the retrenchment hypothesis and the extension of the franchise in england and wales does an extension of the voting franchise always increase public spending or can it be a source of retrenchment we study this question in the context of public spending on health related urban amenities in a panel of municipal boroughs from england and wales in 1868 1871 and 1886 we find evidence of a u shaped relationship between spending on urban amenities and the extension of the local voting franchise our model of taxpayer democracy suggests that the retrenchment effect was related to enfranchisement of the middle class through nation wide reforms and that these reforms might have been pareto inferior in the average borough

business bluffing reconsidered imagine that i walk into a car dealership and tell the salesperson that i absolutely cannot pay more than 10 000 for the car that i want and imagine further she tells me that she absolutely cannot sell the car for less than 12 000 assuming that neither one of us is telling the truth we are bluffing about our reservation prices the price above or below which we will no longer be willing to make the transaction this is certainly a common practice and moreover is most likely minimally prudent whether our negotiating adversary is bluffing or not it will always be in our interest to bluff discussions of bluffing in business commonly invoke reservation prices but need not one could misrepresent his position in any number of areas including the financial health of a company poised for merger the authority that has been granted to him by the parties that he represents or even one s enthusiasm about a project the goal of bluffing is quite simple to enhance the strength of one s position during negotiations bluffing has long been a topic of considerable interest to business ethicists 1 on the one hand bluffing seems to bear a strong resemblance to lying and therefore might be thought to be prima facie impermissible on the other many people have the intuition that bluffing is an appropriate and morally permissible negotiating tactic given this tension what is the moral standing of bluffing in business the dominant position has been that it is permissible and work has there fore been done to show why the apparent imper missibility is either mismotivated or illusory two highly influential papers have taken different approaches to securing the moral legitimacy of bluffing the first by albert carr argued that bluffing in business is analogous to bluffing in poker and therefore should not be thought to be impermissible insofar as it is part of the way that the game is played the second by thomas carson presented a more subtle argument wherein the author reconstrued the concept of lying to require an implied warrantability of truth and since business negotiations instantiate a context wherein claims are not warranted to be

tax innovations and public revenues in sub saharan africa we study the effect of two tax innovations value added taxes vat and autonomous revenue authorities ara on tax revenues in sub saharan africa the dataset consists of 47 countries over 1980 2010 we find that vats have no effect on total tax revenues neither in the short nor in the long run aras lead to higher tax revenues in the short and medium run but the effect dissipates over time the main conclusion is that tax innovations are not a panacea to overcome the revenue shortages in african countries but they are helpful in the short and medium run

democracy comes to europe franchise extension and fiscal outcomes 1830 1938 abstract this paper examines the relation between public spending and the spread of democracy in western europe during the period 1830 1938 our data set includes measures of the size of the electorate the election rule and electoral participation as well as measures of the size and composition of central government expenditures for 12 countries we estimate panel regressions and find that 1 the gradual lifting of socio economic restrictions on the voting franchise contributed to growth in government spending mainly by increasing spending on infrastructure and internal security 2 the female suffrage had a weak positive effect through spending on health education and welfare 3 the change from majority to proportional rule which took place in 10 of the countries did not contribute to growth in government spending and held back spending on health education and welfare 4 there exists weak complementarity between economic development and the spread of democracy

democratisation and tax structure in the presence of home production evidence from the kingdom of greece abstract this paper examines the impact of democratisation on tax structure in an agrarian economy where goods can be produced at home for self consumption we first develop a model of optimal taxation with heterogeneous agents where the good produced in the market is subject to a consumption tax whereas the homogeneous good produced at home is burdened by a direct tax such as land tithes contrary to conventional theory our model suggests that extension of the voting franchise to poorer segments of the population exerts a negative impact on the share of direct to indirect taxes using unique national and regional tax data for the kingdom of greece a typical agrarian economy where universal male suffrage was established in 1864 we provide consistent empirical evidence greek governments adjusted tax policy in order to meet the preferences of the newly enfranchised electorate that constituted mostly peasants and farmers this group was harmed substantially by direct taxes on land but was able to avoid indirect taxes through self consumption we also analyse a sample of 12 european countries over the same period and provide evidence for a similar change in the tax structure when the agricultural sector dominates the economy

do elites benefit from democracy and foreign aid in developing countries abstract a popular argument for the absence of any beneficial effects of foreign aid is that it is skimmed by political elites in recipient countries however studies also suggest that aid may be more effective in relatively democratic developing countries by exploring data on income quintiles derived from the world income inequality database for 88 developing countries a set of results indicate that foreign aid and democracy in conjunction are associated with a higher share of income held by the upper quintile it thus appears that foreign aid contrary to popular beliefs leads to a more skewed income distribution in democratic developing countries while the effects are negligible in autocratic countries the paper closes with a discussion of potential mechanisms generating this perverse effect

why democracies produce efficient results by applying the standard tools of microeconomic analysis i argue that democratic markets work as well as economic markets in particular i show that previous work has greatly exaggerated the existence of principal agent and informational problems in electoral markets and has drawn incorrect conclusions

state lottery adoptions as policy innovations an event history analysis two types of explanations of state government innovation have been proposed internal determinants models which posit that the factors causing a state government to innovate are political economic and social characteristics of a state and regional diffusion models which point toward the role of policy adoptions by neighboring states in prompting a state to adopt we show that the two are conceptually compatible relying on mohr s theory of organizational innovation then we develop and test a unified explanation of state lottery adoptions reflecting both internal and regional influences the empirical results provide a great degree of support for mohr s theory for the empirical analysis we rely on event history analysis a form of pooled cross sectional time series analysis which we believe may be useful in a wide variety of subfields of political science event history analysis may be able to explain important forms of political behavior by individuals organizations or governments even if they occur only rarely

comparing optima do simplifying assumptions affect conclusions consider a family of maximization models in which the optimum trades off beneficial and costly effects then comparative statics derived under many kinds of simplifying assumptions about the benefits technology are also true for general convex and nonconvex technologies for example any comparative statics conclusion about investment by a risk averse decision maker under uncertainty that holds when expected returns are described by a general linear function also holds for an arbitrary nonlinear expected return function

wars and state capacity the article builds a simple model to investigate how different types of armed conflict shape fiscal capacity the state s ability to raise revenue from taxes it starts from the simple observation

immigration redistribution and universal suffrage the effect of immigration on redistribution has been widely debated this paper contributes to this debate by testing two explanations which are that i immigration tends to reduce redistribution due to people s higher levels of xenophobia and that ii immigration affects redistribution because immigrants do not have the right to vote since the demand for redistribution depends on the expected gap between median voter income and mean income immigrants affect the demand for redistribution because as non citizens they do not change the median voter s income but as economic stakeholders they do affect the mean income four empirical consequences of i and ii are tested at the individual level evidence from the european values survey in 45 countries confirms ii showing that immigrants expected competitiveness on the labor market affects preferences for redistribution and that it is amplified when the perceived number of immigrants is high in contrast i is globally rejected since the impact of the citizens declared level of solidarity with immigrants tends to be weak and depends on the type of measurement or specification used

sovereign debt and its restructuring framework in the eurozone debt is a particularly serious macroeconomic problem in the eurozone public debt ratios are high by international historical standards with no immediate prospect of a significant reduction private corporate and household debt ratios are either flat or rising banks remain fragile and impose a contingent liability on the public purse the most stressed economies have not had the option of renewing economic growth through exchange rate depreciation and a boost to exports thus fiscal austerity has been their principal instrument to achieve debt reduction but since austerity also hurts growth the debt to gdp ratios have barely budged persistent low growth has also created deflationary tendencies which further raise the challenge of debt reduction

political regimes and the extractive capacity of governments taxation in democracies and dictatorships recent political and economic transformations in latin america africa asia and eastern europe have brought about a renewed interest in the incentives and capabilities of different types of political regimes to implement policies that are deemed necessary for economic development in particular policies aimed at increasing tax revenue one central question is whether democracies can collect as much in taxes as dictatorships this article addresses this question by examining whether regime type classified as democracy or dictatorship has a causal impact on a government s capacity to mobilize resources through taxation on the basis of data gathered for 108 countries for the period between 1970 and 1990 the article concludes that observed differences across countries regarding the level of taxes collected by the government are not due to the fact that some are under a democracy and others under a dictatorship concerns about the inability of democratic regimes to collect taxes are therefore unfounded

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

the non democratic origins of income taxation this article examines the adoption of income taxes in western economies since the 19th century we identify two empirical regularities that challenge predictions of existing models of taxation and

lessons from the past capital markets during the 19th century and the interwar period on friday 13 august 1982 finance minster jesus silva herzog of mexico made a series of visits to the international monetary fund the federal reserve and the u s treasury his message to each was the same mexico could no longer continue to service its debt thus began a dramatic weekend of negotiations that marked the end of the preceding decade s buoyant expansion of developing country debt and the start of a still continuing response to the sudden collapse

the effect of the expansion of the voting franchise on the size of government this paper examines the claim that expansion of the voting franchise has been an important factor in the growth of government state government spending and state and local spending are explained using a panel of 46 states for 1950 88 elimination of poll taxes and literacy tests led to higher turnout particularly among the poor and a poorer pivotal voter as predicted we find that these changes a fall in the income of voters relative to state income and the ouster of republicans from state government led to a sharp rise in welfare spending but no change in other spending

cities constitutions and sovereign borrowing in europe 1274 1785 this article investigates the politics of sovereign borrowing in europe over the very long run i consider three alternative hypotheses regarding the sources of borrower credibility according to the first european states with constitutional checks on executive authority found it easier to obtain credit at low interest rates than did states that lacked such constraints my second hypothesis focuses on state type city state versus territorial state and the way in which this may have influ enced the balance of political power between owners of land and owners of capital in a society this hypothesis suggests that after controlling for other factors one should observe that city states in europe found it easier to borrow than did larger territorial states and that these city states paid lower interest rates on their debt finally my third hypothesis suggests that borrower credibility depended on the simultaneous presence of both constitutional checks and balances and a city state when one con siders a broad sample of cases over a long time span there is strong support for the proposition involving city states and merchant power but less support for the argu ment that constitutional checks influenced credibility regardless of state type city state or territorial state there is however some empirical evidence of an interaction effect whereby constitutional constraints on rulers made city states particularly cred ible as borrowers my results are robust to a number of controls for alternative deter minants for sample selection bias and for the endogeneity of city state development one of the most frequently cited recent arguments about european state develop ment involves the effect of constitutional checks and balances on economic per formance in areas where political institutions placed constraints on rulers scholars have argued that property rights were more secure which helped stimulate invest ment innovation and growth authors have suggested that checks and balances also facilitated long term borrowing by governments since creditors found it less likely that constrained rulers would default on loans easier access to loans at low interest rates gave some states an advantage in international competition the con trasting cases of great britain and france provide a popular illustration of the

the forgotten history of domestic debt there is a rich scholarly literature on sovereign default on external debt comparatively little is known about sovereign default on domestic debt even today cross country data on domestic public debt remains curiously exotic particularly prior to the 1980s we have filled this gap in the literature by compiling a database on central government public debt external and domestic the data span 1914 to 2010 for most countries reaching back into the nineteenth century and earlier for many our findings here on debt sustainability sovereign defaults the temptation to inflate and the hierarchy of creditors only scratch the surface of what the domestic public debt data can reveal first domestic debt is big for the 64 countries for which we have long time series domestic debt accounts for almost two thirds of total public debt for most of the sample this debt carries a market determined interest rate except for the financial repression era between wwii and financial liberalization second the data go a long way toward explaining the puzzle of why countries so often default on their external debts at seemingly low debt thresholds third domestic debt has largely been ignored in the vast empirical work on inflation in fact domestic debt a significant portion of which is long term and nonindexed is often much larger than the monetary base in the run up to high inflation episodes last the widely held view that domestic residents are strictly junior to external creditors does not find broad support

politics and economics in weak and strong states abstract while much research in political economy points out the benefits of limited government political scientists have long emphasized the problems created in many less developed nations by weak states which lack the power to tax and regulate the economy and to withstand the political and social challenges from non state actors i construct a model in which the state apparatus is controlled by a self interested ruler who tries to divert resources for his own consumption but who can also invest in socially productive public goods both weak and strong states create distortions when the state is excessively strong the ruler imposes such high taxes that economic activity is stifled when the state is excessively weak the ruler anticipates that he will not be able to extract rents in the future and underinvests in public goods i show that the same conclusion applies in the analysis of both the economic power of the state i e its ability to raise taxes and its political power i e its ability to remain entrenched from the citizens i also discuss how under certain circumstances a different type of equilibrium which i refer to as consensually strong state equilibrium can emerge whereby the state is politically weak but is allowed to impose high taxes as long as a sufficient fraction of the proceeds are invested in public goods the consensually strong state might best correspond to the state in oecd countries where taxes are high despite significant control by the society over the government

uncertainty shifting power and appeasement great britain faced an immensely complicated strategic problem in the 1930s and important aspects of it can be stylized as a situation in which a state that is declining in power is unsure of the aims of a rising state if those aims are limited then the declining state prefers to appease the rising state s demands rather than go to war to oppose them if however the rising state s demands are unlimited then the declining state prefers fighting and given that the declining state is becoming weaker over time it prefers fighting sooner rather than later if there is to be a war this situation creates a trade off the earlier a state stands firm the stronger it will be if war ensues but the higher the chance of fighting an unnecessary war in equilibrium the declining state generally tries to appease the rising state by making a series of concessions

the participation dividend of taxation how citizens in congo engage more with the state when it tries to tax them this article provides evidence from a fragile state that citizens demand more of a voice in the government when it tries to tax them i examine a field experiment randomizing property tax collection across 356 neighborhoods of a large congolese city the tax campaign was the first time most citizens had been registered by the state or asked to pay formal taxes it raised property tax compliance from 0 1 in control to 11 6 in treatment it also increased political participation by about 5 percentage points 31 citizens in taxed neighborhoods were more likely to attend town hall meetings hosted by the government or submit evaluations of its performance to participate in these ways the average citizen incurred costs equal to their daily household income and treated citizens spent 43 more than control treated citizens also positively updated about the provincial government perceiving more revenue less leakage and a greater responsibility to provide public goods the results suggest that broadening the tax base has a participation dividend a key idea in historical accounts of the emergence of inclusive governance in early modern europe and a common justification for donor support of tax programs in weak states

sophisticated sincerity voting over endogenous agendas the empirical findings on whether or not legislators vote strategically are mixed this is at least partly due to the fact that to establish any hypothesis on strategic voting legislators preferences need to be known and these are typically private data in this note it is shown that under complete information if decision making is by the amendment procedure and if the agenda is set endogenously then sophisticated strategic voting over the resulting agenda is observationally equivalent to sincere voting the voting strategies however are sophisticated this fact has direct implications for empirical work on sophisticated voting

workers of the world unite franchise extensions and the threat of revolution in europe 1820 1938 abstract we test the hypothesis that the extension of the voting franchise in europe was related to the threat of revolution we contend that international diffusion of regime contention and information about revolutionary events happening in neighboring countries generate the necessary variation in the perceived threat of revolution using two samples of european countries covering the period from 1820 to 1938 we find robust evidence which is consistent with the threat of revolution hypothesis we also find some evidence that war triggered suffrage reform

world economic expansion and national security in pre world war i europe profound and rapid changes in the costs and risks of international trade are now widely acknowledged to be a potent source of domestic political conflict by altering the relative prices of goods available from world markets these changes alter the rewards that flow to different factors of production from different economic activities these distributional consequences of changing levels of trade in turn alter the configuration of interests in the domestic political economy strain existing political alignments and enable the construction of new political coalitions thus global changes in the economy such as the transportation and telecommunications revolutions in the nineteenth and mid twentieth centuries or the collapse of international trade and finance during the interwar years will have global consequences as they reverberate within and through the domestic politics of all countries that trade on world markets

sovereign debt defaults insights from history history provides many insights to address the issue of sovereign debt defaults this article first presents a detailed account of defaults in historical perspective it then discusses the solutions devised in the past to address sovereign debt crises and puts these into perspective with today s answers when crises occur finally the paper stresses the role of history when the events studied do not occur frequently and when archival data may shed new light on the process of the resolution of crises the impact of odious debts declarations of state succession and of international relations on sovereign defaults and on their settlement is thus also addressed copyright 2013 oxford university press

emerging market spreads then versus now we analyze yield spreads on sovereign bonds issued by emerging markets using modern data from the 1990s and newly collected historical data on bonds traded in london during 1870 1913 a previous era of global capital market integration we show that spreads today comove across emerging markets to a significantly higher degree than they did in the historical sample moreover sharp changes in spreads in the 1990s tend to be mostly related to global events whereas they were primarily related to country specific events in 1870 1913 although we find that fundamentals comove somewhat more strongly today than they did in the past we conjecture that today s investors pay less attention to country specific events than their predecessors did

the democratic advantage institutional foundations of financial power in international competition despite their presumed liabilities institutions associated with democracy serve as a source of power in prolonged international competition by increasing the financial resources that states can bring to bear the theory of sovereign debt suggests that a state s ability to raise money through public borrowing is enhanced when debtholders have mechanisms for sanctioning state leaders in the event of default institutions associated with liberal government provide such mechanisms all other things being equal states that possess these institutions enjoy superior access to credit and lower interest rates than do states in which the sovereign has more discretion to default unilaterally liberal states can not only raise more money from a given economic base but can also pursue tax smoothing policies that minimize economic distortions the ability to finance competition in a manner that is consistent with long term economic growth generates a significant advantage in prolonged rivalries these claims are explored by analyzing the anglo french rivalry 1688 1815 and the cold war

central banks at war war is expensive troops must be equipped and weapons must be procured when the enormous borrowing requirements of war make the sovereigns credibility problem more difficult central banks enhance a government s ability to borrow by being the sole direct purchaser of government debt the central bank increases the effective punishment that can be imposed on the government for defaulting on the marginal lender this increases lenders confidence that the government will be punished in case of default making lenders willing to purchase the debt at a lower rate of interest the sovereign dependent on the low borrowing costs offered by the central bank has an incentive to retain the bank data covering the nineteenth and early twentieth centuries reveal that possessing a central bank lowers the sovereign s borrowing costs particularly during times of war

the peaceful conspiracy bond markets and international relations during the pax britannica this article provides foundations to polanyi s famed argument that monopoly power in the global capital market served as an instrument of peace during the pax britannica 1815 1914 our perspective is novel we focus on the role of intermediaries and certification we show that when information and enforcement are imperfect there is scope for the endogenous emergence of prestigious intermediaries who enjoy a monopoly position and as a result control government actions they can implement conditional lending they subject the distribution of credit to the adoption of peaceful policies prestigious intermediaries act that way because of their concern with maintaining an unblemished track record when wars increased risks of default our analysis which brings together insights from different disciplines provides a significant extension to and departure from recent research on how countries accumulate reputational capital

decentralized coercion and self restraint in provincial taxation the ottoman empire 15th 16th centuries abstract for technological reasons the central administration of a state may want to entrust to provincial delegates the dual tasks of extracting provincial resources and converting them into coercive force this article establishes that the coercive threat that the delegates pose may make the administration cap the amount they extract the cap will cause the state not to internalize the marginal benefits of provincial economic development it will also induce inefficient economic policies the identified institutional setup is consistent with the political regime economic policy and legislation of the ottoman empire during its classical age

war international finance and fiscal capacity in the long run in this article i revisit the relationship between war and state making in modern times by focusing on two prominent types of war finance taxes and foreign loans financing war with tax money enhances the capacity to assess wealth and monitor compliance namely fiscal capacity tax financed war facilitates the adoption of power sharing institutions which transform taxation into a non zero sum game carrying on the effect of war in the long run financing war with external capital does not contribute to long term fiscal capacity if borrowers interrupt debt service and as part of the default settlement war debt is condoned or exchanged for nontax revenue the empirical evidence draws from war around the world as early as 1816 results suggest that globalization of capital markets in the nineteenth century undermined the association between war state making and political reform

war making and state making governmental expenditures tax revenues and global wars addressing the disputed relationship between war and the expansion of governmental expenditures and revenues box tiao intervention models are applied to a number of british 1700 1980 united states 1792 1980 french 1815 1979 and japanese 1878 1980 spending and taxation series distinguishing between global and interstate wars the more intensive and extensive bouts of warfare global wars tend to bring about abrupt permanent impacts in contrast to the temporary changes associated with most interstate wars the observed displacements are reflected in both war related and nonwar related types of expenditure and are also observed before 1900 although our findings are not universally applicable and are subject to various other qualifications they may be interpreted in general as reinforcing the need for an appreciation of the persistent centrality of war especially global war in the discontinuous growth and expansion of the modern state

the taxman tools up an event history study of the introduction of the personal income tax abstract the introduction of income taxation was a landmark in the historical development of the fiscal state of the now developed world this paper presents an event history study of the adoption of the income tax in 17 countries from western europe north america oceania and japan between 1815 and 1939 we find evidence that spending pressures reductions in tax collection costs and to a lesser extent social learning played a significant role for the adoption decision we also find evidence that the extension of the franchise at first reduced the likelihood of adoption of the income tax but eventually as universal suffrage was approached increased the likelihood

different paths to the modern state in europe the interaction between warfare economic structure and political regime theoretical work on taxation and state building borrows heavily from early modern european experience while a number of european states increased centralized tax revenues during this period for others revenues stagnated or even declined and these variations have motivated alternative arguments for the determinants of fiscal and state capacity this study reviews the arguments concerning the three determinants that have received most attention namely warfare economic structure and political regime and tests them by making use of a new and comprehensive tax revenue dataset our main finding is that these three determinants worked in interaction with each other specifically when under pressure of war it was representative regimes in more urbanized commercial economies and authoritarian regimes in more rural agrarian economies that tended to better aggregate domestic interests towards state building

the extent of the market and the supply of regulation we present a model in which setting up and running a regulatory institution takes a fixed cost as a consequence the supply of regulation is limited by the extent of the market we test three implications of this model first jurisdictions with larger populations affected by a given regulation are more likely to have it second jurisdictions with lower incremental fixed costs of introducing and administering new regulations should regulate more this implies that regulation spreads from higher to lower population jurisdictions and that jurisdictions that build up transferable regulatory capabilities should regulate more intensely consistent with the model we find that higher population u s states have more pages of legislation and adopt particular laws earlier in their history than do smaller states we also find that the regulation of entry the regulation of labor and the military draft are more extensive in countries with larger populations as well as in civil law countries where we argue that the incremental fixed costs are lower

deadweight costs and the size of government abstract we provide a model for analyzing effects of the tax system and spending programs on the determination of government spending and taxpayer welfare an improvement in the efficiency of either taxes or spending would reduce political pressure for suppressing the growth of government and thereby increase total tax revenue and spending we demonstrate the similarity of the political responses to revenue shocks spending shocks changes in tax efficiency and changes in spending program efficiency empirical analysis of oil shocks intergovernmental grants and other autonomous changes in taxes or spending indicates that cause and effect is not only from spending to tax structures

state capacity conflict and development the absence of state capacities to raise revenue and to support markets is a key factor in explaining the persistence of weak states this paper reports on an ongoing project to investigate the incentive to invest in such capacities the paper sets out a simple analytical structure in which state capacities are modeled as forward looking investments by government the approach highlights some determinants of state building including the risk of external or internal conflict the degree of political instability and dependence on natural resources throughout we link these state capacity investments to patterns of development and growth

voting suffrage and the political budget cycle evidence from the london metropolitan boroughs 1902 1937 we study the opportunistic political budget cycle in the london metropolitan boroughs between 1902 and 1937 under two different suffrage regimes taxpayer suffrage 1902 1914 and universal suffrage 1921 1937 we argue and find supporting evidence that the political budget cycle operates differently under the two types of suffrage taxpayer suffrage where the right to vote and the obligation to pay local taxes are linked encourages demands for retrenchment and the political budget cycle manifests itself in election year tax cuts and savings on administration costs universal suffrage where all adult residents can vote irrespective of their taxpayer status creates demands for productive public services and the political budget cycle manifests itself in election year hikes in capital spending and a reduction in current spending

democratic reliability precommitment of successor governments and the choice of alliance commitment given frequent leadership turnover and leaders need to appeal to voters democracies should face difficulties in maintaining their alliance commitments yet the empirical evidence predominantly shows that they do make reliable allies democratic governments can increase reliability by binding future administrations through the choice of alliance commitment while defense pacts precommit future leaders to close military cooperation with an ally consultation pacts leave more room for discretion this research note examines when precommitment through a defense pact is likely to occur a government should be more likely to conclude a defense pact if potential successors have different preferences regarding the alliance if the government believes that it will lose power soon and if the costs of precommitment are not too high i test the theoretical expectations using the alliance treaty obligations and provisions atop data between 1945 and 2003 the findings support the argument and suggest an answer to the puzzle of why states sometimes conclude whole hearted commitments and other times seemingly half hearted ones

debt and tariffs an empirical investigation of the evolution of revenue systems abstract this paper presents a theoretical framework where government chooses fiscal structure so as to maximize political support and where the evolution of fiscal systems is determined by changing economic political and administrative factors estimating equations are derived and the model is used to explain the development of revenue structure in canada from 1871 to 1913 a period when major revenue sources consisted of the tariff debt and excises the empirical analysis distinguishes between government plans and ex post observations of public revenues and places particular emphasis on the derivation of hypotheses linking economic political and administrative variables to revenue structure

both guns and butter or neither class interests in the political economy of rearmament astate that is confronted with a grave external threat has three basic options of response each of which involves certain trade offs first it can strengthen its military rearmament or internal balancing allows it to maintain its diplomatic freedom of action but its economy may suffer from the strain of accelerating the production of weapons of war second it can join forces with another power alliances may obviate the need for an arms buildup but they carry the risk that the state will be abandoned by its partners or drawn into undesired conflicts finally it can attempt to reconcile with its adversaries by conceding to some of their demands appeasement may be the least troublesome way to eliminate a threat but it is also the most risky because it transfers valued resources to a potential opponent after weighing these options the state should choose the policy or combination of policies that will provide an acceptable level of security at the lowest overall cost 1 the foregoing account is appealingly parsimonious but it captures only part of the story states are frequently racked by bitter internal debates over how to deal with international pressures and changes in their political leadership sometimes bring about sudden shifts in their behavior of the three strategies described above rearmament is often the most acutely divisive it requires a sharp increase in the extraction and mobilization of resources from society so it can become highly politicized some groups will inevitably bear a heavier burden than others and their discontent may eventually endanger the regime s hold on power or its ability to prepare for war to ensure domestic

the output costs of hard and soft sovereign default abstract how costly are sovereign debt crises in this paper we study output losses during sovereign default and debt renegotiation episodes since 1980 in contrast to previous work we account for the severity of default and not only for its occurrence specifically we distinguish between hard and soft defaults using new data on debtor payment and negotiation behavior and on the size of haircuts towards private external creditors we show that hard defaults are associated with a much steeper drop in gdp of up to ten percent compared to soft defaults the results are consistent with theoretical models assuming proportional output costs of default

politics institutions and welfare spending in industrialized democracies 1960 82 electoral turnout as well as left and center governments increase welfare effort that the welfare efforts of governments led by particular types of parties show significant differences and vary notably with the strength of oppositional and junior coalitional parties and that relatively neocorporatist centralized and traditionalistic polities are high on welfare effort overall our findings suggest that contrary to many claims both partisan and nonpartisan facets of democratic politics and political institutions shape contemporary social welfare effort

economic and political foundations of tax structure this paper derives the essential elements of tax systems as the outcome of rational behavior in a model w here government maximizes expected support and where opposition to ta xation depends on the loss in full income the analysis treats the le vel of expenditures as endogenous and integrates the influence of adm inistration costs with that of political and economic factors tax st ructure is shown to be a system of related components in equilibrium a final section compares results to two alternative approaches opti mal taxation and the leviathan model copyright 1988 by american economic association

demography and the composition of taxes evidence from international panel data abstract this paper analyzes the impact of population aging on the composition of taxes when the median voter is of working age then population aging increases the demand for expenditure rather than income taxes in order to increase the tax burden on the retired population international panel evidence supports this hypothesis and this relationship holds more firmly in stronger democracies

the decentralization of collective bargaining a literature review and comparative analysis the author reviews evidence that the bargaining structure is becoming more decentralized in sweden australia the former west germany italy the united kingdom and the united states although in

historical research on international lending and debt the parallels between debt crises past and present have attracted a large number of social scientists to the history of foreign lending and default in this article i describe the findings of the recent literature on the subject the questions posed have obvious relevance to the current policy debate over the debt of less developed countries what features of international capital markets have long rendered them vulnerable to generalized crisis what events tend to spawn debt servicing difficulties and to provoke default what have been the consequences of default for lenders and borrowers what approaches historically have proven most effective at clearing away the residue of debt crises i concentrate on 20th century experience on the lending of the 1920s on the debt crisis of the 1930s and on the recovery of capital markets after world war ii

domestic sources of alliances and alignments the case of egypt 1962 73 the theoretical and empirical literature on international alliances has tended to support the realist view that the pursuit or tightening of external alignments stems predominantly from external security threats consequently the role of domestic factors has generally been ignored or downplayed this article begins with the observation that leaders confronted with external threats make trade offs between the pursuit of external alignments and the mobilization of domestic resources it then argues that the choice of strategy depends on a combination of systemic and domestic factors including the perceived degree of external threat to state security the perceived degree of domestic instability and threat to the government and the constraints that derive from the domestic political economy the analysis of egypt s alignment behavior during the period from 1962 to 1973 underscores the impact of domestic and economic political constraints on the choice of domestic mobilization or alliance formation and the central role of alliances in providing resources for confronting domestic as well as foreign threats

is democracy good for the poor many scholars claim that democracy improves the welfare of the poor this article uses data on infant and child mortality to challenge this claim cross national studies tend to exclude from their samples nondemocratic states that have performed well this leads to the mistaken inference that nondemocracies have worse records than democracies once these and other flaws are corrected democracy has little or no effect on infant and child mortality rates democracies spend more money on education and health than nondemocracies but these benefits seem to accrue to middle and upper income groups

coordination commitment and enforcement the case of the merchant guild we interpret historical evidence in light of a repeated game model to conclude that merchant guilds emerged during the late medieval period to allow rulers of trade centers to commit to the security of alien merchants the merchant guild developed the theoretically required attributes secured merchants property rights and evolved in response to crises to extend the range of its effectiveness contributing to the expansion of trade during the late medieval period we elaborate on the relations between our theory and the monopoly theory of merchant guilds and contrast it with repeated game theories that provide no role for formal organization

the fiscal roots of financial underdevelopment why do some countries indulge in financial repression harming economic development in the process whereas others promote financial development three main explanations have been put forth market failures due to information asymmetries mean that credit is rationed even when lenders could potentially benefit from making loans readily available political failures due to state capture mean that credit will be rationed as a way of generating rents for politically powerful financial incumbents the state might however have its own fiscal reasons for politicizing the supply and price of credit since financial repression provides easy to collect revenues i draw on the third approach to argue that the state s fiscal imperative is usually the primary reason behind financial repression and even when private actors benefit they are subordinate to this concern a dynamic panel analysis that exploits instrumental variables and a case study of mexico adduce strong empirical support for my fiscal transaction cost theory

state capacity and military conflict powerful centralized states controlling a large share of national income only begin to appear in europe after 1500 we build a model that explains their emergence in response to the increasing importance of money for military success when fiscal resources are not crucial for winning wars the threat of external conflict stifles state building as finance becomes critical internally cohesive states invest in state capacity while divided states rationally drop out of the competition causing divergence we emphasize the role of the military revolution a sequence of technological innovations that transformed armed conflict using data from 374 battles we investigate empirically both the importance of money for military success and patterns of state building in early modern europe the evidence is consistent with the predictions of our model

sovereign states bondholders committees and the london stock exchange in the nineteenth century 1827 68 new facts and old fictions this paper unpacks the role of foreign bondholders committees in influencing market access following a default during the era before the creation of the british corporation of foreign bondholders cfb in 1868 i argue that many ideas about this period need to be revisited in particular my evidence which uses archival work to describe market microstructures shows the importance of the london stock exchange lse as a court of arbitration i show how the lse general purpose committee set up a system of collective action clauses requiring majority agreement among bondholders to permit market access i argue that unlike what research has argued thus far this created powerful incentives for bondholders to get organized as they did previous models and historical lessons need to be recast copyright 2013 oxford university press

a new world order explaining the international diffusion of the gold standard 1870 1913 abstract the gold standard gradually became an international monetary regime after 1870 similarly some nations in the european union are waiting to adopt the euro while others have joined immediately what explains the timing of exchange rate regime adoption to find out the international diffusion of the gold standard is analyzed duration analysis shows that network externalities operating through trade channels the desire to decrease borrowing costs on international capital markets and the level of development matter some evidence shows that the level of exchange rate volatility or inflationist agricultural interests did not matter for the timing of adoption

the effects of systemic banking crises in the inter war period abstract this paper examines the time profile of the impact of systemic banking crises on gdp and industrial production using a panel of 24 countries over the inter war period and compares this to the post war experience of these countries we show that banking crises have effects that induce medium term adjustments on economies focussing on an eight year horizon it is clear that the negative effects of systemic banking crises last over the entirety of this time horizon the effect has been identified for gdp and industrial production the adverse effect on the industrial sector stands out as being substantially larger in magnitude relative to the macroeconomic effect comparing the results across long run historical periods for the same selection of countries and variables identifies some differences that stand out the short term macroeconomic impact effects are much larger in the post war period suggesting that the propagation channels of shocks operate at a faster pace in the more recent period moreover the time profile of effects differs suggesting that modern policies may be modulating the temporal shape of the response to banking crises shocks however the broad magnitude of the adverse effect of banking crises remains comparable across these time periods

why did the west extend the franchise democracy inequality and growth in historical perspective during the nineteenth century most western societies extended voting rights a decision that led to unprecedented redistributive programs we argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution political transition rather than redistribution under existing political institutions occurs because current transfers do not ensure future transfers while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution our theory also offers a novel explanation for the kuznets curve in many western economies during this period with the fall in inequality following redistribution due to democratization i introduction the nineteenth century was a period of fundamental political reform and unprecedented changes in taxation and redistribution britain for example was transformed from an oligarchy run by an elite to a democracy the franchise was extended in 1832 and then again in 1867 and 1884 transferring voting rights to portions of the society with no previous political representation the decades after the political reforms witnessed radical social reforms increased taxation and the extension of education to the masses moreover as noted by kuznets inequality which was previously increasing started to decline during this period the gini coefficient for income inequality in england and wales had risen from 0 400 in 1823 to 0 627 in 1871 but fell to 0 443 in 1901 two key factors in the reduction in inequality were the increase in the proportion of skilled workers williamson 1985 and the redistribution of income toward the poorer segments of the society for example taxes rose from 8 12 percent of national product in 1867 to 18 8 percent by 1927 and the progressivity of the tax system increased substantially see lindert 1989

the case for trade liberalization in developing countries in a broad swing of the pendulum developing countries have been shifting from severe and destructive protection to free trade fever many of the notable examples are in latin america mexico after a major unilateral trade liberalization is now negotiating a free trade agreement with canada and the united states chile traditionally a highly protected country is a leading example of reducing trade barriers argentina and brazil have entered free trade agreements a free trade area for the americas is becoming a serious possibility the enthusiasm for more openness of the economy is not limited to latin america for example korea and turkey are cases of highly successful liberalization there are also cases in africa for example ghana and botswana to demonstrate the possibility and the benefits of opening up this new enthusiasm for freer trade stems from four overlapping sources anti statism the world has seen a broad intellectual swing away from emphasizing the beneficial role of the state in the 1980s and protection is seen as one of the manifestations of an overly intrusive state of course a shift to a liberal trade regime has not always been the by product of a more democratic society chile under pinochet or korea in its liberalizing phase were under authoritarian rule two cheers for the market but not three the saying goes today the market gets at least three cheers which may be at least one too many poor economic performance many developing countries have suffered dismal economic performance and declining productive potential much of the reason can be traced to populist macroeconomic policies that engendered debt crises and hyperinflation of course part of the reason was also a very adverse external environment but since the days of plentiful external credit are gone

how to get the snowball rolling and extend the franchise voting on the great reform act of 1832 this paper suggests a new approach to analyzing the causes of franchise extension based on a new dataset it provides a detailed econometric study of the great reform act of 1832 in the united kingdom the analysis yields four main results first modernization theory receives limited support second the reform enjoyed some measure of popular support third the threat of revolution had an asymmetric impact on the voting behavior of the pro reform whigs and the anti reform tories while the threat might have convinced reluctant reformers among the whig politicians and among their patrons to support the bill it seems to have hardened the resistance to reform among the tories fourth ideology played a critical role nevertheless it also appears that self interest and political expedience explained the votes of many members of parliament

ethics deception and labor negotiation there has been widespread emphasis on the importance of trust amongst parties to the employment relationship associated with a call for increased integrative bargaining trust is bound up with ethical action but there has been some debate about the ethics of deception in bargaining because it is possible for cooperative bargainers to be exploited some writers contend that deceptive behavior is ethical and established practice there are several problems about that view it is questionable how clear and uniform such a practice has been an appearance of deceptive bluffing can often be explained as exchange of genuine concessions recent trends have seen increased devolution of bargaining from professionals to non professionals which dilutes any shared understandings there have been in the past while practices that do exist may not be freely or voluntarily accepted and the existence of such practices is not enough to compensate for inequalities of power and skill it is questionable to what extent bluffing and deception are necessary for self defense there other techniques available by which parties can guard themselves against exploitation

arms versus allies trade offs in the search for security nations have two methods of increasing their security building arms and forming alliances both methods present different political costs that must be incurred to raise security building arms requires shifting economic resources to the military forming alliances requires abandoning interests that conflict with those of the ally each of these strategies produces domestic opposition a nation s response to a threat to its security must weigh the relative attractiveness of arms versus allies both in terms of their effects on internal politics and on their external benefits three cases are examined in the light of this argument the response of austria and france to the unification of germany in the 1860s is the central case theories of alliance formation based on neorealism and the offense defense balance predict that austria and france should have allied against the mutual threat of prussia this article argues that they did not form an alliance because arming separately presented lower political costs world wars i and ii likewise are analyzed from the perspective of the argument above

state market civil institutions the case of eastern europe and the soviet republics abstract the transition tasks facing the countries of central and eastern europe are monumental the public sector will play a dominant role during the transition process available evidence suggests that orthodox prescriptions for public sector reform cannot be effectively implemented without an underlying constitution and a legal and regulatory infrastructure lri a well designed constitution and lri instill confidence and policy credibility with perfectly rational expectations and confidence in the constitution and lri the sequence of reforms matters little future reforms are perfectly anticipated today and agents act as though the reforms will occur with certainty short of such confidence reforms need to be simultaneously pursued on many fronts the most important activity is to redefine the role of the state setting a constitution that clearly defines and secures basic political civil and economic freedoms and designing an lri that creates a fertile environment for a vibrant market economy

a distributive n amendment game with endogenous agenda formation in this paper i analyze a 3 person voting game in which players sequentially choose amendments to a bill and then vote sophisticatedly on the resulting agenda this game differs from previous work on endogenous agenda formation in that the number of items on the agenda is not fixed players keep making proposals until they can do no better i find that there is a nonempty set of minimax equilibrium outcomes to the game and that this set contains the simple von neumann morgenstern stable set

the conscription of wealth mass warfare and the demand for progressive taxation the dominant narrative of the politics of redistribution in political sci ence and economics highlights the signature role of the rise of electoral democracy and the development of political parties that mobilize working class groups we argue in this article that this narrative ignores the critical role played by mass warfare in the development of redistributive public policies focusing attention on the determi nants of progressive taxation we argue that mobilization for mass warfare led to demands for increased taxation of the wealthy to more fairly distribute the burden for the war effort we then show empirically that during the past century mass mobi lization for war has been associated with a notable increase in tax progressivity in the absence of war neither the establishment of universal suffrage nor the arrival of political control by parties of the left is systematically associated with large increases in tax progressivity in making these arguments we devote particular attention to a difference in differences comparison of participants and nonparticipants in world war i those who have made fortunes out of the war must pay for the war and labour will insist upon heavily graduated direct taxation with a raising of the exemption limit that is what labour means by the conscription of wealth

tax innovation in the states capitalizing on political opportunity this paper assesses the factors that prompt states to adopt taxes during the twentieth century we test five explanations of state tax innovation derived from the literature economic development fiscal health election cycle party control and regional diffusion using event history analysis a pooled cross sectional time series technique while little support is found for the economic development and party control explanations our empirical results are highly consistent with a political opportunity explanation of state tax adoptions 1 the presence of a long time until the next election 2 the existence of a fiscal crisis and 3 the presence of neighboring states that have previously adopted a tax all create opportunities for politicians to shield themselves from the political costs of supporting a tax increase and are all shown by empirical analysis to increase the probability of a tax adoption this empirical evidence is consistent across different tax instruments and different periods of analysis throughout the twentieth century

state capacity and economic development causal mechanism or correlative filter abstract in this paper we explore why there are no examples of societies with low state capacity and high economic development we argue that such an outcome is unlikely because of the nature of investments in state capacity societies that become rich in the absence of a strong state invite predation by societies that develop such states thus societies invest in state capacity in part to plunder other societies wealth those investments are a form of rent seeking potentially preyed upon societies are forced to invest in state capacity in turn so as to deter potential attackers this entails that as soon as a rent seeker enters the game the likelihood of a low capacity high development society surviving falls this explains the historical lack of such societies we thus interpret state capacity not as a causal condition for widespread economic prosperity but a survivability condition for enjoying this prosperity

guns versus butter a disaggregated analysis irior studies of the guns versus butter trade off have focused on total military expenditures and subcomponents of welfare spending educa tion health and housing i extend the analysis to include the major subcomponents of the defense budget the results are consistent with clayton s domke eichenberg and kelleher s and russett s findings of a lack of defense welfare trade off in the 1947 80 era but reveal very specific trade offs during the reagan years

money and monetary stability in europe 1300 1914 abstract this paper investigates the determinants of monetary stability in europe from the late medieval era until world war i through this period the anchor for monetary policy was the silver or gold value of the monetary unit states however frequently abandoned this anchor some depreciating their monetary units against silver and gold less than 10 fold and others more than 10 000 fold between 1500 and 1914 to understand the determinants of these differences we compile a new and comprehensive monetary history dataset for all major states in europe and test alternative theories we find strong evidence that political factors and in particular fiscal capacity political regime and warfare explain patterns of monetary stability this finding is robust to addressing endogeneity controlling for the instability induced by the mechanics of the monetary system and accounting for the impacts of new monetary technologies and the advent of fiat standard

female voting power the contribution of women s suffrage to the growth of social spending in western europe 1869 1960 women s suffrage was a major event in the history of democratization in western europe and elsewhere public choice theory predicts that the demand for publicly funded social spending is systematically higher where women have and use the right to vote using historical data from six western european countries for the period 1869 1960 we provide evidence that social spending out of gdp increased by 0 6 1 2 in the short run as a consequence of women s suffrage while the long run effect is three to eight times larger we also explore a number of other public finance implications of the gender gap

human capital in the long run abstract this study presents new data sets on long run enrollment ratios educational attainment and human capital stock measures for numerous countries we construct a complete data set of historical enrollment ratios subdivided by education level and gender for 111 countries from 1820 to 1945 at five year intervals by using newly compiled census observations and information on the year of establishment of the oldest school in individual countries then by utilizing these enrollment ratios as well as available census data from 1945 onward on different age groups educational attainment we construct a data set of estimated educational attainment disaggregated by gender and age group and aggregate human capital stock that spans from 1870 to 2010 the data show that over the past two centuries there has been remarkable growth in average educational attainment and human capital stock as well as a narrowing of the gap in average educational attainment between nations

collaborative collective bargaining toward an ethically defensible approach to labor negotiations in this paper i explain the present adversarial collective bargaining process acb and then critique it on legal and ethical grounds a new methodology that i describe as the collaborative collective bargaining process ccb will then be explained and similarly critiqued i argue that replacing the present acb model with the ccb model will result in better long term results for all parties concerned this is because the acb model is comparable in many respects to the adversarial process used in court litigation it is a combat model based on power acb makes the battle lines clear and it grants victory to the more convincing display of power but it leaves casualties indeed it cannot operate except upon the casualties of the opposing party and those casualties are the basis for ever renewed combat tactics employed in acb to achieve victory include deception lying and the abandonment of truth as a moral value i argue that in sharp contrast ccb can foster an environment which encourages candor and truthfulness by following the ccb model the parties can avoid the negative and self defeating elements of acb and can work together toward mutually beneficial goals by the use of an ethically defensible approach to labor negotiations