is protection for sale evidence on the grossman helpman theory of endogenous protection grossman and helpman 1994 present a theory of endogenous protection by explicitly modeling government industry interactions for which mere black box models previously existed they obtain a ramsey pricing type solution to the provision of protection which emphasizes the role of inverse import penetration ratios and import elasticities on the lobbying side the model makes predictions about lobbying competition and lobbying spending according to deadweight costs from protection the model not only makes for richer theory in terms of rigor and elegance but its predictions are directly testable whether the grossman helman model stands up to real world data is investigated in this paper predictions from both the protection side and lobbying side are tested using cross sectional u s nontariff barrier data we also compare the second generation grossman helpman model with a more traditional specification our results call for serious consideration of this model in the political economy literature

fiscal federalism and lobbying abstract which government functions should be decentralized resp centralized once lobbying behavior is taken into account we find that the answer largely depends on how the interests of the regional lobbies are positioned with respect to the function to be decentralized resp centralized when regional lobbies have conflicting interests then lobbying is less damaging for social welfare under centralization than under decentralization on the contrary when regional lobbies have aligned interests then lobbying is less damaging for social welfare under decentralization provided that policy spillovers on the non organized groups are not too strong

on the specification of noise in two agent based asset pricing models abstract the paper is concerned with two recent agent based models of speculative dynamics from the literature one by gaunersdorfer and hommes 2007 and the other by he and li 2007 at short as well as long lags both of them display an autocorrelation structure in absolute and squared returns that comes fairly close to that of real data at a daily frequency the note argues that these long memory effects are to be ascribed to the stochastic specification of the price equation which despite the wide fluctuations in these models fails to normalize the price shocks under an appropriate respecification the long memory completely disappears it is subsequently shown that an alternative introduction of randomness which may be called structural stochastic volatility can restore the original properties and even improves upon them

do complex financial models really lead to complex dynamics agent based models and multifractality abstract agent based models are usually claimed to generate complex dynamics however the link to such complexity has not been subject to rigorous examination this paper studies this link between the complexity of financial time series measured by their multifractal properties and the design of various small scale agent based frameworks used to model the heterogeneity of financial markets nine popular models are analyzed and while some of the models do not generate interesting multifractal patterns we observe the strongest tendency towards multifractal behavior for the bornholdt ising model the discrete choice based models by gaunersdorfer hommes and schmitt westerhoff and the transition probabilities based framework by franke westerhoff complexity is thus not an automatic feature of the time series generated by any agent based model but generated only by models with specific properties in addition because multifractality is considered a financial stylized fact its presence can be used as a new means to validate such models

foreign lobbies and us trade policy abstract in popular discussion much has been made of the susceptibility of government policies to lobbying by foreigners the general presumption being that this is harmful to the home economy however in a trade policy context this may not be the case if the policy outcome absent any foreign lobbying is characterized by welfare reducing trade barriers foreign lobbying may reduce such barriers and possibly raise welfare using a new data set on foreign political activity in the united states this paper investigates this question empirically tariffs and nontariff barriers are both found to be negatively related with foreign lobbying activity

representativeness of news and exchange rate dynamics abstract guided by psychological evidence we develop a behavioral exchange rate model in which investors perception of fundamental shocks switches between two states according to the representativeness heuristic agents underestimate the informational content of news in calm periods whereas they overreact to news if they encounter a series of distinct exchange rate changes simulations indicate that the model mimics the behavior of actual exchange rates quite well for instance we observe fat tails for the distribution of the returns and volatility clustering

on the bimodality of the distribution of the s p 500 s distortion empirical evidence and theoretical explanations abstract after showing that the distribution of the s p 500 s distortion i e the log difference between its real stock market index and its real fundamental value is bimodal we demonstrate that agent based financial market models may explain this puzzling observation within these models speculators apply technical and fundamental analysis to predict asset prices since destabilizing technical trading dominates the market near the fundamental value asset prices tend to be either overvalued or undervalued interestingly the bimodality of the distribution of the s p 500 s distortion confirms an implicit prediction of a number of seminal agent based financial market models

political decentralization and corruption evidence from around the world abstract how does political decentralization affect the frequency and costliness of bribe extraction by corrupt officials previous empirical studies using subjective indexes of perceived corruption and mostly fiscal indicators of decentralization have suggested conflicting conclusions in search of more precise findings we combine and explore two new data sources an original cross national data set on particular types of decentralization and the results of a firm level survey conducted in 80 countries about firms concrete experiences with bribery in countries with a larger number of government or administrative tiers and given local revenues a larger number of local public employees reported bribery was more frequent when local or central governments received a larger share of gdp in revenue bribery was less frequent overall the results suggest the danger of uncoordinated rent seeking as government structures become more complex

politically realistic objective functions and trade policy profs and tariffs abstract this paper demonstrates a mathematical correspondence between the deus ex machina tariff formation approach and political economy approach the correspondence implies that the tariff chosen by lobbying influenced policy makers will be equivalent to a tariff chosen by a deus ex machina government that gives too much weight to profits this result allows many political economy issues to be addressed in the simple framework of a deus ex machina government which faces a politically realistic objective function prof

the role of oligarchs in russian capitalism using a unique dataset we describe the degree of ownership concentration in russian economy and its role in shaping economic and political institutions in russia in particular we find that russian oligarchs do control a substantial part of the economy while the relative weight of their firms in russian economy is huge they do not seem to be excessively large by the standards of the global economy where most of them are operating the oligarchs seem to run their firms more efficiently than other russian owners controlling for industry region and size

decentralization of governance and development all around the world in matters of governance decentralization is the rage even apart from the widely debated issues of subsidiarity and devolution in the european union and states rights in the united states decentralization has been at the center stage of policy experiments in the last two decades in a large number of developing and transition economies in latin america africa and asia the world bank for example has embraced it as one of the major governance reforms on its agenda for example world bank 2000 burki perry and dillinger 1999 take also the examples of the two largest countries of the world china and india decentralization has been regarded as the major institutional framework for the phenomenal industrial growth in the last two decades in china taking place largely in the nonstate nonprivate sector india ushered in a landmark constitutional reform in favor of decentralization around the same time it launched a major program of economic reform in the early 1990s on account of its many failures the centralized state everywhere has lost a great deal of legitimacy and decentralization is widely believed to promise a range of benee ts it is often suggested as a way of reducing the role of the state in general by fragmenting central authority and introducing more intergovernmental competition and checks and balances it is viewed as a way to make government more responsive and efe cient technological changes have also made it somewhat easier than before to provide public services like electricity and water supply relatively efe ciently in smaller market areas and the lower levels of government have now a greater ability to handle certain tasks in a world of rampant ethnic cone icts and separatist movements decentralization is also regarded as a way of diffusing social and political tensions and ensuring local cultural and political autonomy these potential benee ts of decentralization have attracted a very diverse range

interest group politics in a federation the optimal degree of decentralization depends on the importance of inter state externalities of local policies we show that inter state externalities are determined by the spatial distribution of interest groups within the country interest groups who have multi state scope internalize inter state externalities to a larger extent than the lobbyists with interests within a single state we use variation in the geographic boundaries of politically powerful industrial interests to estimate the effect of inter state externalities on firm performance using firm level panel data from a peripheralized federation russia in 1996 2003 we show that controlling for firm fixed effects the performance of firms substantially improves with an increase in the number of neighboring regions under influence of multi regional business groups compared to the number influenced by local business groups our findings have implications for the literatures on federalism and on international trade as trade restrictions are a common source of inter state externalities

boom bust dynamics in a stock market participation model with heterogeneous traders abstract the boundedly rational heterogeneous agent literature can be considered to have properly started with a number of contributions in the early 90s with the impressive contribution by carl chiarella who amongst his huge field of research developed several milestone models of heterogeneous interacting agents that are able to generate a number of dynamic outcomes compatible with the empirical evidence in this paper we propose a stock market model in which participation depends upon an attractiveness measure related to the market activity and the fundamental value of the market a market maker adjusts the stock price with respect to the current endogenous excess market demand which in turn depends on the demands of the different types of agents populating the economy market participants are also allowed to switch between different strategies analytical and numerical results confirm how the participation mechanism amplifies the occurrence of endogenous booms and busts in line with empirical and experimental evidence

models and their uses it is argued that economists ought to recognize that modeling in different styles will be appropriate for different purposes or different stages in the development of an area of economics as an example the paper displays simulations of a stochastic general equilibrium model which shed light on the interpretation of widely discussed small macroeconomic vector autoregressive models connecting monetary variables to output and prices this abstract was borrowed from another version of this item

the productivity effects of privatization longitudinal estimates from hungary romania russia and ukraine this paper estimates the effect of privatization on multifactor productivity using comprehensive panel data on initially state owned manufacturing firms in four economies we exploit the data s longitudinal dimension to control for preprivatization selection and estimate long run impacts the estimates are robust to functional form but sensitive to selection controls our preferred random growth estimates imply positive multifactor productivity effects of 15 percent in romania 8 percent in hungary and 2 percent in ukraine but a 3 percent effect in russia the foreign privatization effect is larger 18 35 percent in all countries positive domestic effects appear immediately in hungary romania and ukraine and continue growing thereafter but emerge only five years after privatization in russia

speculative behavior and the dynamics of interacting stock markets abstract we develop a simple agent based financial market model in which heterogeneous speculators apply technical and fundamental analysis to trade in two different stock markets speculators strategy market selections are repeated at each time step and depend on predisposition effects herding behavior and market circumstances simulations reveal that our model is able to explain a number of nontrivial statistical properties of and between international stock markets including bubbles and crashes fat tailed return distributions volatility clustering persistent trading volume coevolving stock prices and cross correlated volatilities against this background our model may be deemed to have been validated

decentralization and corruption evidence across countries the relationship between decentralization of government activities and the extent of rent extraction by private parties is an important element in the recent debate on institutional design the theoretical literature makes ambiguous predictions about this relationship and it has remained virtually unexamined by empiricists the authors make a first attempt at examining the issue empirically by looking at the cross country relationship between fiscal decentralization and corruption as measured by a number of different indices their estimates suggest that fiscal decentralization in government spending is significantly associated with lower corruption moreover they find that the origin of a country s legal system for example civil versus common legal code performs extremely well as an instrument for decentralization the estimated relationship between decentralization when so instrumented and corruption is even stronger the evidence suggests a number of interesting areas for future work including investigating whether there are specific services for which decentralized provision has a particularly strong impact on political rent extraction and understanding the channels through which decentralization succeeds in keeping corruption in check

speculative markets and the effectiveness of price limits abstract the aim of this paper is to study the effectiveness of price limits in speculative markets we construct a nonlinear stochastic asset pricing model in which traders rely on technical and fundamental analysis to determine their orders the dynamics of the model mimic stylized facts such as the emergence of bubbles excess volatility fat tails for returns or volatility clustering quite well using this model as a laboratory we find that price limits have the potential to reduce both volatility and deviations from fundamentals the more traders lend themselves to trend extrapolating behavior the better price limits work

on the complicated price dynamics of a simple one dimensional discontinuous financial market model with heterogeneous interacting traders abstract we develop a financial market model with heterogeneous interacting agents market makers adjust prices with respect to excess demand chartists believe in the persistence of bull and bear markets and fundamentalists bet on mean reversion moreover speculators trade asymmetrically in over and undervalued markets and while some of them determine the size of their orders via linear trading rules others always trade the same amount of assets the dynamics of our model is driven by a one dimensional discontinuous map despite the simplicity of our model analytical graphical and numerical analysis reveals a surprisingly rich set of interesting dynamical behaviors

the injustice of inequality in many countries the operation of legal political and regulatory institutions is subverted by the wealthy and the politically powerful for their own benefit this subversion takes the form of corruption intimidation and other forms of influence we present a model of such institutional subversion focusing specifically on courts and of the effects of inequality in economic and political resources on the magnitude of subversion we then use the model to analyze the consequences of institutional subversion for the law and order environment in the country as well as for capital accumulation and growth we illustrate the model with historical evidence from gilded age united states and the transition economies of the 1990s we also present some cross country evidence consistent with the basic prediction of the model

fiscal federalism in argentina policies politics and institutional reform argentine fiscal federalism is considered to be very inefficient by all specialists its allocation of tax and spending authorities and its system of intergovernme ntal transfers do not correspond to any economic criteria and provide all sorts of perverse incentives and obstacles for sound economic policies agreeing with the above diagnostic we attempt to take a step further and to provide an explanation for the many inefficient features of argentine fiscal federalism in order to do that we apply and further develop an approach presented in spiller and tommasi 2000 that tries to explain public policies as the outcome of political transactions these approach argues that the nature and characteristics of the observed policies will be conditioned by the rules of the political game under which those t policies are made hence it re focuses policy recommendations from the level of policy reform to the level of institutional reforms with emphasis on political institutions

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

multinational firms political competition and international trade policy this paper considers how the presence of multinational firms influences international trade policy that is determined as the outcome of political competition multinational firms have plants to protect in all policy jurisdictions and hence are more protectionist than national firms that at least have an interest in free trade in export markets nonetheless because of changed incentives for firms to provide political support for free trade and protectionist candidates an increased multinational presence via either merger or direct foreign investment has a liberalizing influence on trade policy copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association