making the same mistake again or is this time different the world faces an economic crisis of unprecedented proportions but much of the policy response has certainly not lacked for precedent national governments and international organisations including the international monetary fund imf have looked to crises of the past for solutions to the present and austerity has become a familiar theme the inability to effectively resolve the current crisis however gives rise to the question is this time different this article provides a broad overview to the origins and development of the recent economic crisis and the resort to policies of austerity although there is historical precedent for the resort to austerity such as the uk treasury view during the 1920s and 1930s this time things are different many of the current problems are deeply rooted and reflect the impact of the shift towards free market economics that started in the 1970s 2 the origins of the crisis since the beginning of the 1970s the private sector finance in particular has reorganised on an increasingly global scale it has innovated in terms of both structure and products and it has experienced significant growth as tridico 2012 this issue shows this financialisation was characterised by a ballooning of stock exchanges as many firms decided not only to list their shares but also to become involved in speculative finance in response to pressures on firms to maximise shareholder value together with the progressive erosion of worker and trade union rights and influence labour markets became more flexible and real wages stagnated concurrently profits rebounded leading to burgeoning inequality in this context aggregate demand and consumption were bolstered by easy credit and the wealth effects of speculative bubbles first in stocks and shares and then in housing

radicalism versus gradualism an analytical survey of the transition strategy debate academic debate on a transition strategy for former socialist economies continues even a quarter century after the collapse of the communism in central and eastern europe and the former soviet union in this paper through an analytical survey of 137 preceding studies we present an overall picture of the debate and examine the relationship between the debate attitudes and the literature attributes in related studies we found that the radicalists maintain a consistent debate attitude from the viewpoints of time speed and policy sequence of economic transition while the debate attitude of the gradualists is more diversified we also found that there is another group of researchers that stays within the framework of the radicalism versus gradualism debate while at the same time keeping at arm s length from both the radicalists and the gradualists in addition our regression estimation of qualitative selection models provides interesting findings on the relationship between the debate attitudes and the literature attributes

the role of the media in fiscal consolidation programmes the case of ireland a number of european countries have implemented austerity programmes since the onset of the current economic crisis this paper focuses on fiscal consolidation a central aspect of such programmes using the case of ireland it investigates the significant role of the mass media in presenting such policies to the public a role which has so far remained unexamined conceiving of the irish experience over the past few decades as a case of neoliberalisation it uses a critical political economic conceptualisation of news organisations to consider 431 editorials and opinion articles discussing fiscal consolidation in three leading irish newspapers between 2008 and 2012 it finds that the majority of articles present viewpoints in favour of fiscal consolidation and display a preference for spending cuts over tax hikes which substantiates the claim that ireland has adopted neoliberal policies to address the crisis only a minority of articles oppose fiscal consolidation these mostly contest specific spending cuts but usually fail to criticise fiscal consolidation itself by calling for economic alternatives such as keynesian stimulus differences between newspapers are also discussed highlighting their ideological cleavages

war and rivalry among great powers we combine analysis of rivalry with consideration of a possible selection bias we discover that what makes great powers more likely to be rivals is statistically related to their propensity to experience war a censored probit allows simultaneous estimation of the influence of six covariates on the probability great powers experience rivalry and war while controlling for statistical linkage between the two dependent variables consequently we recast some past research for example contiguity and parity actually reduce the probability of war between great power rivals once we control for their influence on the probability great powers are rivals in the first place our results compliment other research highlighting various problems of selection bias in world politics and suggest a new direction for future research on rivalry e draw together two literatures about processes in international politics a growing literature concerned with various selectionrelated inferential threats recommends we pay as much attention to how cases get into our datasets as we do to what occurs in those cases a large literature on rivalry analyzes pairs of states repeatedly experiencing conflict both literatures highlight the importance of process in international conflict by process we mean linked instances sequentially and cumulatively resulting in outcomes although many conflict processes likely exist we investigate linkages across a process of the occurrence of rivalry and the onset of war we believe the existence of rivalry and the onset of war are linked expressions of one underlying process and argue that treating them in this way may teach us much the literature on selection effects within international politics helps us produce more valid estimates of what makes rivals escalate their relations to war while interstate rivalry provides a powerful example of where methodological concerns about selection can inform the development of theory in international politics

imf programs do they work can they be made to work better abstract a central issue in the debate about a new international financial architecture has been whether programs of policy reform supported by the international monetary fund work the fund claims that on balance they do because of their positive effect on the balance of payments others claim that programs are ineffective and suggest that they should be discontinued this paper reviews the econometric evidence dealing with the macroeconomic effects of imf programs it goes on to provide additional evidence and judges success against alternative criteria although the record is not good the paper argues that it would be unwise for the fund to cease lending and to abandon conditionality altogether imf programs need to be redesigned and refocused the paper concludes by identifying a number of principles that should underpin reform

audience costs and the dynamics of war and peace we estimate audience costs and examine their substantive effects on the evolution of interstate disputes by using an infinitely repeated and dynamic game of crisis escalation unlike past efforts our approach estimates country specific audience cost parameters without relying on proxy variables such as democracy measures contrary to intuition increases in a country s audience costs encourage it to initiate disputes in equilibrium because the costs serve as a commitment device during the subsequent crisis incentivizing the country to stand firm and coercing its opponent to back down nonetheless the results demonstrate that larger audience costs would result in more peace worldwide as they also discourage potential opponents from initiating disputes beyond regime type we find that a free press provisions for executive appointment or removal and historical rivalries are also important determinants of audience costs

boundedly rational nash equilibrium a probabilistic choice approach we propose an equilibrium for n person finite games based on bounded rationality using the legit model of discrete choice theory at equilibrium each player uses appropriate choice probabilities given those used by the others rationality is parameterized on a continuum from complete rationality to uniform random choice results on the existence of equilibrium and on convergence to nash as rationality becomes perfect are similar to results due to mckelvey and palfrey we identify conditions such that for a given rationality parameter range the path of choices over time when the players use fictitious play converges to equilibrium c 1997 academic press

borrowing from the imf the policy implications of recent empirical research abstract at a time when the future of the international monetary fund is being widely debated a number of relevant and important studies have been published which advance our knowledge of the factors which determine borrowing from the fund there has been little attempt however to put this recent empirical research into context or to extract from it appropriate policy conclusions while dissent remains over some issues there is an emerging consensus on others which provides a firm empirical foundation for policy formulation unfortunately the policy stance adopted by the g7 is in many ways at odds with much of the recent empirical research

the imf a bird s eye view of its role and operations the international monetary fund imf is the world s premier international financial institution with 184 member countries and active programmes in a significant number of them at any one time the fund attracts a great deal of attention much of it critical but the discussion is often polemic in style strongly held but frequently opposing views are expressed this survey attempts to examine in an objective way the theory and evidence relating to the fund s operations many aspects of the empirical research are relatively recent and a universal consensus is yet to emerge as a consequence there is scope for disagreement to persist however the research is also gradually clarifying many important issues the format for the survey is to examine the life cycle of imf arrangements what makes a country turn to the fund for assistance should the imf be lending what influences the outcome of negotiations and the design of programmes are imf programmes effective and why do some countries make prolonged use of imf resources for completeness there is also some discussion of the history of the imf the extent to which fund policies have been influenced by advances in economic theory and the fund s systemic role important organisational and governance issues are also covered briefly although primarily adopting an economist s perspective the survey reflects the growing recognition that in order to understand the imf s operations economics has to be combined with politics examining the imf is an exercise in applied political economy copyright 2007 the author journal compilation 2007 blackwell publishing ltd

geopolitics and international organizations an empirical study on imf facilities there is growing awareness that the distribution of imf facilities may not be influenced only by the economic needs of borrowers this paper focuses on the fact that the imf may favour geopolitically important countries in the distribution of imf loans differentiating between concessional and non concessional facilities to carry out the empirical analysis we construct a new database that compiles a wide array of proxies for geopolitical importance for 107 imf countries over 1990 2003 focusing on emerging and developing economies we use a factor analysis to capture the common underlying characteristic of countries geopolitical importance as well as a potential analysis since we also want to account for the geographical situation of the loan recipients while controlling for economic and political determinants our results show that geopolitical factors influence notably lending decisions when loans are non concessional whereas results are less robust and in opposite direction for concessional loans this study provides empirical support to the view that geopolitical considerations are an important factor in shaping imf lending decisions potentially affecting the institution s effectiveness and credibility

revisiting the effects of imf programs on poverty and inequality investigating how lending programs of the international monetary fund imf affect poverty and inequality we explicitly address model uncertainty we control for endogenous selection into imf programs using data on 86 low and middle income countries for the 1982 2009 period and analyze program effects on various poverty and inequality measures the results rely on averaging over 90 specifications of treatment effect models and indicate adverse short run effects of imf agreements on poverty and inequality for the whole sample while for a 2000 2009 subsample the results are reversed there is evidence that significant short run effects might disappear in the long run author s abstract

subjective and objective measures of governmental regulations in oecd nations abstract since government regulations may have an important impact on the macroeconomic performance of market economies it is necessary to devise quantitative indicators of the regulatory regime which raises some difficult methodological issues after reviewing some of these problems we compare the results of several recent quantitative studies of regulation in oecd nations some based on an extensive review and quantification of laws and regulations others based on observational data of those familiar with these regulations despite their very different methodologies and coverage of particular types of governmental regulation the results of the three studies are significantly correlated which suggests that they all capture the same underlying reality

income distribution political instability and investment abstract this paper successfully tests on a sample of 71 countries for the period 1960 85 the following hypotheses income inequality by fuelling social discontent increases sociopolitical instability the latter by creating uncertainty in the politico economic environment reduces investment as a consequence income inequality and investment are inversely related since investment is a primary engine of growth this paper identifies a channel for an inverse relationship between income inequality and growth we measure socio political instability with indices which capture the occurrence of more or less violent phenomena of political unrest and we test our hypotheses by estimating a two equation model in which the endogenous variables are investment and an index of socio political instability our results are robust to sensitivity analysis on the specification of the model and the measure of political instability and are unchanged when the model is estimated using robust regression techniques

dependency revisited international markets business cycles and social spending in the developing world while increased exposure to the global economy is associated with increased welfare effort in the organization for economic cooperation and development oecd the opposite holds in the developing world these differences are typically explained with reference to domestic politics tradables unions and the like in the developing world are assumed to have less power or interests divergent to those in the oecd interests that militate against social spending i claim that such arguments can be complemented with a recognition that developed and developing nations have distinct patterns of integration into global markets while income shocks associated with international markets are quite modest in the oecd they are profound in developing nations in the oecd governments can respond to those shocks by borrowing on capital markets and spending countercyclically on social programs no such opportunity exists for most governments in the developing world most of which have limited access to capital markets in tough times more significant incentives to balance budgets and as a result cut social spending at the times it is most needed thus while internationally inspired volatility and income shocks seem not to threaten the underpinnings of the welfare state in rich nations it undercuts the capacity of governments in the developing world to smooth consumption and particularly consumption by the poor across the business cycle the author would like to thank steph haggard kristin bakke wongi choe tim jones and seminar participants at duke university penn state university washington university mit and the university of new mexico for their helpful comments nancy brune mark hallerberg and rolf strauch and nita rudra were very generous in providing their capital account oecd fiscal and potential labor power data respectively

patterns of transition from plan to market patterns of transition from plan to market martha de melo cevdet denizer and alan gelb hungary s bankruptcy experience 1992 1993 cheryl w gray sabine schlorke and miklos szanyi why and when do governments initiate public enterprise reform jose edgardo campos and hadi salehi esfahani roads land use and deforestation a spatial model applied to belize kenneth m chomitz and david a gray industrial centralization in indonesia j vernon henderson and ari kuncoro guidlines on searching for a dalton improving tax reform an illustration with data from indonesia shlomo yitzhaki and jeffrey d lewis a new data set measuring income inequality klaus deininger and lyn squire

chasing phantoms the political economy of ustr trade barriers though usually considered welfare reducing are globally ubiquitous in light of the enormous clash between what is and what ought to be researchers have begun addressing the question of why countries so consistently pursue such apparently counterproductive policies

capabilities perception and escalation the evolution of crises depends upon interpreting intentions under uncertainty we model crises as a game of two sided incomplete information players are uncertain about their own payoffs from war because of differences between observable and actual capabilities we derive four hypotheses testing them against crises in europe between 1815 and 1970 we show a nonmonotonic relationship between ex ante observable capabilities and the likelihood of violence in a crisis as well as the ex ante likelihood of a negotiated settlement we answer five questions 1 how do differences in observable capabilities between rivals influence the likelihood of a crisis and the escalation to violence 2 how do intangible capabilities alter the effects of observable capabilities on the likelihood of conflict and violence 3 what do national leaders learn from the responses of their adversaries in crises 4 under what conditions can deterrence succeed 5 under what conditions are the strong likely to give in to the weak or vice versa in a crisis

information power and war ultimatum bargaining models of international interactions suggest that when conflict is costly and the actors are fully informed the probability of conflict goes to zero however conflict occurs with some positive probability when the challenger is uncertain about the defender s reservation value i employ a simple ultimatum game of bargaining to evaluate two traditional power centric theories of world politics balance of power and power transition theory the formal and empirical analyses demonstrate that as states approach power parity information asymmetries are greatest thus enhancing the probability of militarized conflict uncertainty is a central cause of conflict emergence and is correlated with the distribution of observable capabilities recognizing the relationship between the distribution of power and the uncertainty offers a more sophisticated interpretation of power centric explanations of world politics

resistance to reform status quo bias in the presence of individual specific uncertainty comment why do governments so often fail to adopt policies which economists consider to be efficiency enhancing our answer to this question relies on uncertainty regarding the distribution of gains and losses from reform we show that there is a bias towards the status quo and hence against efficiency enhancing reforms whenever some of the individual gainers and losers from reform cannot be identified beforehand there are reforms which once adopted will receive adequate political support but would have failed to carry the day ex ante the argument does not rely on risk aversion irrationality or hysteresis due to sunk costs jel d72 f13 why do governments so often fail to adopt policies that economists consider to be efficiency enhancing this is one of the fundamental questions of political economy the answer usually relies on what may be

job queues and the union status of workers this paper develops a model of the determination of the union status of workers that allows for the possibility of queuing for union jobs the empirical results derived using a sample from the university of michigan panel study of income dynamics are supportive of the queuing hypothesis the no queue model can be rejected using a likelihood ratio test this suggests that a simple probit or logit model for union status is misspecified because it is not based on any consistent behavioral theory an important implication of the model is that because most new entrants to the labor market prefer union jobs but cannot get them and because accrual of nonunion seniority makes workers progressively less likely to desire union jobs the union status of workers is largely determined by their success in being selected from the queue early in their working life

the scope of imf conditionality international organizations are governed by two parallel sets of rules formal rules which embody consensual procedures and informal rules which allow exceptional access for powerful countries a new data set drawn from the imf s records of conditionality provides an opportunity to study the bargaining process within an important international organization and answer questions about the institution s autonomy i find evidence of u s influence which operates to constrain condition ality but only in important countries that are vulnerable enough to be willing to draw on their influence with the united states in ordinary countries under ordinary circumstances broad authority is delegated to the imf which adjusts conditionality to accommodate local circumstances and domestic political opposition the imf has refrained from exploiting the vulnerability of particular countries to maximize the scope of conditionality international organizations have become increasingly important actors in inter national politics they have proliferated have expanded in membership have acquired new legal enforcement powers and have extended their reach into the details of domestic political economy in their member states af ew including the international monetary fund imf or simply the fund command significant resources and wield considerable authority some critics have argued that these international organizations are sufficiently autonomous to create a democratic def icit at the international level as they pursue a vision of undemocratic liberal ism 1 other critics have argued that international organizations are nothing more than instruments in the hands of powerful states 2 these critiques of course cannot simultaneously be true and both run into difficulties the puzzle that the rogue agency view cannot explain is why the principals have chosen to delegate so much authority in principal agent terms this view posits that both screening and monitoring have failed the principals are unable to select agents with preferences similar to their own and are unable

strategic interaction and the statistical analysis of international conflict although strategic interaction is at the heart of most international relations theory it has largely been missing from much empirical analysis in the field typical applications of logit and probit to theories of international conflict generally do not capture the structure of the strategic interdependence implied by those theories i demonstrate how to derive statistical discrete choice models of international conflict that directly incorporate the theorized strategic interaction i show this for a simple crisis interaction model and then use monte carlo analysis to show that logit provides estimates with incorrect substantive interpretations as well as fitted values that can be far from the true values finally i reanalyze a well known game theoretic model of war bueno de mesquita and lalman s 1992 international interaction game my results indicate that there is at best modest empirical support for their model

the effect of imf programs on economic growth abstract using a bivariate dynamic version of the heckman selection model we estimate the effect of participation in international monetary fund imf programs on economic growth we find evidence that governments enter into agreements with the imf under the pressures of a foreign reserves crisis but they also bring in the fund to shield themselves from the political costs of adjustment policies program participation lowers growth rates for as long as countries remain under a program once countries leave the program they grow faster than if they had remained but not faster than they would have without participation

radical moderation recapturing power in two party parliamentary systems we estimate the parameters of a reputational game of political competition using data from five two party parliamentary systems we find that latent party preferences and party reputations persist with high probability across election periods with one exception parties with extreme preferences who find themselves out of power switch to moderation with higher probability than the equivalent estimated likelihood for parties in government extreme or moderate or for moderate parties in opposition we find evidence for the presence of significant country specific differences we subject the model to a battery of goodness of fit tests and contrast model predictions with survey and vote margin data not used for estimation finally according to the estimated model parameters australia is less than half as likely to experience extreme policies and australian governments can expect to win more consecutive elections in the long run as compared to their counterparts in greece malta new zealand and the united kingdom

when do power shifts lead to war we present and test a choice theoretic model of war decisions during shifts in power the model assumes a rising state that overtakes a declining state in capabilities in equilibrium the declining state yields at a critical point in the transition war can occur only before that critical time power shifts are more likely to lead to war as the challenger becomes more risk acceptant the declining state more risk averse the expected costs of war decrease the rising state s dissatisfaction with the status quo increases and during periods of equality between the two sides the rate of growth of the rising state s capabilities and the transition point do not affect the probability of war all these hypotheses are supported by an empirical analysis of all major power dyads since 1815 we also find that expected support from allies must be included in the calculation of a nation s capabilities the implications of the model for theories of hegemonic decline and war are discussed

a public choice approach to international organization the purpose of this paper has been to develop a positive theory of international organization which can supplement the conventional normative theory used as a positive theory the conventional approach draws much of its plausibility from the fact that it relies on the reasons given by the decision makers and reported in the media and on the lofty objections stated in the charters of international agencies the public choice approach by its very nature is precluded from accepting such evidence in some respects it must appear dismal and perhaps cynical it is a positive theory which tries to explain but just as the conventional normative theory tends also to be used as a positive theory our positive theory is likely to have normative implications as well it does not imply that international organization is generally undesirable but it can be used to emphasize the advantages of decentralized policy making and to warn against a naive internationalism which welcomes international agreements for their own sake regardless of what is being agreed upon international organization can be and is abused and the cause is not an occasional lack of virtue among politicians but a systematic built in tendency toward collusion at the expense of the citizens such collusion is not only undesirable in itself there is also the danger that it discredits and crowds out unambiguously desirable forms of international cooperation agreements to remove non market obstacles to market interdependence in the field of international trade and capital movements

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

the effects of imf programs in the third world debate and evidence from latin america abstract this article reviews the debate about the effects of imf sponsored stabilization programs in the third world after examining recent studies by fund economists results of a new study on a latin american country set are presented in this research imf programs are associated with insignificant changes in the current account significant improvements in the overall balance of payments increases in inflation mixed effects on growth and a strong and consistent pattern of reduction in labor share of income the latter result is incorporated into a distribution oriented critique of fund policy

the escalation of great power militarized disputes testing rational deterrence theory and structural realism realism we test the relative explanatory power of these two theoretical approaches on the escalation of deterrence encounters among great powers from 1816 to 1984 we derive a set of hypotheses from each model operationalize them for systematic empirical analysis and test the hypotheses on 97 cases of great power deterrence encounters by means of probit analysis the results are that the hypotheses derived from deterrence theory receive considerable support whereas none of the hypotheses derived from structural realism are supported in contemporary research on the causes of international conflict the realist paradigm has been the dominant theoretical approach within this broad framework however scholars have developed at least two prominent alternative models of the conditions under which conflict is likely to arise the first approach structural realism 1 focuses on the attributes of the international system while the second deterrence theory is largely dyadic and emphasizes the resolve and relative military capabilities of adversarial states while both theoretical approaches attempt to identify the conditions under which international crises and wars are likely to arise their

the revolving door duration and recidivism in imf programs quarterly evidence on participation in imf programs for the period 1974 2003 is examined statistically using the techniques of hazard analysis and error correction estimation three hypotheses are proposed and tested and the results support a revolving door explanation of participation in imf programs first an increase in cumulative prior participation in imf programs is found to cause a reduction on average in the length of a new spell of participation second the length of time between participation spells is reduced significantly with an increase in cumulative prior participation in imf programs third the evolution of reserve adequacy is shown to be significantly and positively affected by participation in imf programs the results depict a revolving door to imf participation and for those countries with prior participation the door revolves more rapidly this result is shown to depend critically upon the mix of countries considered the increase in recidivism is a phenomenon most strongly observed among the least developed countries while the reduction in duration is more strongly observed in the emerging and transition economies these results are derived while controlling for country specific unobserved heterogeneity year specific demand effects external shocks and pre existing policy distortions

effectiveness of regulatory interventions on firm behavior a randomized field experiment with e commerce firms economic regulators use various instruments to stimulate smes to change their behavior but limited evidence exists on the effectiveness of such interventions we analyze the effectiveness of three ways of providing e commerce firms guidance about the legal rules on information disclosure the initial non compliance is considerable in two interventions firm specific guidance is given by post mail and by e mail respectively in another intervention guidance on industry level is given by means of dedicated publications and presentations in all cases the guidance was given on behalf of the regulatory authority the effectiveness of the firm specific guidance is measured through a randomized field experiment while for the industry guidance a panel analysis is conducted we find that sending the firms a letter by post mail slightly improved firm compliance but overall the various forms of guidance appear to be ineffective although information related interventions are commonly used in practice such regulatory interventions can fail to influence the behavior of smes

ideology and voter preferences as determinants of financial globalization we propose that the global spread of ideas affects international economic openness policies and that to omit ideology as an explanatory variable for economic globalization is to risk omitted variable bias using voting data we create measures of global ideology regarding economic openness and propose that changes in both global and domestic ideology influence how open or closed to international finance an economy is we also test other influences on liberalization including proposed state centered diffusion mechanisms using pcsts and system gmm models we estimate the determinants of change in international capital account regulation for 82 countries 1955 to 1999 we thereby examine diffusion of both liberalizations 1950s and 1990s and closures 1960s and 1970s changes in both global and domestic ideology robustly influence liberalization and closure the capital account policies of neighboring countries positively and of the leading economies negatively also influenced a country s capital account liberalization

change and stability in superpower rivalry we investigate the dynamics of superpower rivalry participants in policy debates within each state use information about expected future threats and economic costs to influence other policy actors and this process of sophisticated reaction links the security policies of these two states into a single rivalry system analysis of vector autoregression models of u s and soviet military expenditures and diplomatic hostility and u s gross national product supports the hypothesis that these policies approximate the behavior of unitary rational states capable of forming rational expectations of each other s future behavior the dynamic response of this system to a wide range of exogenous shocks or innovations reveals the underlying stability of this rivalry system the military expenditures of both states exhibit a cyclical response to innovations with a shorter u s cycle this lack of synchronization creates several problems for analysis and for policy change

strategic interaction and trade policymaking formal analysis and simulation this paper introduces a simple game theoretic model and a monte carlo simulation of trade negotiations with the aim of identifying the nature of the selection bias that may threaten valid inference from empirical tests relying on data from trade disputes insights from the formal model are used to critically engage recent empirical analyses this model is applied more specifically to the american use of section 301 as an instrument to prise open foreign markets the results of the game theoretical model and the monte carlo simulation demonstrate that despite significant statistical results models of trade negotiations might potentially suffer from misspecification due to non random selection effects

economic determinants of imf financial arrangements abstract we analyze factors that lead to imf approval of financial arrangements we account for both economic variables that induce a country to seek an imf arrangement demand side factors and macroeconomic policy commitments that the imf considers when deciding whether to approve it supply side factors using a pooled sample of annual observations for 91 developing countries over 1973 1991 we obtain maximum likelihood bivariate and univariate probit estimates of the approval of an imf arrangement for a given country in a given year a number of demand side and supply side variables are statistically significant determinants of the approval of an imf arrangement

the hidden hand of economic coercion why do policymakers consistently employ economic sanctions even though scholars consider them an ineffective tool of statecraft game theoretic models of economic coercion suggest the success rate may be understated because of selection effects when the targeted country prefers conceding to incurring the cost of sanctions it has an incentive to acquiesce before the imposition of sanctions the bulk of successful coercion episodes should therefore end with sanctions threatened but not imposed this contradicts the recent literature on sanctions which assumes that sanctions rarely if ever work at generating significant concessions from the targeted country and are imposed for domestic or symbolic political reasons if the game theoretic argument is correct the crucial cases to study are those in which coercion is threatened but not implemented a statistical analysis of data on sanctions in pursuit of economic or regulatory goals strongly supports the gametheoretic argument these results suggest that the significance of economic coercion has been undervalued in the study of statecraft and international relations more generally

russia austerity and deficit reduction in historical and comparative perspective this paper looks at russian experience with austerity programmes since the breakdown of the former soviet union in 1991 downsizing of the state was one of the major elements in a reform package designed to transform the centrally planned economy into a market one together with deregulation privatisation macroeconomic stabilisation and the opening up of the closed economy this downsizing however proved to be the single most important reason for the collapse of state institutions which in turn deepened the transformational recession contributed to the dramatic rise of income inequalities corruption and crime and the decline in life expectancy the story of the successes and failures of transition is not really the story of consistent shock therapy and inconsistent gradualism the major plot of the postsocialist transformation novel is the preservation of strong institutions in some countries very different in other respects from central europe and estonia to china uzbekistan and belarus and the collapse of these institutions in other countries at least 90 of this story is about government failure the strength of state institutions and not about market failure liberalisation copyright the author 2012 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

an explanation of anomalous behavior in models of political participation this paper characterizes behavior with noisy decision making for models of political interaction characterized by simultaneous binary decisions applications include voting participation games candidate entry the volunteer s dilemma and collective action problems with a contribution threshold a simple graphical device is used to derive comparative statics and other theoretical properties of a quantal response equilibrium and the resulting predictions are compared with nash equilibria that arise in the limiting case of no noise many anomalous data patterns in laboratory experiments based on these games can be explained in this manner

u s soviet chinese relations routine reciprocity or rational expectations international relations theorists disagree about whether great power behaviors reflect bureaucratic routine or reciprocity recently some have suggested that these behaviors result from great powers rational expectations rather than from simple routine or reciprocity the debate is flawed in several respects the quasi experimental studies of great power behavior suffer from specification and measurement errors furthermore most studies of great power behavior focus exclusively on the superpowers without adequately appreciating china s role in world politics we present an improved analysis that recognizes the potential effects of chinese behavior and ameliorates the methodological flaws in existing work the results indicate that the behaviors of the united states the soviet union and china are a relatively stable mix of bureaucratic routine and reciprocity the results also indicate complex asymmetrical connections among u s soviet u s chinese and soviet chinese relations consistent with the notion of a strategic triangle

an experimental study of jury decision rules we present experimental results on groups facing a decision problem analogous to that faced by a jury we consider three treatment variables group size three or six number of votes needed for conviction majority or unanimity and pre vote deliberation we find evidence of strategic voting under the unanimity rule a large fraction of our subjects vote for a decision analogous to conviction even when their private information indicates a state analogous to innocence this is roughly consistent with the game theoretic predictions of feddersen and pesendorfer although individual behavior is explained well by the game theoretic model there are discrepancies at the level of the group decision contrary to feddersen and pesendorfer in our experiments there are fewer outcomes analogous to incorrect convictions under unanimity rule than under majority rule in the case of no deliberation we simultaneously account for the individual and group data using quantal response equilibrium

capabilities uncertainty and resolve a limited information model of crisis bargaining this paper presents and solves a crisis bargaining game under limited information the sides alternate offers from three possible offers with war and its costs starting if the target s counteroffer is rejected the equilibrium of the model falls into four different cases these four cases are analyzed to determine how the sides communicate through their offers and how the costs of war initial beliefs misperceptions and distribution of capabilities drive the probabilities of a crisis and war the model demonstrates a joint selection bias misspecification problem in empirical studies of crises arising from the unobservable nature of beliefs several empirical studies of crisis bargaining are discussed in the light of this methodological problem new patterns of evidence are found that support the presence of the selection problem and their conclusions are reexamined

monitoring and enforcement of environmental regulations lessons from a natural field experiment in norway abstract relying on a small natural field experiment conducted by the norwegian environmental protection agency i estimate effects of three fundamental elements of most monitoring and enforcement practices self reporting audit frequency and specific deterrence i find evidence of under reporting of violations in firms self audits as more violations are detected in on site audits than in self audits announcing the increased audit frequency has no effect on firms compliance but an audit raises subsequent compliance substantially

the effect of candidate quality on electoral equilibrium an experimental study when two candidates of different quality compete in a one dimensional policy space the equilibrium outcomes are asymmetric and do not correspond to the median there are three main effects first the better candidate adopts more centrist policies than the worse candidate second the equilibrium is statistical in the sense that it predicts a probability distribution of outcomes rather than a single degenerate outcome third the equilibrium varies systematically with the level of uncertainty about the location of the median voter we test these three predictions using laboratory experiments and find strong support for all three we also observe some biases and show that they can be explained by quantal response equilibrium

testing theories of strategic choice the example of crisis escalation strategic choice explanations of international crisis escalation imply that because actors anticipate the likely responses of others and choose actions that avoid undesirable responses our observations of nations decisions to use force are interdependent and censored for example suppose a weak nation b is threatened by a powerful neighbor a if b believes a s threat then it should back down unfortunately this censors our ability to observe whether a would actually use violence many traditional methods ignore this censoring and mis specify the extent to which variables influence crisis behavior to ameliorate the problems of interdependence and censoring i develop the strategically censored discrete choice model estimating this model using bayesian markov chain monte carlo simulation methods i analyze bueno de mesquita and lalman s 1992 dyadically coded version of the militarized interstate dispute data gochmann and maoz 1984 based on bayesian model comparison statistics i conclude that strategic explanations outperform nonstrategic ones in explaining crisis behavior

a unified theory and test of extended immediate deterrence we present a unified theory and test of extended immediate deterrence unified in the sense that we employ our theoretical deterrence model as our statistical model in the empirical analysis the theoretical model is a straightforward formalization of the deterrence logic in huth 1988 and huth and russett 1984 coupled with private information concerning utilities our statistical analysis suggests that the attacker and defender s decisions are influenced by the balance of forces nuclear weapons defender protege military alliances arms transfers and trade as well as the regime types of those involved many of these findings contradict previous research by huth 1988 and huth and russett 1988 we find that many of the variables involved in the deterrence calculus are nonmonotonically linked to the probability of deterrence success or war we illustrate the results with case studies of the soviet japanese dispute over manchukuo 1937 1938 and the berlin blockade 1948

independent actor or agent an empirical analysis of the impact of u s interests on international monetary fund conditions abstract in this paper we analyze whether international monetary fund imf conditionality is exclusively designed to be in line with observable economic indicators or whether it is partly driven by the imf s major shareholder the united states a panel data analysis of 206 letters of intent from 38 countries submitted during the period april 1997 through february 2003 revealed that the number of conditions on an imf loan depended on a borrowing country s voting pattern in the un general assembly closer allies of the united states and other group of 7 g7 countries received imf loans with fewer conditions especially prior to elections these results are relevant to current public policy debates on the role and process of setting imf loan conditions and provide broader insight into the influence of the united states and other g7 countries on international institutions

reason and war a new specification of the expected utility model of international conflict places expected utilities within a polar coordinate system treats thirdparty choices in a manner more consistent with classical forms estimates the expected utilities derived from not challenging existing policies more fully represents the expected costs of conflict and normalizes expected utilities regardless of system size by assuming that the probability of escalation of a dispute increases monotonically with leaders expectations of gain we derive continuous functions for the probabilities of war intervention violence and peace the revised theory significantly improves our ability to discriminate between violent and nonviolent disputes and between violent disputes that escalated to warfare and those that did not in europe between 1816 and 1970 in this essay

on the empirical content of quantal response equilibrium the quantal response equilibrium qre notion of mckelvey and palfrey 1995 has recently attracted considerable attention due largely to its widely documented ability to rationalize observed behavior in games played by experimental subjects we show that this ability to t the data as typically measured in this literature is uninformative without ap riori distributional assumptions a qre can match any distribution of behavior by each player in any normal form game we discuss approaches that might be taken to provide valid empirical evaluation of the qre and discuss its potential value as an approximating empirical structure

do economic sanctions destabilize country leaders do economic sanctions destabilize the governments they target a form of foreign pressure sanctions are typically meant to alter the policies of other countries there is much pessimism on whether they ever work this article shows that economic pressure works in at least one respect it destabilizes the leaders it targets i present a theoretical argument that explains why destabilization is a necessary condition for successful coercion i find evidence that pressure destabilizes in a large panel of cross country time series data the destabilization finding indicates that sanctions may be more effective at altering policies than we think i conclude by noting that greater optimism regarding the effectiveness of sanctions should be balanced by a careful consideration of the policy s real and sizeable costs for those caught in the middle

the international monetary fund in a time of crisis a review of stanley fischer s imf essays from a time of crisis the international financial system stabilization and development stanley fischer was deputy managing director of the imf from 1994 to 2001 and perhaps more than any other individual he personifies the international rapid response to financial crises in the 1990s this book is a collection of essays written during his tenure at the imf taken together the essays represent the strongest and most logical defense of imf initiatives in the 1990s in print my review essay comprises six parts in parts 2 through 4 i provide an overview of fischer s arguments in three central areas of contention stabilization policy the impact of imf programs on poverty and the imf s anticipation of and response to international financial crisis i then compare fischer s arguments to those raised by the imf s critics during that period the controversial issues of these parts can be resolved only through empirical investigation but on the issues of greatest importance from the financial crises of the 1990s both fischer and the imf s critics make logically consistent arguments with little empirical support in part 5 i review the recent empirical literature to illuminate what evidence has been found in support of or counter to the assertions of fischer and the imf s critics part 6 provides conclusions and suggestions for follow on empirical research

sophisticated reaction in the u s soviet arms race evidence of rational expectations because of the pervasive security rivalry between the united states and the soviet union information about the expected future behavior of the rival state proves useful to domestic political actors competing to influence budgetary allocations this article examines the hypothesis that in the aggregate this process of sophisticated reaction approximates the behavior of two unitary rational actors capable of forming rational expectations of each other s behavior this rational expectations arms race model implies that the military expenditure series of arms racers should be independent in the granger causal sense but that their residuals should be correlated contemporaneously the latter prediction is inconsistent with bureaucratic process models or alternative expectational formulations and empirical analysis of u s and soviet yearly military expenditures is provided that supports the predictions of the rear model finally some implications of this intimate linkage between the domestic policy processes of these two rival superpowers are briefly discussed

making the first move a two stage analysis of the role of formateurs in parliamentary government formation a standard conclusion of theorists who model bargaining as a non cooperative game is that the party designated to make the first move the formateur party will determine the bargaining outcome most empirical studies of parliamentary coalition formation have paid surprisingly little attention to the formation process in this paper we model government formation as a two stage unordered discrete choice problem that better reflects this process the first step involves the selection of a formateur party and the second involves the choice of partners by the predicted formateur we evaluate several hypotheses for the two stages using a data set of all cabinets formed in the western european countries from 1970 to 2006 in our analyses of formateur selection we find that party size is clearly the dominant feature in the second stage we show that when predicting government composition it is fruitful to add information drawn from a first stage analysis

global horse trading imf loans for votes in the united nations security council we investigate whether temporary members of the united nations security council receive favorable treatment from the international monetary fund imf using panel data for 197 countries over the period from 1951 to 2004 our results indicate a robust positive relationship between temporary security council membership and participation in imf programs even after accounting for economic political and country specific factors there is also evidence that security council membership reduces the number of conditions included in imf programs imf loans seem to be a mechanism by which the major shareholders of the fund can win favor with voting members of the security council

the determinants of industry political activity 1978 1986 c ampaign contributions made by corporate political action committees pacs are increasingly important and controversial in u s elections influence purchasing is often alleged by pundits and campaign finance reform is continually debated in congress in the academy social scientists have analyzed the allocation of interest group monies and have looked for possible impacts on legislation few however have tried to explain the total contributions of economic interest groups we shall analyze variations in contributions across industries and over time with an empirical model based on organizationally constrained profit maximizing behavior we assume that corporate pac contributions in an industry are raised to enhance industry profits subject to the constraints of organization costs and freeriding incentives our empirical work covers 124 industries over five election cycles from 1978 through 1986 both the costs and benefits of political activity vary across industries we argue that the benefits of political action are determined by direct contact with the government as a regulator or purchaser of industry output by government s ability to ameliorate adverse market conditions and by the industry s ability to solve collective action problems without government assistance the costs of industry political action arise mainly from collective action problems because effective political activity often requires concerted action by the constituent firms in each industry we also make a methodological contribution previous studies use statistical techniques that suffer from sample selectivity bias or else force the probability of acting politically to be explained by the same set of coefficients as is the amount of action taken we explain and employ a technique that accounts for both problems the results are consistent with the theses that industries follow investment oriented goals in deciding the amount of political action to undertake and that collective action problems are important constraints on industry political activity we can explain between 60 and 80 of the variation in contributions in our sample first we review existing work on corporate political activity particularly papers examining patterns of aggregate pac spending by industry then we present an organization cost constrained industryprofit maximizing model based on a comparison between an idealized zero organization cost industry and the more realistic case where organizing collective action is difficult the independent variables used in the analysis are also discussed and defined next we discuss the dependent variable and total industry contributions and explain our statistical method then the results are presented followed by a discussion of industry structure and political activity to make clear how our results can explain different contribution patterns we give examples using five actual industries

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

over optimism and the imf one way of assessing the impact of imf programmes is to see whether performance and policy targets are achieved however does a failure to hit targets mean that the programmes have been unsuccessful or could it be that targets have been too ambitious this paper analyses political economy factors impinging on governments and on the imf that may lead to serial over optimism it goes on to examine the empirical evidence that is consistent with over optimism having considered whether over optimism is a cause for concern and concluded that it is the paper considers reforms that would allow realism to replace it by eliminating over optimism it is argued that the psychology of failure surrounding imf programmes could be significantly reduced or even broken

the imf forever an analysis of the prolonged use of fund resources considerable concern has been expressed about the prolonged use made of international monetary fund imf resources by a number of member countries some commentators have seen this as being fundamentally at odds with the role of the imf as a source of temporary balance of payments support and as one aspect of mission creep by the fund the perceived importance of the issue is reflected by the fact that the first report of the fund s independent evaluation office focused on it this article provides a detailed analysis of the prolonged use of fund resources it assesses the extent to which it is a problem and draws on available empirical evidence both qualitative and quantitative to isolate the causes of prolonged use it concludes by examining the policy questions to which prolonged use gives rise

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

the economic impact of short term imf engagement in low income countries summary this study estimates the economic impact of imf supported programs addressing policy and exogenous shocks in low income countries lics using the propensity score matching approach focusing on a more homogenous group of financing events greatly improves the specification and predictive power of the selection model as compared to earlier studies which is the key requirement to control for selection bias this paper looks into a wide range of potential economic and political determinants of participation lower reserve coverage deterioration in the current account balance a weaker real gdp growth increased macroeconomic instability evident in higher fiscal deficits inflation and exchange market pressures and lagged elections would increase the probability of participation i e propensity scores moreover global conditions including changes in real oil and non oil commodity prices and world trade are also significant therefore adverse global shocks could create cycles in demand for imf financing the short term imf engagement is positively associated with a wide range of macroeconomic outcomes notably the impact on the short term growth is the greatest and becomes significant only for lics facing substantial macroeconomic imbalances or large exogenous shocks when matching accounts for propensity scores and institutional quality program countries in this group have changes in growth 1 5 and 3 5 percentage points higher than the control group

the diffusion of e commerce among smes theoretical implications and empirical evidence as a specific institution of distributive trades e commerce displays similarities with retail stores and mail order companies as well as providing theoretical support for the assumption that e commerce is a way to sell certain goods and services at prices potentially lower than those of traditional distributive channels this paper analyses its inter firm diffusion among a sample of firms mostly smes in italy the paper has three main purposes firstly it challenges the view of e commerce as a technological revolution by pointing out its nature as a cost minimizing marketing channel in particular it shows how under certain conditions e commerce is a source of transaction cost advantages analogous to those yielded by mail order business secondly the paper identifies from a theoretical viewpoint the circumstances under which e commerce sales might achieve a significant level of penetration among those smes that would otherwise incur high costs in organizing a proprietary distributive channel thirdly it employs a unique data set of italian manufacturing service and hospitality firms nearly 90 of them with fewer than 100 employees to estimate a diffusion model based on the logistic curve according to the estimates by the fourth quarter of 2003 nearly 50 of the population of firms in the geographical area surveyed will have introduced e commerce among their marketing channels