A political economy model of market intervention

We argue that political competition based on income redistribution à la Lindbeck and Weibull (Public Choice 52:273–297, 1987) may cause distortive regulation in a competitive sector. For this purpose, we propose a model in which imposing a production quota allows the extraction of rents that are then used for vote-buying purposes. Our model permits us to analyze the response of regulatory policy to political factors, such as the size of a group of informed voters and the accuracy of their information about the incumbent. We also show that the extent of voter influence on policy outcomes is shaped by the state of market demand. In particular, if demand becomes weaker, market intervention increases in a magnitude that depends positively on the electoral weight of informed voters.     

A note on the political economy of immigration

In this note it is shown that the different attitudes towards immigration can be explained in terms of economic interest, although the public immigration debate is dominated by moral and political arguments. On the one hand, immigration supporters are mainly found among those who may expect economic gains from immigration – skilled workers and especially members of certain professions. On the other hand, unskilled workers who stand to lose economically because they can be easily substitued for by immigrants are for the most part opposed to immigration.     

Chicago political economy: A public choice perspective

George J. Stigler (Ed.), Chicago studies in political economy. Chicago: University of Chicago Press, 1988. Pages xviii + 641.     

The political economy of fertility

This paper studies the political economy of fertility. Specifically, I argue that fertility may be a strategic choice for ethnic groups engaged in redistributive conflict. I first present a simple conflict model where high fertility is optimal for each ethnic group if and only if the economy’s ethnic diversity is high, institutions are weak, or both. I then test the model in a cross-national dataset. Consistent with the theory, I find that economies where the product of ethnic diversity and a measure of institutional weakness is high have increased fertility rates. I conclude that fertility may depend on political factors.     

The political economy of dissonance

Cognitive dissonance is defined as the psychological discomfort or annoyance that may exist when an individual's choice is not consistent with his values and beliefs. Dissonance may cause an individual to reconsider his values and beliefs, enter new choices with different parameters, respond to the constraints imposed, or change his individual preference function. This paper extends Festinger's (1957) theory of cognitive dissonance to the work of public choice theorists and seeks to explain the incentives of the iron triangle to foment and quell dissonance. Examples are provided for specific environmental and health and safety risks. Akerlof and Dickens (1983) used cognitive dissonance to justify public sector intervention as necessary to correct what they perceived as a market failure in the choice of safety equipment by workers in hazardeus industries. Unlike Akerlof and Dickens (1983), we argue that the concept of cognitive dissonance is applicable to the analysis of public sector decisions giving rise to government failure as well as private decisions involving possible market failure. This paper views the public sector as a market-like arrangement in which dissonance may be produced and exchanged like any other commodity. Cognitive dissonance provides a useful framework for examining individual choice and also expands our understanding of the unseen elements of rent-seeking.     

The political economy of targeting

One of the most widely used method of targeting is to reduce welfare benefits as income rises. Although the need for such targeting is clear enough, it also entails two important difficulties. Firstly, the prospect for the recipients of losing part of their benefits if they were to earn more can be a deterrent to work harder. Secondly, by reducing the number of recipients, targeting reduces the political support for taxation and redistribution. The purpose of this paper is to study the voting equilibrium of the degree of targeting and the level of taxation in an economy where labour supply is variable. The analysis reveals that targeting may be fatal for redistribution even though it rejects strictly less than the richest half of the population, and that it is not possible for a coalition of the extremes to form and reject the middle income group from the welfare system. Moreover, because targeting affects labour supply, we find that Pareto improvements are possible when targeting is either “too low” or “too high”. We also find that voting simultaneously over taxation and targeting is favourable to the poor in the sense that they can converge to their most-preferred policy by successively forming a majority coalition with the rich to increase targeting and with the middle to increase taxation.     

Modes of regulatory governance: A political economy perspective

This article introduces the special issue by presenting a framework for the study of regulatory politics using the analytical tools and approaches of comparative political economy. Having traced the evolution of studies on regulation, it argues that scholars should pay more attention to the systemic features affecting regulation and to the relationship between regulatory policies and their outcomes. The article presents the foundations of an analytical framework based on the “regulatory policy process,” a comprehensive approach that links inputs, outputs, and outcomes. The review of the contributions to this special issue shows that regulatory regimes can be better understood by placing them within the broader political economy of a state or region. A renewed focus on regulatory outcomes can help foresee what one should expect from the impact of a certain regulatory regime on a political‐economic system.     

Immigration and income redistribution: A political economy analysis

This paper examines the effect of immigration on the extent of income redistribution via majority voting on the income tax. The tax outcome depends on the size of the native majority and the initial amount of redistribution in the economy, which in turn determines the skill composition of immigrants. As a main result, we derive conditions for multiple tax equilibria: if the native majority of either skilled or unskilled is not too strong and immigrants are allowed to vote, both a high-tax and a low-tax outcome is possible. In a referendum, natives will then vote against immigrant voting. At best, natives are indifferent towards immigrant voting.     

The political economy of sugar legislation

The findings of this paper are a rather straightforward account of the political economy of senatorial voting on the sugar program. In the spirit of Stigler and Peltzman's accounts of interest group activity, voting on sugar is indeed related to the concentration of economic interests in the Senators' states. States with high concentrations of sugar growers and processing tend to vote for the program, those with high concentration of users tend to vote against it. The emergence of corn syrup as a sugar substitute and its subsequent interests in the program further supports this perspective. These concentrated interests are associated with conditions ripe for overcoming the collective action problem and, we infer, use their organizations to influence senatorial behavior. The political variables suggest countervailing forces which can be interpreted, at least in part, as further examples of organized (here, politically organized) influences on the interests of Senators. Thus, while the model is one of opposing interests, those of producers and users tend to influence different Senators. The major group-interest trade-off, then, is between the pull of organized interests in the constituency with that of party organization at the national (or national institutional level), at least for those for whom the pull is in opposite directions.It is clear, then, that variables representing (concentrated) consumer interests as well as variables representing grower and processor interests as well as variables representing grower and processor interests are significant in determining voting patterns on sugar legislation in the Senate. This model, therefore, is not one in which one-sided organizational interests operate politically uncontested. That, even so, consumer interests are not powerful enough to prevent sugar programs from passing is clear at one level, due to the existence of the program over most of this period. The existing level of the transfers from consumers to producers and of deadweight losses must be reflective of the magnitude of their respective free rider problems. Yet voting on the program to renew or alter those benefits at any level clearly reflects these interests and their interplay.     

The political economy of project delay

Uncertainty about how long it will take to secure approval for large-scale economic projects presents difficulties for policy makers in all industrialized countries. This paper attempts to determine the factors that influence the time required to get public acceptance for energy projects in Japan. It suggests the importance of distributional factors and, hence, the need to examine: 1) the structure of the bargaining environment; 2) the ability of interest groups to sustain opposition to or support for projects; 3) bargaining strategies employed; 4) uncertainty about outcomes; and 5) changing expectations, in explaining why compensation mechanisms operate more effectively in resolving some social disputes than others. It concludes that an analysis of Japanese experience in this area can contribute to an understanding of other social controversies and that the approach has utility to policy makers involved in developing controversial projects.     

The political economy of IMF forecasts

We investigate the political economy of IMF forecasts with data for 157 countries (1999–2005). Generally, we find evidence of forecast bias in growth and inflation. Specifically, we find that countries voting with the United States in the UN General Assembly receive lower inflation forecasts as domestic elections approach. Countries with large loans outstanding from the IMF also receive lower inflation forecasts, suggesting that the IMF engages in “defensive forecasting.” Finally, countries with fixed exchange rate regimes receive lower inflation forecasts, suggesting the IMF desires to preserve stability as inflation can have detrimental effects under such an exchange rate regime.     

Citizen participation through mobilization and the rise of political Islam in Indonesia

The idea that populations participate politically outside of the formal mechanisms of a political system and through mass mobilizations is a reasonably accepted part of political science orthodoxy. Since the turn of the last century, in Indonesia, as in other developing countries, populations have mobilized en masse at particular stages of their histories into nation-state building processes, as well as have been mobilized by political authorities seeking to bolster or install their regimes. In the 1960s, Sukarno increasingly sought to mobilize a range of classes and interests behind his presidency and, in 1965–66, Suharto and his military backers organized anti-communist groups behind a systematic campaign to eradicate the Communist Party and remove Sukarno. Throughout the so-called ‘New Order’ period (1966–98), Suharto periodically mobilized groups behind his presidency and against opponents who, in turn, engaged in occasional street demonstrations against the regime. In the mid-to-late 1990s, the opposition leader, Megawati Sukarnoputri became an important rallying point for popular dissent against Suharto and, in 1998, the student movement played a crucial role in street demonstrations which helped bring down the president after three decades of strongman rule. In the post-Suharto period, which has seen the installation of three presidents between 1998 and 2001, mass mobilizations have continued to be a striking feature of the political landscape. President Habibie mobilized pro-government militias against opponents and student demonstrators, who threatened to bring down his regime. The Muslim supporters of Abdurrahman Wahid entered the streets in their thousands to protest the parliamentary impeachment of the president. Radical Muslim groups demonstrated against US military strikes on Afghanistan and against President Megawati Sukarnoputri's initial soft stance on the strikes. Potentially, these kinds of demonstrations could undermine Megawati's presidency. However, parliamentary processes rather than street mobilizations brought the presidencies of Habibie and Abdurrahman to an end while Megawati is still seeing out her term. This article examines the political mobilizations of the late-Suharto and post-Suharto periods and asks whether these mobilizations pose a threat to Indonesia's fragile transition to democracy and to a more stable institutional political process.     

The constitutional political economy of Gordon Tullock

This paper surveys Gordon Tullock’s contributions to constitutional political economy. His first major contribution was his joint project with James Buchanan on liberal constitutional design. The explicitly constitutional analysis of The Calculus was followed by a series of papers and books that focused on the use of resources in conflict, including Tullock’s contributions to the anarchy and rent-seeking literatures. Tullock also pioneered the rational choice-based analysis of dictatorships and the relative merits of alternative legal systems, topics that has been neglected until fairly recently by most scholars working in the CPE tradition.     

The political economy of the peace dividend

We develop a model of the peace dividend and use it to predict the fiscal consequences of a reduction in the demand for military spending. The model is based on the assumption that the political process responds to political demands and costs in a way that maximizes net political benefits. The predictions of our model on how a peace dividend will be allocated over nonmilitary spending, tax relief, and deficit reduction is tested against the experience of eight major wars in United States history.