violence during democratization and the quality of democratic institutions abstract this paper investigates the impact of violent civil conflicts during the process of democratization on the institutional quality of the emerging democracies we propose a theory of endogenous regime transition in which violent conflict can arise in equilibrium peaceful transitions lead to a social contract that provides all groups with political representation and leads to better protection of civil liberties than violent transitions empirical evidence from the third wave of democratization based on a difference in difference methodology supports the theoretical predictions the findings suggest that compared to peaceful transitions violent conflicts during the democratic transition have persistent negative effects on the institutional quality of the emerging democracies

democracy volatility and economic development growth stability is an important objective because development requires sustained increases in income because volatility is costly for the poor and because volatility deters growth we study the determinants of average growth and its volatility as a two equation system and find that higher levels of democracy and diversification lower volatility whereas volatility itself reduces growth muslim countries instrument for democracy and measures of diversification identify volatility in contrast to the lack of consensus on the democracy growth relationship the democracy stability link is robust rather than focus on growth this paper forges an alternative link between democracy and development through the volatility channel

the resource curse revisited governance and natural resources the paper analyzes the impact of natural resource abundance on selected governance indicators we use a panel data set with observations on a large number of countries over an extended period of time and employ an instrumental variable technique to account for endogeneity the results show that exports of natural resources have above all led to an increase in corruption this result is robust to both different model specifications and an alternative indicator for natural resource abundance for other governance indicators such as law and order and bureaucratic quality we either find no results or results that lack robustness

education and propaganda tradeoffs to public education provision in nondemocracies abstract nondemocratic regimes face a tradeoff when investing in public education education promotes human capital acquisition expanding the tax base yet it also enhances political sophistication and participation at a cost to nondemocratic regimes to relax this tradeoff a regime can disseminate propaganda through its education system i show that even bayesian citizens can be influenced by propaganda by deterring political opposition propaganda can induce nondemocracies to invest in education when they otherwise would not improving social welfare when propaganda is too strong however it can generate a backlash using cross country and survey data i find evidence consistent with the predictions

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

simplified formulae for optimal linear income taxation the optimal income tax problem is simplified considerably if attention is confined to a linear tax schedule where there is a general lump sum subsidy or tax combined with a constant marginal tax rate following mirrlees 1971 this simplified problem was examined in a number of papers by e g sheshinski 1972 itsumi 1974 romer 1976 dixit sandmo 1977 and helpman sadka 1978 alternative expressions for the optimal linear income tax rate are derived in this paper our approach seems to lead to formulae which are quite readily interpretable i e the equity efficiency conflict emerges very clearly

rain and the democratic window of opportunity according to the economic approach to political transitions negative transitory economic shocks can give rise to a window of opportunity for democratic change we examine this hypothesis using yearly rainfall variation over the 1980 2004 period in 41 sub saharan african countries we find that a 25 drop in rainfall increases the probability of a transition to democracy during the following two years by around 3 percentage points a 5 fall in income due to low rainfall raises the probability of democratization by around 7 percentage points we also find that rainfall does not affect transitions from democracy to autocracy

unemployment and the democratic electoral advantage this article calls into question the conventional wisdom that incumbent parties are rewarded when unemployment is low and punished when it is high using county level data on unemployment and election returns for 175 midterm gubernatorial elections and 4 presidential elections from 1994 to 2010 the analysis finds that unemployment and the democratic vote for president and governor move together other things being equal higher unemployment increases the vote shares of democratic candidates the effect is greatest when republicans are the incumbent party but democrats benefit from unemployment even when they are in control the explanation for these findings is that unemployment is a partisan issue for voters not a valence issue and that the democratic party owns unemployment when unemployment is high or rising democratic candidates can successfully convince voters that they are the party best able to solve the problem

the political impact of economic crisis in latin america in the 1980s research on the political implications of economic conditions is separated into two relatively distinct bodies of literature i bridge the theoretical gap between them by examining the effects of economic crisis on electoral outcomes in latin america from 1982 to 1990 an analysis of 21 competitive elections indicates that crisis conditions undermine support for incumbents and provoke high levels of electoral volatility but without necessarily fostering the growth of political extremism or the exhaustion of elite consensus associated with the breakdown of democracy the results also suggest that the relationship between economic conditions and electoral instability is mediated by party system structure rather than democratic age paradoxically the findings buttress prior research on electoral outcomes in the comparatively stable and homogeneous organization for economic cooperation and development oecd nations while undercutting theoretical frameworks elaborated with specific reference to the breakdown and consolidation of third world democracy

benchmarking across borders electoral accountability and the necessity of comparison when the economy in a single country contracts voters often punish the government when many economies contract voters turn against their governments much less frequently this suggests that the international context matters for the domestic vote yet most research on electoral accountability assumes that voters treat their national economies as autarkic we decompose two key economic aggregates growth in real gross domestic product and unemployment into their international and domestic components and demonstrate that voters hold incumbents more electorally accountable for the domestic than for the international component of growth voters in a wide variety of democracies benchmark national economic growth against that abroad punishing rewarding incumbents for national outcomes that underperform outperform an international comparison tests suggest that this effect arises not from highly informed voters making direct comparisons but from pre benchmarking by the media when reporting on the economy the effect of benchmarked growth exceeds that of aggregate national growth by up to a factor of two and outstrips the international component of growth by an even larger margin implying that previous research may have underestimated the strength of the economy on the vote

international commodity prices growth and the outbreak of civil war in sub saharan africa to learn more about the effect of economic conditions on civil war we examine whether sub saharan civil wars are more likely to start following downturns in the international price of countries main export commodities the data show a robust effect of commodity price downturns on the outbreak of civil wars we also find that sub saharan countries are more likely to see civil wars following economic downturns in their main oecd export destinations

credit constraints and growth gains from governance this paper contributes to the governance literature by analyzing the specific mechanisms through which governance affects economic growth the credit channel specifically it investigates the grow

comparative economic voting britain france germany italy likelihood of a vote for the incumbent coalition in contrast personal economic circumstances no matter how measured demonstrate nonexistent to weak effects on vote choice overall economic conditions emerge as a relatively important vote determinant when a more properly specified general multi equation model of the vote is estimated economics shows itself to be as powerful as traditional factors used to explain the western european vote in particular economic variables exceed the impact of partisan identification in britain and roughly equal it in germany moreover the economic variables exercise more influence than the social cleavages of class and religion everywhere except italy

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

the vp function a survey of the literature on vote and popularity functions after 25 years vp functions explain the support for the government at votes and polls by economic and political variables most studies analyze macro time series we also cover studies of individual voters socio economic groups and regional cross sections the theory starts from the responsibil ity hypothesis voters hold the government responsible for economic conditions it works in two party block systems but not else voters in most countries are found to be sociotropic egotropic voting also occurs voters myopia is well established voting is retrospective as expectations are static it costs the average government almost 2 of the vote to rule

clientelism contagious voting and governance this paper explains inferior quality of governance in less affluent countries in terms of a patron client relationship between political parties and a large section of voters the client voters resort to strategic voting which is shown to be contagious leading to suboptimal effort choice by the incumbent government and a higher probability for the incumbent to remain in power the possibility of competition between the incumbent and the opposition in terms of expenditure on political propaganda actually helps the incumbent and reinforces these results

the vp function revisited a survey of the literature on vote and popularity functions after over 40 years nannestad and paldam public choice 79 213 245 1994 published herein an extremely influential review of the literature linking economics and elections what they called the vp functions in that work they offered a number of conclusions in proposition form about the state of the evidence in this field we present the key ones 16 in all and assess the extent to which they continue to hold in light of the new evidence about what has come to be known as economic voting as shall be shown nannestad and paldam were prescient in their early establishment of many of the principal results explaining how the economy moves the vote choice

do voters demand responsive governments evidence from indian disaster relief abstract using rainfall public relief and election data from india we examine how governments respond to adverse shocks and how voters react to these responses the data show that voters punish the incumbent party for weather events beyond its control however fewer voters punish the ruling party when its government responds vigorously to the crisis indicating that voters reward the government for responding to disasters we also find evidence suggesting that voters only respond to rainfall and government relief efforts during the year immediately preceding the election in accordance with these electoral incentives governments appear to be more generous with disaster relief in election years these results describe how failures in electoral accountability can lead to suboptimal policy outcomes

state economies and state taxes do voters hold governors accountable theory states have sufficient autonomy in the policies they adopt that voters hold state officials partly responsible for the condition of the state economy as the best known state official elected by a statewide constituency governors in particular are held accountable for the economic performance of their states with respect to taxes the clear locus of responsibility in state actions and the high visibility of certain taxes suggest that governors will also be held responsible for increased rates hypotheses the performance of the state economy tax increases and voters personal financial situations all influence voting behavior in gubernatorial elections methods logit equations using 1986 abc washington post exit polls in 34 of 36 gubernatorial races combined with economic and tax data from the states results a poor state economy increases in taxes and lowered personal finances all contribute to votes against incumbent governors and their parties

demand for redistribution individuals responses to economic setbacks although economic circumstances have been argued to be a major determining factor of attitudes to redistribution there is little well identied evidence at the individual level utilizing a unique dataset with detailed individual information provides new and convincing evidence on the link between economic circumstances and demand for redistribution in the form of benefits and support the swedishnational election studies are constructed as a rotating survey panel which makes it possible to estimate the causal effect of economic changes the empirical analysis shows that individuals who experience a job loss become considerably more supportive of redistribution yet attitudes to redistribution return to their initiallevel as economic prospects improve suggesting that the effect is only temporary despite the fact that a job loss also changes attitudes to the political parties theprobability to vote for the left wing is not affected

estate taxation with intended and accidental bequests abstract in this paper we examine the properties of the optimal estate tax in the presence of a complete set of tax instruments available to the social planner we allow for both types of bequest motives namely altruistic and accidental we examine the case for estate taxation which seems to be the strongest but not impeccable with accidental bequests in general the estate tax is highly sensitive to the relative importance of the two bequest motives

legislative budget cycles recent literature suggests that electoral budget cycles are a phenomenon of new rather than established democracies what part of the democratization process explains the amelioration of the political budget cycle we argue the answer lies in part in the development of a strong party system we extend the classic rogoff siebert model to show that political budget cycles are possible in a legislative context with rational voters we then demonstrate that the development of a strong party system can restrain political budget cycles in a majoritarian electoral system finally we follow prior work in using vote share volatility as a measure of the institutionalization of the party system using newly collected vote share data for 433 elections for 90 democracies from 1980 2007 we calculate a measure of party institutionalization we then use this data to demonstrate that institutionalized party systems are associated with mitigated political budget cycles especially in majoritarian electoral systems

structural differences in economic growth an endogenous clustering approach this article addresses heterogeneity in determinants of economic growth in a data driven way instead of defining groups of countries with different growth characteristics a priori based on for example geographical location we use a finite mixture panel model and endogenous clustering to examine cross country differences and similarities in the effects of growth determinants applying this approach to an annual unbalanced panel of 59 countries in asia latin and middle america and africa for the period 1971 2000 we can identify two groups of countries in terms of distinct growth structures the structural differences between the country groups mainly stem from different effects of investment openness measures and government share in the economy furthermore the detected segmentation of countries does not match with conventional classifications in the literature

inequality and democracy why inequality harms consolidation but does not affect democratization under what conditions do democracies emerge and consolidate recent theories suggest that inequality is among the leading determinants of both democratization and consolidation by contrast this article argues that inequality harms consolidation but has no net effect on democratization the author shows that the existing theories that link inequality to democratization suffer from serious limitations 1 they are useful only for understanding transitions from below and thus do not apply to many other transitions that is those from above 2 even for democratization from below their predictions are unlikely to hold since inequality actually has two opposite effects and 3 they ignore collective action problems which reduces their explanatory power however these objections do not affect the relationship between inequality and consolidation in particular while inequality has two opposite effects on the probability of transition to democracy it unambiguously increases the probability of transition away from democracy this article conducts the most comprehensive empirical test to date of the relationship between inequality and democracy it finds no support for the main democratization theories contrary to what they predict estimation suggests neither a monotonic negative nor an inverted u shaped relationship yet inequality increases the probability of backsliding from democracy to dictatorship

the influence of political distortions on economic performance alberto alesina is the nathaniel ropes professor of political economy and chairman of the department of economics at harvard university in this interview he discusses with brian snowdon his views on several important contemporary issues including politics and the business cycle budget deficits currency unions the european union the size of nations economic growth inequality democracy foreign aid ethnic fractionalisation and the welfare state in the us and europe

political regimes and economic growth arguments that relate regimes to growth focus on property rights pressures for immediate consumption and the autonomy of dictators while everyone seems to agree that secure property rights foster growth it is controversial whether democracies or dictatorships better secure these rights the main mechanism by which democracy is thought to hinder growth is pressure for immediate consumption which reduces investment only states that are institutionally insulated from such pressures can resist them and democratic states are not the main argument against dictatorships is that authoritarian rulers have no interest in maximizing total output these views are summarized in turn

relative preferences and public goods abstract the paper investigates the optimal provision of public goods in the presence of relative income effects it shows that the optimality properties of groves mechanisms can be preserved by subjecting tax structures to a suitable coordinate transformation provided that the strength of relative income effects are public knowledge if relative income effects are private knowledge standard modifications of the clarke mechanism that guarantee a balanced budget may be used to obtain an efficient provision of the public good

a new data set measuring income inequality this article presents a new data set on inequality in the distribution of income the authors explain the criteria they applied in selecting data on gini coefficients and on individual quintile groups income shares comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage although differences in the definition of the underlying data might still affect inter temporal and international comparability based on this new data set the authors do not find a systematic link between growth and changes in aggregate inequality they do find a strong positive relationship between growth and reduction of poverty

relative standing comparisons risk taking and safety regulations abstract we study the question of how relative standing comparisons or status seeking influence risk taking when utility is separable in consumption and status the following results apply with non systematic risks more concern for status leads to more less risk taking when in a sense made precise in the paper the utility function is less more concave in status than in pure consumption with systematic risk risk taking always increases with the concern for status however status seeking always implies socially excessive risk taking thus suggesting a role for public regulation of risky choices

estimates of the economic returns to schooling from a new sample of twins this paper uses a new survey to contrast the wages of genetically identical twins with different schooling levels multiple measurements of schooling levels were also collected to assess the effect of reporting error on the estimated economic returns to schooling the data indicate that omitted ability variables do not bias the estimated return to schooling upward but that measurement error does bias it downward adjustment for measurement error indicates that an additional year of schooling increases wages by 12 to 16 percent a higher estimate of the economic returns to schooling than has been previously found copyright 1994 by american economic association

who says it s the economy cross national and cross individual variation in the salience of economic performance theories of government approval usually assume that voters care about economic outcomes this assumption frequently does not hold data from the comparative study of electoral systems demonstrate that although the economy is often the most important issue in an election its place on the issue agenda varies across individuals and electoral contexts the economy is more likely to dominate other issue concerns under conditions of economic recession volatility and economic underdevelopment moreover at the individual level the salience of economic performance rises with unemployment and economic vulnerability governance crises related to corruption and human rights reduce attention to the economy as do large scale terrorist attacks if the economy is not perceived as important its effect on government approval is strongly mitigated thus variations in the economy s salience need to be further incorporated into studies linking economic and political outcomes

climate instability urbanisation and international migration abstractthis paper focuses on climate induced migration we construct a simple theoretical model where in a first step climate shocks accelerate the transition from the traditional to the modern sector leading rural workers to move to urban centres within national borders while in a second step downward pressures on wages due to the greater labour supply in cities push people to engage in international migration to test this hypothesis we exploit a rich panel dataset displaying a representative picture of bilateral migration flows and climatic data across 222 countries for the period 1960 2000 findings suggest that in the next few years the climate induced growth rate of migrant stocks might be in a range between 8 6 per cent and 12 8 per cent especially from developing countries where the level of rural employment is more likely to be affected by climatic shocks

long lasting effects of socialist education abstract political regimes influence the content of education and criteria used to select and evaluate students we study the impact of a socialist education on the likelihood of obtaining a college degree and on several labor market outcomes by exploiting the reorganization of the school system in east germany after reunification our identification strategy uses cutoff birth dates for school enrollment that lead to variation in the length of exposure to the socialist education system within the same birth cohort an additional year of socialist education decreases the probability of obtaining a college degree and affects longer term labor market outcomes for men

peasants or bankers the american electorate and the u s economy t he usual model of electoral reaction to economic conditions assumes the retrospective economic voter who bases expectations solely on recent economic performance or personal economic experience voter as peasant a second model assumes a sophisticated economic voter who incorporates new information about the future into personal economic expectations voter as banker using the components both retrospective and prospective of the index of consumer sentiment ics as intervening variables between economic conditions and approval we find that the prospective component fully accounts for the presidential approval time series with aggregate consumer expectations about long term business conditions in the approval equation neither the usual economic indicators not the other ics components matter moreover short term changes in consumer expectations respond more to current forecasts than to the current economy the qualitative result is a rational expectations outcome the electorate anticipates the economic future and rewards or punishes the president for economic events before they happen economics moves political behavior with hard times administrations lose support with good times they gain it we know this to be true but when we ask how by what processes the political translation of economic experience occurs the an

attribution error in economic voting evidence from trade shocks this article exploits the international transmission of business cycles to examine the prevalence of attribution error in economic voting in a large panel of countries from 1990 to 2009 we find that voters on average exhibit a strong tendency to oust the incumbent governments during an economic downturn regardless of whether the recession is home grown or merely imported from trading partners however we find important heterogeneity in the extent of attribution error a split sample analysis shows that countries with more experienced voters more educated voters and possibly more informed voters all conditions that have been shown to mitigate other voter agency problems do better in distinguishing imported from domestic growth jel e3 e6

presidential approval and macroeconomic conditions evidence from a nonlinear model abstractcontrary to previous empirical studies that find a linear link between economic conditions and presidential approval this study argues for and finds a nonlinear relationship a threshold regression is used to assess potential nonlinear relationships between macroeconomic variables and presidential popularity a quarterly data analysis for the 1960q1 2012q2 time period reveals that domestic factors prevail in shaping presidential approval most compelling is evidence of a threshold relationship involving economic conditions when unemployment is slightly over 7 its decline impacts significantly and favourably on presidential approval an effect that virtually disappears below the threshold value change in consumer sentiment affects presidential approval in a limited way while inflation shows no association at all these results combine to encourage further investigation of nonlinear processes in the nexus of economics and politics

likelihood based estimation of dynamic panels with predetermined regressors this article discusses the likelihood based estimation of panel data models with individual specific effects and both lagged dependent variable regressors and additional predetermined explanatory variables the resulting new estimator labeled as subsystem limited information maximum likelihood ssliml is asymptotically equivalent to standard panel generalized method of moment as n for fixed t but tends to present smaller biases in finite samples as illustrated in simulation experiments simulation results also indicate that the estimator is preferred to other alternatives available in the literature in terms of finite sample performance finally to provide an empirical illustration i revisit the evidence on the relationship between income and democracy in a panel of countries using the proposed estimator

voting and the economic cycle sophisticated voters assess incumbent competence by filtering out economic cycles which they do not like from trend growth which they do naive voters on the other hand respond only to raw economic growth this implies that voting in the aggregate should respond asymmetrically to the economic cycle upswings are rewarded by the naive but punished by the sophisticated downswings are punished by all voters using an established dataset of over 400 general elections we find that the incumbent vote share a responds differently to trend growth than to the cycle b does not respond significantly to positive variation in the economic cycle and c responds significantly and negatively to negative realizations in the economic cycle in contrast to standard formulations of the grievance asymmetry this asymmetric vote response is found to be independent of trend growth

the impact of international trade on democracy a long run perspective the likely endogeneity between democracy and trade is addressed with an instrumental variables strategy in this article about whether international trade fosters democracy the authors use a measure of natural openness to obtain estimates of the causal impact of openness on democratization in three separate samples spanning the last 130 years a positive impact of openness on democracy is apparent in the data over the long run the post world war ii results suggest that with a rise in trade with other countries equal to a one standard deviation increase countries such as indonesia russia and venezuela could eventually become as democratic as the u s great britain or france there is some variation in the impact of openness by region that may be because trade seems to have a positive impact only when the capital to labor ratio is sufficiently high this is consistent with the idea that openness promotes democracy when it strengthens the economic fortunes of the middle class

social norms savings behavior and growth we argue that many goods and decisions are not allocated or made through markets we interpret an agent s status as a ranking device that determines how well he or she fares in the nonmarket sector the existence of a nonmarket sector can endogenously generate a concern for relative position in for example the income distribution so that higher income implies higher status moreover it can naturally yield multiple equilibria it is thus possible to explain differences in growth rates across countries without recourse to differences in underlying preferences technologies or endowments different social organizations lead to different reduced form preferences which lead to different growth rates

determinants of democracy a panel study of over 100 countries from 1960 to 1995 finds that improvements in the standard of living predict increase in democracy as measured by a subjective indicator of electoral rights the propensity for democracy rises with per capita gdp primary schooling and a smaller gap between male and female primary attainment for a given standard of living democaracy tends to fall with urbnization and with a greater reliance on natrual resources democracy has little relation to country size but rises with the middle class share of income the apparently strong relation of democracy to colonial heritage mostly disappears when the economic variables are held constant similarly the allowance for these economic variables weakens the interplay between democracy and religious affiliation however negative effects from muslim and non religious affiliations remain intact

the impact of economic development on democracy any account of the social and economic conditions of democracy must come to terms with the central finding of the cross national statistical research a sturdy though not perfect association between economic development and democracy to tackle these questions of causation we adopted a strategy of analytic induction based on comparative historical research our program of comparative historical research confirmed the conclusion of the cross national statistical analyses of the correlates of political democracy the level of economic development is causally related to the development of political democracy however the underlying reason for the connection in our view is that capitalist development transforms the class structure enlarging the working and middle classes and facilitating their self organization thus making it more difficult for elites to exclude them politically simultaneously development weakens the landed upper class democracy s most consistent opponent

trade democracy and the gravity equation abstract does democracy affect trade there are several channels by which democracy may affect trade with differing implications first democratization in the exporting country can improve product quality and reduce trade costs increasing bilateral trade second democratization in the importing country may increase trade barriers and thus reduce imports in this paper i analyze the effect of democracy on trade by augmenting the gravity equation with democracy using a rich panel data set and controlling for the endogeneity of democracy i find empirical evidence consistent with the hypothesis that democracy fosters trade this finding is robust to various econometric methods and to the use of disaggregated specifications

dissatisfied democrats or retrospective voters economic hardship political institutions and voting behavior in latin america this article examines recent trends in latin american voting behavior and casts them in terms of sincere economic and strategic electoral concerns it argues that thanks to years of economic adversity latin americans have developed long sophisticated economic memories although this has resulted in rising frustration with democratic government according to recent opinion polls it has not always led voters to punish all parties responsible for hardship at election time a panel study of the region s presidential systems demonstrates that citizens punish incumbents by voting for established nonincumbents when electoral laws reduce opportunities available to small parties in the systems even if nonincumbents have also been blamed for hard economic times more permissive electoral systems in contrast encourage citizens to reject all parties responsible for economic decline the analysis demonstrates how economic and electoral concerns interact to affect voting behavior political accountability an

transparency political polarization and political budget cycles in oecd countries we investigate the effects of fiscal transparency and political polarization on the prevalence of electoral cycles in fiscal balance while some recent political economy literature on electoral cycles identifies such cycles mainly in weak and recent democracies in contrast we show conditioning on a new index of institutional fiscal transparency that electoral cycles in fiscal balance are a feature of many advanced industrialized economies using a sample of 19 oecd countries in the 1990s we identify a persistent pattern of electoral cycles in low er transparency countries while no such cycles can be observed in high er transparency countries furthermore we find in accordance with recent theory that electoral cycles are larger in politically more polarized countries

attribution bias in consumer choice when judging the value of a good people may be overly influenced by the state in which they previously consumed it for example someone who tries out a new restaurant while very hungry may subsequently rate it as high quality even if the food is mediocre we produce a simple framework for this form of attribution bias that embeds a standard model of decision making as a special case we test for attribution bias across two consumer decisions first we conduct an experiment in which we randomly manipulate the thirst of participants prior to consuming a new drink second using data from thousands of amusement park visitors we explore how pleasant weather during their most recent trip affects their stated and actual likelihood of returning in both of these domains we find evidence that people misattribute the influence of a temporary state to a stable quality of the consumption good we provide evidence against several alternative accounts for our findings and discuss the broader implications of attribution bias in economic decision making

does microfinance reduce income inequality this study addresses the question whether participation of the poor in microfinance contributes to reducing a country s level of income inequality using data from 70 developing countries we show that higher levels of microfinance participation are indeed associated with a reduction of the income gap between rich and poor people we also show however that the effects of microfinance on reducing income inequality are relatively small the results of this study add to the discussion on the impact of microfinance on poverty by showing that although access to microfinance does seem to improve the relative income position of the poor this improvement is modest which is probably because the use of microfinance is generally small as compared to the size of the economy of the countries in our sample microfinance should therefore not be seen as a panacea for bringing down income inequality in a significant way

from education to democracy the conventional wisdom views high levels of education as a prerequisite for democracy this paper shows that existing evidence for this view is based on crosssectional correlations which disappear once we look at within country variation in other words there is no evidence that countries that increase their education are more likely to become democratic

oil and women a re examination abstract in a seminal article ross 2008 reports a negative correlation between oil production and women s representation in the labour force and politics across countries this article re examines these relationships exploiting variations in oil endowments to address endogeneity concerns we confirm that oil production causes decline in women s representation additionally we show that consistent with dutch disease effects oil production decreases women s employment in the traded sector however it also leads to an increase in women s employment in the nontraded sector we explore some social consequences of oil production and show that it results in women marrying earlier and having more children

the art of the possible power sharing and post civil war democracy this article focuses on the role that power sharing arrangements play in making it possible for some countries to make the transition to democracy successfully after civil war the authors hypothesize that the adoption of multiple forms of power sharing measures constructed to end particularly difficult civil wars facilitate the emergence of a minimalist form of democracy following some intrastate conflicts by helping to assuage warring groups security concerns the authors use a bivariate probit model to account for the possibility that the decisions by wartime rivals to engage in power sharing and whether to adopt democracy or not are interrelated employing panel data for all civils wars concluded between 1945 and the end of 2006 they find support for their hypothesis

incumbent behavior vote seeking tax setting and yardstick competition this paper develops a model of the political economy of tax setting in a multijurisdictional world where voters choices and incumbent behavior are determined simultaneously voters are assumed to make comparisons between jurisdictions to overcome political agency problems this forces incumbents into a yardstick competition in which they care about what other incumbents are doing we provide a theoretical framework and empirical evidence using u s state data from 1960 to 1988 the results are encouraging to the view that vote seeking and tax setting are tied together through the nexus of yardstick competition

world welfare is rising estimation using nonparametric bounds on welfare measures abstract i take a new approach to measuring world inequality and welfare over time by constructing robust bounds for these series instead of imposing parametric assumptions to compute point estimates i derive sharp bounds on the atkinson inequality index that are valid for any underlying distribution of income conditional on given fractile shares and gini coefficients while the bounds are too wide to reject the hypothesis that world inequality may have risen i show that world welfare rose unambiguously between 1970 and 2006 this conclusion is valid for alternative methods of dealing with countries and years with missing surveys alternative survey harmonization procedures alternative gdp series or if the inequality surveys used systematically underreport the income of the very rich or suffer from nonresponse bias

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

inequality and party support positional economic voting or a new dimension of valence economic growth helps governments get re elected but does growth as a valence issue exhaust the possibilities for the economic vote this paper shows via an examination of 318 elections in esta

economics and elections revisited the economics and elections connection has been heavily investigated although mostly through single country studies the first comparative survey based research on economic voting by lewis beck

on the number and size of nations this paper studies the equilibrium determination of the number of countries in different political regimes and in different economic environments with more or less economic integration we focus on the trade off between the benefits of large jurisdictions and the costs of heterogeneity of large and diverse populations our model implies that i democratization leads to secessions ii in equilibrium one generally observes an inefficiently large number of countries iii the equilibrium number of countries is increasing in the amount of economic integration

economics party and the vote causality issues and panel data conventional wisdom argues that national economic perceptions generally have an important impact on the vote choice in democracies recently a revisionist view has arisen contending that this link regularly observed in election surveys is mostly spurious according to the argument partisanship distorts economic perception thereby substantially exaggerating the real vote connection these causality issues have not been much investigated empirically despite their critical importance utilizing primarily american and secondarily british and canadian election panel surveys we confront directly questions of the time dynamic and independent variable exogeneity we find after all economics clearly matters for the vote indeed once these causality concerns are properly taken into account the impact of economic perceptions emerges as larger than previously thought as well the actual impact of partisanship is clearly reduced

the ecological fallacy revisited aggregate versus individual level findings on economics and elections and sociotropic voting several aggregate level studies have found a relationship between macroeconomic conditions and election outcomes operating in intuitively plausible directions more recent survey based studies however have been unable to detect any comparable relationship operating at the individual voter level this persistent discrepancy is puzzling one recently proposed explanation for it is that voters actually behave in an altruistic or sociotropic fashion responding to economic events only as they affect the general welfare rather than in terms of self interested pocketbook considerations it is argued here that the discrepancies between the macro and micro level studies are a statistical artifact arising from the fact that observable changes in individual welfare actually consist of two unobservable components a government induced and politically relevant component and an exogenous component caused by life cycle and other politically irrelevant factors it is shown that because of this individual level cross sectional estimates of the effects of welfare changes on voting are badly biased and are essentially unrelated to the true values of the behavioral parameters of interest they will generally be considerable underestimates and may even be of the wrong sign an aggregate level time series analysis on the other hand will often yield reasonably good if somewhat attenuated estimates of the underlying individual level effects of interest thus in this case individual behavior is best investigated with aggregate rather than individual level data it is also shown that the evidence for sociotropic voting is artifactual in the sense that the various findings and evidence which ostensibly show sociotropic behavior are all perfectly compatible with the null hypothesis of self interested pocketbook voting

revolt on the nile economic shocks religion and political power using centuries of nile flood data i document that during deviant nile floods egypt s highest ranking religious authority was less likely to be replaced and relative allocations to religious structures increased these findings are consistent with historical evidence that nile shocks increased this authority s political influence by raising the probability he could coordinate a revolt i find that the available data provide support for this interpretation and weigh against some of the most plausible alternatives for example i show that while nile shocks increased historical references to social unrest deviant floods did not increase a proxy for popular religiosity together the results suggest an increase in the political power of religious leaders during periods of economic downturn publication abstract

revisiting the modernization hypothesis longevity and democracy summary modernization theory claims that changes in economic fundamentals like e g income per capita and education levels affect the political structure of a country in a causal way as an important marker of development life expectancy can also be conjectured to have a direct effect on political structures in this paper we estimate the impact of improvements in life expectancy on democracy for the purpose of identification we use data from the international epidemiological transition to construct an instrument for life expectancy we find a statistically and economically significant positive causal effect of improvements in life expectancy on democracy

international comparisons of rural urban educational attainment data and determinants we study cross country differences in rural and urban educational attainment by using a data set comprising 56 countries we focus on the determinants of rural urban educational inequality which is measured by the ratio of rural to urban average years of schooling within each country we find that riskier human capital investment less credit availability a colonial heritage a legal system of french origin and landlockedness of nations are all associated with relatively lower rural educational levels and greater rural urban educational inequality conversely larger formal labor markets better infrastructure and a legal system of british origin are associated with relatively higher rural educational levels and lower rural urban educational inequality we also identify an interaction effect between economic development level and some of these factors in particular we find that as development level increases the negative positive relationship between french british legal systems and rural urban educational inequality is reversed and becomes positive negative

redistributive taxation with heterogeneous relative consumption concerns this paper studies the impact of redistributive income taxation in a society where only some individuals are motivated by relative consumption concerns introducing this heterogeneity raises theoretical challenges since i earned income becomes an imperfect indicator of underlying ability and ii relative concerns may be inadmissable in the social objective a new behavioural model is developed in which only relatively concerned individuals choose work effort strategically linear tax transfer systems schemes are then characterized and simulated for a series of welfarist and non welfarist social objectives and for different degrees of preference heterogeneity a key result is that a government which understands the extent of relative consumption concerns but places no social weight on individuals with such preferences nevertheless sets a significantly more progressive tax system than a government which ignores relative consumption motivations altogether ce memoire examine l impact d une imposition redistributrice sur le revenu dans une societe ou certaines personnes sont motivees par des questions de niveaux de consommation relative cette sorte d heterogeneite souleve certains defis theoriques puisque i les gains sont un indicateur imparfait des habiletes sous jacentes et ii ces malaises quant a la consommation relative peuvent etre inadmissibles au plan de l objectif social on developpe un nouveau modele de comportement dans lequel seulement les personnes preoccupees par leur position relative definissent leur effort de travail strategiquement on definit des systemes d imposition et de transferts lineaires et on les soumet a des simulations pour une serie d objectifs sociaux a saveur welfariste et non welfariste et pour differents degres d heterogeneite de preferences un resultat crucial est qu un gouvernement qui comprend l importance des sensibilites aux resultats relatifs mais qui ne donne aucune valence sociale aux personnes qui ont de telles preferences neanmoins met en place une fiscalite plus progressive de maniere significative qu un gouvernement qui ignore completement ces motivations fondees sur la consommation relative

opportunistic political cycles test in a young democracy setting this paper tests the theory of opportunistic cycles in a decade old democracy russia finds strong evidence of cycles and provides an explanation for why previous literature often found weaker evidence using regional monthly panel data we find that 1 the budget cycle is sizable and short lived public spending shifts toward direct monetary transfers to voters 2 the magnitude of the cycle decreases with democracy government transparency media freedom voter awareness and over time and 3 preelectoral manipulation increases incumbents chances for reelection the short length of the cycle explains underestimation of its size by previous literature because of low frequency data used in previous studies

income and democracy existing studies establish a strong cross country correlation between income and democracy but do not control for factors that simultaneously affect both variables we show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and vari ous measures of democracy we present instrumental variables estimates that also show no causal effect of income on democracy the cross country corre lation between income and democracy reflects a positive correlation between changes in income and democracy over the past 500 years this pattern is con sistent with the idea that societies embarked on divergent political economic development paths at certain critical junctures jel d7 e 1

natural resources democracy and corruption we study how natural resources can feed corruption and how this effect depends on the quality of the democratic institutions our game theoretic model predicts that resource rents lead to an increase in corruption if the quality of the democratic institutions is relatively poor but not otherwise we use panel data covering the period 1980 to 2004 and 124 countries to test this theoretical prediction our estimates confirm that the relationship between resource rents and corruption depends on the quality of the democratic institutions our main results hold when we control for the effects of income time varying common shocks regional fixed effects and various additional covariates they are also robust across different samples and to the use of various alternative measures of natural resources democracy and corruption

democracy rent seeking public spending and growth abstract does democratization imply faster growth less corruption and less inefficiency past studies yield ambiguous results on the effects of democracy on economic performance and growth we develop a simple two sector endogenous growth model that shows both very young and mature democracies grow faster than countries in mid stages of democratization producing a u effect this effect results from the pattern of rent seeking as it diverts from the provision of public goods rent seekers act as monopolistic competitors initially more democracy increases their number raising aggregate rents however rents per rent seeker fall with the number of rent seekers due to this crowding effect and the increased competition among rent seekers aggregate rents fall in mature democracies thus rents show an inverted u effect in relation to democracy we find fairly robust supportive evidence for the latter

elections economic outcomes and policy choices in canada 1870 2015 in this paper we examine the relationship between economic and electoral outcomes in canada since confederation 1867 and the role that economic policy has played in influencing this relationship

progressive taxation redistribution and labor supply the analysis of the effect of progression on labor supply is extended to a model with many consumers the condition for progression to increase labor supply given constant aggregate tax revenue is derived and shown to depend on the income effects resulting from redistribution it is then shown that the optimal linear income tax schedule involves a degree of progression which on the margin does reduce labor supply