which classic political exchange is waning worker involvement in contract ratification allows confederation leaders to resolve conflicting claims inside their organizations at lower wage levels than are achieved by a less participatory governance process

fiscal adjustment in eu countries a balance sheet approach abstract several european union countries have recently implemented or are envisaging fiscal operations which improve budgetary figures but have no structural impact on government finances we evaluate some of these measures using a balance sheet approach in particular we examine the degree to which reductions in government debt in eu countries has been accompanied by a decumulation of government assets in the runup to maastricht we find a strong correlation between changes in government liabilities and government assets and larger declines in government assets in countries starting from higher public debt levels

good bad or ugly on the effects of fiscal rules with creative accounting abstract do fiscal rules lead to fiscal adjustment or do they encourage the use of creative accounting this question is studied with a model in which fiscal rules are imposed on measured fiscal variables which can differ from true variables because there is a margin for creative accounting the probability of detecting creative accounting depends on its size and the transparency of the budget the model studies the effects on fiscal policy of a budget rule separating structural from cyclical effects and examines how these effects depend on the underlying fiscal distortion and on the degree of transparency of the budget

fiscal shocks and fiscal risk management abstract we use the returns on a set of international financial securities to identify exogenous shocks to the canadian federal surplus we find that a large portion of the variation in the surplus can be replicated by a linear combination of these returns and that the recent rise in debt resulted from adverse shocks and a delayed response by the government we develop a framework to evaluate the gains from a risk management strategy using these securities to hedge against shocks we find that hedging generates significant welfare gains by enhancing the sustainability of fiscal policy and diversifying the risk associated with tax changes

the selection hypothesis and the relationship between trial and plaintiff victory this paper develops implications of the selection hypothesis of priest and klein for the relationship between trial rates and plaintiff win rates i find strong evidence for the selection hypothesis in estimated relationships between trial rates and plaintiff win rates at trial across case types and judges i then structurally estimate the model on judge data yielding estimates of the model s major parameters the decision standard the degree of stake asymmetry and the uncertainty parameter for each of three major case types contracts property rights and torts

the macroeconomic effects of fiscal rules in the us states abstract fiscal policy restrictions are often criticized for limiting the ability of governments to react to business cycle fluctuations and consequently the adoption of quantitative restrictions is viewed as inevitably leading to increased macroeconomic volatility in this paper we use data from 48 us states to investigate how budget rules affect fiscal policy outcomes our key findings are that 1 strict budgetary restrictions lead to lower policy volatility i e less aggressive use of discretion in conducting fiscal policy and 2 fiscal restrictions reduce the responsiveness of fiscal policy to output shocks these two results should have opposite effects on output volatility while less discretion should reduce volatility less responsiveness of fiscal policy might amplify business cycles we provide empirical support for the first effect restrictions by reducing discretion in fiscal policy can reduce macroeconomic volatility

defining the government s debt and deficit although the budget deficit and the public debt feature prominently in political debate and economic research there is no agreement about how they should be measured they can b e defined for different sets of public institutions including the nested sets corresponding to central government general government and the public sector and for any definition of government there are many measures of the debt and deficit including those generated by four kinds of accounts cash financial full accrual and comprehensive which can be derived from four nested sets of assets and liabilities each debt and deficit measure says something about public finances but none tells the whol e story each is also vulnerable to manipulation and is likely to be manipulated if it is subject to a binding fiscal rule or target narrow definitions of government encourage the shifting of spending to entities outside the defined perimeter of governme nt narrow definitions of debt and deficit encourage operations involving off balance sheets assets and liabilities while broad measures are susceptible to the mismeasurement of on balance sheet assets and liabilities reviewing the literature on these is sues the paper concludes that governments should publish several measures of the debt and deficit in a form that clearly reveals their interrelationships

mechanisms for the control of fiscal deficits abstract this paper shows that a simple two stage voting mechanism may implement a constrained optimal state dependent decision about the size of the fiscal deficit i consider a setup with strategic fiscal deficits similar to alesina and tabellini 1990 three groups of voters are informed about the relative desirability of current public spending voters differ in their preferences for public goods and swing voters preferences may change over time the current government decides on the current spending mix and it has an incentive to strategically overspend a simple two stage mechanism under which a deficit requires the approval by a supermajority in parliament approximates a constrained optimal decision and under certain conditions increases social welfare relative to both a strict rule and a laissez faire constitution when the current majority is small political bargaining may further increase social welfare however when the current majority is large a supermajority mechanism with bargaining leads to a biased spending mix and it may reduce welfare whereas the laissez faire mechanism may yield the first best an appropriately adjusted majority threshold can avoid inefficient bargaining whenever necessary

the political economy of product liability reform the present body of product liability rules has been fashioned by common law judges with an occasional assist from legislatures the key premise of the present system is that freedom of contact even subject to the usual caveats of force and misrepresentation has no place to play within the product liability system that assumption makes good sense in the few cases in which defective products are responsible for injuries to bystanders but it is far more dubious when suits are brought by injured product purchasers or users to be sure there is typically no direct contract link between the manufacturer and ultimate purchaser the absence of explicit contracts however is itself a reflection of the present body of legal rules that regulate product use these rules refuse to enforce a limitation on liability or damages created by contract and occasionally impose punitive damages on firms bold enough to seek contractual protection if the law were otherwise then a manufacturer could and would designate a retailer as his agent so as to secure a direct contract with a purchaser and where possible a product user contractual quiescence today is not a sign of satisfaction with the legal rules as ideal default provisions nor is it evidence that transactions costs are so high that voluntary agreements cannot be formed it is only proof that any effort to contract out of the present tort system has been effectively blocked by the judges and legislatures who have created the modern law the present regime of legal rules has powerful social consequences the conventional economic assumption is that rational self interested parties only enter into contracts that ex ante assure them of some joint gain by that standard the present system of public regulation of contract terms whether by common law decisions or statute imposes significant losses on both sides legislation to remore these barriers to private contract could generate some substantial overall gains whenever legislation could generate some allocative improvement it should be possible to divide the gains thereby generated to leave all interested parties better off than before if the costs of passing legislation and dividing the gains were zero then inefficient substantive rules would never remain on the public books today s product liability rules do not fade but grow stronger with each passing year the remainder of this paper helps to explain why this trend is likely to continue the barriers to needed legislative reforms are simply too great

labour market regulation industrial relations and technological regimes a tale of comparative advantage in this paper we present comparative evidence from oecd countries concerning the impact of labour market institutions and regulations on technological specialization the interplay between the degree of labour market flexibility the system of industrial relations and the knowledge base of different industries determines the viability of different human resource strategies thereby shaping the patterns of comparative advantage our empirical results show that countries with coordinated industrial relations systems and strict employment protection tend to specialize in industries with a cumulative knowledge base we argue that two mechanisms explain these patterns the larger the scope for resorting to internal labour markets the lower the adjustment costs imposed by labour market regulation furthermore employment protection and coordinated industrial relations regimes by aligning workers and firms bjectives encourage firm sponsored training as well as the accumulation of firm specific competencies allowing firms to fully exploit the potential of the internal labour market copyright 2002 oxford university press

institutions and performance in european labour markets taking a fresh look at evidence this paper presents a selective survey of the recent literature on labour market institutions and offers new empirical eu based evidence on the impact of labour market reforms on employment and labour market adjustment although the literature traditionally treats labour market institutions as exogenous attention shifted recently towards understanding the underlying causes of specific institutional arrangements as a consequence the literature highlights the great importance of an efficient policy design exploiting these interactions wisely and identifies general principles for achieving an efficient policy design at both macro and micro levels although empirical evidence does not show a major change in terms of intensity of labour market reform after the setting of the economic and monetary union and the creation of the euro the reforms aiming at strengthening the labour market attachment of vulnerable groups tend to have been successful both in raising their employment and increasing labour market adjustment

court politics the political economy of tort awards abstract we investigate the forces that explain why trial awards differ across the united states in 23 states judges are elected and in 10 they are elected via partisan elections elections have two important effects first defendants are often out of state nonvoters while plaintiffs are typically in state voters we predict therefore that elected judges will redistribute wealth from out of state businesses to in state plaintiffs second the realities of campaign financing require judges to seek and accept campaign funding from trial lawyers who uniformly are interested in larger awards we hypothesize that these two forces cause awards to be larger in states where the judiciary is elected rather than appointed we also hypothesize that the demand for redistribution will increase as poverty increases and thus that awards will be larger in states with greater poverty using a sample of over 7 000 cases across 48 of the 50 states we find significant evidence in support of these hypotheses

does personal background influence a finance minister to cook the books an investigation of creative accounting in swiss cantons abstractthis article aims to identify the factors influencing the use of creative accounting in the public sector its distinctive feature is that it sheds light on creative accounting when used not to hide public deficits but to conceal surpluses it especially explores the impact of the finance minister s fm s background on the phenomenon we take advantage of the quasi experimental settings of the swiss cantons in which the financial management act sets out the possibility of implementing certain accounting gimmicks including mainly additional depreciation charges these charges which are depreciations in name only enable the fm to artificially inflate expenses thus increasing the deficit or reducing the surplus our panel data set of the 26 cantons over the period 1980 2012 includes a new data set of creative accounting and of 116 cantonal fms our results indicate that the fms cook the books irrespective of their personal or ideological background with the exception that trained economists

law focal points and fiscal discipline in the united states and the european union many studies suggest that strict balanced budget rules can restrain sovereign debt and lower sovereign borrowing costs even if those rules are never enforced in court why might public officials adhere to a rule that is practically never enforced in court existing literature points to a legal deterrence logic in which the threat of judicial enforcement deters sovereigns from violating the rules in the first place by contrast we argue that balanced budget rules work by coordinating decentralized punishment of sovereigns by bond markets rather than by posing a credible threat of judicial enforcement therefore the clarity of the focal point provided by the rule rather than the strength of its judicial enforcement mechanisms determines its effectiveness we develop a formal model that captures the logic of our argument and we assess this model using data on u s states we then consider implications of our argument for the impact of the balanced budget rules recently imposed on eurozone states in the fiscal compact treaty

the new stability and growth pact a first assessment abstract the paper proposes a theoretical model of fiscal policy offering new insights on some of the key policy trade offs involved in the recent reform of the stability and growth pact as suggested by the proponents of the reform greater room for case specific economic judgment in the implementation of the pact may improve welfare in our model these gains occur because the consolidation path implied by the implementation of the pact does not discourage high quality measures in practice however the difficulty to extract true policy intent from budget figures may hinder the qualitative assessment of fiscal policy hence reforming a rules based fiscal framework with a view to enhance its economic rationale would also require closer monitoring a better grasp of the policies underlying the budget and ultimately stricter enforcement in that sense recent reforms are at best unhelpful

institutions and economic performance evidence from the labour market the institutional determinants of economic performance is analyzed taking european labor market institutions as a case in point european economic growth after the second world war was based on fordist technologies a setting to which the continent s institutions of solidaristic wage bargaining were ideally suited they eased distributive conflicts and delivered wage moderation which in turn supported high investment the wage compression that was a corollary of their operation was of little consequence so long as the dominant technologies were such that firms could rely on a relatively homogeneous labor force but as fordism gave way to diversified quality production which relied more on highly skilled workers the centralization of bargaining and the compression of wages became impediments rather than aids to growth assuming that growth will rely even more in the future on rapidly changing science based skilled labor intensive technologies countries with centralized labor market institutions will have to move still further in the direction of decentralization whether europe in particular can accommodate these demands will help to determine whether it is able to re establish a full employment economy in the twenty first century

is there a politically optimal level of judicial independence independent courts render current policy more durable by raising the cost of future policy changes but may also engage in policy making of their own this paper asks is there an optimal level of judicial independence from the perspective of incumbent officials in the other branches to answer that question the paper develops a model of strategic institutional choice and tests it on the judicial institutions of the american states consistent with the model s predictions the most independenceenhancing institutions are found where political competition between rival parties is tightest and differences between party platforms are largest

the structure of class conflict in democratic capitalist societies the article presents a theory of class conflict between workers and capitalists who pursue their material interests under a form of societal organization that combines private ownership of instruments of production with representative political institutions there exist economic and political conditions under which both classes would simultaneously choose courses of action that constitute a class compromise workers consent to the institution of profit and capitalists to democratic institutions through which workers can effectively press claims for material gains when these conditions hold and a compromise is in force the role of the state consists in institutionalizing coordinating and enforcing the terms of a compromise that represents the preferences of workers as well as capitalists the combination of private ownership of the instruments of production with representative political institutions based on widespread suffrage constitutes a compromise between workers who consent to the private appropriation of profit by owners of capital and capitalists who accept the democratic institutions through which workers can make effective claims for an improvement of their material conditions this form of societal organization was con

the political economy of fiscal consolidations in the context of recent research in political economy this paper addresses the policy problem of fiscal consolidation in terms of three types of issues i the macroeconomic effects of alternative strategies to consolidate ii the institutional setups conducive to a consolidation and iii the best strategy for implementing a consolidation in order to maximize its political feasibility one methodological feature of this survey is an emphasis on policy feasibility one methodological feature of this survey is an emphasis on policy issues in order to bridge the gap between the level of abstraction of politico economic models of fiscal policy and the issues faced by a policymaker when attempting a fiscal consolidation

public employee pensions and the local labor budget abstract this paper examines the causes and consequences of public employee pension funding by local governments the pension funding decision is analyzed within the context of two models one where current taxpayers stay and pay employees future retirement benefits and a second model where current taxpayers move and thereby hope to avoid paying future retirement benefits the empirical results test the alternative models for a sample of 60 large u s cities using data for local police and fire services the effects of underfunding on local wages and employment is then examined and found to be significant implications for national pension funding policy are drawn

public sector efficiency the roles of political and budgetary institutions fiscal capacity and democratic participation the purpose of this paper is to investigate whether efficiency in public service provision is affected by political and budgetary institutions fiscal capacity and democratic participation in order to address this issue we take advantage of a new global efficiency measure for norwegian local governments we find that high fiscal capacity and a high degree of party fragmentation contribute to low efficiency in addition there is some evidence that democratic participation increases efficiency while a centralized top down budgetary procedure is associated with low efficiency

the costs and benefits of balanced budget rules lessons from a political economy model of fiscal policy this paper analyzes the impact of a balanced budget rule that requires that legislators do not run deficits in the political economy model of battaglini and coate 2008 the main finding is that the rule leads to a gradual reduction in the level of public debt legislators reduce debt in periods when the demand for public goods is relatively low they do so because the rule by restricting future fiscal policies raises the expected costs of carrying debt whether the rule increases citizen welfare depends on a comparison of the benefits of a lower debt burden with the costs of greater volatility in taxes and less responsive public good provision a quantitative version of the model is developed in which costs and benefits can be evaluated a welfare loss results if the debt level when the rule is imposed lies in the support of the long run distribution associated with the unconstrained equilibrium

independent and competing agencies an effective way to control government controlling government is a primary focus of the politico economic literature recently various political institutions have been analyzed from this perspective most importantly balanced budget rules fiscal federalism and direct democracy however one type of institution has been neglected so far elected competitors to the government such institutional competition between the government and an independent agency can be found at the swiss local level where finance commissions compete with the government in some parts of switzerland local finance commissions can ex ante criticize government projects and bring alternative policy proposals onto the political agenda which are then voted on by the citizens thus they become strong competitors to the government we econometrically investigate this institutional setting by comparing the 26 swiss cantons we find the power of the local finance commission to have an economically relevant statistically significant and robust negative effect on the tax burden and on public expenditures

good and bad institutions is the debate over cross country firm level evidence from the textile industry using firm level data from nine developing countries we demonstrate that certain institutions like restrictive labour market regulations that are considered bad for economic growth might be beneficial for production efficiency whereas good business environment which is considered beneficial for economic growth might have an adverse impact on production efficiency we argue that our results suggest that there might be significant difference in the macro and micro impacts of institutional quality such that the classification of institutions into good and bad might be premature

pathology of path dependency the ilo and the challenge of new governance using archival sources the authors study strategic and organizational change in the international labour organization ilo over the last twenty years they focus specifically on the ilo s efforts to incorporate certain elements of the new governance model into its policies and organizational practices which include the shift from standards expressed as detailed legal norms to soft law the active involvement of civil society organizations other than trade unions and employer associations in regulatory activities and the introduction of quantitative indicators of compliance with labor standards they argue that the efforts of the ilo leadership have been waylaid by the organization s corporatist structure which gives employer associations and trade unions veto power over policy developments at a time in which these actors are increasingly unable to agree on concrete policy measures finally the authors ask whether this corporatist structure accurately reflects the ilo s self defined mission prov

charles k rowley william f shughart ii and robert d tollison eds the economics of budget deficits the international library of critical writings in economics 153 ed by mark blaug cheltenham u k and northampton ma u s a edward elgar 2002 2 vols 1 112 pages usd 370 00 gbp 245 00 cloth

what do deficits tell us about debt empirical evidence on creative accounting with fiscal rules in the eu fiscal rules such as the excessive deficit procedure and the stability and growth pact sgp aim at constraining government behavior milesi ferretti 2003 develops a model in which governments circumvent such rules by reverting to creative accounting the amount of this depends on the reputation cost for the government and the economic cost of sticking to the rule we provide empirical evidence of creative accounting in the european union we find that the sgp rules have induced governments to use stock flow adjustments a form of creative accounting to hide deficits the tendency to substitute stock flow adjustments for budget deficits is especially strong for the cyclical component of the deficit as in times of recession the cost of reducing the deficit is particularly large

art of the deal the merger settlement process at the federal trade commission 1 introductiontwo firms competing with each other in at least one line of business face a complicated regulatory regime if they attempt to merge under the hart scott rodino hsr act of 1975 almost all large transactions in the united states are subject to review by either the department of justice or the federal trade commission ftc in the event an enforcement agency objects to the transaction several outcomes are possible i the parties could give up and abandon their transaction ii take the case to a federal court and litigate the dispute to a conclusion or iii the firms could settle their differences with the enforcement agency all settlements however are not the same in particular agencies have shown some willingness to accept compromise settlements defined here as consents that do not fully resolve the relevant competitive concerns the purpose of this study is to model the interaction between an antitrust agency and firms seeking to consummate mergers in doing so we will attempt to answer an important question in antitrust regulation what attributes drive the final outcome of a merger challenge this paper will model interactions between the ftc and private parties interested in consummating horizontal mergers that may adversely affect competition in at least one relevant market this decision to fight fold or settle is somewhat more complicated than an action for damages because the prospective nature of the alleged competitive injury gives the defendant an opportunity to abandon the transaction before the injury occurs moreover the conglomerate nature of most mergers creates a possibility for a strong settlement to resolve competitive concerns while allowing the firm to quickly consummate the innocuous portions of the transaction compromise settlements also are possible under which the consent offers partial relief the maximum likelihood estimation procedure used in the paper is derived directly from a game theoretic analysis that models the outcome of the interaction between merging firms and the ftc this allows for formal estimation of utility functions for both merging parties and the ftc estimating the structural equations of the model offers more detailed insight into the regulatory system we have two basic hypotheses with respect to this process first the underlying opportunity costs the legal merits of particular cases and possibly the political ramifications of enforcement decisions drive ftc decisions second firms decisions depend not only on the competitive merits of the ftc s case but perhaps more importantly on both the financial issues relevant to the specific transaction and how the nature of the case fits into the merger review process section 2 presents the background for the analysis by discussing the institutional structure of the ftc explaining the merger review process describing the hostage effects that may affect a firm s response to an ftc enforcement decision and introducing the idea of a compromise settlement section 3 models the game theoretic interaction between firms and the ftc and then explores an econometrically tractable method of estimating the underlying utility functions for the players in the game section 4 describes the data and specifications to be used results of the maximum likelihood estimation are presented in section 5 concluding comments are in section 6 we hope to shed light on an important aspect of the u s merger review process we also suggest that our results may have broader consequences since the mid 1980s a large number of countries have established formal antitrust procedures the results here may be of assistance to those policy regimes as well 2 issues in merger enforcementbackground on the ftcthe ftc is a government agency charged along with the department of justice doj with enforcing u s antitrust laws the bulk of the casework involves the evaluation of proposed horizontal mergers

defining the government s debt and deficit defining the government s debt and deficit although the budget deficit and the public debt feature prominently in political debate and economic research there is no agreement about how they should be measured they can be defined for different sets of public institutions including the nested sets corresponding to central government general government and the public sector and for any definition of government there are many measures of the debt and deficit including those generated by four kinds of accounts cash financial full accrual and comprehensive which can be derived from four nested sets of assets and liabilities each debt and deficit measure says something about public finances but none tells the whole story each is also vulnerable to manipulation and is likely to be manipulated if it is subject to a binding fiscal rule or target narrow definitions of government encourage the shifting of spending to entities outside the defined perimeter of government narrow definitions of debt and deficit encourage operations involving off balance sheets assets and liabilities while broad measures are susceptible to the mismeasurement of on balance sheet assets and liabilities reviewing the literature on these issues the paper concludes that governments should publish several measures of the debt and deficit in a form that clearly reveals their interrelationships

the political economy of fiscal deficits a survey this paper surveys recent literature both theoretical and empirical regarding political explanations for fiscal deficits political economy suggests conflicts of interest may lie behind the emergence of deficits 1 opportunistic politicians generate deficits to win elections even in conflict with general welfare 2 conflicts of interests between politicians partisan preferences create incentives for at least some incumbents to run deficits and 3 conflicts of interest between different social groups or regions generate tensions in the allocation of government resources leading to overspending this paper reviews these different strands of the literature it also covers contributions that highlight the crucial role of budget institutions in determining the extent to which the political motivations to generate deficits are indeed translated into poor fiscal outcomes promising avenues for future research are highlighted

legal systems institutional environment and food safety in the aftermath of the recent food scares the united states and the united kingdom face major challenges to maintain a safe food system regulators on opposite sides of the atlantic are facing rapid product and process innovations changes in consumption behaviors expansion of international trade and discovery of new food hazards the u k and the u s demonstrate different approaches to manage safety risks this article will focus on two issues the reasons behind the differences in the american and english policy approaches to food safety and how these differences impact u s safety outcomes a comparative legal framework is provided to understand how food safety is elicited in the economy and the incentive implications of the different institutional settings these two different lenses because they differ so teach us about the fundamental sources of safety the u k s prevalent doctrine is parliamentary sovereignty and leads to a regulatory framework while the u s is based on constitutional supremacy and relies on a legal framework the source of safety under a regulatory framework is the government bureaucracy while the u s legal framework provides an important point of departure the constitutional standing of the firm and the consumer we argue that while the u k system is structured to work through a regulatory framework to enhance the supply of safety in the economy the u s system is much less directed the legal system the subject of this article plays an important role not only in discouraging breach but also in acting as a check on the discretionary authority of the regulator in the end the u s and the u k may have equally safe food systems but what differs is the fundamental source of the safety supply the practical implication is that safety in the food system emerges from several sources not just through regulation therefore direct importation of u k style regulatory approaches may not be effective within a u s constitutional setting