bipolarity multipolarity and free trade recent literature typically attributes the relative scarcity of open international markets to the prisoner s dilemma structure of state preferences with respect to trade i argue that the prisoner s dilemma representation does not reflect the most critical aspect of free trade agreements in an anarchic international system security externalities explicit consideration of these effects suggests that a bipolar international political system has an advantage relative to its multipolar counterpart with respect to the opening of markets among states less credible exit threats and stronger incentives to engage in altruism within its alliances explain the advantage of a two power system the real income gains that motivate free trade are also the source of the security externalities that impede it their ability to internalize these effects makes military alliances the natural basis of agreements to open international markets the evolutionary prospects of alliances vary however ones that are the products of bipolar systems are more likely to evolve into free trade coalitions than are their multipolar counterparts i argue that less credible exit threats and stronger incentives to engage in alliance altruism explain the advantage of a two power system several important limits of the argument should be made clear immediately i argue at the systemic level i attempt to isolate the political and economic incentives for free trade that occur at the level of the international system i do not therefore consider the impact of unitlevel factors on the pursuit of these incentives for example neither the role of special interest groups nor the organization of domestic exchange via hierarchies instead of markets is considered doyle 1986 frieden 1988 ruggie 1982 the conditions i assume are those of standard international trade theory ethier 1983 and illustrative rather than systematic empirical referents are used these restrictions are appropriate given my purpose to demonstrate analytically the advantage of a bipolar international political system with respect to free trade

bilateral trade and shocks in political relations evidence from china and some of its major trading partners 1990 2013 abstract an extensive number of studies investigate the effects of political relations on trade by estimating a gravity model using annual or quarterly data we argue that the use of low frequency data introduces an aggregation bias because the cycle of moderate political shocks is much shorter measured in weeks using monthly data from 1990 through 2013 for china we estimate a model of political relations and conclude that political shocks are short lived narrative evidence from two case studies illustrates the transitory nature of these shocks a var model shows that although political shocks influence exports to china the effects largely vanish within two months a comparison of the monthly and annual frequency gravity equation regressions illustrates the effects of temporal aggregation

conflict cooperation and commerce the effect of international political interactions on bilateral trade flows the public choice approach to political economy is employed to gain insight into the connection between international politics and trade flows a model is constructed in which importers are assumed to be rational utility maximizers who seek to satisfy international security as well as economic welfare objectives this model of bilateral trade flows reflects contemporary theory in the field of international economics and it explicitly incorporates the general foreign policy orientation of importers among its determinants the model is tested in 16 annual crosssectional estimations 1960 75 for a complete network of 25 countries the findings show considerable support for the hypothesis that trade flows are significantly influenced by broad political relations of amity and enmity between nations the author concludes that nations adjust trade ties to satisfy security as well as economic welfare goals and that a formal political economy of trade should reflect this fact

pressure groups and redistribution abstract the simple pressure group model of political redistribution can predict more with less restrictive assumptions instead of ready made pressure groups composed of individuals who vote their pocketbooks we posit heterogeneous agents each of whom decides which group to join and how much effort to expend on political activity our model then examines social affinity conditions that foster pressure group formation political sympathies based on social affinity imply testable effects of growth rate and income distribution on progressive transfers effects that prove substantial in pooled time series cross section regressions for 13 oecd countries 1960 1981

an interest group model of direct income redistribution an interest group model of the determinants of policies which directly re distribute income to low income persons is developed and tested the model assum es that altruistic taxpayers nonaltruistic taxpayers and needy beneficiaries f orm separate interest groups from which politicians seek support benefit levels depend on variables such as taxpayer income and the price of benefits but unlike median voter models the model also implies a role for interest group strengt h and competition between political parties the author uses latent variable met hods and data on the aid to families with dependent children program to demonstr ate empirical support forthe model copyright 1986 by mit press

tests of a rational theory of the size of government in many countries the political party holding power changes more frequently than the trend growth rates in government spending and taxes shifts of political power are often preceded by rhetoric about meeting needs or cutting taxes which post election performances rarely match yet changes in the size of government up and down occur on average the size of government measured by the share of taxes or spending to output has increased in many countries during the past century but changes in size occur at diffrent rates and at times the relative size of government declines

electoral politics interest groups and the size of government electoral politics interest groups and the size of government i introduction interest groups have been considered main actors in the political drama for some time now by political scientists as in bentley 1908 schattschneider 1935 and truman 1951 and more recently by economist also such as olson 1965 and stigler 1975 despite the widespread consensus on their importance there have been few formal attempts to analyze their impact on public policies thus borooah and van der ploeg 1983 90 were moved to declare that theory based on the importance of different interest groups is badly needed in economics an important exception is becker s 1983 1985 analysis of interest group competition becker draws insights about the nature of the trade offs that occur when interest groups compete for political influence but becker consciously avoids incorporating into his model political institutions such as voting voting rules and candidates 1983 391 4 1985 330 rather he assumes that the political process operates as a veil through which the underlying strengths and demands of various interest groups are revealed this paper takes a different tack but one complementary to becker s approach the analysis is based on an explicit model of the political process that includes interest groups in the model interest group influence is a potential supply of votes for which parties or candidates compete each party seeks a winning coalition of voters and thus engages in implicit logrolling tullock 1959 572 an equilibrium exists in the competition for the support of interest groups and the nature of the equilibrium electoral platforms is identified below embodied in the characterization of the equilibria is a set of parameters that can be said to measure the strengths of the various interest groups and which enable one to identify how candidates change their policy positions in response to a change in the strength of an interest group it is therefore possible to analyze simultaneously the existence of an electoral equilibrium its nature including its normative properties and changes in equilibrium due to shifts in the balance of forces between competing groups 1 in contrast to becker 1983 1985 these analytical features are not assumed outright rather they are based on an underlying model of elections the theoretical underpinnings for this model are discussed in section ii interest groups are often alleged to be responsible in part for recent increases in the size of government in western democracies 2 therefore in sections iii and iv a model of the political process is used to study the impact of an increase in the influence of a particular interest group on government size in the simple models of the public sector considered here increasing group influence per se does not cause the size of the government to increase but an increase in the government s size does result when i there are constraints on the government s ability to change tax shares in response to a shift in group power or ii there is a publicly provided good which benefits one untaxed group and that group s sole concern with government policy is to maximize the amount of the good that it gets the paper concludes by considering some of the normative implications of the results ii interest groups in the electoral process there are two sets of actors in the model parties and interest groups and two sets of relationships which must be analyzed the relationships between interest groups and the parties and the relationship between the parties themselves with respect to the first question this paper investigates the determinants of each interest group s influence on the platforms proposed by the parties with respect to the second it explores whether the competition for votes between the parties produces an equilibrium and if so what its properties are

the development of a natural gas transportation logistics management system abstract efficient management of the natural gas business chain based on pipeline transmission networks and taking into consideration the interaction among the main players e g shippers suppliers transmission companies and local distribution companies requires the use of decision making support systems these support systems maximise resources and mitigate contingencies due to gas supply shortfalls operational contingencies from scheduled and non scheduled equipment outages and market demand shortfalls this study presents a practical use for technologies such as a thermohydraulic simulation of gas flow through pipelines a monte carlo simulation for compressor station availability studies an economic risk evaluation related to potential revenue losses and contractual penalties and linear programming for the maximisation of income and the minimisation of contractual penalties the proposed system allows the optimum availability level to be defined and maintained by the transporter by installing reserve capacity to mitigate losses related to revenue and contractual penalties it also economically identifies quantifies and justifies the installation of stand by compressor units that can mitigate the transporter s exposure to losses caused by capacity shortfalls as a consequence of scheduled and non scheduled outages

political regimes and international trade the democratic difference revisited how do domestic political institutions affect the outcomes of international trade negotiations specifically are the aggregate trade barriers agreed upon by a democratic pair lower than those by a pair composed of a democracy and an autocracy i revisit these important questions by highlighting some problematic aspect of the analysis by mansfield milner and rosendorff 2000 contrary to their central conclusion i find that whether the aggregate trade barriers are lower for a democratic pair than those for a mixed pair depends on the preferences of the decision makers involved thus although domestic political institutions are important they alone are insufficient to predict a higher level of cooperation among democracies

the political economy of trans pakistan gas pipeline project assessing the political and economic risks for india there is a growing realisation among indian policy makers to consider the import of natural gas to address india s growing energy demand among many policy options to import natural gas indo iran overland pipeline option is considered to be effective and economical in addressing india s long term energy demands such a pipeline would have to traverse pakistani territory thereby necessitating a role for pakistan in the pipeline project though security guarantees have been offered india refuses to entertain the role of pakistan in the project for a fear of its energy supply being disrupted in case of a military conflict with pakistan this paper argues that gas pipeline project is not only aimed at addressing india s energy concerns but also to further its strategic objectives this paper contends that india iran and pakistan do not have shared objective to make the overland project a political and commercial reality india s stakes in the overland pipeline project are high as india s economic interests in the pipeline project are not in congruence with the politico economic and strategic objectives of iran and pakistan

power politics and international trade r recent literature attributes the relative scarcity of open international markets to the prisoner s dilemma structure of state preferences with respect to trade we argue that the prisoner s dilemma representation does not reflect the most critical aspect of free trade agreements in an anarchic international system namely their security externalities we consider these external effects explicitly doing so leads us to two conclusions 1 free trade is more likely within rather than across political military alliances and 2 alliances are more likely to evolve into free trade coalitions if they are embedded in bipolar systems than in multipolar systems using data drawn from an 80 year period beginning in 1905 we test these hypotheses the results of the analysis make it clear that alliances do have a direct statistically significant and large impact on bilateral trade flows and that this relationship is stronger in bipolar rather than in multipolar systems in the early 1970s students of international relations began what would become a long and heated debate about the political correlates of open international markets recently however an important element of consensus has begun to emerge most contributors to this debate now seem to agree that the prisoner s dilemma structure of state preferences with respect to trade explains the relative dearth of open international markets here we argue that what has become the standard prisoner s dilemma representation neglects the most critical aspect of free trade agreements in the anarchic international system namely their security externalities we consider these external effects explicitly in order to do so we construct and analyze a simple game theoretic model the results of this analysis demonstrate that tariff games between allies differ systematically from those played between actual or potential adversaries these differences imply that free trade is more likely within rather than across political military alliances however our analysis also suggests that the evolutionary prospects of alliances vary those that are the products of bipolar systems are more likely to evolve into free trade coalitions than are their multipolar counterparts less credible exit threats and clearer responsibilities for alliance stability explain the advantage of a bipolar system we test this argument using data drawn from an 80 year period beginning in 1905 the empirical analysis supports our argument it demonstrates that alliances have a direct statistically significant and large effect upon bilateral trade moreover it shows that on average alliances have a much stronger effect on trade in a bipolar than in a multipolar world 2

lies defection and the pattern of international cooperation this article characterizes how incentives to lie affect international cooperation and the design of cooperation agreements i study the optimal structure of cooperation agreements in an environment where the costs of cooperation fluctuate over time cooperation is complicated by the fact that the costs of cooperation are private information and participants can benefit from lying about them when the extent of asymmetries of information between the cooperating governments can be measured in terms of the transparency of the political process democracies face greater contracting opportunities than authoritarian regimes however this article shows that even under asymmetries of information a limited extent of cooperation can be achieved when the design of cooperation agreements recognizes incentives to lie

government spending cycles ideological or opportunistic this paper examines whether partisan and opportunistic motives affect government expenditure growth in the netherlands the time series analysis covering the period 1953 1993 allows for different types of government spending in general spending is inspired by ideological and opportunistic motives all government expenditure categories show an upward drift during election times and the partisan motives behind government spending are clearly revealed left wing cabinets attach greater importance to social security and health care than right wing cabinets and right wing cabinets value expenditure on infrastructure and defense more than left wing parties

correction to the political determinants of international trade efforts to replicate our study of the effects of politics on trade flows between the major powers have revealed that the computer program written to calculate the estimates produced errors in both the coefficients and the standard errors furthermore these errors have some consequences for the results in this brief corrigendum we present corrected tables for our research note and a slightly modified interpretation of the results our study examined evidence to assess three arguments about how politics may affect trade the first contends that positive political relations in a dyad result in higher levels of trade this argument leads to two hypotheses states in conflict will have a lower level of trade than those not in conflict and trade will increase with the degree of common interests between a pair of states the second argument concludes that democratic dyads will have a higher level of trade than other dyads the third argument focuses on the security concerns of states and leads to the hypotheses that alliances will increase trade in a bipolar system but will have no effect in a multipolar system we refer readers to the original article for a fuller statement of the logic of these arguments their respective hypotheses and a complete statement of our research design and operationalization of the variables morrow siverson and tabares 1998

who learns from what in policy diffusion processes the idea that policy makers in different states or countries may learn from one another has fascinated scholars for a long time but little systematic evidence has been produced so far this article improves our understanding of this elusive argument by distinguishing between the policy and political consequences of reforms and by emphasizing the conditional nature of learning processes using a directed dyadic approach and multilevel methods the analysis of unemployment benefits retrenchment in oecd countries demonstrates that policy makers learn selectively from the experience of others right governments tend to be more sensitive to information on the electoral consequences of reforms while left governments are more likely to be influenced by their policy effects

does foreign policy determine foreign trade cointegration analysis of exports from selected countries to the middle east the paper analyses the relations between foreign policy and export performance the paper deals with exports of selected european countries and the usa to middle eastern countries including israel cointegration analysis is used to identify common stochastic trends in export series a long term relationship implies no significant influence of foreign policy differences on trade performance according to the johansen tests applied to bivariate and multivariate models german austrian dutch and eu exports to israel are cointegrated with the us exports while swiss exports are never cointegrated with the exports of these countries this result confirms the importance of foreign policy in trade performance

the political determinants of international trade the major powers 1907 1990 we test three arguments about the effect of international politics on trade flows the first argument states that trade flows are greater between states with similar interests than those with dissimilar interests the second that trade flows are greater in democratic dyads than nondemocratic dyads and the third that trade flows are greater between allies we examine trade flows between the major powers from 1907 to 1990 this period provides variation on all three independent variables of interest and allows us to separate the three arguments empirically we estimate a gravity model of trade with the above political variables added our results demonstrate that joint democracy and common interests increase trade in a dyad but alliances generally do not even when controlling for polarity of the system

paying a visit the dalai lama effect on international trade is political compliance a precondition for healthy trade relations with china the chinese government frequently threatens that meetings between its trading partners officials and the dalai lama will be met with animosity and ultimately harm trade ties with china we run a gravity model of exports to china from 159 partner countries between 1991 and 2008 to test the extent to which bilateral tensions affect trade with autocratic china in particular we investigate empirically whether countries that receive the dalai lama despite china s opposition experience a significant reduction of their exports to china in order to account for the potential endogeneity of meetings with the dalai lama the number of tibet support groups and the travel pattern of the tibetan leader are used as instruments our empirical results support the idea that countries officially receiving the dalai lama at the highest political level are punished through a reduction of their exports to china however this dalai lama effect is only observed for the hu jintao era and not for earlier periods furthermore we find that this effect is mainly driven by reduced exports of machinery and transport equipment and that it disappears two years after a meeting took place

costs of taxation and the size of government existing theory on the form of government suggests that a parliamentary system promotes a larger size of government than does a presidential system this paper extends the existing theory by allowing for distortionary taxation a main result is that if taxation is sufficiently distortionary the parliamentary system may promote a smaller size of government than the presidential system the proposed mechanism appears consistent with several empirical patterns in the data that cannot be explained by other theories

lessons learned from brazilian natural gas industry reform over the past decades many countries have reformed their infrastructure industries although these reforms have been broadly similar for the most part aiming at introducing competition in potentially competitive segments the contexts in which they have been carried out differ this is due to the past regulatory experience in each country the maturity of the industry and or the number of agents when the reform process started the brazilian natural gas reform stands out due to the country s singular conditions the development of the natural gas industry in brazil was grounded on stepping up supplies through integration with neighboring nations particularly bolivia and establishing a competitive environment by lowering the barriers hampering the arrival of new investors however natural gas is located at the crossroads of two main energy chains oil and hydroelectricity this article analyzes the brazilian natural gas reform and extracts lessons from this process the low capillarity of transportation and distribution systems continues to be the main bottleneck of the country s natural gas industry the challenges of the new legal framework are to encourage investments in networks and guarantee supply to allow the industry to consolidate and mature against a backdrop of rapid changes in the world market

how did wars dampen trade in the mena region abstractthe article investigates the impact of wars on trade in the middle east and north african region using an augmented gravity model that controls for the endogeneity problem in our estimation we introduce a war variable and distinguish between different types of conflicts the results show that wars have a significantly negative impact on exports imports and trade civil conflicts hinder exports imports and trade significantly the disaggregated version of the gravity model shows that non state conflicts have a detrimental effect on bilateral trade flows in manufacturing and that none of the conflicts do affect trade in services we also find that on average a conflict is equivalent to a tariff of 5 of the value of trade

state visits and international trade politicians travel extensively abroad for various reasons one purpose of external visits is to improve bilateral economic relations in this paper i examine the effect of state visits on international trade i use a large data set covering the travel activities of the heads of state of france germany and the united states between 1948 and 2003 my results indicate that state and official visits are indeed positively correlated with exports a typical visit is associated with higher bilateral exports by about 8 to 10 per cent holding other things constant

forecasting risks of natural gas consumption in slovenia abstract efficient operation of modern energy distribution systems often requires forecasting future energy demand this paper proposes a strategy to estimate forecasting risk the objective of the proposed method is to improve knowledge about expected forecasting risk and to estimate the expected cash flow in advance based on the risk model the strategy combines an energy demand forecasting model an economic incentive model and a risk model basic guidelines are given for the construction of a forecasting model that combines past energy consumption data weather data and weather forecast the forecasting model is required to estimate expected forecasting errors that are the basis for forecasting risk estimation the risk estimation strategy also requires an economic incentive model that describes the influence of forecasting accuracy on the energy distribution systems cash flow the economic model defines the critical forecasting error levels that most strongly influence cash flow based on the forecasting model and the economic model the development of a risk model is proposed the risk model is associated with critical forecasting error levels in the context of various influential parameters such as seasonal data month day of the week and temperature the risk model is applicable to estimating the daily forecasting risk based on the influential parameters the proposed approach is illustrated by a case study of a slovenian natural gas distribution company

natural gas corridors between the eu and its main suppliers simulation results with the dynamic gastale model abstract growth in gas demand poses a challenge for european energy consumers and other gas importing countries in terms of an increasing dependency on gas imports and consequently also supply security this paper focuses on interactions among demand supply and investments in natural gas corridors namely pipeline transport lng and storage facilities affecting the european natural gas market over the period 2005 2030 a number of policy scenarios including a business as usual bau scenario are formulated to study the impact of demand uncertainty and delays in investment on the gas transport infrastructure required in the long run in europe the analyses indicate that substantial investments in gas transport corridors are needed to accommodate imports and seasonal demand variations analysis of scenarios of supply interruption in the form of suddenly reduced import capacity for particular pipeline routes indicates that portions of europe could experience price increases of up to 100 in the case of a year long interruption to accommodate import needs and to mitigate possible disruptions pipeline connections running from east to west need to be given special priority

does trade still follow the flag t he economic ties between any two nations are frequently affected by a warming or cooling of bilateral diplomatic relations but there is little to be found in modern economics or political science that helps us understand the connections between international politics and commerce the notion that international economics could be studied in isolation from its political underpinnings or consequences would have been quite alien to mercantilist thinkers in the eighteenth century or to the critics or advocates of imperialism in the nineteenth that economics and politics were inextricably intertwined was taken as a matter of course indeed trade follows the flag was central to these people s understanding of world politics and international economics intellectual trends over the past century radically changed this worldview the ascendancy of liberalism in economic thought brought with it a compartmentalization of disciplines that may now be eroding but we are left with theories of international politics and economics that are very weakly bridged the objective of this study is to map one of the many connections between international politics and commercial ties specifically i seek to identify and measure the effect of changes in state to state diplomatic relations on trade flows between those nations theoretical underpinnings of my effort are in the tradition of public choice political economy frey 1984 because i treat importers as rational utility maximizers and their behavior as determined by preferences pursued within a context of specified constraints the model i put forward is wholly consistent with contemporary neoclassical trade theory but i extend the economists notion of welfare and contend that importers take account not only of the price and quantity of goods and services but of the place of origin of these products and the political relationship between the importing and the exporting nation they do so essentially for traditional security reasons that is importers are motivated to manage their trade relations in ways that minimize risks of disruption in supply or the possibility of hurting friends or

collateral damage trade disruption and the economic impact of war abstract conventional wisdom in economic history suggests that conflict between countries can be enormously disruptive of economic activity especially international trade we study the effects of war on bilateral trade with available data extending back to 1870 using the gravity model we estimate the contemporaneous and lagged effects of wars on the trade of belligerent nations and neutrals controlling for other determinants of trade as well as the possible effects of reverse causality we find large and persistent impacts of wars on trade national income and global economic welfare we also conduct a general equilibrium comparative statics exercise that indicates costs associated with lost trade might be at least as large as the conventionally measured direct costs of war such as lost human capital as illustrated by case studies of world wars i and ii

a risk analysis for gas transport network planning expansion under regulatory uncertainty in western europe abstract the natural gas industry in western europe went through drastic changes induced by the unbundling of the national companies followed by the liberalization of gas trade and the regulation of gas transmission natural gas transmission is operated through a network of interconnected grids and is capacity constrained each of the grids is locally regulated in terms of price limits on transportation services local tariff differences may induce unnatural gas routing within a network creating congestion in some part of it this phenomena is referred to as the jepma effect following jepma 2001 gaslevering onder druk stichting jin available at www jiqweb org 52pp in dutch this may lead to misguided investment decisions in this paper a multi stage linear program is used to simulate the repartition of the natural gas flow in an interconnected grid system on a succession of contracting periods by this simulation the risk linked to infrastructure investment is assessed the risk measured can be seen as the probability of a negative present net value for the investment the model is applied on an example of two grids that are on alternative routes serving same destinations when applied to a specific situation of north west europe germany and the netherlands the model clearly demonstrates that the risks turn out to be too high to invest there are hardly any scenarios under which an acceptable roi will be realized given the current tariff policy and current publicly available forecasts of demand and supply it is unlikely that market forces will attract additional investments in transportation capacity this reluctance to invest can be prohibitive for further growth of supply if the demand would increase significantly

make trade not war this paper analyses theoretically and empirically the relationship between military conflicts and trade we show that the conventional wisdom that trade promotes peace is only partially true even in a model where trade is economically beneficial military conflicts reduce trade and leaders are rational when war can occur because of the presence of asymmetric information the probability of escalation is lower for countries that trade more bilaterally because of the opportunity cost associated with the loss of trade gains however countries more open to global trade have a higher probability of war because multilateral trade openness decreases bilateral dependence to any given country and the cost of a bilateral conflict we test our predictions on a large data set of military conflicts on the 1950 2000 period using different strategies to solve the endogeneity issues including instrumental variables we find robust evidence for the contrasting effects of bilateral and multilateral trade openness for proximate countries we find that trade has had a surprisingly large effect on their probability of military conflict

state owned mncs and host country expropriation risk the role of home state soft power and economic gunboat diplomacy expropriation risk has a binding effect on foreign direct investment fdi however state owned multinational corporations may counter the monopoly power of the host state by leveraging the political influence of their home government the magnitude of this counter force we argue may vary depending on the strength of political relations between the home and host state and the level of economic dependence of the host country on the home market we find supporting evidence of our hypotheses using chinese firm level fdi information between 2003 and 2010

the kantian peace the pacific benefits of democracy interdependence and international organizations 1885 1992 the authors test kantian and realist theories of interstate conflict using data extending over more than a century treating those theories as complementary rather than competing as the classical liberals believed democracy economic interdependence and international organizations have strong and statistically significant effects on reducing the probability that states will be involved in militarized disputes moreover the benefits are not limited to the cold war era some realist influences notably distance and power predominance also reduce the likelihood of interstate conflict the character of the international system too affects the probability of dyadic disputes the consequences of having a strong hegemonic power vary but high levels of democracy and interdependence in the international system reduce the probability of conflict for all dyads not just for those that are democratic or dependent on trade

the decline of welfare benefits in the u s the role of wage inequality welfare benefits in the u s have experienced a much studied secular decline since the mid 1970s we explore a new hypothesis for this decline related to the increase in wage inequality in the labor market and the decline of real wages at the bottom of the distribution we posit that voters prefer benefits which are tied to low skilled wages we test the hypothesis using a 1969 1992 panel of state level data an additional contribution of our analysis is the use of general social survey data on voter preferences for welfare which we combine with current population survey data to determine the voter in each state who has the median preferred welfare benefit level our analysis reveals considerable evidence in support of a role for declining real wages in the decline of welfare benefits

a second chance at success a political economy perspective abstract this paper characterizes a stationary markov perfect political equilibrium where agents vote over income taxation that distorts educational investment agents become rich or poor through educational investment and the poor have a second chance at success the results show the following concerning the cost of a second chance first when the cost is low the economy is characterized by high levels of upward mobility and inequality and a low tax burden supported by the poor with prospects for upward mobility second when the cost is high there are multiple equilibria with various patterns of upward mobility inequality and redistribution numerical examples show that the shift from a high cost economy to a low cost economy may reduce social welfare

interest group politics under majority rule abstract we develop a model of interest group politics in which the groups and coalitions that arise and the form of redistributive policies sought are jointly determined the model generates three key results first programs intended to reduce income inequality are more likely to involve direct payments than are programs that redistribute wealth across groups with similar incomes second nonequalizing redistribution is unlikely unless the various participants in the political process face significantly different political and economic costs of obtaining transfers third many policies that induce asymmetries among interest groups also impose significant deadweight costs stable nonequalizing redistribution will therefore tend to involve indirect and economically inefficient methods of transferring income

the impact of leadership turnover on trading relations between states we test how domestic political institutions moderate the effect of lead ership turnover on relations between states deriving hypotheses from recent theo retical work bueno de mesquita et al and mcgillivray and smith we examine how leader change affects trading relations between states using dyadic trade data con sistent with hypotheses we find that large winning coalition systems such as democ racies are relatively immune from the vagaries of leadership change in such systems trade remains relatively constant whether leader change occurs or not in contrast when winning coalition size is small as in autocratic states leadership change pro foundly alters relations causing a decline in trade finally we examine instances of poor relations measured by a significant decline in trade compared to historical lev els as predicted instances of poor relations are less common between pairs of democ racies than other dyadic pairings further leadership turnover in autocratic systems restores trading relations between states the effect of leadership change in democ racies is much less pronounced since first drafting this article the united states has invaded iraq and deposed its leader saddam hussein for more than a decade iraq experienced harsh economic sanctions with hussein s removal these sanctions have been lifted and iraq is in the processes of being reinstated into the international community although it was the iraqi people who bore the costs of the sanctions the sanctions were aimed at hussein s regime with hussein removed the prospects for improved relations between iraq and western states look strong while iraq offers an extreme example this article assesses how the turnover of leaders affects relations between states as measured by trade flows in partic ular drawing on recent theoretical developments we examine how domestic insti tutions and leadership turnover affect dyadic trade flows consistent with the theoretical arguments we find that trade flows between states depend on the inter action of institutions and leader turnover

survey of economic implications of maritime and territorial disputes drawing on studies on the economics of conflict this paper reviews the literature on maritime and territorial disputes and it examines an array of economic implications associated with territorial and maritime disputes these include adverse effects on certain economic and development outcomes arising from possible armed confrontation with some of these possibly lingering in the aftermath of conflict there are also various economic disruptions and costs associated with these disputes emphasizing how they also affect the livelihoods of resource users in the disputed areas a clearer understanding of these economic links could help inform and motivate policymakers on mitigating the risks of conflict based on the review of evidence herein the economic implications of conflict in terms of foregone average trade among the country pairs considered in the west philippine sea south china sea in 1985 dollars which differ in important ways but hint at some common channels of impact could range from us 909 3 million to us 98 8 billion more broadly the impacts on a disrupted global production chain can easily amplify these results even further affecting global growth prospects for many decades according to experience

clear and clean the fixed effects of the liberal peace in their article in this issue donald p green soo yeon kim and david h yoon claim contrary to liberal theory and extensive evidence that neither joint democracy nor economic interdependence significantly reduces the frequency of militarized interstate disputes in pooled time series analyses when dyadic fixed effects are taken into account similarly their fixed effects analyses contradict theory and previous evidence that democracies have higher levels of trade with one another than do other types of states our reexamination however refutes both claims and reinforces previous findings their fixed effects analyses of disputes produces distorted results because they consider a relatively short time period 1951 92 in which variation in the binary dependent variable and the key independent variables democracy and trade is limited when we analyze a longer period 1886 1992 the results confirm liberal theory the differences between our analyses of bilateral trade and those of green kim and yoon primarily arise from a seemingly minor methodological decision a more reasonable method confirms that democracies do have higher levels of trade than expected on purely economic grounds though we do not advocate a fixed effects model for analyzing these data and have serious reservations about its general usefulness our findings provide additional confirmation of liberal theories of international relations

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

energy policy and cooperation in southeast asia the history challenges and implications of the trans asean gas pipeline tagp network this article explores the proposed multibillion dollar trans asean gas pipeline tagp network in southeast asia focusing on the interests that have promoted the tagp and why based on extensive field research textual analysis of government reports and more than 100 research interviews at government institutions multilateral development banks universities consulting firms energy companies and nongovernmental organizations this article assesses the challenges facing the tagp in terms of promotion implementation and operation it explores the genesis of the tagp project and the drivers pushing southeast asian investment in natural gas with a special emphasis on the development needs of the region it also investigates the numerous technical economic legal political social and environmental impediments to the tagp project the article concludes that the rhetoric of regional energy cooperation touted by the association of southeast asian nations asean does not match its actual practice and that in many cases discussions of regionalism and energy security are intended to obscure opportunistic thinking within individual countries

trade blocs trade flows and international conflict the relationship between foreign trade and political conflict has been a persistent source of controversy among scholars of international relations existing empirical studies of this topic have focused on the effects of trade flows on conflict but they have largely ignored the institutional context in which trade is conducted in this article we present some initial quantitative results pertaining to the influence on military disputes of preferential trading arrangements ptas a broad class of commercial institutions that includes free trade areas common markets and customs unions we argue that parties to the same pta are less prone to disputes than other states and that hostilities between pta members are less likely to occur as trade flows rise between them moreover we maintain that heightened commerce is more likely to inhibit conflict between states that belong to the same preferential grouping than between states that do not our results accord with this argument based on an analysis of the period since world war ii we find that trade flows have relatively little effect on the likelihood of disputes between states that do not participate in the same pta within ptas however there is a strong inverse relationship between commerce and conflict parties to such an arrangement are less likely to engage in hostilities than other states and the likelihood of a military dispute dips markedly as trade increases between them

business as usual economic responses to political tensions do political tensions harm economic relations theories claim that trade prevents war and political relations motivate trade but less is known about whether smaller shifts in political relations impact economic exchange looking at two major economies we show that negative events have not hurt u s or japanese trade or investment flows we then examine specific incidents of tensions in u s french and sino japanese relations over the past decade two case pairs that allow us to compare varying levels of political tension given high existing economic interdependence and different alliance relations aggregate economic flows and high salience sectors like wine and autos are unaffected by the deterioration of political relations in an era of globalization actors lack incentives to link political and economic relations we argue that sunk costs in existing trade and investment make governments firms and consumers unlikely to change their behavior in response to political disputes d o political tensions have economic consequences the relationship between economic interdependence and conflict has been a central debate in international relations leading scholars contend that states with good relations should have more trade than states with poor relations and import decisions of firms will respond to the climate of friendliness orhostilitythatexistsbetweentheimporterandexporter morrow siverson and tabares 1998 650 pollins 1989b 739 analysis of trade and conflict in a simultaneous equations model concludes that political relations are driving commerce not the other way around keshk pollins and reuveny 2004 1175 we reexamine these arguments in the current globalization era to show that sunk costs reduce incentives for state and private actors to link political and economic relations 1

the transit oil and gas pipeline and the role of bargaining a non technical discussion transit oil and gas pipelines are growing in relevance and face a number of topical problems one of such issues is the problem of potential disruption from a number of sources notably post construction behaviour of the transit country present and future pipelines face the risk of continuous conflict over legal economic and political issues once the pipeline is built and in operation the threat of disruption of the pipeline by the transit country over disputed transit terms exists this is due to two key problems first a shift in bargaining powers to the transit country upon construction and operation of the pipeline and second changes in the value of the throughput imply price changes that can affect the behaviour of the transit country this paper discusses the role of basic bargaining principles in cross border oil and gas pipelines involving transit through one or more countries it finds that the motive behind the pipeline plays a key role in the prevention of potential disruptions to the pipeline due to rent squeezing also although the potential of such disruptions does exist there are a number of factors that could serve to mute the consequences of shifts in bargaining power to the transit countries

interest groups and the size of government the results of the previous section estimates of a three equation model from 23 observations must obviously be regarded as tentative the consistent positive relationship between number of interest groups and size of government observed with changing sets of included independent variables changing samples of nations and treating the number of interest groups as either exogenous or codetermined does imply rather unequivocally that interest groups are able to influence public policies in such a manner as to lead to increased government size beyond helping to reinforce this conclusion the results of the previous section should be regarded as first steps in the development of a model of the polity that can explain participation in the political process by interest groups and citizens as well as the size of government

the structure of inequality and the politics of redistribution against the current consensus among comparative political economists we argue that inequality matters for redistributive politics in advanced capitalist societies but it is the structure of inequality not the level of inequality that matters our theory posits that middle income voters will be inclined to ally with low income voters and support redistributive policies when the distance between the middle and the poor is small relative to the distance between the middle and the rich we test this proposition with data from 15 to 18 advanced democracies and find that both redistribution and nonelderly social spending increase as the dispersion of earnings in the upper half of the distribution increases relative to the dispersion of earnings in the lower half of the distribution in addition we present survey evidence on preferences for redistribution among middle income voters that is consistent with our theory and regression results indicating that the left parties are more likely to participate in government when the structure of inequality is characterized by skew

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

free to trade democracies autocracies and international trade trade relations we address this issue by analyzing the relationship between regime type and trade policy in a formal model of commercial policy we establish that the ratification responsibility of the legislature in democratic states leads pairs of democracies to set trade barriers at a lower level than mixed country pairs composed of an autocracy and a democracy we test this hypothesis by analyzing the effects of regime type on trade during the period from 1960 to 1990 the results of this analysis accord with our argument democratic pairs have had much more open trade relations than mixed pairs t he effects of domestic political institutions on trade policy have long been a source of controversy among social scientists despite the widespread interest that this debate has prompted however remarkably few studies have addressed the links between political regime type and commercial policy 1 most work on the political economy of trade policy that examines institutional factors focuses only on variations in policy among democracies and avoids comparing democracies with other types of regimes moreover many analyses of trade barriers especially those by economists ignore the effects of domestic political

distributional effects of growth and public expenditures in africa estimates for tanzania and rwanda summary in this paper we explore the effects of fiscal policies and growth on measures of household welfare across the distribution of expenditures for two african countries rwanda and tanzania we explore the effect of government expenditures on expenditure growth in each quintile of the expenditure distribution and the effect of growth for each group we find that the benefits of growth are concentrated among the better off sectors of the population in these two countries perhaps to the detriment of the poorer sectors by looking at the effects within a country and across different groups of households and administrative entities we exploit variation in expenditures and growth across and within regions of each country to estimate the elasticities of expenditure with respect to fiscal expenditure and mean expenditure growth at different points of the expenditure distribution using household survey data and government expenditure data at the district level we find that overall mean expenditure growth benefits the top expenditure groups the welfare spillovers are mostly present for top 20 of the expenditure distribution with the middle of the distribution in tanzania responding slightly to these spillovers public social expenditures do not appear to affect inequality considerably but do tend to work toward decreasing inequality however mean expenditure growth is related to increases in inequality in the sense that the richest sectors of the population benefit the most from growth we find that the growth elasticity of expenditure is only above one for the top quintile in both countries in tanzania a 1 increase in average household expenditure is related to a 1 96 expenditure growth in the top quintile and 0 43 in the third quintile in rwanda a 1 increase in average household expenditure is related to a 1 93 increase in household expenditure in the top 20 of the distribution

growth learning and redistributive policies abstract this paper develops an endogenous growth model with redistributive taxation in which the growth rate of the economy affects the agents preferences over redistributive policies and therefore the equilibrium level of taxation the main mechanism through which the growth rate affects policy preferences is by changing the ability of the agents to learn their positions in the future distribution of incomes the main result of the paper is that during periods of growth the society opts for less taxation and less redistribution the model also predicts that growing economies are characterized by higher inequality in the distribution of income and by greater mobility of agents within income classes over time

public policies pressure groups and dead weight costs abstract this paper presents a model of competition among special interest groups for political influence each active group exerts pressure to affect its taxes and subsidies where activities of different groups are related by the equality between total tax collections and total tax subsidies the dead weight costs and benefits of taxes and subsidies play a major role in our model an increase in the dead weight cost of taxation encourages pressure by taxpayers while an increase in the dead weight costs of subsidies discourages pressure by recipients various applications of the analysis are discussed