fighting with one hand tied behind the back political budget cycles in the west german states theories of political budget cycles have been contested because scholars find that incumbents can manipulate deficits in the pre election period only if fiscal transparency is low i argue that these findings do not generally rule out the possibility of fiscal electioneering governments may increase spending on highly visible policies the composition of the budget serves as a second best strategy it increases political support without straining the budget balance an empirical analysis of the west german states reveals alternative electoral budget strategies and ultimately point to the importance of analyzing how governments choose between alternative fiscal instruments

political cycles and economic performance in oecd countries empirical evidence from 1951 2006 this paper examines whether electoral motives and government ideology influence short term economic performance i employ data on annual gdp growth in 21 oecd countries over the 1951 2006 period and provide a battery of empirical tests in countries with two party systems gdp growth is boosted before elections and under leftwing governments in the first two years of a legislative period these findings indicate that political cycles are more prevalent in two party systems because voters can clearly punish or reward political parties for governmental performance my findings imply that we need more elaborate theories of how government ideology and electoral motives influence short term economic performance

a large scale mapping of territorial development dynamics in latin america summary this paper summarizes a study of changes in per capita income monetary poverty and income distribution in 9 045 subnational administrative units of nine latin american countries between the mid 1990s and mid 2000s the results largely support spatial convergence of mean household incomes although the estimates indicate it has been slow territorial inequality is found to be persistent and reduces the pro poor effect of local income growth although national context specific the estimates also indicate that territorial development dynamics are influenced by the structural features of the territories in view of the evidence territorial development policies in latin america seem well warranted

voting and nonvoting a multi election perspective prior attempts to differentiate between voters and nonvoters have focused on a single election the implicit assumption being that voting or not voting in a particular election is indicative of a more general proclivity this paper tests the impact of a number of factors that have emerged in earlier studies as predictors ofvoting participation but uses participation over a series of 10 elections as the criterion the model tested here demonstrates greater explanatory power than those previously tested and follow up analysis strongly suggests that this explanatory power is a function of the multi election measurement of participation

how do budget deficits and economic growth affect reelection prospects evidence from a large panel of countries conventional wisdom is that good economic conditions and expansionary fiscal policy help incumbents get reelected but this has not been tested in a large cross section of countries we test these arguments in a sample of 74 countries over the period 1960 2003 we find no evidence that deficits help reelection in any group of countries developed and less developed new and old democracies countries with different government or electoral systems and countries with different levels of democracy in developed countries and in old democracies election year deficits actually reduce the probability that a leader is reelected with similar although smaller negative electoral effects of deficits in the earlier years of an incumbent s term in office higher growth rates of real gdp per capita raise the probability of reelection only in the less developed countries and in new democracies but voters are affected by growth over the leader s term in office rather than in the election year itself and apparently only by growth not attributed to global growth low inflation is rewarded by voters only in the developed countries the effects we find are not only statistically significant but also quite substantial quantitatively we also suggest how the absence of a positive electoral effect of deficits can be consistent with the political deficit cycle found in new democracies

macroeconomic policy in a two party system as a repeated game this paper considers the interaction of two parties with different objectives concerning inflation and unemployment and rational and forward looking wage setters if discretionary policies are followed an economic cycle related to the political cycle results in equilibrium this cycle is significantly different from the traditional political business cycle reputational mechanisms due to the repeated interaction of the two parties and the public or commitments to a common policy rule can improve upon the discretionary outcome by reducing or eliminating the magnitude of the economic fluctuations

black hole tariffs and endogenous policy theory political economy in general equilibrium preface acknowledgments list of results 1 a preview of the results 2 endogenous policy theory a diagrammatic approach part i endogenous policy theory with specific factors the theory of industry tariffs in partial equilibrium 3 the probabilistic voting model of political efficiency and powerless politicians 4 endogenous lobbying theory and the contribution specialization theorem 5 endogenous tariff theory 6 the power function model of endogenous industry lobbying 7 three simple tests of the stolper samuelson theorem 8 the invisible foot and the waste of nations lawyers as negative externalities part ii endogenous policy theory in general equilibrium a long run theory of national tariff levels 9 the 2 x 2 x 2 x 2 model of endogenous redistribution theory 10 a prisoner s dilemma theory of endogenous protection the leontief model 11 the compensation effect and the multiple equilibrium trap 12 increasing returns to politics and factor endowments economic development and brazilian vitality versus the indian disease 13 endogenous protection in the united states 1900 88 14 a cobb douglas model 15 black hole tariffs 16 the endowment effect cross national evidence on endogenous tariffs part ii postscript 17 the senile industry argument for protection 18 optimal obfuscation and the theory of the second worst the politically efficient policy mathematical appendices references author index subject index

an economic model of representative democracy this paper develops an approach to the study of democratic policy making where politicians are selected by the people from those citizens who present themselves as candidates for public office the approach has a number of attractive features first it is a conceptualization of a pure form of representative democracy in which government is by as well as of the people second the model is analytically tractable being able to handle multidimensional issue and policy spaces very naturally third it provides a vehicle for answering normative questions about the performance of representative democracy

linkage to dynamic markets and rural territorial development in latin america summary linkage to dynamic markets is a key factor in understanding why different rural territories in latin america perform differently this paper combines two conceptual frameworks from the new economic geography and economic sociology for an in depth analysis of the mechanisms that operate in this linkage and to identify key factors that allow for inclusive economic development this analysis considers three rural territories that exemplify market linkages frequently observed in latin america where although high transaction costs and limited access to financial capital prevail other types of capital social cultural and human capital available to rural dwellers can be mobilized

structure behavior and voter turnout in the united states electoral participation in the united states is examined to provide a clearer account of the effect of the registration requirement on individual voting behavior pooling nes data from 1980 1984 and 1988 i first model with traditional and selection bias techniques the full electorate to distinguish among three groups nonregistrants registered nonvoters and voters analyses limited to recent movers then reported to understand more fully the forces associated with the actual decision calculi of registering and voting the influences of many factors commonly accepted as important determinants of voting are disentangled and their effect at each stage is ascertained factors yielding inconsistent effects in previ research or believed to be unimportant such as race gender attitudes toward the candidates and trust government are shown to deserve closer scrutiny by electoral scholars

money politics and the post war business cycle abstract the political economy literature has enshrined as stylized fact the view that lower inflation and temporarily lower growth follow the election of republican presidents and has emphasized political manipulation of monetary policy as an explanation support for the monetary explanation comes in econometric work that largely ignores identification issues that dominate the literature on measuring the effects of monetary policy we generalize a standard vector autoregression framework to accommodate discrete political party variables we find almost no support for the view that political effects on the macroeconomy operate through monetary policy and only weak evidence that political effects are significant at all

keynesian government spending multipliers and spillovers in the euro area the global financial crisis has led to a renewed interest in discretionary fiscal stimulus advocates of discretionary measures emphasize that government spending can stimulate additional private spending the keynesian multiplier effect thus we investigate whether the spending package announced by euro area governments for 2009 and 2010 is likely to boost gdp by more than one for one because of modelling uncertainty it is essential that such policy evaluations be robust to alternative modelling assumptions and parameterizations we use five different empirical macroeconomic models with keynesian features such as price and wage rigidities to evaluate the impact of the fiscal stimulus four of them suggest that the planned increase in government spending will reduce private consumption and investment significantly only a model that largely ignores the forward looking behavioural response of consumers and firms implies crowding in of private spending we review a range of issues that may play a role in the recession of 2008 2009 implementation lags are found to reinforce crowding out and may even cause an initial contraction zero bound effects may lead the central bank to abstain from interest rate hikes and increase the gdp impact of government spending crowding in however requires an immediate anticipation of at least two years at the zero bound using a multi country model we find that spillovers between euro area countries are negligible or even negative because direct demand effects are offset by the indirect effect of a euro appreciation new keynesian dynamic stochastic general equilibrium dsge models provide a strong case for government savings packages announced with sufficient lead time spending cuts induce a significant short run stimulus and crowding in of private spending tobias cwik and volker wieland

biased perceptions of income distribution and preferences for redistribution evidence from a survey experiment abstract individual perceptions of income distribution play a vital role in political economy and public finance models yet there is little evidence regarding their origins or accuracy this study examines how individuals form these perceptions and explores their potential impact on preferences for redistribution a tailored household survey provides original evidence on systematic biases in individuals evaluations of their own relative position in the income distribution the study discusses one of the mechanisms that may generate such biases based on the extrapolation of information from endogenous reference groups and presents some suggestive evidence that this mechanism has significant explanatory power the impact of these biased perceptions on attitudes toward redistributive policies is studied by means of an experimental design that was incorporated into the survey which provided consistent information on the own ranking within the income distribution to a randomly selected group of respondents the evidence suggests that those who had overestimated their relative position and thought that they were relatively richer than they were tend to demand higher levels of redistribution when informed of their true ranking

electoral cycles in government employment evidence from us gubernatorial elections abstract incumbents may opportunistically design policies increasing employment before elections or postpone cuts until afterwards i investigate electoral cycles in public sector employment around us gubernatorial elections exploiting staggered gubernatorial election cycles across states i use both county fixed effects models and a geographic discontinuity design that compares neighboring counties at state borders with a difference in gubernatorial election cycles consistent with manipulation state and local government employment per capita are higher leading up to elections afterwards employment abruptly returns to normal political and spatial heterogeneities are investigated including by election competitiveness term limits incumbent party affiliation and ideological alignment between the incumbent and the state legislature or local citizens differences across types of government employment and private sector employment are also explored

does globalization affect growth evidence from a new index of globalization the study develops an index of globalization covering its three main dimensions economic integration social integration and political integration using panel data for 123 countries in 1970 2000 it is analysed empirically whether the overall index of globalization as well as sub indexes constructed to measure the single dimensions affect economic growth as the results show globalization indeed promotes growth the dimensions most robustly related with growth refer to actual economic flows and restrictions in developed countries although less robustly information flows also promote growth whereas political integration has no effect

the growth of public health expenditures in oecd countries do government ideology and electoral motives matter this paper empirically evaluates whether government ideology and electoral motives influenced the growth of public health expenditures in 18 oecd countries over the 1971 2004 period the results suggest that incumbents behaved opportunistically and increased the growth of public health expenditures in election years government ideology did not have an influence these findings indicate 1 the importance of public health in policy debates before elections and 2 the political pressure towards re organizing public health policy platforms especially in times of demographic change

the modern history of exchange rate arrangements a reinterpretation we develop a novel system of reclassifying historical exchange rate regimes one key difference between our study and previous classifications is that we employ monthly data on market determined parallel exchange rates going back to 1946 for 153 countries our approach differs from the imf official classification which we show to be only a little better than random it also differs radically from all previous attempts at historical reclassification our classification points to a rethinking of economic performance under alternative exchange rate regimes indeed the breakup of bretton woods had less impact on exchange rate regimes than is popularly believed

wage inflation electoral uncertainty and the exchange rate regime theory and uk evidence the authors extend the rational partisan model of inflation to allow for the effects of unemployment persistence on the dynamics of inflation the authors combine this model with the exchange rate regime model of inflation and examine the experience of the united kingdom outside the fixed exchange rate regime of bretton woods persistently high inflation can be attributed to the failure of political parties to precommit to price stability in the light of unemployment persistence election times are associated with higher inflation with the exception of the thatcher period there is no evidence that the labour party is in general more tolerant to inflation than the conservatives copyright 1992 by royal economic society

electoral uncertainty and the macroeconomy the evidence from canada the partisan advantage and incumbency advantage versions ofthe rational partisan business cycle model are tested bothmodels assume agents form weighted averages of partisaninflation rates during an election period and differ only inhow the weights are formed which alters the form of businesscycles the partisan advantage assumes fixed weightsdesignated for both major parties in each election whereasthe incumbency advantage model assumes fixed weights forwhichever is the incumbent and opposition party in eachelection the symmetric representation assumes each electionis a toss up strongest support is found for a temporarysymmetric effect on the level of output but none of themodels are supported for temporary electoral changes in growthor unemployment rates

a rejoinder to a commentary on does the fed contribute to a political business cycle jerry tempelman public choice 132 433 436 2007 claims that advances in macroeconomic theory and in the implementation of monetary policy make discretionary monetary policy preferable to a rules based system his supporting evidence is based on the performance of the fed during the volcker greenspan regimes his evidence is inappropriate and his conclusion supporting discretion over rules unwarranted

fiscal transparency political parties and debt in oecd countries abstract many believe and argue that fiscal or budgetary transparency has large positive effects on fiscal performance however the evidence linking transparency and fiscal policy outcomes is less compelling to analyze the effects of fiscal transparency on public debt accumulation we present a career concerns model with political parties this allows us to integrate as implications of a single model three hitherto separate results in the literature on deficit and debt accumulation that transparency decreases debt accumulation at least by reducing an electoral cycle in deficits that right wing governments at least for strategic reasons tend to have higher deficits than left wing governments and that increasing political polarization increases debt accumulation to test the predictions of the model we construct a replicable index of fiscal transparency on 19 country oecd data simultaneous estimates of debt and transparency strongly confirm that a higher degree of fiscal transparency is associated with lower public debt and deficits independent of controls for explanatory variables from other approaches

political business cycles and macroeconomic credibility a survey there is clear evidence that government popularity and election performance is affected in part by economic performance suggesting that governments may manipulate the economy to political advantage simple models incorporating adaptive expectations which allowed the government to exploit this relationship were developed in the 1970s but fell out of fashion with the advent of new classical economics however modern theories of the political business cycle which are closely related to the macroeconomic policy game literature assume rational expectations and lead to forms of political business cycle driven by the existence of uncertainty of one type or another the international evidence suggests that some aspects of the theories apply although definitive conclusions are as we might expect hard to come by

searching for political business cycles in germany one reslt of the revitalised literature on political business cycles is that there are signs in german data that elections and ideology have an impact however using monthly data for the period 1950 1989 and standard methods of time series analysis we reject both the nordhaus hypothesis of opportunistic cycles and the partisan approaches by hibbs ans alesina we show that some results are sensitive to the assumption of stationarity there are signs of policy cycles in m1 it is hard though to bring this in line with the rogoff hypothesis of rational opportunistic cycles because of the german institutional setting

partisanship theory macroeconomic outcomes and endogenous elections recently there has been a surge of interest in partisanship theories of macroeconomic political interaction unlike political business cycle theory in which economic policy is motivated only by reelection concerns partisanship theory maintains that policy is motivated along ideological lines political parties differ with respect to economic policy and consequently economic performance may differ as well indeed not only is there evidence that political parties in the united states have quite different policy priorities but that this difference in policy priorities is translated into differences in economic outcomes 2

electoral cycles in active labor market policies we examine how electoral motives influence active labor market policies that promote short term job creation such policies reduce measures of unemployment using german state data for the period 1985 to 2004 we show that election motivated politicians pushed job promotion schemes before elections

explaining voter turnout patterns an information theory voting research is rich in empirical regularities yet a parsimonious theory of voter turnout that can match the facts has proven to be elusive this paper argues that voter turnout patterns can be explained by extending the traditional rational voter model to include limited information a model is presented in which utility maximizing consumers receive higher payoffs from voting the more confident they are of their vote choice the model provides an explanation for the most important cross sectional voter turnout patterns in addition it suggests a novel explanation for the post 1960 decline in u s participation

pervasive shortages under socialism we present a new theory of pervasive shortages under socialism based on the assumption that the planners are self interested because the planners meaning bureaucrats in the ministries and managers offirms cannot keep the official profits that firms earn it is in their interest to create shortages of output and to collect bribes from consumers the theory implies that 1 an increase in the official price of a good might reduce output 2 market socialism is bound to fail even without computational complexities facing the planners and 3 price liberalization will succeed only iffirms get to keep their profits

on the form of transfers to special interests an important question in political economy concerns the form of transfers to special interests the chicago view is that political competition leads politicians to make such transfers efficiently the virginia position is that lack of information on the part of voters leads politicians to favor inefficient sneaky methods of redistribution this paper analyzes the form of transfers in a model of political competition in which politicians have incentives to make transfers to special interests it shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians inefficient methods of redistribution may be employed

electoral politics and monetary policy does the bank of canada contribute to a political business cycle in this paper i apply the work of abrams and iossifov public choice 129 249 262 2006 to monetary policy in canada to see if same political party affiliation is needed to produce evidence of political opportunism after modifying their analysis to maintain the time series consistency of their variables for canada i find that both an error correction model and a taylor rule reformulation of their test generate evidence consistent with same party political opportunism but only weakly so on the other hand i also find the presence of more traditional indicators of political influence in particular the data suggest that the election of a liberal party government a decrease in the degree of political competition and to a lesser extent the election of a minority government all positively influence the expansiveness of canadian monetary policy

equilibrium political budget cycles political business cycle theories generally rely on nominal rigidities and voter myopia this paper offers an equilibrium theory that preserves some basic insights from earlier models though with significant refinements the political budget cycle emphasized here is in fiscal policy rather than output and inflation it arises via a multidimensional signal process one can consider the welfare implications of proposals to mitigate the cycle and the effects of altering the electoral structure copyright 1990 by american economic association

local inequality and project choice theory and evidence from ecuador this paper provides evidence consistent with elite capture of social fund investment projects in ecuador exploiting a unique combination of data sets on village level income distributions social fund project administration and province level electoral results we test a simple model of project choice when local political power is unequally distributed in accordance with the predictions of the model poorer villages are more likely to receive projects that provide excludable private goods to the poor such as latrines controlling for poverty more unequal communities are less likely to receive such projects consistent with the hypothesis of elite capture these results are sensitive to the specific measures of inequality and elite power used in the empirical analysis and are strongest for expenditure shares at the top of the distribution

misconceptions and political outcomes a large literature shows that strategic interactions among actors with conflicting objectives can cause the political process to produce outcomes that lower welfare this paper investigates an alternative explanation of such outcomes if individuals errors in assessing the likely effects of proposed policies are correlated democratic decisionmaking can produce welfare reducing outcomes even in the absence of conflicting objectives under plausible assumptions choosing candidates from among the best informed individuals does not remedy the problems created by such errors but subsidising information and exposing representatives to information after their election do concentration of power has ambiguous effects

does government ideology influence deregulation of product markets empirical evidence from oecd countries this paper examines how government ideology has influenced deregulation of product markets in oecd countries i analyze a dataset of non manufacturing regulation indicators covering energy transport and communication industries in 21 oecd countries over the 1980 2003 period and employ two different indices of government ideology the results suggest that government ideology has had a strong influence on the deregulation process market oriented governments promoted the deregulation of the energy transport and communication industries this finding identifies remarkable differences between leftist and rightwing governments concerning the role of government in the economy and basic elements of political order

economic performance voting and political support a unified approach a presidential vote function and a presidential approval ratings function are jointly estimated for u s postwar observations the estimation technique treats the two equations as seemingly unrelated regressions with unequal numbers of observations cross equation restrictions implying that voters and poll respondents use identical standards in judging the economic performance of incumbents are imposed and tested estimates show that both votes and approval ratings are influenced by gnp growth and inflation the results suggest that poll respondents are more inflation averse than voters however tests of this hypothesis are not conclusive copyright 1990 by mit press

rational partisan theory empirical evidence for the united states this paper presents two tests of the rational partisan theory rpt of business cycles first i develop and test an rpt model in which wage contracts are staggered and overlapping bureau of labor statistics bls data on the density and duration of wage contracts and estimates of the incumbent party s election win probability are employed to calibrate partisan intervention variables entered in output growth regressions next i perform a more flexible test of the rpt by comparing partisan output growth differences after elections in which the outcome was relatively surprising with partisan output growth differences after elections in which the outcome was widely anticipated the two approaches produce the same conclusion the rpt is not supported by the data

on political business cycles with endogenous election dates abstract the pattern of policy generated cycles which result in the nordhaus model is examined under different hypotheses regarding election date determination

partisan conflicts and parliamentary dominance the norwegian political business cycle this is the author s final accepted and refereed manuscript to the article the final publication is available at www springerlink com

electoral cycles in public administration decisions evidence from german municipalities abstractelectoral cycles in public administration decisions evidence from german municipalities regional studies this paper provides evidence that there is an electoral cycle in public administration decisions using data from german local governments in the period 2001 10 specifically it finds that the number of building licences issued by the public administration significantly increases in election years this result is robust to various specification tests and to dealing with the potential endogeneity of the election timing

us presidential elections and real gdp growth 1961 2004 in this paper i show that since 1960 an electoral cycle in us output growth can both be seen by the naked eye in the raw data and confirmed by a statistical analysis that allows for rational partisan effects as well as a wide range of control variables that is controlling for multiple lags of interest rate changes inflation money growth energy prices lagged output growth government spending or its growth and temporary partisan effects the timing of elections exerts a significant influence on quarterly real gdp 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

variable rational partisan business cycles theory and some evidence the variable rational partisan business cycle model is developed where agents face uncertainty regarding the timing and outcome of the next election the model predicts that partisan influences on the economy persist throughout the government s rule and are further influenced in the opposite direction by which party ruled in the previous period party popularity also has a causal effect on the business cycle finally the effects from changes in election timing expectations are dependent on which party ruled in the previous period empirical results for output and unemployment in canada germany and united kingdom yield mixed support for the model jel classification d72 e32 le modele des cycles d affaires variables fonde sur le comportement du partisan rationnel theorie et resultats le modele de cycles d affaires variables fonde sur le comportement du partisan rationnel est developpe pour le cas ou les agents font face a de l incertitude quant au moment du declenchement des elections et quant aux resultats des prochaines elections le modele predit que les influences partisanes sur l economie persistent tout au long du mandat du gouvernement et qu elles sont influencees dans la direction opposee par le type de parti au pouvoir au cours du mandat anterieur la popularite du parti a un effet de causalite sur le cycle d affaires enfin les effets des changements dans les anticipations du moment du declenchement des elections dependent de quel parti etait au pouvoir au cours de la periode anterieure les resultats empiriques de la calibration du modele pour la production et le chomage au canada en allemagne et au royaume uni donnent des resultats mitiges

understanding economic policy reform one of the eventual consequences of the global debt crisis was a wave of market oriented economic reforms this paper discusses the state of our knowledge on the political economy of this process why were inefficient and often unsustainable policies maintained for so long why are so many governments reforming now after decades of adherence to policies of an opposite kind have the reformers internalized the correct lessons from the east asian experience finally are there any helpful rules for reformers to follow in guiding their policies through complicated political terrain

the demand for bad policy when voters underappreciate equilibrium effects most of the political economy literature blames inefficient policies on institutions or politicians motives to supply bad policy but voters may themselves be partially responsible by demanding bad policy in this article we posit that voters may systematically err when assessing potential changes in policy by underappreciating how new policies lead to new equilibrium behaviour this biases voters towards policy changes that create direct benefits welfare would rise if behaviour were held constant even if those reforms ultimately reduce welfare because people adjust behaviour conversely voters are biased against policies that impose direct costs even if they induce larger indirect benefits using a lab experiment we find that a majority of subjects vote against policies that while inflicting direct costs would help them to overcome social dilemmas and thereby increase welfare subjects also support policies that while producing direct benefits create social dilemmas and ultimately hurt welfare both mistakes arise because subjects fail to fully anticipate the equilibrium effects of new policies more precisely we establish that subjects systematically underappreciate the extent to which policy changes will affect the behaviour of other people and that these mistaken beliefs exert a causal effect on the demand for bad policy

does the fed contribute to a political business cycle in contrast to findings of other studies evidence is presented to support the existence of a federal reserve induced political monetary cycle that corresponds to the u s presidential election cycle using various taylor rules we find support for the view that fed policy turns significantly more expansionary in the seven quarters prior to the election but only when the fed chair and incumbent presidential party have partisan affiliations

differential interpretation of public signals and trade in speculative markets most models of trade in speculative markets assume that agents interpret public information identically we provide empirical evidence on the relation between the volume of trade and stock returns around public announcements and we argue that the evidence is inconsistent with this assumption we then develop a model of trade around public announcements that incorporates differential interpretations and is consistent with the observed volume return relation then we test the standard model of belief revision underlying most models of trade using stock brokerage research analysts earnings forecasts the hypthesis of identical interpretations seems inconsistent with the forecast revisions in these data

poverty and famines an essay on entitlement and deprivation this book focuses on the causes of starvation in general and famines in particular the traditional analysis of famines is shown to be fundamentally defective and the author develops an alternative analysis

the evidence on globalisation globalisation is blamed for many socioeconomic shortcomings i discuss the consequences of globalisation by surveying the empirical globalisation literature my focus is on the kof indices of globalisation that have been used in more than 100 studies early studies using the kof index reported correlations between globalisation and several outcome variables studies published more recently identify causal effects the evidence shows that globalisation has spurred economic growth promoted gender equality and improved human rights moreover globalisation did not erode welfare state activities did not have any significant effect on labour market interaction and hardly influenced market deregulation it increased however within country income inequality the consequences of globalisation thus turn out to be overall much more favourable than often conjectured in the public discourse

another look at the evidence for rational partisan cycles in presenting evidence in favor of rational partisan cycles where electoral victories by leftist parties are expected to create temporary expansions and electoral victories by rightist parties are expected to create temporary recessions alesina cohen and roubini 1999 rely upon autoregressive time series intervention regressions these regressions however are not consistent with their model in this paper a model is derived which is consistent with the intervention approach in its reduced form the differences between the models are highlighted and new empirical estimates are presented on a panel of seven oecd nations which generally does not support the rational partisan cycle implications

the unemployment rate consequences of partisan monetary policies economists and political scientists have identified several ways in which political motivations and institutional arrangements can affect macroeconomic policymaking one way is described by the political business cycle model 42 37 in which vote seeking politicians manipulate the path of the economy to secure unsustainably favorable conditions at election times variants of this model have been widely tested with limited success a second channel for political impacts comes through partisan policy changes brought about by electoral turnover the pathbreaking work in this literature includes the contributions of hibbs 30 31 32 33 and beck 11 these works have focused on the empirical issue of how unemployment rates vary under democratic and republican presidents in the u s and have found strong support for the proposition that unemployment rates decline under democratic administrations a third phenomenon has been studied primarily by economists and concerns the credibility problem faced by a central bank selecting money growth rates models of the credibility problem 8 21 describe a setting in which the central bank and the public interact by respectively choosing actual and expected money growth rates in a variant of the prisoners dilemma this interaction can result in excessive inflation

did globalization restrict partisan politics an empirical evaluation of social expenditures in a panel of oecd countries this paper evaluates empirically how in the course of globalization partisan politics affected social expenditures in a panel of oecd countries i introduce an updated indicator of government ideology and investigate its interaction with the kof index of globalization two basic results emerge first at times when globalization proceeded at an average pace partisan politics had no effect on social expenditures but leftist governments increased social expenditures when globalization was proceeding rapidly second policies differed in the 1980s and 1990s leftist governments pursued expansionary policies in the 1980s yet partisan politics disappeared in the 1990s but not because of globalization

political business cycles in the parliamentary system abstract in the parliamentary system the cabinet may call a general election before the term of the house members matures if the timing is judged favorable econometric tests to differentiate the following two hypotheses are proposed and applied to the japanese data under the manipulative cabinet hypothesis the cabinet decides the timing of the election by political reasons and manipulates an economy to have a boom in time i e elections cause booms similar to the presidential system while the opportunistic cabinet hypothesis states that the cabinet does not manipulate the economy but calls an election when positive private sector shocks cause high growth and low inflation i e booms trigger elections findings indicate that the japanese cabinet has acted opportunistically rather that manipulatively

what are the effects of fiscal policy shocks we propose and apply a new approach for analyzing the effects of fiscal policy using vector autoregressions specifically we use sign restrictions to identify a government revenue shock as well as a government spending shock while controlling for a generic business cycle shock and a monetary policy shock we explicitly allow for the possibility of announcement effects i e that a current fiscal policy shock changes fiscal policy variables in the future but not at present we construct the impulse responses to three linear combinations of these fiscal shocks corresponding to the three scenarios of deficit spending deficit financed tax cuts and a balanced budget spending expansion we apply the method to us quarterly data from 1955 to 2000 we find that deficit financed tax cuts work best among these three scenarios to improve gdp with a maximal present value multiplier of five dollars of total additional gdp per each dollar of the total cut in government revenue 5 years after the shock copyright 2009 john wiley sons ltd

educational inequality and public policy preferences evidence from representative survey experiments abstract to study how information about educational inequality affects public concerns and policy preferences we devise survey experiments in representative samples of the german population providing information about the extent of educational inequality strongly increases concerns about educational inequality it also affects support for equity oriented education policies which have high baseline support although effects are quantitatively small on average however instrumental variable estimates suggest substantial effects of concerns on policy preferences among the compliers whose concerns are shifted by the information treatment there are substantial effects on support for compulsory preschool which increases further if respondents are informed about policy effectiveness

the rational timing of parliamentary elections this paper presents a rational choice model for the timing of parliamentary elections in political systems where the government has the option of calling an early election the optimal timing of elections involves the government weighing the benefits of calling an election versus the costs and is modelled mathematically as an optimal stopping problem the model implies that the timing of elections depends upon time left in the government s term the degree of electoral uncertainty the volatility of government popularity the government s time rate of discount and institutional constraints such as the length of term and whether the government is likely to be forced from power by a vote of no confidence

biased beliefs and retrospective voting why democracies choose mediocre policies there are two well established empirical regularities about voters first they entertain systematically biased beliefs about how public policies affect economic outcomes second voters vote retrospectively they punish the incumbent for poor and reward him for good macroeconomic performance thus political parties face a trade off offering popular yet economically harmful policies increases the chance of being elected today but decreases the chance of re election we provide the first rigorous game theoretical analysis of the trade off the model addresses two questions how can biased beliefs and retrospective voting be explained consistently what policy outcomes emerge in party competition to micro found persistently biased beliefs we introduce the psychological concept of mental models deviating from earlier studies we allow parties to choose strategic mixtures of populist i e bad yet popular and good but less popular platforms we show that retrospective voting provides a self correction mechanism so that parties offer strategic mixtures of policies in equilibrium rather than purely populist or purely good policy platforms thus democracy is characterized by mediocre policy choices and half hearted reforms an incumbent bias or unclear responsibilities weaken the self correction mechanism

if homo economicus could choose his own utility function would he want one with a conscience reply in my model of the evolution of honesty 1 i assumed the existence of a signal a blush perhaps extreme values of which served to identify some individuals as being honest with certainty joseph harrington notes that without this assumption honest individuals have difficulty invading a population initially dominated by defectors for readers who do not wish to work through the algebra in his comment the argument is easily summarized in nontechnical terms suppose two honest mutants a and b arrive in an uncountably large population consisting entirely of dishonest persons and suppose that the probability that an honest person exhibits an intense blush is say 0 999 while the corresponding probability for everyone else is only 0 001 when a sees an intense blush on the face of b what will then be his estimate of the probability that b is honest assuming that a knows the laws of elementary probability and corrects for the base rate of honest persons in the population it will be zero when virtually everyone in the population is dishonest even a person with an intense blush will be pegged as dishonest provided that even the smallest fraction of dishonest persons also shows an intense blush with

poverty reduction through dispossession the milk boom and the return of the elite in santo tomas nicaragua summary ideally poverty indicators improve because poor people s livelihoods are improved they can however also improve because poor people are expelled from the territory this article explores the case of the cattle region of chontales nicaragua which during 1998 2005 experienced economic growth and declining poverty rates spurred by investments and organizational development the article argues that in the absence of pro poor coalitions these investments facilitated the return and strengthening of the local elite and that the observed decline in poverty rates emerges as the result of dispossession and subsequent exodus of the poor rather than of inclusive economic growth 2014 published by elsevier ltd this is an open access article under the cc by license http creativecommons org licenses by 3 0

partisan political business cycles in the german labour market empirical tests in the light of the lucas critique this paper focuses on alternative specifications ofpartisan political business cycles partisan theory rational partisan theory and hysteresis augmentedrpt it elaborates on analogies of the natural ratehypothesis underlying all specifications and thecointegration concept accordingly problems of thespecification of hypotheses estimation and inferencein a cointegrating framework with politicalinterventions are treated super exogeneity tests areshown to be equivalent to tests of the lucas critiqueand the rpt therefore the concept ofsuper exogeneity is transferred to empirical tests ofpartisan cycles by this a new testing framework ofpartisan cycles is developed and applied to germanlabour market data

election results and opportunistic policies a new test of the rational political business cycle model the literature on the rational pbc suggests that politicians systematically manipulate economic and fiscal conditions before elections to increase their chances of reelection most tests of this theory look for evidence of pre election distortions in fiscal policy we propose a new test that explores the two way interaction between the magnitude of the opportunistic distortion and the margin of victory the test is implemented using a large panel of portuguese municipalities the results show that opportunism leads to a larger win margin for the incumbent and that incumbents behave more opportunistically when their win margin is small these results are consistent with the theoretical model

believing in economic theories sex lies evidence trust and ideology i introduction beliefs about the descriptive validity of economic theories may influence preferences among economic policies if so these beliefs may shape and constrain economic institutions and policies in democracies we examine how beliefs about the descriptive validity of supply and demand theory respond to evidence and how these beliefs are related to individual attitudes and demographic characteristics with a strong focus on the potential role played by ideology political economists usually view heterogeneity of policy preferences as mostly reflecting heterogeneity of values interests or goals a large interdisciplinary debate continues about the relative importance of diverse self interests and public spirited goals in explaining political outcomes but the potential role played by diversity of positive beliefs has received relatively little attention preferences under uncertainty are typically decomposed into values utilities of outcomes and beliefs about the likelihoods of outcomes suggesting that heterogeneity of policy preferences may derive as much from differences in beliefs about how the economic world functions as from differences in interests such descriptive beliefs frequently differ sharply from those of economists slembeck 2003 for instance blendon et al 1997 reported that only 28 of the us public think price increases are mainly due to the laws of supply and demand and nearly three fourths of the public believed that the increase in gasoline prices in 1996 was due more to the oil companies trying to increase profits than to supply and demand while 85 of economists believed that supply and demand explained the price increase the recurring significance of ideology or proxies for it in empirical studies of political outcomes provides one reason to take this idea seriously rubin 2001 concluded that while electoral constraints based on voter interests limit politicians behavior factors measuring ideology have large power in explaining congressional voting ideology could reflect self interest but other explanations are possible from the perspective of bounded rationality people might use ideology heuristically to evaluate descriptive claims when evidence is scant or hard to evaluate from a game theoretic perspective people may regard descriptive claims made by others with ideologies different from their own as manipulation attempts and hence may discount them particularly in the long run causality may run the other way around revisions of descriptive beliefs about the workings of the economic world may bring about changes in ideology we address some of these matters below and discuss others in our conclusions romer 2003 p 29 offered a theoretical account of how diverse but correlated beliefs can lead to inefficient policy outcomes even when interests do not vary and concluded that t he research program suggested by this paper is that of bringing ideology back into the analysis of politics there may be a great deal to be learned if we do not presume that ideology is just a mask for individuals well informed pursuit of their self interest but instead consider the possibility that it often reflects individuals beliefs and that these beliefs often influence their actions our results here provide some evidence supporting this view we understand of course that the student respondents we examine in this study are a narrowly selected subset of any polity 1 bearing this in mind perhaps it is best to view our work as illustrating an approach to exploring the relationship between ideology and descriptive belief still more broadly we freely combine econometric and experimental methods of economics with survey measurement tools borrowed from political and social psychology our work here may also be regarded as an applied introduction to some of the latter tools

voting on the budget deficit this paper analyzes a model in which a group of rational individuals votes over the composition and time profile of public spending all voters agree that a balanced budget is ex ante optimal however if there is disagreement between current and future majorities a balanced budget is not a political equilibrium under majority rule under certain conditions a majority of the voters favors a budget deficit and the equilibrium deficit is larger the greater is the polarization among voters copyright 1990 by american economic association

overlapping political budget cycles we advance the literature on political budget cycles by testing for cycles in expenditures for elections to the legislative and the executive branches using municipal data we identify cycles independently for the two branches evaluate the effects of overlaps and account for general year effects we find sizable effects on expenditures before legislative elections and even larger effects before joint elections to the legislature and the office of mayor in the case of coincident elections we show that it is important whether the incumbent chief executive seeks reelection to account for the potential endogeneity of that decision we apply an iv approach using age and pension eligibility rules

political biases despite external expert participation an empirical analysis of tax revenue forecasts in germany this paper explores whether and how political biases arise in an institutional setting where revenue forecasting is delegated to a body that includes experts from institutions neither part of nor controlled by the government the empirical analysis focuses on the performance of german federal tax revenue forecasts in the preparation of which the advice of external experts has a long tradition as an institutional safeguard while on average revenue forecasts turn out to be unbiased the results show that the government exerts an influence in particular optimism pessimism in the government s gdp forecast helps to explain why the revenue forecast turns out too optimistic pessimistic in addition governmental estimates of the revenue effects of tax law changes are found to contribute to forecast errors

the swing voter s curse the authors analyze two candidate elections in which some voters are uncertain about the realization of a state variable that affects the utility of all voters they demonstrate the existence of a swing voter s curse less informed indifferent voters strictly prefer to abstain rather than vote for either candidate even when voting is costless the swing voter s curse leads to the equilibrium result that a substantial fraction of the electorate will abstain even though all abstainers strictly prefer voting for one candidate over voting for another copyright 1996 by american economic association

a commentary on does the fed contribute to a political business cycle abrams and iossifov 2006 find that during 1957 2004 monetary policy turned significantly more expansionary prior to u s presidential elections when the federal reserve chairman and the incumbent president belonged to the same political party however their long sample period obscures changes in trends during the period stemming from advances in macroeconomic theory and in the implementation of monetary policy indeed when one considers only the volcker greenspan era 1979 2004 there is insufficient evidence to accept the notion of a political business cycle effect

new keynesian versus old keynesian government spending multipliers renewed interest in fiscal policy has increased the use of quantitative models to evaluate policy because of modelling uncertainty it is essential that policy evaluations be robust to alternative assumptions we find that models currently being used in practice to evaluate fiscal policy stimulus proposals are not robust government spending multipliers in an alternative empirically estimated and widely cited new keynesian model are much smaller than in these old keynesian models the estimated stimulus is extremely small with gdp and employment effects only one sixth as large and with private sector employment impacts likely to be even smaller we investigate the sensitivity of our findings with regard to the response of monetary policy the zero bound on nominal interest rates and the inclusion of an empirically relevant degree of rule of thumb behaviour in the new keynesian model in addition we relate our findings using estimated structural macroeconomic models to the recent literature using reduced form regression techniques

a positive model of reserve requirements and interest on reserves a clearinghouse interpretation of the federal reserve system this paper develops a positive model of reserve requirements and interest on reserves based on the observation that congress exempted the fed from a legal restriction that had prevented private clearinghouses from issuing their own currency eliminating the restriction provided the fed with a source of revenue that could be used to finance general government outlays and to pay implicit interest on reserves the model implies that the government s financing requirements help explain reserve requirement movements and that interest rates on reserves vary with market loan rates cointegration error correction and granger causality tests provide supporting evidence

on price recognition and computational complexity in a monopolistic model a single seller of an indivisible good operates in a market with many consumers who differ in their ability to process information the consumers constraints are modeled in two submodels the first in terms of the limits on the number of sets in the partition of the price space and the second in terms of the limits on the complexity of the operation he can use to process a price offer for the construction of the second submodel the tool of a perceptron is borrowed from the parallel computation literature assuming a negative correlation between the seller s cost of supply of the good and the consumer s ability to process information i demonstrate that the heterogeneity of consumer s abilities can be used by the seller to profitably discriminate among them